Edenville Energy Plc (LON:EDL), the AIM quoted company operating the Rukwa Coal Project in southwest Tanzania, has announced its audited results for the year ended 31 December 2021.
The Company’s Annual Report for the year ended 31 December 2021 will be available on the Company’s website at: https://edenville-energy.com/annual-reports/ later today, pursuant to the Company’s Articles of Association which allow Edenville to use electronic communications for the posting of the Annual Report.
Notice of the Company’s Annual General Meeting will be announced shortly, along with information regarding how shareholders can request a hard copy of the Annual Report.
CHAIRMAN’S STATEMENT
The first half of 2021 was once again dominated by the impact of COVID across the world. The start of 2021 coincided with the re-emergence of lockdowns across much of the globe. Naturally this provided significant challenges to the Company with the reduced demand for coal seen in 2020 continuing and the logistical issues remaining. In light of this the Company took a number of steps to address both its financial position as well as its operational plans for the future.
In January 2021 we announced an oversubscribed placing raising £900,000. The placing was supported by Edenville’s existing three largest shareholder groups and specialist mining investor RAB Capital. In May 2021 we announced a further placing to raise gross proceeds of nearly £2.5 million, including a £1 million participation from a new strategic investor, Tony Buckingham. The Company used part of the proceeds to repay the outstanding debt to Lind Partners LLC, leaving the majority to fund future operations.
In August 2021 Franco Caselli joined the Board as a Non-executive Director of the Company. Mr Caselli is a geologist with more than 40 years of international operational and market experience in the energy and mining sectors.
With the Company better capitalised, and with the support of new shareholders, our focus during the year was to both monitor the situation in Tanzania with respect to Rukwa and to look at various opportunities and new assets to inject into the Company. We continue to explore various options and look forward to updating shareholders as soon as appropriate.
Post period end, in February 2022, the Company entered into a contract mining agreement with Nextgen Coalmine Limited (“Nextgen”) for the operation of the Company’s Rukwa Coal Project. Shortly after that both the international and domestic coal price increased significantly. This resulted in significant demand for both Rukwa’s washed and fine coal. Therefore, we were pleased that in May 2022 the Company reached an agreement with NextGen to terminate the contract and the Company is now again in full control of the operations at Rukwa.
Although the last few years have been difficult for the Company, we believe that the current trend of high coal prices and increased demand, combined with the fact that the Company is better capitalised, put us in a great position to move the Company forward significantly.
I would like to thank all our stakeholders, including you the shareholders, our partners, the local authorities and local communities, my fellow directors, our employees and contractors who have collectively supported the Company throughout this difficult period.
I believe the Company is now better positioned than it has been for some considerable time and we look forward to reporting on the Company’s progress in the coming months.
Dr Jeffrey Malaihollo
Chairman
29 June 2022
CHIEF EXECUTIVE OFFICER’S REPORT
2021 was a year in which there was a significant positive change in the prospects for the Company, both with regard to the Rukwa coal project and more widely with an improved cash position.
Funding
On 19 January 2021 we announced an oversubscribed placing raising gross proceeds of £900,000, supported by Edenville’s existing three largest shareholder groups and specialist mining investor RAB Capital. On 5 May 2021 we announced a further placing to raise gross proceeds of £2.48 million, including a £1 million participation from a new strategic investor, Tony Buckingham.
Mr Buckingham is well known in the natural resources market, particularly in Africa, having been CEO and major shareholder of Heritage Oil Limited from 2006 until its acquisition by a wholly owned subsidiary of Qatari investment fund, Al Mirqab Capital SPC, in 2014 for a consideration of US$1.6 billion.
Additionally, following the £2.48 million fund raise, we announced on 22 June 2021 that the Company had fully repaid in cash the full outstanding amount owing to Lind Partners LLC (“Lind”) under the Funding Agreement dated 6 November 2018. and the Company had no further outstanding obligations to Lind.
The fundings undertaken through the year ensured that the Company is well capitalised, with cash resources as at 31 December 2021 of £1,229,801 (31 December 2020: £25,690) and reduced borrowings of £18,258 (31 December 2021: £440,831).
As at 27 June 2022 the Company had cash balances of approximately £515,428. Whilst this is sufficient for the Company’s current needs, at Rukwa, where it is expected the Company will become cashflow positive later this year as production ramps up.
