TIDMCZA
RNS Number : 1677S
Coal of Africa Limited
29 September 2017
COAL OF AFRICA LIMITED
AUDITED ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2017
(Expressed in United States Dollars unless otherwise stated)
Page
Directors' Report 2
Auditor's Independence Declaration 19
Corporate Governance Statement 20
Directors' Declaration 36
Consolidated Statement of Profit
or Loss and Other Comprehensive
Income 37
Consolidated Statement of Financial
Position 38
Consolidated Statement of Changes
in Equity 39
Consolidated Statement of Cash
Flows 40
Notes to the Consolidated Financial
Statements 41
Independent Auditor's Report 105
AUDITED ANNUAL CONSOLIDATED FINANCIAL STATEMENTS INDEX
DIRECTORS' REPORT
The directors of Coal of Africa Limited ("CoAL" or the
"Company") submit herewith the annual report of the Company and the
entities controlled by the Company (its subsidiaries), collectively
referred to as the "Group" or the "Consolidated Entity," for the
financial year ended 30 June 2017. All balances are denominated in
United States dollars unless otherwise stated.
In order to comply with the provisions of the Corporations Act
2001, the directors report as follows:
Information about the directors and key management personnel
The names and particulars of the directors of the Company during
or since the end of the financial year are set out below. Unless
otherwise stated, the directors held office during the whole of the
financial year:
Bernard Robert Independent Non-Executive Mr Pryor is currently
Pryor Chairman the chief executive
officer of Alufer
Mining Limited and
was previously the
chief executive officer
of African Minerals
Limited and prior
to that the chief
executive of Q Resources
Plc. Between 2006
and 2010 he held senior
executive positions
within Anglo American
Plc as head of business
development, and CEO
of Anglo Ferrous Brazil
Inc.
David Hugh Executive Director Mr Brown is a Chartered
Brown and Chief Executive Accountant, CA (SA)
Officer and completed his
articles with Ernst
& Young, graduating
from the University
of Cape Town. Mr Brown
joined CoAL following
a tenure of almost
14 years at Impala
Platinum Holdings
Limited ("Implats").
He joined the Impala
Group in 1999 and
served as chief financial
officer and financial
director of Implats
before being appointed
chief executive officer
in 2006. He is currently
an independent non-executive
director of Vodacom
Group Limited. In
the past he has served
as a non-executive
director of Simmer
& Jack Limited, as
well as Edcon Holdings
Limited and chairman
of ASX listed Zimplats
Holdings Limited.
De Wet Olivier Executive Director Mr De Wet Schutte
Schutte and Chief Financial is a Chartered Accountant,
Officer CA (SA) and completed
an MBA at the University
of Virginia in 2002.
He has been involved
at the senior level
in the mining and
natural resources
industry for the past
16 years, most notably
as Managing Director,
Natural Resources
at Macquarie Bank
and CFO at the listed
platinum producer,
Atlatsa Resources
Corporation. Prior
to these positions
he worked for Harmony
Gold Mining (Pty)
Ltd as its New Business
and Exploration Executive
for a period of three
years.
Peter George Independent Non-Executive Mr Cordin has a Bachelor
Cordin Director of Engineering from
the University of
Western Australia
and is experienced
in the evaluation,
development and operation
of resource projects
within Australia and
overseas. He is a
non-executive director
of Vital Metals Limited
and Aurora Minerals
Limited.
Information about the directors and key management
personnel (continued)
Khomotso Independent Non-Executive Mr Mosehla is a Chartered
Brian Mosehla Director Accountant, CA (SA)
and completed his
articles with KPMG.
Mr Mosehla worked
for five years at
African Merchant Bank
Limited, where he
gained a broad range
of experience, including
management buy-out,
leveraged buy-out
and capital restructuring/raising
transactions. In 2003,
he established Mvelaphanda
Corporate Finance,
for the development
of Mvelaphanda's mining
and non-mining interests.
Mr Mosehla served
as a director on the
boards of several
companies, including
Mvelaphanda Resources
Limited, and he is
currently the Chief
Executive Officer
of Mosomo Investment
Holdings Proprietary
Limited. Mr Mosehla
is currently a director
of Northam Platinum
Ltd as well as Zambezi
Platinum Limited.
Rudolph Henry Independent Non-Executive Mr Torlage is a Chartered
Torlage Director Accountant and has
over twenty years'
experience with ArcelorMittal
South Africa. He is
currently General
Manager, Strategy
and Special Projects
and a Board member
of various unlisted
ArcelorMittal Group
companies. He was
previously the Executive
Director Finance at
ArcelorMittal South
Africa.
Andrew David Independent Non-Executive Mr Mifflin obtained
Mifflin Director his BSc. (Hons) Mining
Engineering from Staffordshire
University and has
a Master's Degree
in Business Administration.
Andrew has over 30
years' experience
specifically in the
coal mining arena.
His experience spans
across various organisations
such as British Coal
Corporation, Xstrata
and more recently
GVK Resources. He
has gained in depth
knowledge in coal
operations, both thermal
and hard coking coal
as well as in project
development.
Thabo Felix Independent Non-Executive Mr Mosololi is a Chartered
Mosololi Director Accountant, CA (SA)
qualified in South
Africa and brings
considerable expertise
as a director of various
companies as well
as from his time as
Finance Director and
Operations Director
with Tsogo Sun. Thabo
has 20 years of experience
within the South African
corporate environment.
Mr Mosololi is currently
a director of Pan
African Resources
PLC.
Shangren Non-executive Mr Ding is an experienced
Ding Director professional engineer
and has worked for
a number of mining
and energy companies
as well as acting
as a consultant to
government geological
bureaus. Shangren
has over 30 years'
experience predominantly
in the coal mining
sector and has gained
extensive operational
coal mining knowledge
through chief operating
roles at a number
of mines in the Heilongjiang
province in the People's
Republic of China.
Since 2014, Mr Ding
has worked in a number
of senior roles for
Beijing Haohua Energy
Resource Co., Ltd.
Shangren Ding was appointed on 11 October 2016.
All other directors held office during and since
the end of the previous financial year.
DIRECTORS' REPORT
Directorships of other listed companies
Directorships of other listed companies held by the directors in
the three years immediately before the end of the financial year
are as follows:
Director Company Period of
directorship
--------------- --------------------------- ----------------
Bernard Robert African Minerals Limited 2011 - 2014
Pryor
David Hugh Vodacom Group Limited 2012 - Present
Brown
De Wet Olivier None
Schutte
Peter George Vital Metals Limited 2009 - Present
Cordin Aurora Minerals Limited 2014 - Present
Khomotso Brian Northam Platinum Limited 2015 - Present
Mosehla Zambezi Platinum Limited 2015 - Present
Rudolph Henry None
Torlage
Andrew David None
Mifflin
Thabo Felix Evraz Highveld Steel & 2013 - 2015
Mosololi Vanadium Limited
Pan African Resources PLC 2014 - Present
Directors' shareholdings
The following table sets out each director's relevant interest
in shares or options in shares or debentures of the Company as at
the date of this report.
Director Ordinary shares Performance Unlisted options
Rights
-------------- ---------------- ------------ -----------------
B Pryor (1) 150,000 - 1,000,000
D Brown (2) 825,000 20,968,954 -
D Schutte - 13,433,659 -
(3)
P Cordin (4) 1,371,059 - 1,000,000
K Mosehla
(5) - - 1,000,000
R Torlage - - -
A Mifflin
(6) - - 1,000,000
T Mosololi
(7) 10,000 - 1,000,000
S Ding - - -
-------------- ---------------- ------------ -----------------
2,356,059 34,402,613 5,000,000
-------------- ---------------- ------------ -----------------
Directors' shareholdings (continued)
1. Mr Pryor was issued with the following share options:
-- 1,000,000 share options with an exercise price of GBP0.055,
and expiring three years from date of issue, issued on 27 November
2015.
2. Mr Brown was issued with the following performance
rights:
-- 9,714,021 unlisted conditional performance rights
("Performance Rights") were granted on 30 November 2015. 11,254,933
unlisted conditional performance rights were granted on 30 November
2016. The Performance Rights were granted for no consideration. No
exercise price is payable upon exercise of the Performance
Rights.
3. Mr Schutte was issued with the following performance
rights:
-- 5,449,944 unlisted conditional Performance Rights were
granted on 30 November 2015. 7,983,715 Performance Rights were
granted on 30 November 2016.The Performance Rights were granted for
no consideration. No exercise price is payable upon exercise of the
Performance Rights.
4. 958,300 shares are held by the Cordin Pty Ltd (The Cordin
Family Trust) and 412,759 shares held by Cordin Pty Ltd (The Cordin
Superannuation Fund). Mr Cordin is a beneficiary of both the trust
and superannuation fund. Mr Cordin was issued 1,000,000 share
options with an exercise price of GBP0.055, and expiring three
years from date of issue, issued on 27 November 2015.
5. Mr Mosehla was issued 1,000,000 share options with an
exercise price of GBP0.055, and expiring three years from date of
issue, issued on 27 November 2015.
6. Mr Mifflin was issued 1,000,000 share options with an
exercise price of GBP0.055, and expiring three years from date of
issue, issued on 27 November 2015.
7. Mr Mosololi was issued 1,000,000 share options with an
exercise price of GBP0.055, and expiring three years from date of
issue, issued on 27 November 2015.
Remuneration of directors and key management personnel
Information about the remuneration of directors and key
management personnel is set out in the remuneration report of this
directors' report, on pages 9 to 17. Shareholder nominee
non-executive directors are not remunerated.
Share options granted to directors and senior management
During and since the end of the financial year, share options
and performance rights were granted to Directors and key management
personnel of the Company and of its controlled entities as part of
their remuneration. Details of options and performance rights
granted to Directors and senior management are set out on page
89.
Company secretary
Mr Tony Bevan, a qualified Chartered Accountant with over 25
years' experience, is the Company Secretary and works with
Endeavour Corporate Pty Ltd, the company engaged to provide
contract secretarial, accounting and administration services to
CoAL.
Principal activities
The Company is a limited company incorporated in Australia. Its
common shares are listed on the ASX, the AIM and the JSE in South
Africa. The principal activities of the Company and its
subsidiaries are the acquisition, exploration, development and
operation of metallurgical and thermal coal projects in South
Africa.
The Group's principal assets and projects include:
-- The operating mine, Uitkomst Colliery, acquired on 30 June 2017 (refer note 36 );
-- The Makhado hard coking and thermal coal project that has
been granted a new order mining right ("NOMR"), an integrated water
use licence ("IWUL") and an environmental authorisation;
-- The Vele Colliery, a semi soft coking and thermal coal mine,
currently under care and maintenance is awaiting the final IWUL
relating to the new perennial stream diversion application;
-- Three exploration and development stage coking and thermal
coal projects, namely Chapudi, Generaal and Mopane in the
Soutpansberg Coalfield; and
-- The Mooiplaats Colliery is currently on care and maintenance.
The Company is currently engaged with various parties to sell
Mooiplaats Colliery and expects to complete a sale within twelve
months of the reporting date.
Review of operations
The Company undertook the following activities during the
year:
Operational salient features
-- No fatalities (FY2016: none) and no lost time injuries
recorded during the year (FY2016: none).
-- Mooiplaats Colliery and Vele Colliery are still on care and
maintenance. The Company is currently engaged with various parties
to sell Mooiplaats Colliery and expects to complete a sale within
twelve months of the reporting date.
-- The IWUL for its Vele Colliery in the Limpopo Province has
been renewed for a further twenty years.
-- The suspension of the Integrated Water Use Licence ("IWUL")
for the Makhado Coking Coal Project ("Makhado Project" or
"Makhado") was lifted by the South African Minister of the
Department of Water and Sanitation ("DWS").
Corporate salient features
-- 49,007,596 ordinary shares were issued to M&G Investment
Management Limited ("M&G") at a price of $0.04081 per share to
raise $2 million for working capital.
-- The $10 million loan from Yishun Brightrise Investment Pte
Limited ("YBI") was converted to ordinary share capital.
245,037,981 shares were issued at $ 0.04081 per share.
-- The Company entered into a loan agreement ("Loan Agreement")
with the Industrial Development Corporation of South Africa ("IDC")
and Baobab Mining and Exploration Proprietary Limited ("Baobab"), a
subsidiary of CoAL and owner of the mining right for the Makhado
Project, in terms of which the IDC would advance loan funding up to
$18.4 million (ZAR240 million) to Baobab for use in the Makhado
Project. The loan can be used for general purposes as well. The
first drawdown of $9.2 million (ZAR120 million) was completed in
May 2017.
-- Summer Trees Pte Ltd ("SummerTrees") acquired 257,884,615
ordinary shares in the Company for $10 million.
-- M&G acquired 77,368,384 shares for $3 million at $0.03878 per share.
-- CoAL fulfilled all its obligations to Rio Tinto Minerals
Development Limited ("Rio Tinto") in June 2017 in relation to the
agreements under which its subsidiary company, MbeuYashu
Proprietary Limited acquired its interest in Chapudi Coal
Proprietary Limited and Kwezi Mining Exploration Proprietary
Limited. Full and final payment was made in June 2017.
-- On 30 June 2017, CoAL acquired 100% of the shares in and
claims against Pan African Resources Coal Holdings Proprietary
Limited ("PAR Coal") from Pan African Resources Plc ("Pan African")
for $21.1 million (ZAR275 million), of which $1.9 million (ZAR25
million) is deferred for twenty four months . PAR Coal holds a 91%
shareholding in Uitkomst Colliery Proprietary Limited ("Uitkomst")
with the remaining 9% held by broad based trusts (including
employees and communities) and a strategic entrepreneur's
trust.
Review of operations (continued)
Subsequent events
There have been no events between 30 June 2017 and the date of
this report which necessitate adjustment to the consolidated
statements of comprehensive income, consolidated statements of
financial position, consolidated statements of changes in equity
and the consolidated statements of cash flows at that date.
Financial review
-- No revenue was generated during the year as result of all
operations either remaining in the development stage or being on
care and maintenance (FY2016 $nil).
-- Non-cash charges of $9.3 million (FY2016: $12.8 million) including:
-- Depreciation and amortisation of $0.4 million (FY2016: $1.2 million);
-- Unrealised foreign exchange gain of $2 million (FY2016: $9.6
million loss) as a result of the South
African rand strengthening against the United States dollar;
-- Impairment of the intangible asset of $10.6 million; and
-- Share based payment expense of $0.3 million (FY2016: $0.2 million).
-- Total unrestricted cash balances at year-end, including cash
held by operations available for sale of $9.6 million (FY2016:
$19.5 million).
Future developments
The NOMR for the Makhado Project was granted in May 2015 as well
as a section 11 approval for the transfer of the right to CoAL's
74% owned subsidiary, Baobab Mining. The Company was granted the
IWUL in January 2016 for the period equal to life of mine. The
Company completed a definitive feasibility study for Makhado during
FY2013 which indicates that the project has 344.8 million mineable
tonnes in situ and a 16 year life of mine. The opencast project is
expected to produce 12.6Mtpa of ROM coal yielding 2.3Mtpa of hard
coking coal and 3.2Mtpa of thermal coal for domestic and export
markets. The Company is monitoring the land claims process on the
farms Lukin and Salaita which will form part of the project
boundary and is reworking the project before it can proceed with
development.
The Company will continue to progress all outstanding regulatory
matters as they relate to Vele Colliery. With respect to the Vele
Colliery the South African Department of Mineral Resources ("DMR")
granted an Environmental Authorisation in terms of the National
Environmental Management Act ("NEMA") and the Environmental Impact
Assessment Regulations (2014) for stream diversion and associated
infrastructural activities in the current year under review. CoAL
awaits the approval of the Integrated Water Use Licence ("IWUL")
from the Department of Water and Sanitation which is the final
regulatory approval required for the diversion of two non-perennial
streams. When the latest approval is finalised (expected toward H2
CY2017) the company will make the decision on the commencement of
the plant modification taking into account the prevailing market
conditions.
The exploration and development of the CoAL prospects in the
Soutpansberg coalfield is the catalyst for the long-term growth of
the Company. The DMR is considering the Company's NOMR applications
for the Mopane, Generaal, Chapudi and Telema & Gray
Projects.
Environmental regulations
The Consolidated Entity's operations are not subject to any
significant environmental regulations under either Commonwealth or
State legislation and there has consequently been no breach. The
Group is subject to numerous environmental regulations in South
Africa, including the
-- Environment Conservation Act (No. 73 of 1989);
-- National Water Act (No. 45 of 1965);
-- National Environmental Management Act (No. 107 of 1998);
-- National Environmental Management Air Quality Act (No. 39 of 2004); and
-- The environmental provisions in the Mineral and Petroleum
Resources Development Act (No 28 of 2002).
There is uncertainty regarding the interrelationship between
these statutes in the mining context and as such complete
compliance with all simultaneously is often difficult. The Board
believes that the Consolidated Entity has adequate systems
Environmental regulations (continued)
in place for the management of its environmental impacts but
from time to time statutory non-compliances may occur. The Board
takes these seriously and undertook a thorough review of all its
activities during FY2013 to bring them into compliance and
continues to monitor compliance thereof.
Dividends
No dividend has been paid or proposed for the financial year
ended 30 June 2017 (FY2016: nil).
Shares under option or issued on exercise of options
Details of unissued shares under option as at the date of this
report are:
Number Class of Exercise Expiry date
of shares shares price
under option
------------------ -------------- --------- --------- ------------
Investec options 20,000,000 Ordinary ZAR1.32 21 October
2018
ESOP Unlisted 5,000,000 Ordinary GBP0.055 27 November
Options 2018
------------------ -------------- --------- --------- ------------
Total Unlisted
Options 25,000,000
------------------ -------------- --------- --------- ------------
The holders of these options do not have the right, by virtue of
the option, to participate in any share issue of the Company or of
any other body corporate or registered scheme.
Details of unissued performance rights granted as at the date of
this report are:
Number Class of Exercise Expiry date
of shares shares price
under Performance
Rights
------------------- ------------------- --------- --------- ------------
Performance 25,994,060 Ordinary Nil 1 December
Rights 2018
Performance 29,641,177 Ordinary Nil 29 November
Rights 2019
Total Performance
Rights 55,635,237
------------------- ------------------- --------- --------- ------------
No shares or interests were issued during or since the end of
the financial year as a result of exercise of options.
Indemnification of officers and auditors
During the financial year, the Company paid a premium in respect
of a contract insuring the directors of the Company, the company
secretary, and all executive officers of the Company and of any
related body corporate against a liability incurred by such a
director, secretary or executive officer to the extent permitted by
the Corporations Act 2001.
The Company has not otherwise, during or since the end of the
financial year, except to the extent permitted by law, indemnified
or agreed to indemnify an officer or auditor of the Company or of
any related body corporate against a liability incurred by such an
officer or auditor.
Directors' meetings
The following table sets out the number of directors' meetings
(including meetings of committees of directors) held during the
financial year and the number of meetings attended by each director
(while they were a director or committee member). During the
financial year, a total of six board meetings were held, four
scheduled and two unscheduled, four nomination and remuneration
committee meeting, five audit committee meetings and four safety
and health committee meeting were held.
Directors' meetings (continued)
Board Meetings Audit Committee Nomination Safety,
Meetings and Remuneration Health and
Committee Environment
Meetings Committee
Meetings
Director Held Attended Held Attended Held Attended Held Attended
------------ ------ --------- ------ ---------- ------- ----------- ----- ---------
B Pryor 6 6 5 5 4 4 - -
D Brown 6 6 - - 4 4 4 4
D Schutte 6 6 - - - - - -
P Cordin 6 6 - - - - 4 4
K Mosehla 6 6 5 5 - - - -
R Torlage 6 6 - - - - - -
A Mifflin 6 6 - - - - 4 4
T Mosololi 6 4 5 5 4 4 - -
S Ding* 6 5 - - - - - -
*- Appointed after the first meeting of the financial year
Proceedings on behalf of the Company
No persons applied for leave to bring or intervene in
proceedings on behalf of the Company during or since the end of the
financial year.
