African Energy Resources Guernsey : Half-Year Accounts

African Energy Resources Limited

ARBN 123 316 781

Interim Financial Statements for the six months ended

31 December 2018

AFRICAN ENERGY RESOURCES LIMITED Contents page

Directors' Report 3

Directors' Declaration 4

Independent Auditor's Review Report 5

Independence Declaration 7

Consolidated Statement of Profit or Loss and Other Comprehensive Income 8

Consolidated Statement of Financial Position 9

Consolidated Statement of Changes in Equity 10

Consolidated Statement of Cash Flows 11

Notes to the Consolidated Financial Statements 12

AFRICAN ENERGY RESOURCES LIMITED Directors' Report

Your Directors present their report on the consolidated entity consisting of African Energy Resources Limited ("African Energy" or the "Company") and the entities it controlled at the end, or during, the half‐year ended 31 December 2018 ("Consolidated Entity").

DIRECTORS

Mr Alasdair Cooke	Executive Chairman
Dr Charles (Frazer) Tabeart	Executive Director ‐ investor relations and business development
Mr Gregory (Bill) Fry	Executive Director ‐ commercial
Mr Valentine Chitalu	Non‐Executive Director
Mr Vincent (Ian) Masterton‐Hume	Non‐Executive Director
Mr John Dean	Non‐Executive Director
REVIEW OF OPERATIONS

The Consolidated Entity's core business remains the development of Sese Coal to Power Project ("Sese" or Sese JV) in Botswana, in which it holds a 35% interest. First Quantum Minerals Ltd. (FQM) owns 65% of Sese JV. Technical studies at Sese have been completed to at least PFS level and most permits and agreements executed with final tasks for full project permitting in progress.

During the half‐year ended 31 December 2018, the Company:

•  Continued to assist FQM with a number of commercial and permitting activities related to the development of Sese as an exporter of power to FQM's Zambian copper operations;

•  Updated resource estimate for Mining Licence area prepared to JORC (2012) and NI 43‐101 standard. Global resource estimate for Sese now stands at 2,418Mt of thermal coal in Measured, Indicated and Inferred categories;

•  A mining reserve statement for the SS Seam within the proposed mining area is being prepared using the updated resource estimate and information from First Quantum's in‐house mining feasibility study; and

•  Significant progress made on the Resettlement Action Plan (RAP) at Sese, with over half of the asset owners having received full compensation for their assets and have left the surface rights area.

The Company's focus is to:

•  Secure access to transmission systems to transmit power from Sese to FQM's Zambian operations in the Copperbelt;

•  Continue negotiations with other credit‐worthy offtakers for the balance of power available from Sese;

•  Pursue development opportunities for its Mmamabula West coal project and continues to support TM Consulting as the potential developer and buyer of the Mmamantswe coal to power project, both of which are suitable for supply into South Africa's 3,750MW Coal‐Fired Independent Power Project Procurement Program; and

•  Evaluate new project opportunities for base and precious metals projects that are deemed to have the potential to add to shareholder value.

At 31 December 2018, the Consolidated Entity had cash reserves of US$2.32M (30 June 2018: US$2.30M).

EVENTS OCCURRING AFTER REPORTING PERIOD

No matters or circumstances have arisen since the end of the interim financial period which significantly affected or may significantly affect the operations, results or the state of affairs of the consolidated entity or the parent company in future reporting periods.

LEAD AUDITOR'S INDEPENDENCE DECLARATION

The lead auditor's Independence Declaration is set out on page 7 and forms part of the Directors' report for the half year ended 31

December 2018.

Charles Frazer Tabeart Executive Director

15 March 2019

AFRICAN ENERGY RESOURCES LIMITED Directors' Declaration

The opinion of the directors of African Energy Resources Limited:

a. The financial statements and notes set out on pages 8 to 17 are in accordance with the Corporations Act 2001, including:

• i. Giving a true and fair view of the consolidated entity's financial position as at 31 December 2018 and of its performance for the half‐year ended on that date; and

• ii. Complying with AASB 134 Interim Financial Reporting, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and

b.

There are reasonable grounds to believe that African Energy Resources Limited will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the directors.

Charles Frazer Tabeart

Executive Director

15 March 2019

Tel: [phone]	38 Station Street
Fax: [phone]	Subiaco, WA 6008
www.bdo.com.au	PO Box 700 West Perth WA 6872
Australia

INDEPENDENT AUDITOR'S REVIEW REPORT

To the members of African Energy Resources Limited

Report on the Half-Year Financial Report

Conclusion

We have reviewed the half-year financial report of African Energy Resources Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 31 December 2018, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the half-year then ended, and notes comprising a statement of accounting policies and other explanatory information, and the directors' declaration.

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of the Group is not in accordance with the Corporations Act 2001 including:

• (i) Giving a true and fair view of the Group's financial position as at 31 December 2018 and of its financial performance for the half-year ended on that date; and

• (ii) Complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001.

Directors' responsibility for the Half-Year Financial Report

The directors of the company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error.

Auditor's responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including giving a true and fair view of the Group's financial position as at 31 December 2018 and its financial performance for the half-year ended on that date and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of the Group, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of financial services licensees