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SHUMBA ENERGYANNUAL REPORT2018
GE
NE
RA
L IN
FOR
MA
TIO
N
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
Republic of Mauritius
SANNE Mauritius
(formerly International Financial Services Limited)
IFS Court
TwentyEight
Cybercity
Ebene 72201
Republic of Mauritius
Standard Bank (Mauritius) Limited
AfrAsia Bank Limited
Grant Thornton
Ebene Tower
52 Cybercity
Ebene 72201
Republic of Mauritius
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
Republic of Botswana
Imara Botswana Limited
2nd Floor, Morojwa Mews
Unit 6, Plot 74769
Western Commercial Road, CBD
Gaborone
Republic of Botswana
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
Republic of Botswana
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:
COMMENTARY OF THE DIRECTORS
PAGE 5
FOU
ND
ER
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.
COMMENTARY OF THE DIRECTORS
PAGE 7
FOU
ND
ER
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%
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 8
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
COMMENTARY OF THE DIRECTORS
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
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 10
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.
COMMENTARY OF THE DIRECTORS
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
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 12
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
COMMENTARY OF THE DIRECTORS
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.
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 14
KAPILDEO JOORY (Chartered Accountant)
Non–Independent and
Non–Executive Director
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
Non–Executive Director
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)
Non–Executive Director
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.
COMMENTARY OF THE DIRECTORS
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
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 16
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
COMMENTARY OF THE DIRECTORS
PAGE 17
FOU
ND
ER
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:
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 18
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
COMMENTARY OF 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
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 20
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.
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 22
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.
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 24
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.
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 26
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
(formerly International Financial Services Limited)
Secretary
Registered Office:
IFS Court
TwentyEight
Cybercity
Ebene 72201
Republic of Mauritius
Date: 28 September 2018
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 28
INDEPENDENT AUDITORS’ REPORT
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
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 30
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.
INDEPENDENT AUDITORS’ REPORT
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.
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 32
______________________________________
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
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 34
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
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
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
PAGE 35
The Group The Company
(Note 25) Restated
Name Notes 2018 USD 2017 USD 2018 USD 2017 USD
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
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
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 36
The Group The Company
Note 25 Restated
Name Notes 2018 USD 2017 USD 2018 USD 2017 USD
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:
The notes on pages 43 to 85 form an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHERCOMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED)
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 38
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
The notes on pages 43 to 85 form an integral part of these consolidated financial statements.
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
The notes on pages 43 to 85 form an integral part of these consolidated financial statements.
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 40
The Group The Company
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)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2018
CONSOLIDATED STATEMENT OF CASH FLOWS
PAGE 41
The Group The Company
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:
The notes on pages 43 to 85 form an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED)
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 42
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 44
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 46
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.
NOTES TO 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
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 48
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 50
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 52
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 54
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 56
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 58
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 60
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
PAGE 61
The Group The Company
Restated Restated
Name Notes 2018 USD 2017 USD 2018 USD 2017 USD
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
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 62
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
The Group The Company
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
The Group The Company
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
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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:
The Group The Company
Profit/loss and equity Loss and equity
Name 2018 USD 2017 USD 2018 USD 2017 USD
The Group The Company
Profit/loss and equity Loss and equity
Name 2018 USD 2017 USD 2018 USD 2017 USD
At 30 June 152,306 97,804 (604,010) (1,106,694)
At 30 June (152,306) (97,804) 604,010 1,106,694
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 64
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:
The Group The Company
Restated Restated
Name 2018 USD 2017 USD 2018 USD 2017 USD
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 66
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
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 68
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
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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:
Investee company Country of incorporation Type of shares % held Cost 2018 USD
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:
Investee company Country of incorporation Type of shares % held Cost 2018 USD
Hodges Morupule Mauritius Limited Republic of Mauritius Ordinary shares 100% 1
INDIRECT HOLDING THROUGH SHUMBA COAL TRADING LIMITED:
Investee company Country of incorporation Type of shares % held Cost 2018 USD
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.
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 70
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
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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
The GroupFurniture & fittingsUSD
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
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 72
The GroupFurniture & fittingsUSD
Motor vehiclesUSD
IT equip-mentUSD
Office 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
The GroupFurniture & fittingsUSD
Motor vehiclesUSD
IT equipmentUSD
Office equip-mentUSD
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
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 -
Additions during the year 446,602 662,485
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
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 74
The Group 2018 USD 2017 USD
Cost
At 01 July 9,949,583 8,600,862
On consolidation of new subsidiaries 224,883 -
Additions during the year 446,602 662,485
Disposals during the year (5,958,940) -
Exchange differences (26,664) 686,236
At 30 June 4,635,464 9,949,583
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
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
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 76
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
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
17.1 ISSUED AND FULLY PAID:
The movement during the year is as follows:
17
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 78
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
The Group The Company
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
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 80
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
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 82
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
Proportion of ownership interest 100% 100%
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
Proportion of ownership interest 74% 76%
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
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
SHUMBA ENERGY LTD ANNUAL REPORT 2018PAGE 84
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
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
PAGE 85
COMPANY CONTACT DETAILS
info@shumbaenergy.com
Shumba Energy
Plot 2780
Manong Close, Extension 9
P O Box 70311
Gaborone
Botswana
+970 599 112 335
www.shumbaenergy.com
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