Non-audit services
Non-audit services were provided during the current financial
year for services rendered relating to the acquisition of Pan
African Resources Coal Holdings Proprietary Limited and additional
review procedures. Details of amounts paid or payable to the
auditor for services provided during the year by the auditor are
outlined in note 8 to the consolidated financial statements.
Auditor's independence declaration
The auditor's independence declaration is included on page 19 of
these consolidated financial statements.
Remuneration report (Audited)
This remuneration report, which forms part of the Directors
report, sets out information about the remuneration of Coal of
Africa Limited's Directors and its senior management for the
financial year ended 30 June 2017. The prescribed details for each
person covered by this report are detailed below under the
following headings:
-- Director and senior management details;
-- Remuneration policy;
-- Relationship between the remuneration policy and company performance;
-- Remuneration of Directors and senior management; and
-- Key terms of employment contracts.
The Board is responsible for establishing remuneration packages
applicable to the Board members of the Company. The policy adopted
by the Board is to ensure that remuneration properly reflects an
individual's duties and responsibilities and that remuneration is
competitive in attracting, retaining and motivating people of the
highest calibre.
Directors' remuneration packages are also assessed in the light
of the condition of markets within which the Company operates, the
Company's financial condition and the individual's contribution to
the achievement of corporate objectives. Executive Directors are
remunerated by way of a salary or consultancy fees, commensurate
with their required level of service.
Remuneration report (Audited) (continued)
Total remuneration for all Non-executive Directors, excluding
share-based payments, as approved by shareholders at the November
2010 General Meeting, is not to exceed A$1,000,000 per annum
($768,550).
The Board has nominated a Nomination and Remuneration Committee
which was made up as follows: Mr Pryor (Chairman), Mr Mosololi and
Mr Brown. The Company does not have any scheme relating to
retirement benefits for Executive or Non-executive Directors.
Director and key management personnel details
The following persons acted as directors of the Company during
or since the end of the financial year:
-- B Pryor Independent Chairman
-- D Brown Chief Executive Officer and Executive Director
-- D Schutte Chief Financial Officer and Executive Director
-- P Cordin Independent Non-Executive Director
-- K Mosehla Independent Non-Executive Director
-- R Torlage(1) Non-Executive Director
-- A Mifflin Independent Non-Executive Director
-- T Mosololi Independent Non-Executive Director
-- S Ding(2) Non-Executive Director
1. From 30 June 2017, R Torlage became an Independent
Non-Executive Director.
2. S Ding was appointed on 11 October 2016.
Key management personnel are those persons having authority and
responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly, including any
director (whether executive or otherwise) of that entity. The term
'key management' is used in this remuneration report to refer to
the following persons.
-- C Bronn(3) Chief Operating Officer
3. Mr Bronn resigned in March 2017 and remained as a consultant
to the Company until 30 June 2017.
Except as noted, the named persons held their current position
for the whole of the financial year and since the end of the
financial year.
Remuneration policy
The remuneration policy of CoAL has been designed to align key
management personnel objectives with shareholder and business
objectives by providing a fixed remuneration component and offering
specific long-term incentives based on key performance areas
affecting the consolidated Group's financial results. The Board of
CoAL believes the remuneration policy to be appropriate and
effective in its ability to attract and retain the best key
management personnel to run and manage the consolidated Group, as
well as create goal congruence between Directors, key management
and shareholders.
The Board's policy for determining the nature and amount of
remuneration for key management personnel of the consolidated Group
is as follows:
-- The remuneration structure is developed by the Nomination and
Remuneration Committee and approved by the Board after professional
advice is periodically sought from independent external
consultants.
-- All key management personnel receive a base salary (based on
factors such as length of service and experience), options and
performance incentives.
-- Incentives paid in the form of cash and options are intended
to align the interests of the Directors, key management and the
Company with those of the shareholders.
The Nomination and Remuneration Committee reviews key management
personnel packages annually by reference to the consolidated
Group's performance, executive performance and comparable
information from industry sectors.
The performance of key management personnel is measured against
criteria agreed annually with each executive and bonuses and
incentives are linked to predetermined performance criteria. The
performance criteria vary and are determined
Remuneration policy (continued)
in line with each individual's performance contract. The Board
may, however, exercise its discretion in relation to approving
incentives, bonuses and options, and can recommend changes to the
Nomination and Remuneration Committee's recommendations. Any
changes must be justified by reference to measurable performance
criteria. The policy is designed to attract the highest calibre of
executives and reward them for performance results leading to
long-term growth in shareholder wealth.
All remuneration paid to key management personnel is valued at
the cost to the Company and expensed.
The Board's policy is to remunerate Non-executive Directors at
market rates for time, commitment and responsibilities. Shareholder
nominee non-executive directors are not remunerated. The Nomination
and Remuneration Committee determines payments to the Non-executive
Directors and reviews their remuneration annually, based on market
practice, duties and accountability. The maximum aggregate amount
of fees, excluding share-based payments that can be paid to
Non-executive Directors is A$1,000,000 ($768,550).
To assist Directors with independent judgement, it is the
Board's policy that if a director considers it necessary to obtain
independent professional advice to properly discharge the
responsibility of their office as a director then, provided the
director first obtains approval from the Chairman for incurring
such expense, the Company will pay the reasonable expenses
associated with obtaining such advice.
Options granted under the arrangement do not carry dividend or
voting rights. Options are valued using a binomial option pricing
model and the Black-Scholes option pricing model was used to
validate the price calculated.
During the prior financial year the Nomination and Remuneration
Committee approved and implemented a performance rights plan. The
purpose of the Plan is to assist in the reward, retention and
motivation of eligible employee and to align the interest of
eligible employee with the shareholders of the Company. Prior to a
Performance Right being exercised the performance grants do not
carry any dividend or voting rights. The Performance Rights will be
granted for no consideration and no exercise price is payable upon
exercise of the Performance Rights.
All the Performance Rights proposed to be granted are subject to
the following vesting conditions.
Vesting of the Performance Rights will be subject to a hurdle
based on the compound annual growth rate in total shareholder
return (TSR) across the 3 years commencing on the grant date of the
Performance Rights (Performance Period). TSR is a measure of the
increase in the price as determined by the Company. The base price
for the TSR calculation will be the volume weighted average price
(VWAP) of shares over the five days prior to the grant date. The
end price for the TSR calculation will be the VWAP over the last
five days of the Performance Period.
Performance - based remuneration
The key performance indicators (KPIs) are set annually, which
includes consultation with key management personnel to ensure
buy-in. The measures are specifically tailored to the area each
individual is involved in and has a level of control over. The KPIs
target areas the Board believes hold greater potential for group
expansion and profit, covering financial and non-financial as well
as short and long-term goals.
Performance in relation to the KPIs is assessed annually, with
bonuses being awarded depending on the number and deemed difficulty
of the KPIs achieved.
Hedging of Management Remuneration
No member of key management entered into an arrangement during
or since the end of the financial year to limit the risk relating
to any element of that person's remuneration.
Relationship between remuneration policy and Company
performance
The tables below set out summary information about the Group's
earnings and movements in shareholder wealth for the five years to
June 2017.
Year Year Year Year Year
ended ended ended ended ended
30 June 30 June 30 June 30 June 30 June
2017 2016 2015 2014 2013
$'000 $'000 $'000 $'000 $'000
--------- --------- --------- ------------ ---------
Revenue - - - 4,060 146,396
Net loss before tax
from continuing operations 14,640 23,903 6,711 84,120 155,754
Net loss after tax
from continuing operations 14,345 22,472 6,711 84,120 148,137
----------------------------- --------- --------- --------- ------------ ---------
Share price at start A$0.06 A$0.09 A$0.07 A$0.19 A$0.56
of year
Share price at end A$0.05 A$0.06 A$0.09 A$0.07 A$0.19
of year
Basic and diluted
loss per share ($
cents) from continuing
operations 0.86 1.19 0.47 8.02 17.00
----------------------------- --------- --------- --------- ------------ ---------
Remuneration of directors and key management personnel
Details of the nature and amount of each major element of the
remuneration of each director and senior management personnel for
the year are:
Short term employee Post-employment Share-based Total Share
benefits benefits payments based
% of
Total
--------------------------------- ---------------- ------------ ------------ ---------- ---------
2017 Salary Bonus Non Super-annuation Termination Options
and -monetary benefits / Shares
fees benefits
---------- -------- ----------- ---------------- ------------ ------------ ---------- ---------
$ $ $ $ $ $ $ %
---------- -------- ----------- ---------------- ------------ ------------ ---------- ---------
Non-Executive
Directors
B Pryor 54,573 - - - - - 54,573 -
P Cordin 39,639 - - 3,766 - - 43,405 -
K Mosehla 36,371 - - - - - 36,371 -
R Torlage 36,371 - - - - - 36,371 -
A Mifflin 39,964 - - 3,441 - - 43,405 -
T Mosololi 36,371 - - - - - 36,371 -
S Ding(1) - - - - - - - -
Executive Directors
D Brown 445,867 179,271 - - - 155,653 780,791 20
D Schutte 278,142 101,173 - - - 98,830 478,145 21
967,298 280,444 - 7,207 - 254,483 1,509,432 17
---------- -------- ----------- ---------------- ------------ ------------ ---------- -------
Key
Management
C Bronn(2) 249,957 58,918 - - - - 308,875 -
1,217,255 339,362 - 7,207 - 254,483 1,818,307 14
---------- -------- ----------- ---------------- ------------ ------------ ---------- ---------
1. Mr Ding was appointed on 11 October 2016.
2. Mr Bronn resigned during the financial year and held the
position until 30 June 2017.
Remuneration of directors and key management personnel
(continued)
No director or key management appointed during the period
received a payment as part of his consideration for agreeing to
hold the position.
In September 2016, performance bonuses of $0.3 million were paid
out in relation to certain performance targets met for the 2016
financial year. The performance targets were based on a combination
of individual performance and corporate key performance indicators
including; safety, regulatory approvals for Makhado and Vele and
equity funding raised.
Short term employee Post-employment Share-based Total Share
benefits benefits payments based
%
of
Total
-------------------------------- ---------------- ------------ ------------ ---------- -------
2016 Salary Bonus Non Super-annuation Termination Options Salary Bonus
and -monetary benefits / Shares and
fees benefits fees
---------- ------- ----------- ---------------- ------------ ------------ ---------- -------
$ $ $ $ $ $ $ %
---------- ------- ----------- ---------------- ------------ ------------ ---------- -------
Non-Executive
Directors
B Pryor 56,608 - - - - 17,478 74,086 24
P Cordin 47,070 - - 4,472 - 17,478 69,020 25
K Mosehla 46,240 - - - - 17,478 63,718 27
R Torlage 46,240 - - - - - 46,240 -
A Mifflin 47,070 - - 4,472 - 17,478 69,020 25
T Mosololi 46,240 - - - - 17,478 63,718 27
Executive Directors -
D Brown 405,424 31,782 - - - 78,876 516,082 15
D Schutte 251,964 - - - - 25,053 277,017 9
946,856 31,782 - 8,944 - 191,319 1,178,901 16
---------- ------- ----------- ---------------- ------------ ------------ ---------- -------
Key Management
C Bronn 227,227 17,335 - - - 17,437 261,999 7
1,174,083 49,117 - 8,944 - 208,756 1,440,900 14
---------- ------- ----------- ---------------- ------------ ------------ ---------- -------
Share-based payments granted as compensation for the current
financial year
During the financial year, the following share-based payment
arrangements were in existence:
Exercise Grant
Grant Expiry price date Vesting
Option series Number date date value date
--------------- ----------- ----------- ----------- --------- --------- --------
ESOP unlisted
options 2,670,000 16/09/2011 14/02/2017 ZAR7.60 ZAR3.46 (1)
ESOP unlisted
options 3,932,928 22/11/2013 30/06/2017 ZAR1.75 ZAR0.52 (2)
ESOP unlisted
options 3,525,000 28/11/2014 01/02/2019 ZAR1.20 ZAR0.15 (3)
ESOP unlisted
options 3,525,000 28/11/2014 01/02/2019 ZAR1.32 ZAR0.14 (3)
ESOP unlisted
options 3,525,000 28/11/2014 01/02/2019 ZAR1.45 ZAR0.12 (3)
ESOP unlisted
options 5,000,000 27/11/2015 27/11/2018 GBP0.055 AUD0.024 (4)
22,177,928
-----------
1. These options were issued to employees and one third vested
on 1 July 2012, one third on 1 July 2013 and the remaining third on
1 July 2014. These options expired during the current financial
year.
2. These options all vested on 28 November 2012 and all options
expired during the current financial year.
3. A total of 10,575,000 options were granted to Mr Brown on his
appointment as Chief Executive Officer and vest in three equal
tranches on 1 February 2015, 1 February 2016 and 1 February 2017.
These options were cancelled in the current financial year.
4. A total of 5,000,000 options were granted to non-executive
Directors Mr Cordin, Mr Mosehla, Mr Pryor, Mr Mifflin and Mr
Mosololi vesting immediately on grant date.
The following grants of share-based payment compensation to key
management personnel relate to the current financial year:
During the financial year
-------------------------------------------------------------------
% of
compensation
Name for the year
% of grant % of grant consisting of
Option series Number granted Number vested vested forfeited options
------------ ----------------- --------------- -------------- ---------------- ---------------- ----------------
Performance
D Brown Grant 11,254,933 - - n/a 15
Performance
D Schutte Grant 7,983,715 - - n/a 9
Performance
C Bronn(1) Grant 3,429,966 - - 100 0
1. Mr Bronn resigned during the financial year and therefore
forfeited the performance grant.
During the year, none of the key management personnel exercised
options that were granted to them as part of their
compensation.
Key terms of employment contracts
The Company entered into formal contractual employment
agreements with the Chief Executive Officer and the Chief Financial
Officer only and not with any other member of the Board. The
employment conditions of the Chief Executive Officer and Chief
Financial Officer are:
Current
1. Mr Brown's appointment as Chief Executive Officer commenced
on 1 February 2014 with an annual remuneration of ZAR6.1 million
and a six month notice period. During the year, Mr Brown received
11,254,993 Performance Rights. The Performance Rights factor in a
hurdle rate based on the compound annual growth rate of total
shareholder return across the period from the grant date. Options
of 10,575,000 that were previously granted to Mr Brown in
accordance with the Company's employee share option plan were
cancelled during the period
2. Mr Schutte serves as Financial Director with an annual
remuneration of ZAR3.8 million and a three month notice period.
During the year, Mr Schutte received 7,983,715 Performance Rights.
The Performance Rights factors in a hurdle rate based on the
compound annual growth rate of total shareholder return across the
period from the grant date.
The employment conditions of the following specified executives
have been formalised in employment contracts:
1. Mr Bronn was employed by CoAL in the capacity of Chief
Operations Officer, at an annual remuneration of ZAR3.4 million. Mr
Bronn resigned as Chief Operating Officer in March 2017 following
the judgement and fine lodged by the Financial Services Board for
the contravention of Section 78(1)(a) of the Financial Markets Act,
19 of 2012. He remained as a consultant to the Company until 30
June 2017 to finalise specific tasks. Mr Bronn, forfeited all share
based incentive awards and was not entitled to receive any bonus
payments for the year ending 30 June 2017.
Key management personnel equity holdings
Option holdings
The movement during the reporting period in the number of
options over ordinary shares exercisable at ZAR1.75 on or before 30
June 2017 held directly, indirectly or beneficially by each
director and key management personnel including their
personally-related entities, is as follows:
Held Granted Exercised Expired/Other Held at
at as remuneration changes 30 June
1 July 2017
2016
---------------- -------- ----------------- ---------- -------------- ---------
Non-Executive
Directors
B Pryor - - - - -
D Murray(1) - - - - -
P Cordin - - - - -
K Mosehla - - - - -
R Torlage - - - - -
A Mifflin - - - - -
T Mosololi - - - - -
S Ding - - - - -
Executive
Directors
D Brown - - - - -
D Schutte - - - - -
Key management
C Bronn(1) 174,696 - - (174,696) -
---------------- -------- ----------------- ---------- -------------- ---------
1. Mr Bronn resigned during the financial year and therefore
forfeited the options
Key management personnel equity holdings (continued)
The movement during the reporting period in the number of
options over ordinary shares exercisable in three equal tranches at
ZAR1.20 on or before 1 February 2015, ZAR1.32 on or before 1
February 2016 and ZAR1.45 on or before 1 February 2017 held
directly, indirectly or beneficially by each director and key
management personnel including their personally-related entities,
is as follows:
Held Granted Exercised Expired/Other Held at
at as remuneration changes 30 June
1 July 2017
2016
---------------- ----------- ----------------- ---------- -------------- ---------
Non-Executive
Directors
B Pryor - - - - -
P Cordin - - - - -
K Mosehla - - - - -
R Torlage - - - - -
A Mifflin - - - - -
T Mosololi - - - - -
S Ding
Executive
Directors
D Brown(1) 10,575,000 - - (10,575,000) -
D Schutte - - - - -
Key management
C Bronn - - - - -
---------------- ----------- ----------------- ---------- -------------- ---------
1. These options were cancelled during the period.
The movement during the reporting period in the number of
options over ordinary shares at GBP 0.055, vesting immediately held
directly, indirectly or beneficially by each director and key
management personnel including their personally-related entities,
is as follows:
Held Granted Exercised Expired/Other Held at
at as remuneration changes 30 June
1 July 2017
2016
---------------- ---------- ----------------- ---------- -------------- ----------
Non-Executive
Directors
B Pryor 1,000,000 - - - 1,000,000
P Cordin 1,000,000 - - - 1,000,000
K Mosehla 1,000,000 - - - 1,000,000
R Torlage - - - - -
A Mifflin 1,000,000 - - - 1,000,000
T Mosololi 1,000,000 - - - 1,000,000
S Ding - - - - -
Executive
Directors
D Brown - - - - -
D Schutte - - - - -
Key management
C Bronn - - - - -
---------------- ---------- ----------------- ---------- -------------- ----------
Key management personnel equity holdings (continued)
The movement during the reporting period in the number of
performance grants over ordinary shares exercisable in three years'
time subject to performance criteria, held directly, indirectly or
beneficially by each director and key management personnel
including their personally-related entities, is as follows:
Held Granted Exercised Expired/Other Held at
at as remuneration changes 30 June
1 July 2017
2016
---------------- ---------- ----------------- ---------- -------------- -----------
Non-Executive
Directors
B Pryor - - - - -
P Cordin - - - - -
K Mosehla - - - - -
R Torlage - - - - -
A Mifflin - - - - -
T Mosololi - - - - -
S Ding - - - - -
Executive
Directors
D Brown 9,714,021 11,254,933 - - 20,968,954
D Schutte 5,449,944 7,983,715 - - 13,433,659
Key management
C Bronn(1) 3,793,298 3,429,966 - (7,223,264) -
---------------- ---------- ----------------- ---------- -------------- -----------
1. Mr Bronn resigned during the financial year and therefore
forfeited the options.
The movement during the reporting period in the number of
ordinary shares held, directly, indirectly or beneficially by each
key management personnel including their personally-related
entities, is as follows:
Held Granted Exercised Expired/Other Held at
at as remuneration changes 30 June
1 July 2017
2016
---------------- ---------- ----------------- ---------- -------------- ----------
Non-Executive
Directors
B Pryor 150,000 - - - 150,000
P Cordin 1,371,059 - - - 1,371,059
K Mosehla - - - - -
R Torlage - - - - -
A Mifflin - - - - -
T Mosololi(1) 10,000 - - - 10,000
S Ding - - - - -
Executive
Directors
D Brown 825,000 - - - 825,000
D Schutte - - - - -
Key management
C Bronn 117,000 - - - 117,000
---------------- ---------- ----------------- ---------- -------------- ----------
1. Purchased prior to being appointed as a Non-executive
Director.