Operational Review
Whilst the first half of 2021 was another period impacted by the Covid 19 pandemic and the resultant reduced demand, there were significant changes in the demand scenario and outlook as the year progressed as international coal prices rose and local Tanzanian producers started to switch to supplying the export market.
Prior to this uptick in coal prices and demand duringthe later part of the year the Company successfully focused on preserving cash for possible further asset acquisitions and focussed on supplying existing customers. This translated into increasing production in the final quarter of the year and revenue for the year as a whole of £105,228 (2020: £33,852)
Corporate Social Responsibility
The Company has continued to take its corporate and social responsibility very seriously. We understand that Edenville must meet the social requirements of an operator in Tanzania. The construction of a mining operation at Rukwa has already provided several opportunities to improve infrastructure for the local community, the most visible being the construction of the road from Kipandi, past Mkomolo village and beyond, to the mine. This has opened-up a major artery in the area which services farmers and the local population, as well as the mine itself.
At Rukwa, wherever possible, we have sought to employ local people from the surrounding villages. Many of the operators and management are local and are proving to be highly competent and skilled employees. The positive social benefits also overflow into the general community where enterprising individuals are providing services such as food supply for workers.
Post Period Events
On 3 February 2022 we announced that the Company’s subsidiary Edenville International (Tanzania) Limited had entered into a contract with Nextgen Coalmine Limited (“Nextgen”) for the operation of the Company’s Rukwa Coal Project. This superseded the Coal Mining Agreement with Infrastructure and Logistics Tanzania Limited and the Sales and Marketing Agreement with MarTek Global FZ-LLC, announced on 8 June 2020 and 26 August 2020 respectively. These agreements were terminated by Edenville due to lack of progress on implementation.
Subsequent to entering into the agreement with NextGen both the international and domestic coal price increased significantly. This coincided with heightened interest from potential customers to enter into offtake agreements for coal from Rukwa. Additionally, the implementation of the coal mining agreement with Nextgen was, for various reasons, problematic, resulting in very poor production figures over the period from February to May 2022 and no material revenue for the Company.
The lack of progress by Nextgen culminated in the announcement on 31 May 2022 that the Company had reached an agreement with NextGen to terminate the contract. Following the termination of the contract all mining equipment has been brought back into service by Edenville, whilst an additional pre-strip excavator has been added to the fleet. Up to three additional trucks have been sourced to rapidly scale production. Our initial goal is to satisfy existing demand from local customers of 1,500 tonnes of washed lump coal product and 500 tonnes of coal fines in the immediate future, targeting sales of 5,000 tonnes per month of washed coal late in Q3 2022, with coal fines sales also expected to continue and possibly expand. During the first half of 2022, 9,466 tonnes of ROM coal has been mined.
We believe there is sufficient demand based on the Company’s order book and recent discussions with potential customers to sell any coal that is produced at Rukwa. The Company is also exploring the potential of exporting its coal for the first time, given margins would be expected to be even greater.
Much of 2021 and the first half of 2022 was spent pursuing reverse takeover and other opportunities to add assets to the Company. During this time the Company focused on reducing cash burn on its Tanzanian project whilst it has explored these potential new projects. One potential transaction progressed significantly, however was ultimately terminated by mutual consent. As part of the termination it was agreed that the transaction costs incurred by the Company would be re-imbursed in full by the potential take-over target.
Further to the Company announcements on 18 and 31 May 2022 that Upendo Group Ltd.’s current 10% economic interest in the joint venture, which holds the licences governing the Rukwa Project, had been transferred to a 10% direct holding on the principal production licence. The Company has sought legal advice and has been advised that the variation has been undertaken illegally and that the holding should be reversed by the Government, This reversal has been sought. The Company will provide a further update as appropriate.
Summary and Outlook
With Edenville now being in full control of the operations at Rukwa we are able to take advantage of the recent macro changes that have made the economics of our Rukwa project considerably more attractive. Edenville is determined to maximise cash returns in the current global coal environment, especially given the attractive pricing forecast over the coming years. To this end we have already started applying a modest proportion of our existing cash resources towards expanding the Rukwa operations to meet these heightened sales enquiries.
Additionally, with an improved cash position we continue to target additional asset acquisitions, leveraging the natural resources and capital markets expertise of the Board, and significant shareholders.
I look forward to the remainder of 2022 and beyond with confidence that there is a positive future for Edenville that can deliver shareholder value.
Alistair Muir
Chief Executive Officer, Edenville Energy
29 June 2022