This directors' report is signed in accordance with a resolution
of directors made pursuant to s298(2) of the Corporations Act
2001.
On behalf of the Directors
Bernard Robert Pryor David Hugh Brown
Chairman Chief Executive Officer
29 September 2017 29 September 2017
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Tower 2, Brookfield Place
123 St Georges Terrace
Perth WA 6000
GPO Box A46
Perth WA 6837 Australia
Tel: +61 8 9365 7000
Fax: +61 8 9365 7001
www.deloitte.com.au
The Board of Directors
29 September 2017
Dear Directors
Coal of Africa Limited
In accordance with section 307C of the Corporations Act 2001, I
am pleased to provide the following declaration of independence to
the directors of Coal of Africa Limited.
As lead audit partner for the audit of the financial statements
of Coal of Africa Limited for the financial year ended 30 June
2017, I declare that to the best of my knowledge and belief, there
have been no contraventions of:
(i) the auditor independence requirements of the Corporations
Act 2001 in relation to the audit; and
(ii) any applicable code of professional conduct in relation to
the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
David Newman
Partner
Chartered Accountants
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE STATEMENT
The Board of Directors of Coal of Africa Limited is responsible
for the establishment of a corporate governance framework that has
regard to the best practice recommendations set by the ASX
Corporate Governance Council.
This statement summarises the corporate governance practices
that have been adopted by the Board. In addition to the information
contained in this statement, the Company's website at
www.coalofafrica.com contains additional details of its corporate
governance procedures and practices.
The Company has followed the ASX Corporate Governance Council's
Corporate Governance Principles and Recommendations (Third Edition)
(ASX Principles) where the Board has considered the recommendations
to be an appropriate benchmark for its corporate governance
principles. Where the Company considered it was not appropriate to
presently comply with a particular recommendation, the reasons are
set out in the relevant section of this statement.
PRINCIPLE 1: LAY SOLID FOUNDATIONS FOR MANAGEMENT AND
OVERSIGHT
A listed entity should establish and disclose the respective
roles and responsibilities of its board and management and how
their performance is monitored and evaluated.
ASX Principles Recommendation 1.1:
A listed entity should disclose:
a) the respective roles and responsibilities of its board and management; and
b) those matters expressly reserved to the board and those delegated to management.
The Board has established a Board Charter which sets out
functions reserved to the Board and those delegated to senior
executives. This Charter is available on the Company's website.
The role of the Board is to provide leadership for and
supervision of the Company's senior management. The Board provides
the strategic direction of the Company and regularly measures the
progression by senior management of that strategic direction.
The key responsibilities of the Board include:
-- Overseeing the Company, including its control and accountability systems;
-- Appointing the Chief Executive Officer, or equivalent, for a
period and on terms as the Directors see fit and, where
appropriate, removing the Chief Executive Officer, or
equivalent;
-- Ratifying the appointment and, where appropriate, the removal
of senior executives, including the Chief Financial Officer and the
Company Secretary;
-- Ensuring the Company's policy and procedure for selection and
(re)appointment of Directors is reviewed in accordance with the
Company's Nomination Committee Charter;
-- Approving the Company's policies on risk oversight and
management, internal compliance and control, Code of Conduct, and
legal compliance;
-- Satisfying itself that senior management has developed and
implemented a sound system of risk management and internal control
in relation to financial reporting risks and reviewed the
effectiveness of the operation of that system;
-- Assessing the effectiveness of senior management's
implementation of systems for managing material business risk
including the making of additional enquiries and to request
assurances regarding the management of material business risk, as
appropriate;
-- Monitoring, reviewing and challenging senior management's
performance and implementation of strategy;
CORPORATE GOVERNANCE
-- Ensuring appropriate resources are available to senior management;
-- Approving and monitoring the progress of major capital
expenditure, capital management, and acquisitions and
divestitures;
-- Monitoring the financial performance of the Company;
-- Ensuring the integrity of the Company's financial (with the
assistance of the Audit and Risk Committee) and other reporting
through approval and monitoring;
-- Providing overall corporate governance of the Company,
including conducting regular reviews of the balance of
responsibilities within the Company to ensure division of functions
remain appropriate to the needs of the Company;
-- Appointing the external auditor (where applicable, based on
recommendations of the Audit and Risk Committee) and the
appointment of a new external auditor when any vacancy arises,
provided that any appointment made by the Board must be ratified by
shareholders at the next Annual General Meeting of the Company;
-- Engaging with the Company's external auditors and Audit and Risk Committee;
-- Monitoring compliance with all of the Company's legal
obligations, such as those obligations relating to the environment,
native title, cultural heritage and occupational health and safety;
and
-- Making regular assessment of whether each non-executive
director is independent in accordance with the Company's policy on
assessing the independence of Directors.
-- The Board has delegated responsibilities and authorities to
management to enable them to conduct the Company's day-to-day
activities. Matters which are not covered by these delegations,
such as approvals which exceed certain limits, require Board
approval.
Meeting attendance of members of the Board for
FY2017
Number of Board Number of Board
meetings attended meetings held while
while a member a member
Bernard Pryor
(Chairman) 6 6
David Brown 6 6
Peter Cordin 6 6
Khomotso Mosehla 6 6
Rudolph Torlage 6 6
Andrew Mifflin 6 6
Thabo Mosololi 4 6
De Wet Schutte 6 6
Shangren Ding 5 5
The Board has established three standing Committees to assist it
to meet its responsibilities:
-- Audit and Risk Committee;
-- Nomination and Remuneration Committee; and
-- Safety, Health and Environment Committee.
Each standing Committee has a formal Charter approved by the
Board setting out the matters relevant to composition, terms of
reference, process and administration of that Committee. These
Committees are described in further detail elsewhere in this
Corporate Governance Statement.
The Board Charter requires the Board to convene regular meetings
with such frequency as is sufficient to appropriately discharge its
responsibilities.
Standing Committee meetings are held as required, generally the
day prior to the scheduled Board meeting. The Chairman sets the
agenda for each meeting in conjunction with the Chief Executive
Officer and Company Secretary. Any Director may request additional
matters on the agenda. Members of senior management attend meetings
of the Board and its Committees by invitation and are available for
questioning by Directors.
ASX Principles Recommendation 1.2:
A listed entity should:
a) undertake appropriate checks before appointing a person, or
putting forward to security holders a candidate for election, as a
Director; and
b) provide security holders with all material information in its
possession relevant to a decision on whether or not to elect or
re-elect a Director.
The Company performs checks on all potential Directors which
include checks on a person's character, experience, education,
criminal record and bankruptcy history. Potential Directors are
required to provide their consent for the Company to conduct any
background or other checks and also acknowledge that they will have
sufficient time available to fulfil their responsibilities as
Director of the Company.
Newly appointed Directors must stand for reappointment at the
next Annual General Meeting of the Company. The Notice of Meeting
for the AGM provides shareholders with information about each
Director standing for election or re-election including details
regarding their length of tenure, relevant skills and
experience.
ASX Principles Recommendation 1.3:
A listed entity should:
a) have a written agreement with each Director and senior
executive setting out the terms of their appointment.
The Company has written agreements in place with each Director
in the form of an appointment letter. The letter, among other
matters, summarises the terms of appointment including
remuneration, the requirement to comply with key corporate policies
including the Code of Conduct and Share Trading Policy and
indemnity and insurance arrangements.
All senior executives including the Chief Executive Officer and
the Chief Financial Officer have their position descriptions, roles
and responsibilities set out in writing in an employment
contract.
ASX Principles Recommendation 1.4:
The Company Secretary of a listed entity should:
a) be accountable directly to the Board, through the Chairman,
on all matters to do with the proper functioning of the Board;
and
b) the Company Secretary has an important role in supporting the
effectiveness of the Board and its committees.
The role of the Company Secretary includes:
-- Advising the Board and its committees on governance matters;
-- Monitoring that Board and committee policy and procedures are followed; and
-- Ensuring that the business at Board and committee meetings is
accurately reflected in the minutes.
All Directors have direct access to the Company Secretary and
vice versa. The appointment and removal of the Company Secretary is
a matter for decision by the Board as a whole.
ASX Principles Recommendation 1.5:
A listed entity should:
a) have a diversity policy which includes requirements for the
Board or a relevant committee of the board to set measurable
objectives for achieving gender diversity and to assess annually
both the objectives and the entity's progress in achieving
them;
b) disclose the policy or a summary of it; and
c) disclose at the end of each reporting period the measurable
objectives for achieving gender diversity set by the board or a
relevant committee of the Board in accordance with the entity's
diversity policy and its progress towards achieving them and
either:
1. the respective proportions of men and women on the Board, in
senior executive positions and across the whole organisation;
or
2. if the entity is a "relevant employer" under the Workplace
Gender Equality Act, the entity's most recent "Gender Equality
Indicators", as defined in and published under that Act.
The Company is committed to developing a diverse workforce and
providing a work environment in which all employees are treated
fairly and with respect. To this end, the Company has in place an
Employment Equity Policy which details its commitment to being an
equal opportunity employer and is in line with the South African
Mining Charter and Employment Equity legislation in South Africa. A
copy of the Employment Equity Policy and the Diversity Policy are
available on the Company's website.
The Mining Charter requires that a company establish measurable
objectives for achieving gender diversity and assess such
objectives and progress toward achieving them. The targets set for
CoAL include 10% female representation in core mining positions.
Employment Equity targets as these relate to designated groups (one
of which is women) are included as part of the business key
performance areas which are included in all management performance
contracts.
Proportion of female employees
in the organisation at end
FY2017 %
Employees 40
Management 20
Senior Executive 25
Board 0
The Company is not considered a relevant employer under the
Australian Workplace Gender Equality Act as the number of employees
in Australia is below the threshold.
ASX Principles Recommendation 1.6:
A listed entity should:
a) have and disclose a process for periodically evaluating the
performance of its Board, its committees and individual Directors;
and
b) disclose in relation to each reporting period, whether a
performance evaluation was undertaken in the reporting period in
accordance with that process.
The Board reviews its performance and the performance of
individual Directors annually. The most recent review, which was
conducted during the year, involved the completion of a detailed
questionnaire by each Director. The process was managed by the
Company Secretary and the Chairman and the results of the review
were discussed at a subsequent Board meeting.
The Board considers its processes for reviewing the performance
of the Board appropriate for the size and stage of development of
the Company.
ASX Principles Recommendation 1.7:
A listed entity should:
a) have and disclose a process for periodically evaluating the
performance of its senior executives; and
b) disclose in relation to each reporting period, whether a
performance evaluation was undertaken in the reporting period in
accordance with that process.
The Chief Executive Officer is responsible for assessing the
performance of the key executives within the Company. This is
performed at least annually through a formal process involving a
formal meeting with each senior executive. A performance evaluation
of senior executives was completed in the financial year in
accordance with this process.
PRINCIPLE 2: STRUCTURE THE BOARD TO ADD VALUE
A listed entity should have a Board of an appropriate size,
composition, skills and commitment to enable it to discharge its
duties effectively.
ASX Principles Recommendation 2.1:
The board of a listed entity should:
a) have a Nomination Committee which:
1. has at least three members, a majority of whom are
independent Directors; and
2. is chaired by an independent Director; and disclose
3. the Charter of the committee;
4. the members of the committee; and
5. as at the end of the reporting period the number of times the
committee met throughout the period and the individual attendances
of the members at those meetings; or
b) if it does not have a nomination committee, disclose that
fact and the processes it employs to address board succession
issues and to ensure that the board has the appropriate balance of
skills, knowledge, experience, independence and diversity to enable
it to discharge its duties and responsibilities effectively.
The Company has established a Nomination and Remuneration
Committee and adopted a Charter that sets out the committee's roles
and responsibilities, composition and membership requirements. The
Charter has been published on the Company's website.
The Committee's nomination responsibilities include ensuring
that the Board has the appropriate blend of Directors with the
necessary expertise and relevant industry experience. As such, the
Charter requires the Committee to:
-- Regularly review the size and composition of the Board, and
make recommendations to the Board on any appropriate changes;
-- Identify and assess necessary and desirable Director
competences and provide advice on the competency levels of
Directors with a view to enhancing the Board;
-- Make recommendations on the appointment and removal of Directors;
-- Make recommendations on whether any Directors whose term of
office is due to expire should be nominated for re-election;
and
-- Regularly review the time required from non-executive
Directors and whether non-executive Directors are meeting that
requirement.
The responsibilities of this Committee with respect to
remuneration matters are set out elsewhere in this statement.
The Committee Charter states that the composition should include
a minimum of three members, the majority of whom must be
independent, and a Chairman who is an independent Director.
Membership is consistent with the composition requirements of the
Charter and the recommendations of the ASX Principles.
Meeting attendance of members of the Nomination
and Remuneration Committee for FY2017
Number of Committee Number of Committee
meetings attended meetings
in FY2017 while held in FY2017
a member while
a member
Bernard Pryor
(Chairman) 4 4
Thabo Mosololi 4 4
David Brown 4 4
ASX Principles Recommendation 2.2:
A listed entity should:
a) have and disclose a board skills matrix setting out the
skills and diversity that the Board currently has or is looking to
achieve in its membership.
The Company's website contains details on the procedures for the
selection and appointment of new Directors and the re-election of
incumbent Directors, together with the Board's policy for the
nomination and appointment of Directors.
The Board has developed a structured process for selection and
appointment of new Directors to the Board. As part of this
procedure, the Board has committed to:
-- The evaluation and identification of the diversity, skills,
experience and expertise that will best complement Board
effectiveness;
-- The development of a competencies review process for
identifying and assessing Director competencies;
-- The conduct of a competencies review of the Board before a
candidate is recommended for appointment; and
-- The periodic review of the Board's succession plan.
The following Board skills matrix sets out the mix of skills,
experience and expertise the Board currently has across
its membership:
Competencies Rating
South African politics
Strategic thinking
Gender x
Technical
Financial
Commercial
Mergers and acquisitions
Coal markets
International affairs
Shareholder relations
Project development
Equity markets
Debt markets/banking x
experience
Executive leadership
Listed board experience
SHE and sustainability
X - The CoAL Board
is working to increase
these skills.
ASX Principles Recommendation 2.3:
A listed entity should disclose:
a) the names of the Directors considered by the Board to be
independent Directors;
b) if a Director has an interest, position, association or
relationship of the type that might cause doubts about the
independence of that Director but the Board is of the opinion that
it does not compromise the independence of the Director; the nature
of the interest, position, association or relationship in question
and an explanation of why the board is of that opinion; and
c) the length of service of each Director.
ASX Principles Recommendation 2.4:
A majority of the board of a listed entity should:
-- be independent Directors.
ASX Principles Recommendation 2.5:
The chair of the board of a listed entity should:
a) be an independent Director and, in particular; should not be
the same person as the Chief Executive Officer of the entity.
The Board currently comprises two executive Directors and seven
non-executive Directors. Six of the non-executive Directors are
considered to be independent. The Chairman, Mr Pryor, is one of the
independent Directors.
The Board agrees that all Directors should bring an independent
judgement to bear in decision-making. The Board has adopted a
formal policy on access to independent professional advice which
provides that Directors are entitled to seek independent
professional advice for the purposes of the proper performance of
their duties. The advice is at the Company's expense and advice so
obtained is to be made available to all Directors.
A Director's obligations to avoid a conflict of interest are set
out in the Code of Conduct, available on the Company's website.
Directors must also comply strictly with Corporations Act
requirements for the avoidance of conflicts.
The Board considers an independent Director to be a
non-executive Director who meets the criteria for independence set
out the ASX Principles. In determining a Director's independence,
the Board considers the relationships that may affect
independence.
Criteria that the Board takes into account when determining
Director independence include:
-- Substantial shareholdings in the Company;
-- Past or current employment in an executive capacity;
-- Whether or not the Director has been a principal of a
material professional adviser or a material consultant to the
Company in the past three years;
-- Material supplier or customer relationships with the Company;
-- Material contractual relationships or payments for services other than as a Director; and
-- Family ties and cross-directorships.
Materiality for these purposes is based on quantitative and
qualitative thresholds, set out in the Board Charter available from
the Company's website.
The Board has reviewed and considered the positions and
associations of each of the Directors in office at the date of this
report and consider that a majority of the Directors are
independent. Bernard Pryor, Peter Cordin, Khomotso Mosehla, Andrew
Mifflin, Thabo Mosololi and Rudolph Torlage are considered
independent. Executive Directors David Brown and De Wet Schutte and
non-executive Director Shangren Ding are not considered
independent. Non-executive Director, Shangren Ding, is an
officer/senior employee of Haohua Energy International (Hong Kong)
Resource Co., Ltd, a substantial shareholder in the Company and as
such does not meet the Board's criteria for independence.
The period of office held by each Director
in office
Period in Due for re-election
Director Date appointed office (years) or retirement
Bernard Pryor 6 August 5 2019 AGM
2012
David Brown 6 August 5 2018 AGM
2012
De Wet Schutte 22 June 2015 2 2017 AGM
Peter Cordin 8 December 19 2018 AGM
1997
Khomotso 18 November 6 2019 AGM
Mosehla 2010
Rudolph Torlage 18 November 6 2017 AGM
2010
Andrew Mifflin 12 December 2 2017 AGM
2014
Thabo Mosololi 12 December 2 2018 AGM
2014
Shangren 11 October 1 2019 AGM
Ding 2016
Directors must retire at the third AGM following their election
or most recent re-election. At least one third of Directors must
stand for election at each AGM. Any Director appointed to fill a
casual vacancy since the date of the previous AGM must submit
themselves to shareholders for election at the next AGM.
Re-appointment of Directors by rotation is not automatic.
ASX Principles Recommendation 2.6:
A listed entity should:
a) have a program for inducting new Directors and provide
appropriate professional development opportunities for Directors to
develop and maintain the skills and knowledge needed to perform
their role as Directors effectively.
As part of the induction process, meetings are arranged with
other Board members and key executives prior to the Director's
appointment.
All Directors are expected to maintain the skills required to
discharge their obligations to the Company. Directors are
encouraged to undertake continuing professional education and where
this involves industry seminars and approved education courses,
this is paid for by the Company where appropriate.
The skills, experience and expertise relevant to the position of
Director held by each Director in office at the date of this
integrated report is set out in the Directors' report.
PRINCIPLE 3: ACT ETHICALLY AND RESPONSIBLY
A listed entity should act ethically and responsibly.
ASX Principles Recommendation 3.1:
A listed entity should:
a) have a code of conduct for its Directors, senior executives
and employees; and
b) disclose that code or a summary of it.
CODE OF CONDUCT
The Board encourages appropriate standards of conduct and
behaviour from Directors, officers, employees and contractors of
the Company. The Board has adopted a Code of Conduct in relation to
Directors and employees, available from the Company's website. This
Code of Conduct is regularly reviewed and updated as necessary to
ensure that it reflects the highest standards of behaviour and
professionalism and the practices necessary to maintain confidence
in the Company's integrity.
A fundamental theme is that all business affairs are conducted
legally, ethically and with strict observance of the highest
standards of integrity and propriety.
SECURITIES TRADING POLICY
The Board has adopted a Securities Trading Policy which
regulates dealings by Directors, officers and employees in
securities issued by the Company. The policy is intended to assist
in maintaining market confidence in the integrity of dealings in
the Company's securities.
Under the policy, which is available on the Company's website,
Directors, officers and employees of the Company must not, whether
in their own capacity or as an agent for another, subscribe for,
purchase or sell, or enter into an agreement to subscribe for,
purchase or sell, any securities (ie. shares or options) in the
Company, or procure another person to do so:
a) If that Director, officer or employee possesses information
that a reasonable person would expect to have a material effect on
the price or value of the securities if the information was
generally available;
b) If the Director, officer or employee knows or ought
reasonably to know, that:
-- the information is not generally available; and
-- if it were generally available, it might have a material
effect on the price or value of the securities in the Company;
and
c) without the written acknowledgement of the Chair.
Further, Directors, officers and employees must not either
directly or indirectly pass on this kind of information to another
person if they know, or ought reasonably to know, that this other
person is likely to deal in the securities of the Company or
procure another person to do so.
The policy regulates trading by key management personnel within
defined closed periods, as well as providing details of trading not
subject to the policy, exceptional circumstances in which key
management personnel may be permitted to trade during a prohibited
period with prior written clearance and the procedure for obtaining
written clearance.
Directors, officers and employees must not enter into
transactions or arrangements which operate to limit the economic
risk of their security holding in the Company without first seeking
and obtaining written acknowledgement from the Chair.
Executives are also prohibited from entering into transactions
or arrangements which limit the economic risk of participating in
unvested entitlements.
PRIVACY
The Company has resolved to comply with the National Privacy
Principles contained in the Privacy Act 1988, to the extent
required for a company the size and nature of CoAL.
PRINCIPLE 4: SAFEGUARD INTEGRITY IN CORPORATE REPORTING
A listed entity should have formal and rigorous processes that
independently verify and safeguard the integrity of its corporate
reporting.
ASX Principles Recommendation 4.1:
The board of a listed entity should:
a) have an audit committee which:
1. has at least three members, all of whom are non-executive
Directors and a majority of whom are
independent Directors; and
2. is chaired by an independent Director, who is not the chair
of the board, and disclose
3. the charter of the committee;
4. the relevant qualifications and experience of the members of
the committee; and
5. in relation to each reporting period, the number of times the
committee met throughout the period and the individual attendances
of the members at those meetings; or
b) if it does not have an audit committee, disclose that fact
and the processes it employs that independently verify and
safeguard the integrity of its corporate reporting, including the
processes for the appointment and removal of the external auditor
and the rotation of the audit engagement partner.
AUDIT COMMITTEE
The Company has established an Audit and Risk Committee which is
comprised of a majority of independent non-executive Directors.
The role of the Audit and Risk Committee is to:
-- Monitor and review the integrity of the financial reporting
of the Company, reviewing significant financial reporting
judgments;
-- Review the Company's internal financial control system and,
unless expressly addressed by a separate risk committee or by the
Board itself, risk management systems;
-- Monitor, review and oversee the external audit function
including matters concerning appointment and remuneration,
independence and non-audit services;
-- Monitor and review compliance with the Company's Code of Conduct; and
-- Perform such other functions as assigned by law, the Company's Constitution, or the Board.
The Board has determined that the Audit and Risk Committee
should comprise:
-- At least three members;
-- A majority of independent non-executive Directors; and
-- An independent chair who is not the Chair of the Board.
In addition 1, the Audit and Risk Committee should include:
-- Members who are financially literate i.e. able to read and understand financial statements;
-- At least one member with relevant qualifications and
experience, i.e. a qualified accountant or other finance
professional with experience of financial and accounting matters;
and
-- At least one member with an understanding of the industry in which the entity operates.
-- Membership is consistent with the composition requirements of
the Charter and the recommendations of the ASX Principles.
The Charter is published on the Company's website. The website
also contains information on the procedures for the selection and
appointment of the external auditor and for the rotation of
external audit partners.
Details of meeting attendance of members of
the Audit and Risk Committee for FY2017
Number of Committee Number of Committee
meetings attended meetings held in
in FY2017 FY2017
while a member while a member
Thabo Mosololi
(Chairman) 5 5
Bernard Pryor 5 5
Khomotso Mosehla 5 5
ASX Principles Recommendation 4.2:
The board of a listed entity should:
a) before it approves the entity's financial statements for a
financial period, receive from the CEO and CFO a declaration that,
in their opinion, the financial records of the entity have been
properly maintained and that the financial statements comply with
the appropriate accounting standards and give a true and fair view
of the financial position and performance of the entity and that
the opinion has been formed on the basis of a sound system of risk
management and internal control which is operating effectively.
The Chief Executive Officer and Chief Financial Officer confirm
in writing to the Board that:
a) The Company's annual financial reports present a true and
fair view, in all material respects, of the Company's financial
condition and operational results are in accordance with relevant
accounting standards;
b) The above confirmation is founded on a sound system of risk
management and internal compliance and control which implements the
policies of the Board; and
c) The Company's risk management and internal compliance and
control system is operating efficiently and effectively in all
material respects.
This declaration was obtained for the relevant reporting
period.
ASX Principles Recommendation 4.3:
A listed entity that has an AGM should:
a) ensure that its external auditor attends its AGM and is
available to answer questions from security holders relevant to the
audit.
The auditor attends the AGM, usually by telephone as the meeting
is held in the United Kingdom. Shareholders are able to ask
questions on the conduct of the audit and the preparation and
content of the audit report, in accordance with the requirements of
the Corporations Act 2001.
PRINCIPLE 5: MAKE TIMELY AND BALANCED DISCLOSURE
A listed entity should make timely and balanced disclosure of
all matters concerning it that a reasonable person would expect to
have a material effect on the price or value of its securities.
The Company is committed to ensuring that:
-- All investors have equal and timely access to material
information concerning the Company - including its financial
situation, performance, ownership and governance; and
-- Company announcements are factual and presented in a clear and balanced way.
ASX Principles Recommendation 5.1:
A listed entity should:
a) have a written policy for complying with its continuous
disclosure obligations under the Listing Rules; and
b) disclose that policy or a summary of it.
The Board has an established Shareholder Communication Policy
which is available from the Company's website. The Company has
adopted certain procedures to ensure that it complies with its
continuous disclosure obligations and has appointed a Responsible
Officer who is responsible for ensuring the procedures are complied
with.
PRINCIPLE 6: RESPECT THE RIGHTS OF SECURITY HOLDERS
A listed entity should respect the rights of its security
holders by providing them with appropriate information and
facilities to allow them to exercise those rights effectively.
ASX Principles Recommendation 6.1:
A listed entity should:
a) provide information about itself and its governance to
investors via its website.
ASX Principles Recommendation 6.2:
A listed entity should:
a) design and implement an investor relations program to
facilitate effective two-way communication with investors.
ASX Principles Recommendation 6.3:
A listed entity should:
b) disclose the policies and processes it has in place to
facilitate and encourage participation at meetings of security
holders.
ASX Principles Recommendation 6.4:
A listed entity should:
a) give security holders the option to receive communications
from, and send communications to, the entity and its security
register electronically.
The Board has established a communications strategy which is
available from the Company's website.
The Board aims to ensure that the shareholders are informed of
all major developments affecting the Company. All shareholders
receive the Company's annual report, and may also request copies of
the Company's half-yearly and quarterly reports.
The Company maintains a website at www.coalofafrica.com and
makes comprehensive information available on a regular and up-to
date basis. The Company provides shareholder materials directly to
shareholders through electronic means. A shareholder may request a
hard copy of the Company's annual report to be posted to them.
Shareholders are encouraged at annual general meetings to ask
questions of Directors and senior management and also the Company's
external auditors, who attend the Company's AGMs.
PRINCIPLE 7: RECOGNISE AND MANAGE RISK
A listed entity should establish a sound risk management
framework and periodically review the effectiveness of that
framework.
ASX Principles Recommendation 7.1:
The board of a listed entity should:
a) have a committee or committees to oversee risk, each
of which:
1. has at least three members, a majority of whom are
independent Directors;
2. is chaired by an independent Director;
3. discloses the charter of the committee;
4. discloses the members of the committee; and
5. as at the end of each reporting period, the number of times
the committee met throughout the period and the individual
attendances of the members at those meetings; or
b) it does not have a risk committee or committee that satisfies
(a) above, disclose that fact and the processes it employs for
overseeing the entity's risk management framework.
The Company has a policy for the oversight and management of
material business risks, which is available on the Company's
website. The Board is responsible for approving the Company's
policies on risk oversight and management and satisfying itself
that management has developed and implemented a sound system of
risk management and internal control.
Implementation of the risk management system and day-to-day
management of risk is the responsibility of the Chief Executive
Officer, with the assistance of senior management, as required.
The Chief Executive Officer has responsibility for identifying,
assessing, monitoring and managing risks. The Chief Executive
Officer is also responsible for identifying any material changes to
the Company's risk profile and ensuring, with approval of the
Board, the risk profile of the Company is updated to reflect any
material change.
The Chief Executive Officer is required to report on the
progress of, and on all matters associated with, risk management on
a regular basis, and at least annually. During the reporting
period, the Chief Executive Officer regularly reported to the Board
as to the effectiveness of the Company's management of its material
business risks.
The Audit and Risk Committee also has responsibility for
reviewing the Company's internal financial control system and risk
management systems and reporting to the Board. Details of the
composition and Charter of the Audit and Risk Committee has been
disclosed earlier in this document (refer Principle 4).
In addition, the Board has also established a Safety, Health and
Environment Committee to assist the Board in the effective
discharge of its responsibilities in relation to safety, health and
environmental (SHE) issues for CoAL, and the oversight of risks
relating to these issues. The Committee's responsibilities include
to:
-- Understand the risks of SHE issues involving CoAL's activities;
-- Ensure that the systems and processes for identifying,
assessing and managing SHE risks of CoAL are adequately
monitored;
-- Regularly review and ensure compliance with the SHE
strategies and policies of CoAL and the supporting management
systems and processes; and
-- Monitor developments in relevant SHE-related legislation and
regulations and monitor CoAL's compliance with relevant
legislation, including through audits.
Details of meeting attendance of members of the Audit and Risk
Committee for FY2016 are contained in a table earlier in this
document (refer Principle 4).
ASX Principles Recommendation 7.2:
The board or committee of the board should:
a) review the entity's risk management framework at
least annually to satisfy itself that it continues to be sound;
and
b) disclose, in relation to each reporting period, whether such
a review has taken place.
The risk management framework was reviewed by the Committee
during the reporting period.
ASX Principles Recommendation 7.3:
A listed entity should disclose:
a) if it has an internal audit function, how the function is
structured and what role
it performs; or
b) if it does not have an internal audit function, that fact and
the processes it employs for evaluating and continually improving
the effectiveness of its risk management and internal control
processes.
Due to the size of the Company and its current level of activity
and operations, the Company does not have a formal internal audit
function.
The Board believe that the Company's risk management and
internal control systems establish a sufficient control environment
to manage business risks.
ASX Principles Recommendation 7.4:
A listed entity should disclose whether it has any material
exposure to economic, environmental and socially sustainable risks
and, if it does, how it manages or intends to manage those
risks.
The Company is very aware of its impact on the economy, the
environment and the community in which it operates, and the risks
associated with not dealing with aspects appropriately.
The Company annually reports on these aspects through its
Sustainable Development Review in the Integrated (Annual) Report.
This report is available on the Company website.
PRINCIPLE 8: REMUNERATE FAIRLY AND RESPONSIBLY
A listed entity should pay Director remuneration sufficient to
attract and retain high quality Directors and design its executive
remuneration to attract, retain and motivate high quality senior
executives and to align their interests with the creation of value
for security holders.
ASX Principles Recommendation 8.1:
The Board of a listed entity should:
a) have a remuneration committee which:
1. has at least three members, a majority of whom are
independent Directors; and
2. is chaired by an independent Director; and disclose
3. the charter of the committee;
4. the members of the committee; and
5. as at the end of each reporting period, the number of times
the committee met throughout the period and the individual
attendances of the members at those meetings;
or
b) if it does not have a remuneration committee, disclose that
fact and the processes it employs for setting the level and
composition of remuneration for Directors and senior executives and
ensuring that such remuneration is appropriate and not
excessive.
The Board has established a Nomination and Remuneration
Committee and adopted a Charter that sets out the committee's roles
and responsibilities, composition and membership requirements. The
Charter is available on the Company's website.
The Committee Charter states that the composition should include
a minimum of three members, the majority of whom must be
independent, and a Chairman who is an independent Director.
Membership is consistent with the composition requirements of the
Charter and the recommendations of the ASX Principles.
Details of meeting attendance of members of the Nomination and
Remuneration Committee for FY2017 are contained in a table earlier
in this document (refer Principle 2).
ASX Principles: Recommendation 8.2:
A listed entity should:
a) separately disclose its policies and practices regarding the
remuneration of non-executive Directors and the remuneration of
executive Directors and other senior executives.
The Charter of the Remuneration Committee details the Company's
approach to the structure of executive and non-executive
remuneration. Executive Directors and key executives are
remunerated by way of a salary or consultancy fees, commensurate
with their required level of services. Non-executive Directors
receive a fixed monthly fee for their services. Total aggregated
non-executive Directors' fees are currently capped at A$1,000,000
per annum.
The Company does not have any scheme relating to retirement
benefits for non-executive Directors.
The remuneration report contained in the Directors' report
contains details of remuneration paid to Directors and key
executives during the year.
Disclosure of the Company's remuneration policies is best served
through a transparent and readily understandable framework for
executive remuneration that details the costs and benefits. The
Company intends to meet its transparency obligations in the
following manner:
-- Publishing a detailed remuneration report in the annual report each year;
-- Continuous disclosure of employment agreements with key
executives where those agreements, or obligations falling due under
those agreements, may trigger a continuous disclosure obligation
under ASX Listing
Rule 3.1;
-- Presentation of the remuneration report to shareholders for
their consideration and nonbinding vote at the Company's AGM;
-- Taking into account the outcome of the nonbinding shareholder
vote when determining future remuneration policy; and
-- Responding to shareholder questions on policy and practice in a frank and open manner.
ASX Principles: Recommendation 8.3:
A listed entity which has an equity-based remuneration scheme
should:
a) have a policy on whether participants are permitted to enter
into transactions (whether through the use of derivatives or
otherwise) which limit the economic risk of participating in the
scheme; and
b) disclose that policy or a summary of it. Companies should
clearly distinguish the structure of non-executive Directors'
remuneration from that of executive Directors and senior
executives.
The Company has a Performance Rights Plan which was approved by
Shareholders at the 2015 AGM. A summary of the plan was included in
the Company's 2015 Notice of General Meeting, a copy of which is
available on the Company's website.
The Company's Policy for Trading in Company Securities prohibits
Directors, Officers and Employees from entering into transactions
or arrangements which operate to limit the economic risk of their
security holding in the Company without first seeking and obtaining
written clearance from the Chairman.
A copy of the Company's Policy for Trading in Company Securities
can be found on the Company's website.
DIRECTORS' DECLARATION
The directors declare that:
a) in the directors' opinion, there are reasonable grounds to
believe that the Company will be able to pay its debts as and when
they become due and payable;
b) in the directors' opinion, the attached consolidated
financial statements are in compliance with International Financial
Reporting Standards, as stated in note 1.1 to the consolidated
financial statements;
c) in the directors' opinion, the attached consolidated
financial statements and notes thereto are in accordance with the
Corporations Act 2001, including compliance with accounting
standards and giving a true and fair view of the financial position
and performance of the Consolidated Entity; and
d) the directors have been given the declarations required by
s.295A of the Corporations Act 2001.
Signed in accordance with a resolution of the directors made
pursuant to s.295(5) of the Corporations Act 2001.
On behalf of the Directors
Bernard Pryor David Brown
Chairman Chief Executive Officer
29 September 2017 29 September 2017
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME
for the year ended 30 June 2017
---------------------------------------------------------------------
Year ended Year ended
30 June 30 June
2017 2016
Note $'000 $'000
------------------------------------ ----- ----------- -----------
Continuing operations
Revenue - -
Investment income 5 522 753
Other income 6 419 257
Other gains/(losses) 6 525 (354)
Depreciation and amortisation 6 (354) (1,199)
Foreign exchange gains/(losses) 6 3,364 (10,654)
Employee benefits expense 6 (4,646) (3,765)
Impairment expense 7 (10,624) -
Finance costs 9 (1,185) (1,578)
Consulting expense (1,102) (624)
Other expenses 6 (4,581) (6,739)
----------- -----------
Loss before tax (17,662) (23,903)
Income tax credit 10 295 1,431
----------- -----------
Net loss for the year from
continuing operations (17,367) (22,472)
Discontinued operations
Profit/(loss) for the year
from operations classified
as held for sale 11 1,815 (973)
LOSS FOR THE YEAR (15,552) (23,445)
----------- -----------
Other comprehensive income/(loss),
net of income tax
Items that may be reclassified
subsequently to profit or
loss
Exchange differences on
translating foreign operations 16,057 (28,921)
----------- -----------
Total comprehensive income/(loss)
for the year 505 (52,366)
----------- -----------
Loss for the year attributable
to:
Owners of the Company (15,536) (23,445)
Non-controlling interests (16) -
----------- -----------
(15,552) (23,445)
----------- -----------
Total comprehensive income/(loss)
attributable to:
Owners of the Company 521 (52,366)
Non-controlling interests (16) -
----------- -----------
505 (52,366)
----------- -----------
Loss per share 12
From continuing operations
and discontinued operations
Basic and diluted (cents
per share) (0.77) (1.24)
From continuing operations
Basic and diluted (cents
per share) (0.86) (1.19)
The accompanying notes are an integral
part of these consolidated financial
statements.
30 June 30 June
2017 2016
Note $'000 $'000
--------------------------------- ----- ---------- ----------
ASSETS
Non-current assets
Development, exploration
and evaluation expenditure 13 232,822 207,923
Property, plant and equipment 14 30,531 6,755
Intangible assets 15 - 10,489
Other receivables 16 237 1,013
Other financial assets 17 9,171 7,033
Restricted cash 20 52 249
Deferred tax assets 25 5,713 4,773
---------- ----------
Total non-current assets 278,526 238,235
---------- ----------
Current assets
Inventories 18 1,688 5
Trade and other receivables 19 6,107 666
Tax receivable 326 -
Other financial assets 17 5 188
Cash and cash equivalents 20 9,624 19,502
---------- ----------
17,750 20,361
Assets classified as held
for sale 21 9,791 14,567
Total current assets 27,541 34,928
---------- ----------
Total assets 306,067 273,163
---------- ----------
LIABILITIES
Non-current liabilities
Deferred consideration 22 1,916 -
Borrowings 23 8,197 -
Provisions 24 7,468 4,003
Deferred tax liability 25 6,087 -
Total non-current liabilities 23,668 4,003
---------- ----------
Current liabilities
Deferred consideration 22 - 16,016
Trade and other payables 26 4,224 2,323
Borrowings 23 - 10,000
Provisions 24 597 398
Current tax liabilities 1,290 1,249
---------- ----------
6,111 29,986
Liabilities associated
with assets held for sale 21 3,414 2,732
---------- ----------
Total current liabilities 9,525 32,718
---------- ----------
Total liabilities 33,193 36,721
---------- ----------
NET ASSETS 272,874 236,442
---------- ----------
EQUITY
Issued capital 27 1,040,950 1,006,435
Accumulated deficit 28 (750,100) (736,403)
Reserves 29 (18,535) (34,165)
---------- ----------
Equity attributable to
owners of the Company 272,315 235,867
Non-controlling interests 31 559 575
---------- ----------
TOTAL EQUITY 272,874 236,442
---------- ----------
The accompanying notes are an integral part
of these consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2017
----------------------------------------------------------------------------------------------------------------------------------------
Issued Accumulated Share Capital Warrants Foreign Attributable Non-controlling Total
capital deficit based profits reserve currency to owners interests equity
payment reserve translation of the
reserve reserve parent
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
--------------------- ---------- ------------ -------- -------- --------- ------------ ------------- ---------------- ---------
Balance at 1 July
2016 1,006,435 (736,403) 2,274 91 - (36,530) 235,867 575 236,442
Total comprehensive
loss for the year - (15,536) - - - 16,057 521 (16) 505
---------- ------------ -------- -------- --------- ------------ ------------- ---------------- ---------
Loss for the year - (15,536) - - - - (15,536) (16) (15,552)
Other comprehensive
loss, net of tax - - - - - 16,057 16,057 - 16,057
---------- ------------ -------- -------- --------- ------------ ------------- ---------------- ---------
Shares issued for
capital
raising (net of
costs) 14,864 - - - - - 14,864 - 14,864
Shares issued for
conversion
of YBI loan 10,000 - - - - - 10,000 - 10,000
Performance grants
issued
to employees - - 466 - - - 466 - 466
Share options
expired - 1,839 (1,839) - - - - - -
Share options
cancelled/forfeited - - (188) - - - (188) - (188)
Warrants issued to
the
IDC - - - - 1,134 - 1,134 - 1,134
Shares issued for
the
acquisition of
Uitkomst
Colliery 9,651 - - - - - 9,651 9,651
Balance at 30 June
2017 1,040,950 (750,100) 713 91 1,134 (20,473) 272,315 559 272,874
---------- ------------ -------- -------- --------- ------------ ------------- ---------------- ---------
Balance at 1 July
2015 992,374 (718,081) 7,205 91 - (7,609) 273,980 575 274,555
Total comprehensive
loss for the year (23,445) - (28,921) (52,366) (52,366)
---------- ------------ -------- -------- --------- ------------ ------------- ---------------- ---------
Loss for the year - (23,445) - - - - (23,445) - (23,445)
Other comprehensive
loss, net of tax - - - - - (28,921) (28,921) - (28,921)
---------- ------------ -------- -------- --------- ------------ ------------- ---------------- ---------
Shares issued for
capital
raising (net of
costs) 13,707 - - - - - 13,707 - 13,707
Shares issued for
the
acquisition of
subsidiary 354 - - - - - 354 - 354
Shares issued to
employees - - 275 - - - 275 - 275
Share options
expired - 5,123 (5,123) - - - - - -
Share options
cancelled - - (83) - - - (83) - (83)
---------- ------------ -------- -------- --------- ------------ ------------- ---------------- ---------
Balance at 30 June
2016 1,006,435 (736,403) 2,274 91 - (36,530) 235,867 575 236,442
---------- ------------ -------- -------- --------- ------------ ------------- ---------------- ---------
The accompanying notes are an integral part
of these consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 June 2017
--------------------------------------------------------------------
Year ended Year ended
30 June 30 June
2017 2016
Note $'000 $'000
----------------------------------- ----- ----------- -----------
Cash flows from operating
activities
Receipts from customers 117 311
Payments to suppliers
and employees (10,341) (13,448)
----------- -----------
Cash used in operations 33 (10,224) (13,137)
Interest received 471 585
Interest paid (14) (140)
Net cash used in operating
activities (9,767) (12,692)
----------- -----------
Cash flows from investing
activities
Purchase of property,
plant and equipment 14 (164) (114)
Proceeds from the sale
of property, plant and
equipment 2 29
Investment in development
assets 13 (6) -
Investment in exploration
assets 13 (430) (1,187)
Net cash outflow on business
combination 36 (8,394) -
Proceeds from the sale
of Holfontein 21 3,042 -
Net purchase of other
financial assets 17 (402) (3,336)
Decrease in restricted
cash 197 774
Net cash used in investing
activities (6,155) (3,834)
----------- -----------
Cash flows from financing
activities
Payment of deferred consideration 22 (18,247) (4,066)
Proceeds from loans payable 23 9,004 10,000
Debt issuance costs 23 (91) -
Proceeds from loans receivable 16 457 444
Proceeds from the issue
of shares (net of share
issuance costs) 14,864 13,707
Net cash generated by
financing activities 5,987 20,085
----------- -----------
Net (decrease)/increase
in cash and cash equivalents (9,935) 3,559
Net foreign exchange differences 58 (1,918)
Cash and cash equivalents
at beginning of the year 19,523 17,882
----------- -----------
Cash and cash equivalents
at the end of the year 20 9,646 19,523
----------- -----------
The accompanying notes are an integral part
of these consolidated financial statements.
1. General Information
Coal of Africa Limited ("CoAL" or the "Company") is a limited
company incorporated in Australia. Its common shares are listed on
the Australian Securities Exchange ('ASX'), the Alternative
Investment Market of the London Stock Exchange ('AIM') and the
Johannesburg Securities Exchange ('JSE') in South Africa. The
addresses of its registered office and principal places of business
is Suite 8, 7 The Esplanade, Mt Pleasant, Perth, Western Australia
6000.
The principal activities of the Company and its subsidiaries
('the Group' or 'the Consolidated Entity') are the acquisition,
exploration, development and operation of metallurgical and thermal
coal projects in South Africa.
The Group's principal assets and projects include:
-- The operating mine, Uitkomst Colliery, acquired on 30 June 2017 (refer note 36)
-- The Makhado hard coking and thermal coal project that has
been granted a new order mining right ("NOMR"), an integrated water
use licence ("IWUL") and an environmental authorisation ;
-- The Vele Colliery, a semi soft coking and thermal coal mine,
currently under care and maintenance is awaiting the final IWUL
relating to the new perennial stream diversion application;
-- Three exploration and development stage coking and thermal
coal projects, namely Chapudi, Generaal and Mopane in the
Soutpansberg Coalfield; and
-- The Mooiplaats colliery is currently on care and maintenance.
The Company is currently engaged with various parties to sell
Mooiplaats Colliery and expects to complete a sale within twelve
months of the reporting date.
Going Concern
These consolidated financial statements have been prepared on
the going concern basis, which contemplates the continuity of
normal business activities and the realisation of assets and the
settlement of liabilities in the normal course of business.
The Consolidated Entity has incurred a net loss after tax for
the year ended 30 June 2017 of $17.4 million (30 June 2016: loss of
$22.5 million), including an impairment of $10.6 million, a foreign
exchange gain of $3.4 million and depreciation and amortisation
charges of $0.4 million. For the year ended 30 June 2017, net cash
outflows from operating activities were $9.8 million (30 June 2016
net outflow: $12.7 million) and net cash outflow from investing
activities were $6.2 million (30 June 2016 net outflow: $3.8
million). As at 30 June 2017 the Consolidated Entity had a net
current asset position of $11.6 million (30 June 2016: net current
liability position of $9.6 million), excluding assets and
liabilities classified as held for sale.
During the period, the Company raised additional capital of $15
million from M & G Investment Management Limited ("M&G")
and Summer Trees Pte Limited. These funds were partially utilised
to fund the acquisition of Pan African Resources Coal Holdings
Proprietary Limited ("PAR Coal"), the 91% shareholder in the cash
generating operating mine, Uitkomst Colliery Proprietary Limited
("Uitkomst" or "Uitkomst Colliery"), on 30 June 2017.
During the period, the Company also converted the loan provided
in the prior period by Yishun Brightrise Investment Pte Limited
("Yishun") into CoAL shares.
The Company also fulfilled its obligations to Rio Tinto in June
2017 in relation to the agreements under which its subsidiary
company, MbeuYashu Proprietary Limited acquired its interest in
Chapudi Coal Proprietary Limited and Kwezi Mining Exploration
Proprietary Limited.
In addition, the Company entered into a loan agreement (the
"Loan Agreement") with the Industrial Development Corporation of
South Africa Limited ("IDC") and Baobab Mining and Exploration
Proprietary Limited ("Baobab"), a subsidiary of CoAL and owner of
the mining right for the Makhado Project. In terms of the Loan
Agreement, the IDC will advance loan funding up to $18.4 million
(ZAR240 million) to Baobab for use in the Makhado Project to
advance the operations and implementation of the project. The loan
funding is to be provided in two equal tranches of $9.2 million
(ZAR120 million) upon written request from Baobab. The first
tranche was drawn down during the period and the second tranche is
still available to the Company (refer note 23).
Going Concern (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2017
The directors have prepared a cash flow forecast for the
eighteen months ended 31 December 2018, taking into account
available facilities and expected cash to be generated by Uitkomst,
which indicates that the Company and Consolidated Entity will have
sufficient cash flow to fund their operations for at least the
twelve month period from the date of signing this report.
At the date of this report, the directors believe that the
Company and Consolidated Entity will have sufficient funds to meet
their obligations as when they fall due, and are of the opinion
that the use of the going concern basis remains appropriate.
Basis of presentation
1.1. Statement of compliance
These consolidated financial statements are general purpose
financial statements which have been prepared in accordance with
the Corporations Act 2001, Accounting Standards and
Interpretations, and comply with other requirements of the law. The
financial statements comprise the consolidated financial statements
of the Group. For the purposes of preparing the consolidated
financial statements, the Company is a for-profit entity.
Accounting Standards include Australian Accounting Standards.
Compliance with Australian Accounting Standards ensures that the
consolidated financial statements and notes of the Company and the
Group comply with International Financial Reporting Standards
("IFRS") as issued by the International Accounting Standards
Board.
The consolidated financial statements were authorised for issue
by the Directors on 29 September 2017.
1.2. Basis of Preparation
The consolidated financial statements have been prepared on the
basis of historical cost, except for other financial assets and
financial instruments that are measured at revalued amounts or fair
values, as explained in the accounting policies below. Historical
cost is generally based on the fair values of the consideration
given in exchange for assets.
All amounts are presented in United States dollars, and rounded
to nearest thousand unless otherwise noted.
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date, regardless of whether
that price is directly observable or estimated using another
valuation technique. In estimating the fair value of an asset or a
liability, the Group takes into account the characteristics of the
asset or liability if market participants would take those
characteristics into account when pricing the asset or liability at
the measurement date. Fair value for measurement and/or disclosure
purposes in these consolidated financial statements is determined
on such a basis, except for share-based payment transactions that
are within the scope of AASB 2, and measurements that have some
similarities to fair value but are not fair value, such as net
realisable value in AASB 2 or value in use in AASB 136.
In addition, for financial reporting purposes, fair value
measurements are categorised into Level 1, 2 or 3 based on the
degree to which the inputs to the fair value measurements are
observable and the significance of the inputs to the fair value
measurement in its entirety, which are described as follows:
-- Level 1 inputs are quoted prices (unadjusted) in active
markets for identical assets or liabilities that the entity can
access at the measurement date;
-- Level 2 inputs are inputs, other than quoted prices included
within Level 1, that are observable for the asset or liability,
either directly or indirectly; and
-- Level 3 inputs are unobservable inputs for the asset or liability.
2. Accounting policies
2.1. Basis of Consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries). Control is achieved when the Company:
-- has power over the investee;
-- is exposed, or has rights, to variable returns from its involvement with the investee; and
-- has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the three elements of control listed above. When the
Company has less than a majority of the voting rights of an
investee, it has power over the investee when the voting rights are
sufficient to give it the practical ability to direct the relevant
activities of the investee unilaterally. The Company considers all
relevant facts and circumstances in assessing whether or not the
Company's voting rights in an investee are sufficient to give it
power, including:
-- the size of the Company's holding of voting rights relative
to the size and dispersion of holdings of the other vote
holders;
-- potential voting rights held by the Company, other vote holders or other parties;
-- rights arising from other contractual arrangements; and
-- any additional facts and circumstances that indicate that the
Company has, or does not have, the current ability to direct the
relevant activities at the time that decisions need to be made,
including voting patterns at previous shareholders' meetings.
Consolidation of a subsidiary begins when the Company obtains
control over the subsidiary and ceases when the company loses
control of the subsidiary. Specifically, income and expenses of a
subsidiary acquired or disposed of during the year are included in
the consolidated statement of profit or loss and other
comprehensive income from the date the Company gains control until
the date when the Company ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income
are attributed to the owners of the Company and to the
non-controlling interests. Total comprehensive income of
subsidiaries is attributed to the owners of the Company and to the
non-controlling interests even if this results in the
non-controlling interests having a deficit balance.
A list of controlled entities is contained in note 36 to the
consolidated financial statements.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies into
line with those used by other members of the Group.
All inter-group transactions, balances, income and expenses are
eliminated in full on consolidation.
Changes in the Group's ownership interests in subsidiaries that
do not result in the Group losing control are accounted for as
equity transactions. The carrying amounts of the Group's interests
and the non-controlling interests are adjusted to reflect the
changes in their relative interests in the subsidiaries. Any
difference between the amount by which the non-controlling
interests are adjusted and the fair value of the consideration paid
or received is recognised directly in equity and attributed to
owners of the Company.
When the Group loses control of a subsidiary, a gain or loss is
recognised in profit or loss and is calculated as the difference
between
(i) the aggregate of the fair value of the consideration
received and the fair value of any retained interest and
(ii) the previous carrying amount of the assets (including
goodwill), and liabilities of the subsidiary and any non-
controlling interests.
When assets of the subsidiary are carried at revalued amounts or
fair values and the related cumulative gain or loss has been
recognised in other comprehensive income and accumulated in equity,
the amounts previously recognised in other comprehensive income and
accumulated in equity are accounted for as if the Company had
directly disposed of the relevant assets (i.e. reclassified to
profit or loss or transferred directly to any category of equity as
specified by applicable Standards). The fair value of any
investment retained in the former subsidiary at the date when
control is lost is regarded as the fair value on initial
recognition for subsequent accounting under Accounting Standard
AASB 139
2. Accounting policies (continued)
'Financial Instruments: Recognition and Measurement' or, when
applicable, the cost on initial recognition of an investment in an
associate or joint venture.
2.2. Business combinations
Business combinations occur where an acquirer obtains control
over one or more businesses and results in the consolidation of its
assets and liabilities.
Acquisitions of businesses are accounted for using the
acquisition method. The consideration transferred in a business
combination is measured at fair value which is calculated as the
sum of the acquisition-date fair values of assets transferred by
the Group, liabilities incurred by the Group to the former owners
of the acquiree and the equity instruments issued by the Group in
exchange for control of the acquiree. Acquisition-related costs are
recognised in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and
the liabilities assumed are recognised at their fair value, except
that:
-- deferred tax assets or liabilities are recognised and
measured in accordance with AASB 112 'Income Taxes';
-- assets or liabilities related to employee benefit
arrangements are recognised and measured in accordance with AASB
119 'Employee Benefits';
-- liabilities or equity instruments related to share-based
payment arrangements of the acquiree or share-based payment
arrangements of the Group entered into to replace share-based
payment arrangements of the acquiree are measured in accordance
with AASB 2 'Share-based Payment' at the acquisition date; and
-- assets (or disposal groups) that are classified as held for
sale in accordance with AASB 5 'Non-current Assets Held for Sale
and Discontinued Operations' are measured in accordance with that
Standard.
Goodwill is measured as the excess of the sum of the
consideration transferred, the amount of any non-controlling
interests in the acquiree, and the fair value of the acquirer's
previously held equity interest in the acquiree (if any) over the
net of the acquisition-date amounts of the identifiable assets
acquired and the liabilities assumed. If, after reassessment, the
net of the acquisition-date amounts of the identifiable assets
acquired and liabilities assumed exceeds the sum of the
consideration transferred, the amount of any non-controlling
interests in the acquiree and the fair value of the acquirer's
previously held interest in the acquiree (if any), the excess is
recognised immediately in profit or loss as a bargain purchase
gain.
Non-controlling interests that represent ownership interests and
entitle their holders to a proportionate share of the entity's net
assets in the event of liquidation may be initially measured either
at fair value or at the non-controlling interests' proportionate
share of the recognised amounts of the acquiree's identifiable net
assets. Non-controlling interests are measured at fair value or,
when applicable, on the basis specified in another Standard.
Where the consideration transferred by the Group in a business
combination includes assets or liabilities resulting from a
contingent consideration arrangement, the contingent consideration
is measured at its acquisition-date fair value. Changes in the fair
value of the contingent consideration that qualify as measurement
period adjustments are adjusted retrospectively, with corresponding
adjustments against goodwill. Measurement period adjustments are
adjustments that arise from additional information obtained during
the 'measurement period' (which cannot exceed one year from the
acquisition date) about facts and circumstances that existed at the
acquisition date.
The subsequent accounting for changes in the fair value of
contingent consideration that do not qualify as measurement period
adjustments depends on how the contingent consideration is
classified. Contingent consideration that is classified as equity
is not remeasured at subsequent reporting dates and its subsequent
settlement is accounted for within equity. Contingent consideration
that is classified as an asset or liability is remeasured at
subsequent reporting dates in accordance with AASB 139, or AASB 137
'Provisions, Contingent Liabilities and Contingent Assets', as
appropriate, with the corresponding gain or loss being recognised
in profit or loss.
Where a business combination is achieved in stages, the Group's
previously held equity interest in the acquiree is remeasured to
fair value at the acquisition date (i.e. the date when the Group
attains control) and the resulting gain or loss, if any, is
recognised in profit or loss. Amounts arising from interests in the
acquiree prior to the acquisition date that have previously been
recognised in other comprehensive income are reclassified to profit
or loss where such treatment would be appropriate if that interest
were disposed of.
If the initial accounting for a business combination is
incomplete by the end of the reporting period in which the
combination occurs, the Group reports provisional amounts for the
items for which the accounting is incomplete. Those provisional
amounts are adjusted during the measurement period (see above), or
additional assets or liabilities are
2. Accounting policies (continued)
recognised, to reflect new information obtained about facts and
circumstances that existed as of the acquisition date that, if
known, would have affected the amounts recognised as of that
date.
2.3. Functional and presentation currency
The individual financial statements of each group entity are
presented in the currency of the primary economic environment in
which the entity operates (its functional currency). For the
purpose of the consolidated financial statements, the results and
financial position of each group entity are expressed in United
Sates dollars ('$'), which is the presentation currency for the
consolidated financial statements.
Transactions in foreign currencies are initially recorded in the
functional currency at the rate of exchange ruling at the date of
the transaction. Monetary assets and liabilities denominated in
foreign currencies are translated to the spot rate of exchange
ruling at the reporting date. All differences are taken to the
consolidated statement of profit or loss and other comprehensive
income.
Non-monetary items that are measured at historical cost in a
foreign currency are translated using the exchange rates at the
date of the initial transaction.
Exchange differences on monetary items are recognised in profit
or loss in the period in which they arise except for:
-- exchange differences on foreign currency borrowings relating
to assets under construction for future productive use, which are
included in the cost of those assets when they are regarded as an
adjustment to interest costs on those foreign currency
borrowings;
-- exchange differences on transactions entered into in order to
hedge certain foreign currency risks; and
-- exchange differences on monetary items receivable from or
payable to a foreign operation for which settlement is neither
planned nor likely to occur (therefore forming part of the net
investment in the foreign operation), which are recognised
initially in other comprehensive income and reclassified from
equity to profit or loss on repayment of the monetary items.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Group's foreign operations are
translated into United States dollars using the spot rate of
exchange ruling at the reporting date. Income and expense items are
translated at the average exchange rates for the period, unless
exchange rates fluctuated significantly during that period, in
which case the exchange rates at the dates of the transactions are
used. Exchange differences arising, if any, are recognised in other
comprehensive income and accumulated in equity (attributed to
non-controlling interests as appropriate).
On the disposal of a foreign operation (i.e. a disposal of the
Group's entire interest in a foreign operation, or a disposal
involving loss of control over a subsidiary that includes a foreign
operation, loss of joint control over a jointly controlled entity
that includes a foreign operation, or loss of significant influence
over an associate that includes a foreign operation), all of the
accumulated exchange differences in respect of that operation
attributable to the Group are reclassified to profit or loss.
Goodwill and fair value adjustments on identifiable assets and
liabilities arising on the acquisition of a foreign operation are
treated as assets and liabilities of the foreign operation and
translated at the spot rate of exchange ruling at the reporting
date. Exchange differences arising are recognised in equity.
2.4. Non-current assets held for sale
Non-current assets and disposal groups are classified as held
for sale if their carrying amount will be recovered principally
through a sale transaction rather than through continuing use. This
condition is regarded as met only when the sale is highly probable
and the non-current asset (or disposal group) is available for
immediate sale in its present condition. Management must be
committed to the sale, which should be expected to qualify for
recognition as a completed sale within one year from the date of
classification.
When the criteria above are met and the Group is committed to a
sale plan involving loss of control of a subsidiary, all of the
assets and liabilities of that subsidiary are classified as assets
held for sale and liabilities associated with assets held for sale
in the consolidated statement of financial position. The income and
expenses from these operations are not included in the various line
items in the consolidated statement of profit or loss and other
comprehensive income but the net results from these operations
classified as held for sale are disclosed as a separate line within
the statement of profit or loss.
Non-current assets (and disposal groups) classified as held for
sale are measured at the lower of their previous carrying amount
and fair value less costs to sell.
2. Accounting policies (continued)
2.5. Exploration and evaluation expenditure
(i) Pre-licence costs
Pre-licence costs relate to costs incurred before the Group has
obtained legal rights to explore in a specific area. Such costs may
include the acquisition of exploration data and the associated
costs of analysing that data. These costs are expensed in the
period in which they are incurred.
(ii) Exploration and evaluation expenditure
Exploration and evaluation activity involves the search for
mineral resources, the determination of technical feasibility and
the assessment of commercial viability of an identified
resource.
Exploration and evaluation activity includes:
i. Researching and analysing historical exploration data
ii. Gathering exploration data through geophysical studies
iii. Exploratory drilling and sampling
iv. Determining and examining the volume and grade of the resource
v. Surveying transportation and infrastructure requirements
vi. Conducting market and finance studies
Licence costs paid in connection with a right to explore in an
existing exploration area are capitalised and
amortised over the term of the permit.
Once the legal right to explore has been acquired, exploration
and evaluation expenditure is charged to profit or loss as
incurred, unless the Group conclude that a future economic benefit
is more likely than not to be realised.
Capitalised expenditure includes costs directly related to
exploration and evaluation activities in the relevant area of
interest, including materials and fuel used, surveying costs,
drilling costs and payments made to contractors. General and
administrative costs are allocated to an exploration or evaluation
area of interest and capitalised as an asset only to the extent
that those costs can be related directly to operational activities
in the relevant area of interest.
Exploration and evaluation assets acquired in a business
combination are initially recognised at fair value, including
resources and exploration potential that are valued beyond proven
and probable reserves. Similarly, the costs associated with
acquiring an exploration and evaluation asset (that does not
represent a business) are also capitalised. They are subsequently
measured at cost less accumulated impairment.
All capitalised exploration and evaluation expenditure is
written off where the above conditions are no longer satisfied, and
assessed for impairment if facts and circumstances indicate that an
impairment may exist. See note 2.11.
Exploration and evaluation expenditure that has been capitalised
is reclassified to property, plant and equipment - development
assets, when the technical feasibility and commercial viability of
extracting a mineral resource are demonstrable. Prior to such
reclassification, exploration and evaluation expenditure
capitalised is tested for impairment.
2.6. Property, plant and equipment - Development assets
Development expenditure incurred by or on behalf of the Group is
accumulated separately for each area of interest in which
economically recoverable resources have been identified. Such
expenditure comprises costs directly attributable to the
construction of a mine and the related infrastructure.
No depreciation is recognised in respect of development
assets.
Development assets are assessed for impairment if facts and
circumstances indicate that an impairment may exist. See note
2.11.
A development asset is reclassified as a 'mining property' at
the end of the commissioning phase, when the mine is capable of
operating in the manner intended by management. Immediately prior
to such reclassification, development assets are tested for
impairment.
2. Accounting policies (continued)
2.7. Property, plant and equipment - Mining property
Mining property includes expenditure that has been incurred
through the exploration and development phases, and, in addition,
further development expenditure that is incurred in respect of a
mining property after the commencement of production, provided
that, in all instances, it is probable that additional future
economic benefits associated with the expenditure will flow to the
Group. Otherwise such expenditure is classified as cost of
sales.
Mining property includes plant and equipment associated with the
mining property.
When a mine construction project moves into the production
phase, the capitalisation of certain mine construction costs
ceases, and costs are either regarded as part of the cost of
inventory or expensed, except for costs which qualify for
capitalisation relating to mining asset additions, improvements or
new developments, underground mine development or mineable reserve
development.
Depreciation on plant and equipment included within mining
property is computed on a straight-line basis over five years.
Depreciation on other components of mining property, is charged
using the units-of-production method, with separate calculations
being made for each area of interest. The units-of-production basis
results in a depreciation charge proportional to the depletion of
proved and probable reserves.
Mining property is assessed for impairment if facts and
circumstances indicate that an impairment may exist. See note
2.11.
2.8. Deferred stripping costs
Stripping costs comprise the removal of overburden and other
waste products from a mine. Stripping costs incurred in the
development of a mine before production commences are capitalised
as part of the cost of constructing the mine (initially within
development assets) and are subsequently depreciated over the life
of the operation.
Stripping costs incurred during the production stage of a mine
are deferred when this is considered the most appropriate basis for
matching the costs against the related economic benefits. The
amount deferred is based on the waste-to-ore ratio ('stripping
ratio'), which is calculated by dividing the tonnage of waste mined
by the quantity of ore mined. Stripping costs incurred in a period
are deferred to the extent that the current period ratio exceeds
the expected life-of mine-ratio. Such deferred costs are then
charged to the consolidated statement of profit or loss and other
comprehensive loss to the extent that, in subsequent periods, the
current period ratio falls below the life-of mine-ratio. The
life-of-mine stripping ratio is calculated based on proved and
probable reserves. Any changes to the life-of-mine ratio are
accounted for prospectively.
Where a mine operates more than one open pit that is regarded as
a separate operation for the purpose of mine planning, stripping
costs are accounted for separately by reference to the ore from
each separate pit. If, however, the pits are highly integrated for
the purpose of the mine planning, the second and subsequent pits
are regarded as extensions of the first pit in accounting for
stripping costs. In such cases, the initial stripping (i.e.
overburden and other waste removal) of the second and subsequent
pits is considered to be production phase stripping relating to the
combined operation.
Deferred stripping costs are included in the cost base of assets
when determining a cash-generating unit for impairment assessment
purposes.
2.9. Property, plant and equipment - Mining Rights
Mining rights are classified as property plant and equipment on
commencement of commercial production.
Depreciation is charged using the units-of-production method.
The units-of-production basis results in a depreciation charge
proportional to the depletion of proved and probable reserves.
Mining rights are assessed for impairment if facts and
circumstances indicate that an impairment may exist.
2. Accounting policies (continued)
2.10. Property, plant and equipment (excluding development
assets, mining property and mining rights)
Freehold land is stated at cost and is not depreciated.
Items of property, plant and equipment are stated at cost less
accumulated depreciation and accumulated impairment losses. Where
items of property, plant and equipment contain components that have
different useful lives to the main item of plant and equipment,
these are capitalised separately to the plant and equipment to
which the component can be logically assigned.
The initial cost of an asset comprises its purchase price or
construction cost, any costs directly attributable to bringing the
asset into operation, the initial estimate of the rehabilitation
obligation, and, for qualifying assets (where relevant), borrowing
costs. The purchase price or construction cost is the aggregate
amount paid and the fair value of any other consideration given to
acquire the asset. The capitalised value of a finance lease is also
included in property, plant and equipment.
Depreciation is recognised so as to write off the cost of assets
(other than freehold land) less their residual values over their
useful lives, using the straight-line method. The estimated useful
lives, residual values and depreciation method are reviewed at the
end of each reporting period, with the effect of any changes in
estimate accounted for on a prospective basis.
Assets held under finance leases are depreciated over their
expected useful lives on the same basis as owned assets. However,
when there is no reasonable certainty that ownership will be
obtained by the end of the lease term, assets are depreciated over
the shorter of the lease term and the useful lives.
An item of property, plant and equipment is derecognised upon
disposal or when no future economic benefits are expected to arise
from the continued use of the asset. Any gain or loss arising on
the disposal or retirement of an item of property, plant and
equipment is determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognised in
profit or loss.
The annual depreciation rates applicable to each category of
property, plant and equipment are as follows:
Furniture, fittings and office equipment 13% - 50%
Buildings 20%
Plant and equipment 20%
Motor vehicles 20% - 33%
Leasehold improvements 25%
Computer equipment 33%
Leased assets Lease period
2.11. Intangible assets, excluding goodwill
An intangible asset is recognised at cost if it is probable that
future economic benefits will flow to the Group and the cost can be
reliably measured. The cost of intangible assets acquired in a
business combination is their fair value at the date of
acquisition. Following initial recognition, intangible assets are
carried at cost less any accumulated amortisation and accumulated
impairment losses, if any.
Intangible assets are amortised on a straight-line basis over
their estimated useful lives. The amortisation method used and the
estimated remaining useful lives are reviewed at least
annually.
Gains or losses arising from derecognition of an intangible
asset are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognised in
the consolidated statement of profit or loss and other
comprehensive income when the asset is derecognised.
Intangible assets are assessed for impairment if facts and
circumstances indicate that an impairment may exist. See note
2.11.
2. Accounting policies (continued)
2.12. Impairment of tangible and intangible assets other than
goodwill
The carrying amounts of the Group's tangible and intangible
assets are reviewed at each reporting date to determine whether
there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent
of the impairment loss (if any).
Where it is not possible to estimate the recoverable amount of
an individual asset, the Group estimates the recoverable amount of
the cash-generating unit to which the asset belongs. Where a
reasonable and consistent basis of allocation can be identified,
corporate assets are also allocated to individual cash-generating
units, or otherwise they are allocated to the smallest group of
cash-generating units for which a reasonable and consistent
allocation basis can be identified.
Recoverable amount is the higher of fair value less costs to
sell and value-in-use. In assessing value-in-use, the estimated
future cash flows are discounted to their present value using a
post-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised immediately in
profit or loss.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (or cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset (or cash-generating unit) in prior years. A reversal
of an impairment loss is recognised immediately in profit or
loss.
2.13. Leasing
Leases are classified as finance leases whenever the terms of
the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as
operating leases.
Assets held under finance leases are initially recognised as
assets of the Group at their fair value at the inception of the
lease or, if lower, at the present value of the minimum lease
payments. The corresponding liability to the lessor is included in
the consolidated statement of financial position as a finance lease
obligation.
Lease payments are apportioned between finance expenses and
reduction of the lease obligation so as to achieve a constant rate
of interest on the remaining balance of the liability. Finance
expenses are recognised immediately in profit or loss, unless they
are directly attributable to qualifying assets, in which case they
are capitalised in accordance with the Group's general policy on
borrowing costs (see 2.24 below). Contingent rentals are recognised
as expenses in the periods in which they are incurred.
Operating lease payments are recognised as an expense on the
straight-line basis over the lease term, except where another
systematic basis is more representative of the time pattern in
which economic benefits from the leased asset are consumed.
Contingent rentals arising under operating leases are recognised as
an expense in the period in which they are incurred.
2.14. Inventories
Inventories are stated at the lower of cost and net realisable
value. Costs of inventories include expenditure incurred in
acquiring the inventories, production or conversion costs and other
costs incurred in bringing them to their existing location and
condition.
Cost is determined by using the weighted-average method and
comprises direct purchase costs and an appropriate portion of fixed
and variable overhead costs, including depreciation and
amortisation, incurred in converting materials into finished goods,
based on the normal production capacity
Any provision for obsolescence is determined by reference to
specific items of stock. A regular review is undertaken to
determine the extent of any provision for obsolescence.
Net realisable value represents the estimated selling price for
inventories less all estimated costs of completion and costs
necessary to make the sale.
2. Accounting policies (continued)
2.15. Trade receivables
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method, less provision for impairment.
A provision for impairment of trade receivables is established
when there is objective evidence that the Group will not be able to
collect all amounts due according to the original terms of the
receivables. Significant financial difficulties of the debtor,
probability that the debtor will enter bankruptcy or financial
reorganization, and default or delinquency in payments are
considered indicators that the trade receivable is impaired. The
amount of the provision is the difference between the asset's
carrying amount and the present value of estimated future cash
flows, discounted at the original effective interest rate. The
carrying amount of the asset is reduced through the use of an
allowance account, and the amount of the loss is recognised in the
consolidated statement of profit or loss. When a trade receivable
is uncollectible, it is written off against the allowance account
for trade receivables. Subsequent recoveries of amounts previously
written off are credited in the consolidated statement of profit or
loss and other comprehensive loss.
2.16. Cash and cash equivalents
Cash and cash equivalents comprise cash balances and short-term
deposits.
Restricted cash comprise cash balances which are encumbered and
the Group does therefore not have access to these funds.
2.17. Financial instruments
Recognition
Financial assets and financial liabilities are recognised when a
Group entity becomes a party to the contractual provisions of the
instrument.
Financial assets and financial liabilities are initially
measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and
financial liabilities (other than financial assets and financial
liabilities at fair value through profit or loss) are added to or
deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets
or financial liabilities at fair value through profit or loss are
recognised immediately in profit or loss.
Effective interest method
The effective interest method is a method of calculating the
amortised cost of a financial asset or financial liability and of
allocating interest over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future
cash receipts (including all fees on points paid or received that
form an integral part of the effective interest rate, transaction
costs and other premiums or discounts) through the expected life of
the instrument, or, where appropriate, a shorter period, to the net
carrying amount on initial recognition.
Income is recognised on an effective interest basis for debt
instruments other than those financial assets classified as at fair
value through profit or loss ('FVTPL').
Financial assets
Financial assets are classified into the following specified
categories: FVTPL, 'held-to-maturity' investments,
'available-for-sale' ('AFS') financial assets and 'loans and
receivables'. The classification depends on the nature and purpose
of the financial assets and is determined at the time of initial
recognition. All regular way purchases or sales of financial assets
are recognised and derecognised on a trade date basis. Regular way
purchases or sales are purchases or sales of financial assets that
require delivery of assets within the time frame established by
regulation or convention in the marketplace.
2. Accounting policies (continued)
2.17. Financial instruments (continued)
Financial assets at FVTPL
Financial assets are classified as at FVTPL when the financial
asset is either held for trading or it is designated as at
FVTPL.
A financial asset is classified as held for trading if:
-- it has been acquired principally for the purpose of selling it in the near term; or
-- on initial recognition it is part of a portfolio of
identified financial instruments that the Group manages together
and has a recent actual pattern of short-term profit-taking; or
-- it is a derivative that is not designated and effective as a hedging instrument.
A financial asset other than a financial asset held for trading
may be designated as at FVTPL upon initial recognition if:
-- such designation eliminates or significantly reduces a
measurement or recognition inconsistency that would otherwise
arise; or
-- the financial asset forms part of a group of financial assets
or financial liabilities or both, which is managed and its
performance is evaluated on a fair value basis, in accordance with
the Group's documented risk management or investment strategy, and
information about the grouping is provided internally on that
basis; or
-- it forms part of a contract containing one or more embedded
derivatives, and AASB 139 'Financial Instruments: Recognition and
Measurement' permits the entire combined contract (asset or
liability) to be designated as at FVTPL.
Financial assets at FVTPL are stated at fair value, with any
gains or losses arising on remeasurement recognised in profit or
loss. The net gain or loss recognised in profit or loss
incorporates any dividend or interest earned on the financial asset
and is included in the 'other gains and losses' line item. Fair
value is determined in the manner described in note 32.
Held to maturity investments
Non-derivative financial assets with fixed or determinable
payments and fixed maturity dates that management has the intent
and ability to hold to maturity are classified as held to maturity.
These investments are included in non-current assets, except for
maturities within 12 months from the financial year-end date, which
are classified as current assets. Held to maturity investments are
carried at amortised cost using the effective interest rate method
less any impairment.
Loans and receivables
Trade receivables, loans, and other receivables that have fixed
or determinable payments that are not quoted in an active market
are classified as 'loans and receivables'. Loans and receivables
are measured at amortised cost using the effective interest method,
less any impairment. Interest income is recognised by applying the
effective interest rate, except for short-term receivables when the
effect of discounting is immaterial.
Available for sale investments
AFS financial assets are non-derivatives that are either
designated as AFS or are not classified as (a) loans and
receivables, (b) held-to-maturity investments or (c) financial
assets at FVTPL.
Changes in the carrying amount of AFS monetary financial assets
relating to changes in foreign currency rates (see below), interest
income calculated using the effective interest method and dividends
on AFS equity investments are recognised in profit or loss. Other
changes in the carrying amount of AFS financial assets are
recognised in other comprehensive loss. Where the investment is
disposed of or is determined to be impaired, the cumulative gain or
loss previously accumulated in the equity is reclassified to profit
or loss.
The fair value of AFS monetary financial assets denominated in a
foreign currency is determined in that foreign currency and
translated at the spot rate prevailing at the end of the reporting
period. The foreign exchange gains and losses that are recognised
in profit or loss are determined based on the amortised cost of the
monetary asset. Other foreign exchange gains and losses are
recognised in other comprehensive loss.
Dividends on AFS equity instruments are recognised in profit or
loss when the Group's right to receive the dividends is
established.
2. Accounting policies (continued)
2.17. Financial instruments (continued)
AFS equity investments that do not have a quoted market price in
an active market and whose fair value cannot be reliably measured
and derivatives that are linked to and must be settled by delivery
of such unquoted equity investments are measured at cost less any
identified impairment losses at the end of each reporting
period.
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for
indicators of impairment at the end of each reporting period.
Financial assets are considered to be impaired when there is
objective evidence that, as a result of one or more events that
occurred after the initial recognition of the financial asset, the
estimated future cash flows of the investment have been
affected.
For listed or unlisted equity investments classified as AFS, a
significant or prolonged decline in the fair value of the security
below its cost is considered to be objective evidence of
impairment.
For certain categories of financial asset, such as trade
receivables, assets that are assessed not to be impaired
individually are, in addition, assessed for impairment on a
collective basis. Objective evidence of impairment for a portfolio
of receivables could include the Group's past experience of
collecting payments, an increase in the number of delayed payments
in the portfolio past the average credit period, as well as
observable changes in national or local economic conditions that
correlate with default on receivables.
For financial assets carried at amortised cost, the amount of
the impairment loss recognised is the difference between the
asset's carrying amount and the present value of estimated future
cash flows, discounted at the financial asset's original effective
interest rate.
For financial assets carried at cost, the amount of the
impairment loss is measured as the difference between the asset's
carrying amount and the present value of the estimated future cash
flows discounted at the current market rate of return for a similar
financial asset. Such impairment loss will not be reversed in
subsequent periods.
The carrying amount of the financial asset is reduced by the
impairment loss directly for all financial assets with the
exception of trade receivables, where the carrying amount is
reduced through the use of an allowance account. When a trade
receivable is considered uncollectible, it is written off against
the allowance account. Subsequent recoveries of amounts previously
written off are credited against the allowance account. Changes in
the carrying amount of the allowance account are recognised in
profit or loss.
When an AFS financial asset is considered to be impaired,
cumulative gains or losses previously recognised in other
comprehensive income are reclassified to profit or loss in the
period.
For financial assets measured at amortised cost, if, in a
subsequent period, the amount of the impairment loss decreases and
the decrease can be related objectively to an event occurring after
the impairment was recognised, the previously recognised impairment
loss is reversed through profit or loss to the extent that the
carrying amount of the investment at the date the impairment is
reversed does not exceed what the amortised cost would have been
had the impairment not been recognised.
In respect of AFS equity securities, impairment losses
previously recognised in profit or loss are not reversed through
profit or loss. Any increase in fair value subsequent to an
impairment loss is recognised in other comprehensive income and
accumulated under the heading of investments revaluation reserve.
In respect of AFS debt securities, impairment losses are
subsequently reversed through profit or loss if an increase in the
fair value of the investment can be objectively related to an event
occurring after the recognition of the impairment loss.
2. Accounting policies (continued)
2.17. Financial instruments (continued)
Derecognition
The Group derecognises a financial asset when the contractual
rights to the cash flows from the asset expire, or when it
transfers the financial asset and substantially all the risks and
rewards of ownership of the asset to another entity. Any interest
in financial assets transferred that is created or retained by the
group is recognised as a separate asset or liability.
The Group may enter into transactions whereby it transfers
assets recognised on its consolidated statement of financial
position, but retains either all risks and rewards of the
transferred assets or a portion of them. If all, or substantially
all, risks and rewards are retained, then the Group continues to
recognise the financial asset and also recognises a collateralised
borrowing for the proceeds received.
On derecognition of a financial asset in its entirety, the
difference between the asset's carrying amount and the sum of the
consideration received and receivable and the cumulative gain or
loss that had been recognised in other comprehensive income and
accumulated in equity is recognised in profit or loss.
On derecognition of a financial asset other than in its entirety
(e.g. when the Group retains an option to repurchase part of a
transferred asset or retains a residual interest that does not
result in the retention of substantially all the risks and rewards
of ownership and the Group retains control), the Group allocates
the previous carrying amount of the financial asset between the
part it continues to recognise under continuing involvement, and
the part it no longer recognises on the basis of the relative fair
values of those parts on the date of the transfer. The difference
between the carrying amount allocated to the part that is no longer
recognised and the sum of the consideration received for the part
no longer recognised and any cumulative gain or loss allocated to
it that had been recognised in other comprehensive income is
recognised in profit or loss. A cumulative gain or loss that had
been recognised in other comprehensive income is allocated between
the part that continues to be recognised and the part that is no
longer recognised on the basis of the relative fair values of those
parts.
Financial liabilities
Financial liabilities are initially measured at fair value.
Financial liabilities comprise short-term and long-term
interest-bearing borrowings and trade and other payables (excluding
income received in advance).
Subsequent to initial measurement, such liabilities are carried
at amortised cost using the effective interest method.
Borrowings
Borrowings comprise short-term and long-term interest-bearing
borrowings. Premiums or discounts arising from the difference
between the fair value of borrowings raised and the amount
repayable at maturity date are recognised in the consolidated
statement of profit or loss as borrowing costs based on the
effective interest rate method.
Derecognition
Financial liabilities are derecognised when the associated
obligation has been discharged, cancelled or has expired.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of the Group after deducting all of its
liabilities, and includes ordinary share capital. Equity
instruments issued by the Group are recorded at the proceeds
received, net of direct issue costs.
2.18. Trade payables
Trade payables are obligations to pay for goods or services that
have been acquired in the ordinary course of business from
suppliers. Trade payables are classified as current liabilities if
payment is due within one year or less. If not, they are presented
as non-current liabilities.
Trade payables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method.
2. Accounting policies (continued)
2.19. Provisions
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of a past event, it is probable
that the Group will be required to settle the obligation, and the
amount can be reliably estimated. Provisions are not recognised for
future operating losses.
The amount recognised as a provision is the best estimate of the
consideration required to settle the present obligation at the end
of the reporting period, taking into account the risks and
uncertainties surrounding the obligation. When a provision is
measured using the cash flows estimated to settle the present
obligation, its carrying amount is the present value of those cash
flows (where the effect of the time value of money is material).
The increase in provisions due to the passage of time is included
in the finance cost line item in the consolidated statement of
profit or loss and comprehensive loss.
Financial Guarantee Contracts
A financial guarantee contract is a contract that requires the
issuer to make specified payments to reimburse the holder for a
loss it incurs because a specified debtor fails to make payment
when due in accordance with the original or modified terms of a
debt instrument.
The entity recognizes a provision for financial guarantees when
it is probable that an outflow of resources embodying economic
benefits and will be required to settle the obligation and a
reliable estimate of the obligation can be made.
Determining whether an outflow of resources is probable in
relation to financial guarantees requires judgement. Indications
that an outflow of resources may be probable are:
- Financial difficulty of the debtor
- Defaults or delinquencies in interest and capital repayment of
the debtor
- Breaches of the terms of the debt instrument that result in it
being payable earlier than the agreed term and the ability of the
debtor to settle its obligation on the amended terms.
- A decline in prevailing economic circumstances (e.g. high
interest rates, inflation and unemployment) that impact on the
ability of entities to repay their obligations.
Rehabilitation provision
A provision for rehabilitation is recognised when there is a
present obligation as a result of exploration, development or
production activities undertaken, it is probable that an outflow of
economic benefits will be required to settle the obligation, and
the amount of the provision can be measured reliably.
The nature of these restoration activities includes: dismantling
and removing structures; rehabilitating mines and tailings dams;
dismantling operating facilities; closing plant and waste sites;
and restoring, reclaiming and revegetating affected areas.
The provision for future rehabilitation costs is the best
estimate of the present value of the expenditure required to settle
the rehabilitation obligation at the reporting date, based on
current legal and other requirements and technology. Future
rehabilitation costs are reviewed annually and any changes in the
estimate are reflected in the present value of the rehabilitation
provision at each reporting date.
The initial estimate of the rehabilitation provision relating to
exploration, development and production facilities is capitalised
into the cost of the related asset and depreciated or amortised on
the same basis as the related asset. Changes in the estimate of the
provision are treated in the same manner, except that the unwinding
of the effect of discounting on the provision is recognised as a
finance cost rather than being capitalised into the cost of the
related asset.
2.20. Share-based payments transactions of the Company
Equity-settled
Equity-settled share-based payments to employees and others
providing similar services are measured at the fair value of the
equity instruments at the grant date. Details regarding the
determination of the fair value of equity-settled share-based
transactions are set out in note 30.
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on the
straight-line basis over the vesting period, based on the Group's
estimate of equity instruments that will eventually vest, with
2. Accounting policies (continued)
a corresponding increase in equity. At the end of each reporting
period, the Group revises its estimate of the number of equity
instruments expected to vest. The impact of the revision of the
original estimates, if any, is recognised in profit or loss such
that the cumulative expense reflects the revised estimate, with a
corresponding adjustment to the equity-settled employee benefits
reserve.
Equity-settled share-based payment transactions with parties
other than employees are measured at the fair value of the goods or
services received, except where that fair value cannot be estimated
reliably, in which case they are measured at the fair value of the
equity instruments granted, measured at the date the entity obtains
the goods or the counterparty renders the service.
2.20. Share-based payments transactions of the Company
(continued)
Accounting for BEE transactions
Where equity instruments are issued to a broad based black
economic empowerment ('BEE') party at less than fair value, these
are accounted for as share-based payments. Any difference between
the fair value of the equity instrument issued and the
consideration received is accounted for as an expense in the
consolidated statement of profit or loss and other comprehensive
loss.
A restriction on the BEE party to transfer the equity instrument
subsequent to its vesting is not treated as a vesting condition,
but is factored into the fair value determination of the
instrument.
2.21. Taxation, including sales tax
The income tax expense or income for the period represents the
sum of the tax currently payable or recoverable and deferred
tax.
Current taxation
The tax currently payable or recoverable is based on taxable
profit or loss for the year. Taxable profit or loss differs from
profit or loss as reported in the consolidated statement of profit
or loss and other comprehensive loss because of items of income or
expense that are taxable or deductible in other years and items
that are never taxable or deductible. The Group's liability for
current tax is calculated using tax rates that have been enacted or
substantively enacted at the reporting date in countries where the
Group operates and generates taxable income.
Deferred taxation
Deferred taxation is recognised on temporary differences between
the carrying amounts of assets and liabilities in the consolidated
financial statements and the corresponding tax bases used in the
computation of taxable profit or loss. Deferred tax liabilities are
generally recognised for all taxable temporary differences.
Deferred tax assets are generally recognised for all deductible
temporary differences to the extent that it is probable that
taxable profits will be available against which those deductible
temporary differences can be utilised. Such deferred tax assets and
liabilities are not recognised if a taxable temporary difference
arises from the initial recognition of goodwill or any temporary
difference arises from the initial recognition (other than in a
business combination) of other assets and liabilities in a
transaction that affects neither the taxable profit nor the
accounting profit.
Deferred tax assets are reviewed at each reporting date and are
reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset
to be recovered.
Deferred tax balances are calculated using the tax rates that
are expected to apply to the reporting period or periods when the
temporary difference reverse, based on tax rates and tax laws
enacted or substantively enacted at the end of the reporting
period.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
Deferred tax liabilities are recognised for temporary
differences associated with investments in subsidiaries and
associates, and interests in joint ventures, except where the
timing of the reversal of the temporary difference is controlled by
the Group and it is probable that the temporary difference will not
reverse in the foreseeable future. Deferred tax assets arising from
deductible temporary differences associated with such investments
and interests are only recognised to the extent that it is probable
that there will be sufficient taxable profits against which to
utilise the benefits of the temporary differences and they are
expected to reverse in the foreseeable future.
2. Accounting policies (continued)
2.22. Taxation, including sales tax (continued)
Current and deferred tax for the year
Current and deferred tax are recognised in profit or loss,
except when they relate to items that are recognised in other
comprehensive income or directly in equity, in which case the
current and deferred tax are also recognised in other comprehensive
income or directly in equity, respectively.
Where current tax or deferred tax arises from the initial
accounting for a business combination, the tax effect is included
in the accounting for the business combination.
Sales tax
Revenues, expenses and assets are recognised net of the amount
of the applicable sales tax, except:
-- where the amount of sales tax incurred is not recoverable
from the taxation authority, it is recognised as part of the cost
of acquisition of an asset or as part of an item of expense; or
-- for receivables and payables which are recognised inclusive of sales tax.
The net amount of sales tax recoverable from, or payable to, the
taxation authority is included as part of receivables or
payables.
Cash flows are included in the cash flow statement on a gross
basis. The sales tax component of cash flows arising from investing
and financing activities which is recoverable from, or payable to,
the taxation authority is classified within operating cash
flows.
2.23. Revenue recognition
Revenue is recognised at fair value of the consideration
received net of the amount of applicable sales tax.
Sale of goods
Revenue from the sale of goods is recognised when all the
following conditions are satisfied:
-- the Group has transferred to the buyer the significant risks
and rewards of ownership of the goods;
-- the Group retains neither continuing managerial involvement
to the degree usually associated with ownership nor effective
control over the goods sold;
-- the amount of revenue can be measured reliably;
-- it is probable that the economic benefits associated with the
transaction will flow to the Group; and
-- the costs incurred or to be incurred in respect of the
transaction can be measured reliably.
Specifically, revenue from the sale of goods is recognised when
goods are delivered and legal title is passed.
Many of the Group's sales are subject to an adjustment based on
inspection of the shipment by the customer. In such cases, revenue
is recognised based on the Group's best estimate of the grade at
the time of shipment, and any subsequent adjustments are recorded
against revenue when advised. Historically, the differences between
estimated and actual grade have not been significant.
Interest income
Interest income is recognised when it is probable that the
economic benefits will flow to the Group and the amount of revenue
can be measured reliably. Interest income is accrued on a time
basis, by reference to the principal outstanding and at the
effective interest rate. Interest income is recognised in
investment income on the consolidated statement of profit or loss
and other comprehensive income.
2.24. Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets, which are assets
that necessarily take a substantial period of time to get ready for
their intended use or sale, are added to the cost of those assets,
until such time as the assets are substantially ready for their
intended use or sale.
All other borrowing costs are recognised in profit or loss in
the period in which they are incurred.
2. Accounting policies (continued)
2.25. Employee benefits
A liability is recognised for benefits accruing to employees in
respect of wages and salaries, annual leave and sick leave when it
is probable that settlement will be required and they are capable
of being measured reliably.
2.26. Segment information
Reportable segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Company's executive
committee.
Management has determined the reportable segments of the Group
based on the reports reviewed by the Company's executive committee
that are used to make strategic decisions. The Group has three
reportable segments: Exploration, Development and Mining (see note
4).
2.27. Adoption of new and revised Accounting Standards and
Interpretations
The key new and amended reporting requirements that must be
applied for the first time this year include:
-- AASB 2014-3 Amendments to Australian Accounting Standards
-Accounting for Acquisitions of Interest in Joint operations
-- AASB 2014-4 Amendments to Australian Accounting Standards
-Clarification of Acceptable Methods of Depreciation and
Amortisation
-- AASB 2015-1 Amendments to Australian Accounting Standards -
Annual Improvements to Australian Accounting Standards 2012-2014
Cycle
-- AASB 2015-2 Amendments to Australian Accounting Standards -
Disclosure Initiative: Amendments to AASB 101
The application of these amendments does not have any material
impact on the disclosures or the amounts recognised in the Group's
consolidated financial statements.
At the date of the authorisation of the financial report, a
number of Standards and Interpretations were in issue but not yet
effective. The Company has assessed these as follows:
Mandatory
application
Title Nature of date/ Date of
of standard change Impact adoption by Group
---------------- ------------------ ------------------------------------------------------------ ------------------
AASB 9 AASB 9 addresses The Group has yet Must be applied
Financial the to undertake a detailed for financial
Instruments classification, assessment of the years commencing
measurement classification and on or after 1
and derecognition measurement of financial January 2018.
of financial assets. Based on the
assets and The other financial transitional
financial assets held by the provisions in
liabilities, Group include: the completed
introduces * equity investments currently measured at fair value AASB 9, early
new rules through profit or loss which would likely continue to adoption in
for hedge be measured on the same basis under AASB 9. phases
accounting was only
and a new permitted
impairment Accordingly, the for annual
model for Group does not expect reporting
financial the new guidance periods beginning
assets. to have a significant before 1 February
impact on the classification 2015. After that
and measurement date, the new
of its financial rules must be
assets. adopted in their
There will be no entirety.
impact on the Group's Expected date
accounting for financial of adoption by
liabilities, as the Group: 1
the new requirements July 2018
only affects the
accounting for financial
liabilities that
are designated at
fair value through
profit or loss and
the Group does not
have any such liabilities.
The derecognition
rules have been
transferred from
AASB 139 Financial
Instruments: Recognition
and Measurement
and have not been
changed.
The new impairment
model requires the
recognition of impairment
provisions based
on expected credit
losses (ECL) rather
than only incurred
credit losses as
is the case under
AASB 139. It applies
to financial assets
classified at amortised
cost, debt instruments
measured at fair
value through other
comprehensive income,
contract assets
under AASB 15 Revenue
from Contracts with
Customers, lease
receivables, loan
commitments and
certain financial
guarantee contracts.
The Group has yet
to undertake a detailed
assessment of how
its impairment provisions
would be affected
by the new model.
The new standard
also introduces
expanded disclosure
requirements and
changes in presentation.
These are expected
to change the nature
and extent of the
Group's disclosures
about its financial
instruments particularly
in the year of the
adoption of the
new standard.
---------------- ------------------ ------------------------------------------------------------ ------------------
AASB 15 The AASB Management is currently Mandatory for
Revenue has issued assessing the effects financial years
from Contracts a new standard of applying the commencing on
with Customers for the new standard on or after 1
recognition the Group's financial January
of revenue. statements, especially 2018, but
This will with the acquisition available
replace of Uitkomst Colliery for early
AASB 118 on 30 June 2017. adoption.
which covers At this stage, the Expected date
revenue Group is not able of adoption by
arising to estimate the the Group: 1
from the effect of the new July 2018.
sale of rules on the Group's
goods and financial statements.
the rendering The Group will make
of services more detailed assessments
and AASB of the effect over
111 which the next twelve
covers months.
construction
contracts.
The new
standard
is based
on the principle
that revenue
is recognised
when control
of a good
or service
transfers
to a customer.
The standard
permits
either a
full
retrospective
or a modified
retrospective
approach
for the
adoption.
---------------- ------------------ ------------------------------------------------------------ ------------------
AASB 16 AASB 16 The standard will Mandatory for
Leases was issued affect primarily financial years
in February the accounting for commencing on
2016. It the Group's operating or after 1
will result leases. As at the January
in almost reporting date, 2019. At this
all leases the Group has low stage, the Group
being recognized value operating does not intend
on the balance leases and may be to adopt the
sheet, as covered by the exception standard before
the distinction for short-term and its effective
between low-value leases date.
operating and some commitments
and finance may relate to arrangements
leases is that will not qualify
removed. as leases under
Under the AASB 16. The Group
new standard, has not yet determined
an asset to what extent these
(the right commitments will
to use the result in the recognition
leased item) of an asset and
and a financial a liability for
liability future payments
to pay rentals and how this will
are recognized. affect the Group's
The exceptions profit and classification
are short-term of cash flows.
and low-value
leases.
---------------- ------------------ ------------------------------------------------------------ ------------------
3. Critical accounting estimates and key judgements
Estimates assume a reasonable expectation of future events and
are based on current trends and economic data, obtained both
externally and within the Group. Actual results may differ from
these estimates. Estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimates are revised and in
any future periods affected. The primary areas in which estimates
and judgements are applied are discussed below.
Asset carrying values and impairment charges
The Group assesses impairment at the end of each reporting
period by evaluating conditions and events specific to the Group
that may be indicative of impairment triggers. Recoverable amounts
of relevant assets are reassessed using value-in-use calculations
which incorporate various key assumptions. Key assumptions include
future coal prices, future operating costs, discount rates, foreign
exchange rates and coal reserves. Refer to note 13.
Coal reserves
Economically recoverable coal reserves relate to the estimated
quantity of coal in an area of interest that can be expected to be
profitably extracted, processed and sold.
The Group determines and reports coal reserves under the
Australasian Code of Reporting of Mineral Resources and Ore
Reserves (the 'JORC Code'). This includes estimates and assumptions
in relation to geological, technical and economic factors,
including: quantities, grades, production techniques, recovery
rates, production costs, transport costs, exchange rates and
expected coal demand and prices.
Because the economic assumptions used to estimate reserves
change from period to period, and because additional geological
data is generated during the course of operations, estimates of
reserves may change from period to period. Changes in reported
reserves may affect the Group's financial results and financial
position in a number of ways, including the following:
-- asset carrying values may be affected due to changes in estimated future cash flows; and
-- depreciation and amortisation charges may change where such
charges are determined by the units of production basis, or where
the useful economic lives of assets change.
Depreciation and amortisation charges in the consolidated
statement of profit or loss may change where such charges are
determined by the units of production basis, or where the useful
economic lives of assets change.
3. Critical accounting estimates and key judgements (continued)
Exploration and evaluation assets
Determining the recoverability of exploration and evaluation
expenditure capitalised requires estimates and assumptions as to
future events and circumstances, in particular, whether successful
development and commercial exploitation, or alternatively sale, of
the respective areas of interest will be achieved. The Group
applies the principles of AASB 6 and recognises exploration and
evaluation assets when the rights of tenure of the area of interest
are current, and the exploration and evaluation expenditures
incurred are expected to be recouped through successful development
and exploitation of the area. If, after having capitalised the
expenditure under the Group's accounting policy, a judgment is made
that recovery of the carrying amount is unlikely, an impairment
loss is recorded in profit or loss. Refer to note 13.
Development expenditure
Development activities commence after the commercial viability
and technical feasibility of the project is established. Judgment
is applied by management in determining when a project is
commercially viable and technically feasible. Any judgments may
change as new information becomes available. If, after having
commenced the development activity, a judgment is made that a
development asset is impaired, the appropriate amount will be
written off to the consolidated statement of comprehensive income.
Refer to note 13.
The Company considers the following items as pre-requisites
prior to concluding on commercial viability:
-- All requisite regulatory approvals from government
departments in South Africa have been received and are not subject
to realistic legal challenges
-- The Company has the necessary funding to engage in the
construction and development of the project as well as general
working capital until the project is cash generative
-- A JORC compliant resource proving the quantity and quality of
the project as well as a detailed Mine Plan reflecting that the
colliery can be developed and will deliver the required return
hurdle rates
-- The Company has secured off-take and/or logistics agreements
for a significant portion of the product produced by the mine and
the pricing has been agreed
-- The Company has the appropriate skills and resources to develop and operate the project
Rehabilitation and restoration provisions
Certain estimates and assumptions are required to be made in
determining the cost of rehabilitation and restoration of the areas
disturbed during mining activities and the cost of dismantling of
mining infrastructure. The amount the Group is expected to incur to
settle its future obligations includes estimates regarding:
-- the future expected costs of rehabilitation, restoration and dismantling.
-- the expected timing of the cash flows and the expected life
of mine (which is based on coal reserves noted above);
-- the application of relevant environmental legislation; and
-- the appropriate rate at which to discount the liability;
Changes in the estimates and assumptions used could have a
material impact on the carrying value of the rehabilitation
provision and related asset. The provision is reviewed at each
reporting date and updated based on the best available estimates
and assumptions at that time. The carrying amount of the
rehabilitation provision is set out in note 24.
Recoverability of non-current assets
As set out in note 13, certain assumptions are required to be
made in order to assess the recoverability of non-current assets
where there is an impairment indicator. Key assumptions include
future coal prices, future operating costs, discount rate, foreign
exchange rates and estimates of coal reserves. Estimates of coal
reserves in themselves are dependent on various assumptions (refer
above). Changes in these assumptions could therefore affect
estimates of future cash flows used in the assessment of
recoverable amounts, estimates of the life of mine and
depreciation. Refer to note 13.
Contingent liabilities - litigation
Certain claims have been made against the Group. Judgments about
the validity of the claims have been made by the Directors. Further
details are included in note 34.
3. Critical accounting estimates and key judgements (continued)
Non-current Assets Held for Sale and Discontinued Operations
A non-current asset, or disposal group, is classified as held
for sale if its carrying amount will be recovered principally
through a sale transaction rather than continued use. In accordance
with AASB 5 'Non-current Assets Held for Sale and Discontinued
Operations', assets which meet the definition of held for sale are
valued at the lower of carrying value and fair value less costs to
sell.
Judgement is required by management in determining whether an
asset meets the AASB 5 criteria of held for sale, including whether
the asset is being actively marketed, is available for sale in its
current condition and whether a sale is highly probable within 12
months of classification as held for sale. When calculating fair
value less costs to sell, estimates of future disposal proceeds are
also required. Refer to note 21 for further details.
4. Segment information
The Group has three reportable segments: Exploration,
Development and Mining.
The Exploration segment is involved in the
search for resources suitable for commercial
exploitation, and the determination of the
technical feasibility and commercial viability
of resources. As of 30 June 2017, projects
within this reportable segment include three
exploration stage coking and thermal coal complexes,
namely the Chapudi Complex (which comprises
the Chapudi project, the Chapudi West project
and the Wildebeesthoek project), the Soutpansberg
Complex (which comprises the Voorburg project,
the Mt Stuart project and the Jutland project)
and the Makhado Complex (comprising the Makhado
project, the Makhado Extension project and
the Generaal project).
The Development segment is engaged in establishing
access to and commissioning facilities to extract,
treat and transport production from the mineral
reserve, and other preparations for commercial
production. As of 30 June 2017, projects included
within this reportable segment include project,
namely the Vele Colliery, in the early operational
and development stage and Klipspruit which
is included in the newly acquired Uikomst Colliery.
The Mining segment is involved in day to day
activities of obtaining a saleable product
from the mineral reserve on a commercial scale
and consists of the Mooiplaats Colliery and
the newly acquired Uitkomst Colliery. As of
30 June 2017 the Mooiplaats Colliery has been
classified as operations held for sale. No
revenue or costs have been recognised for the
Uitkomst Colliery as the effected date of acquisition
was 30 June 2017.
The accounting policies of the reportable segments
are the same as those described in Note 2,
Accounting policies.
The Group evaluates performance on the basis
of segment profitability, which represents
net operating (loss) / profit earned by each
reportable segment.
Each reportable segment is managed separately
because, amongst other things, each reportable
segment has substantially different risks.
The Group accounts for intersegment sales and
transfers as if the sales or transfers were
to third parties, i.e. at current market prices.
The Group's reportable segments focus on the
stage of project development and the product
offerings of coal mines in production.
In order to reconcile the segment results with
the consolidated statement of profit or loss
and other comprehensive income, the discontinuing
operations should be deducted from the segment
total and the corporate results (as per the
reconciliation later in the note should be
included).
4. Segment information (continued)
Exploration Development Mining Total
For the year ended $'000 $'000 $'000 $'000
30 June 2017
------------------------------
Revenues from - - - -
external customers
Inter-segment - - - -
revenues
--------------- --------------- ------- --------
Revenue - - - -
--------------- --------------- ------- --------
Segment loss (1,505) (808) - (2,313)
Items included
within the Group's
measure of segment
profitability
- Depreciation
and amortisation (68) (39) - (107)
* Finance income 2 14 - 16
- Finance cost (1,062) (120) - (1,182)
Segment assets 124,216 120,406 31,016 275,638
--------------- --------------- ------- --------
Items included
within the Group's
measure of segment
assets
- Additions to
non-current assets
(Including Uitkomst) 679 6 31,016 31,701
--------------- --------------- ------- --------
Segment liabilities 8,758 6,672 9,045 24,475
Exploration Development Mining Total
For the year $'000 $'000 $'000 $'000
ended 30 June
2016
--------------------- ------------ ------------ ------- --------
Revenues from - - - -
external customers
Inter-segment - - - -
revenues
------------ ------------ ------- --------
Revenue (1) - - - -
------------ ------------ ------- --------
Segment loss (5,246) (136) - (5,382)
Items included
within the Group's
measure of segment
profitability
- Depreciation
and amortisation (63) (42) - (105)
- Finance income - - - -
- Finance cost (1,455) (112) - (1,567)
- Income tax
expense - 1,431 - 1,431
------------ ------------ ------- --------
(1) Revenues represent
sale of product
Segment assets 112,242 105,941 - 218,183
------------ ------------ ------- --------
Items included
within the Group's
measure of segment
assets
- Additions to
non-current assets 1,169 18 - 1,187
------------ ------------ ------- --------
Segment liabilities 16,947 4,076 - 21,023
4. Segment information (continued)
Reconciliations of the total segment amounts to respective items
included in the consolidated financial statements are as
follows:
Year ended Year ended
30 June 30 June
2017 2016
$'000 $'000
----------- -----------
Total loss for reportable
segments 2,313 5,382
Reconciling items:
Unallocated corporate costs 5,995 8,654
Impairment expense 10,624 -
Depreciation and amortisation 247 1,094
Foreign exchange (gains)/losses (1,812) 7,342
(Profit)/loss for the year
from operations classified
as held for sale (1,815) 973
----------- -----------
Loss for the year 15,552 23,445
----------- -----------
Total segment assets 275,638 218,183
Reconciling items:
Unallocated property, plant
and equipment 4,118 3,379
Intangible assets - 10,489
Other financial assets 7,311 5,611
Other receivables - 1,013
Unallocated current assets 9,310 19,921
Assets classified as held
for sale 9,690 14,567
----------- -----------
Total assets 306,067 273,163
----------- -----------
Total segment liabilities 24,475 21,023
Reconciling items:
Borrowings - 10,000
Deferred consideration 1,916 -
Unallocated liabilities 3,388 2,966
Liabilities associated with
assets held for sale 3,414 2,732
----------- -----------
Total liabilities 33,193 36,721
----------- -----------
4. Segment information
(continued)
Year ended Year ended
30 June 30 June
2017 2016
$'000 $'000
----------- -----------
The Group operates in two principal geographical
areas - Australia (country of domicile) and
South Africa.
The Group's revenue from external customers
by location of operations and information about
its non-current assets by location of assets
are detailed below.
Revenue by location of operations
South Africa - -
Australia - -
----------- -----------
Total revenue - -
----------- -----------
Non-current assets by location
of operations
South Africa 278,526 238,235
Australia - -
----------- -----------
Total non-current assets 278,526 238,235
----------- -----------
5. Investment income
Continuing operations
Rental income 196 172
----------- -----------
Interest income
Bank deposits 173 479
Interest on loans 61 90
Interest on other financial
assets 92 12
----------- -----------
Total interest income 326 581
----------- -----------
Total investment income 522 753
----------- -----------
6. Loss for the year from continuing
operations
Loss for the year from continuing operations
has been arrived at after (charging) or crediting:
Other income
Non-refundable deposits received
for sale of non-core assets
(Holfontein- refer note 11) - 250
Scrap sales 172 -
Gain on sale of Opgoedenhoop 73 -
Other 174 7
----------- -----------
Total other income 419 257
----------- -----------
6. Loss for the year from continuing operations
(continued)
Year ended Year ended
30 June 30 June
2017 2016
$'000 $'000
----------- -----------
Other gains/(losses)
Profit on disposal of property,
plant and equipment - 8
Revaluation of investments 521 (80)
Fair value adjustment 4 78
Impairment of investment - (360)
----------- -----------
Total other gains/(losses) 525 (354)
----------- -----------
Depreciation and amortisation
Depreciation
Depreciation of property, plant
and equipment (note 14) (354) (351)
----------- -----------
Total depreciation (354) (351)
----------- -----------
Amortisation
Amortisation of intangible
asset (note 15) - (848)
----------- -----------
Total amortisation - (848)
----------- -----------
Total depreciation and amortisation (354) (1,199)
----------- -----------
Foreign exchange profit/(loss)
Unrealised 1,971 (9,568)
Realised 1,393 (1,086)
----------- -----------
3,364 (10,654)
----------- -----------
Employee benefits expenses
Share-based payments (272) (193)
Super-annuation (7) (9)
Salaries and wages (4,367) (3,563)
----------- -----------
Total employee benefits expense (4,646) (3,765)
----------- -----------
Other expenses
Included in other expenses is transaction costs
of $1 million (2016: $2.6 million).
7. Impairment expense
Impairment of intangible (refer (10,624) -
note 15)
8. Auditors' remuneration
Year ended Year ended
30 June 30 June
2017 2016
$'000 $'000
----------- -----------
Deloitte - Australia
Audit and review of financial
reports 92 77
Non-audit related services 34 11
----------- -----------
126 88
----------- -----------
Deloitte - South Africa
Audit and review of financial
reports 200 176
Non-audit related services 5 96
----------- -----------
205 272
----------- -----------
9. Finance costs
Interest on borrowings 1,051 1,457
Interest on overdraft - 9
Unwinding of interest 120 112
Other 14 -
----------- -----------
1,185 1,578
----------- -----------
10. Income tax and deferred
tax
Income tax recognised in profit
or loss from continuing operations
Current tax
Current tax expense in respect - -
of the current year
----------- -----------
-
----------- -----------
Deferred tax (note 25)
Recognition of deferred tax
assets on assessed losses 295 1,431
----------- -----------
295 1,431
----------- -----------
Total income tax credit recognised 295 1,431
----------- -----------
10. Income tax and deferred tax (continued)
The Group's effective tax rate for the year
from continuing operations was (2%) (2016:
(6%)). The tax rate used for the 2017 and 2016
reconciliations below is the corporate tax
rate of 30% for Australian companies. The income
tax expense for the year can be reconciled
to the accounting profit as follows:
Year ended Year ended
30 June 30 June
2017 2016
$'000 $'000
----------- -----------
Loss from continuing operations
before income tax (17,662) (23,903)
Income tax benefit calculated
at 30% (2016: 30%) 5,299 7,171
Tax effects of:
Expenses that are not deductible
for tax purposes (157) (1,195)
Differences in tax rates (127) (442)
Income not taxable 436 -
Other temporary differences
not recognized (5,156) (5,106)
Recognition of deferred tax
asset - Losses - 1,003
----------- -----------
Income tax credit 295 1,431
----------- -----------
Income tax recognised in profit
or loss from discontinued operations
Current tax
Current tax expense in respect - -
of the current year
----------- -----------
- -
----------- -----------
Deferred tax (note 25)
Recognition of deferred tax - -
assets on assessed losses
----------- -----------
- -
----------- -----------
Total income tax credit recognised - -
----------- -----------
The Group's effective tax rate for the year
from discontinued operations was (0%) (2016:
0%). The tax rate used for the 2017 and 2016
reconciliations below is the corporate tax
rate of 30% payable by Australian corporate
entities. The income tax expense for the year
can be reconciled to the accounting profit
as follows:
Profit/(loss) before income
tax from discontinued operations 1,815 (973)
Income tax benefit calculated
at 30% (2016: 30%) (545) 292
Tax effects of:
Expenses that are not deductible
for tax purposes (80) 13
Difference in tax rates 37 (19)
Income not taxable 846 -
Other temporary differences
not recognized (258) (286)
----------- -----------
Income tax credit - -
----------- -----------
11. Discontinuing operations
11.1 Holfontein (Pty) Ltd ('Holfontein')
The Company finalized the disposal of the Holfontein
thermal coal project near Secunda in Mpumalanga
during the financial year. Holfontein was disposed
for $3.8 million (ZAR50 million), of which
$0.8 million (ZAR10 million) was received in
prior periods.
11.2 Plan to dispose of Langcarel
(Pty) Ltd ('Mooiplaats')
The Company had previously announced a long-term
strategy to dispose of certain non-core thermal
assets in order to focus on the development
of the coking coal assets. The Company had
been actively seeking a buyer for this business.
The Company is currently engaged with various
parties to sell Mooiplaats Colliery and expects
to complete a sale within twelve months of
the reporting date. The Group has not recognised
any impairment on the Mooiplaats Colliery during
the current financial year. (2016: $nil - note
21).
11.3 Analysis of loss for the
year from discontinuing operations
The combined results of the operations held
for sale included in the loss for the year
are set out below. The comparative losses and
cash flows from operations held for sale have
been re-presented to include those operations
classified as held for sale in the current
year.
Year ended Year ended
30 June 30 June
2017 2016
$'000 $'000
------------ --------------------------
Loss for the year from discontinuing
operations
Revenue - -
Other gains - Reversal of Holfontein
impairment 3,022 -
------------ --------------------------
3,022 -
Expenses (1,207) (973)
------------ --------------------------
Profit/(loss) before tax 1,815 (973)
------------ --------------------------
Profit/(loss) for the year from
operations held for sale (attributable
to owners of the Company) 1,815 (973)
------------ --------------------------
Cash flows from discontinuing
operations
Net cash outflows from operating
activities (860) (951)
Net cash (outflows)/inflows
from investing activities (140) 1
Net cash inflows from financing
activities 761 1,400
------------ --------------------------
Net cash (outflows)/inflows (239) 450
------------ --------------------------
These operations have been classified and accounted
for at 30 June 2017 as a disposal group held
for sale (see note 21).
11. Discontinuing operations (continued)
Impairment testing
Non-current assets held for sale
As of 30 June 2017 the net book value of the
following project assets were classified as
non-current assets held for sale
* Mooiplaats Colliery: $9.4 million (refer note 21)
The Company has announced a strategy to dispose
of the Mooiplaats Colliery within the next 12
months. Consequently, these project assets have
been classified as non-current assets held for
sale and have been written down to their fair
value less costs to sell represented by indicative
offers received.
12. Loss per share attributable
to owners of the Company
Cents Cents
per share per share
------------ -------------------------
12.1 Basic loss/(profit) per
share
From continuing operations 0.86 1.19
From discontinuing operations (0.09) 0.05
------------ -------------------------
0.77 1.24
------------ -------------------------
Year ended Year ended
30 June 30 June
2017 2016
$'000 $'000
------------ -------------------------
Loss for the year attributable
to owners of the Company (15,536) (23,445)
Less: (Profit)/loss for the
year from operations held for
sale (1,815) 973
------------ -------------------------
Loss used in the calculation
of basic loss per share from
continuing operations (17,351) (22,472)
------------ -------------------------
'000 shares '000 shares
------------ -------------------------
Weighted number of ordinary
shares
Weighted average number of ordinary
shares for the purposes of basic
loss per share 2,010,622 1,896,412
------------ -------------------------
12.2 Diluted loss per share
Diluted loss per share is calculated by dividing
loss attributable to owners of the Company by
the weighted average number of ordinary shares
outstanding during the year plus the weighted
average number of diluted ordinary share that
would be issued on conversion of all the dilutive
potential ordinary shares into ordinary shares.
As at 30 June 2017, 80,635,237 options (2016
- 75,627,052 options) and 5,675,415 weighted
average number of warrants, issued to the IDC,
were excluded from the computation of the loss
per share as their impact is anti-dilutive.
12.3 Headline loss per share
(in line with JSE requirements)
The calculation of headline loss per share at
30 June 2017 was based on the headline loss
attributable to ordinary equity holders of the
Company of $7.9 million (2016: $22.0 million)
and a weighted average number of ordinary shares
outstanding during the period ended 30 June
2016 of 2,010,621,629 (2016: 1,896,412,421).
The adjustments made to arrive at the headline
loss are as follows:
Year ended Year ended
30 June 30 June
2017 2016
$'000 $'000
------------ ------------
Loss for the period attributable
to ordinary shareholders (15,536) (23,445)
Adjust for:
Impairment losses 7,602 360
Profit on sale of property,
plant and equipment - (8)
------------ ------------
Headline earnings (7,934) (23,093)
------------ ------------
Headline loss per share (cents
per share) (0.39) (1.22)
13. Development, exploration
and evaluation expenditure
Development, exploration and
evaluation expenditure comprises:
Exploration and evaluation assets 118,652 104,893
Development expenditure 114,170 103,030
------------ ------------
Balance at end of year 232,822 207,923
------------ ------------
A reconciliation of development, exploration
and evaluation expenditure is presented below:
Exploration and evaluation assets
Balance at beginning of year 104,893 118,498
Additions 430 1,187
Movement in Rehabilitation asset (37) (18)
Transfer from development assets 2,342 -
Acquisition of Uitkomst Colliery 249 -
(refer note 36)
Foreign exchange differences 10,775 (14,774)
------------ ------------
Balance at end of year 118,652 104,893
------------ ------------
13. Development, exploration
and evaluation expenditure
(continued)
Year ended Year ended
30 June 30 June
2017 2016
$'000 $'000
------------------- -------------------------------------
Development assets
Balance at beginning of year 103,030 114,315
Additions 6 -
Movement in Rehabilitation
asset 2,004 (167)
Transfer from property, plant
and equipment - 6,501
Transfer to exploration and (2,342) -
evaluation assets
Deferred tax asset - (1,488)
Foreign exchange differences 11,472 (16,131)
------------------- -------------------------------------
Balance at end of year 114,170 103,030
------------------- -------------------------------------
Impairment testing
Exploration and Evaluation Assets
As of 30 June 2017, the net book value of the
following project assets were classified as
Exploration and Evaluation assets:
* Greater Soutpansberg Project: $65.9 million
* Makhado Project: $52.5 million
In terms of AASB 6 - Exploration for and Evaluation
of Mineral Resource management have performed
an assessment of whether facts and circumstances
suggest that the carrying amount of an exploration
and evaluation asset may exceed its recoverable
amount. In performing its assessment, management
have considered its exploration rights to the
exploration areas, its planned & budgeted exploration
activities and the likelihood of the recoverability
of the net book value from the successful development
of the areas of interest. Management have concluded
that no indicators of impairment for its Exploration
and Evaluation assets exist as at 30 June 2017.
Development Assets
As of 30 June 2017 the net book value of the
following project assets were included in Development
assets:
* Vele Colliery: $114.2 million
In terms of AASB 136 - Impairment of Assets
management have identified the coal commodity
price as an indicator that the Vele assets
may be impaired and have performed a formal
impairment assessment.
Management have adopted the fair value less
costs of disposal approach to estimate the
recoverable amount of the project, before comparing
this amount with the carrying value of the
associated assets and liabilities in order
to assess whether an impairment of the carrying
value is required under AASB 136. Management
formed the view that there is no impairment.
In calculating fair value less costs of disposal,
management have forecast the cash flows associated
with the project over its expected life of
17 years until 2035. The cash flows are estimated
for the assets of the colliery in its current
condition together with CAPEX required for
the colliery to resume operation and discounted
to its present value
13. Development, exploration and evaluation
expenditure (continued)
using a post-tax discount rate that reflects
the current market assessments of the risks
specific to the Vele Colliery. The identification
of impairment indicators and the estimation
of future cash flows require management to
make significant estimates and judgments. Details
of the key assumptions used in the fair value
less costs of disposal calculation at 30 June
2017 are included below.
Key assumptions 2018 2019 2020 2021 LT
-------------------------------------- ----- ----- ----- ----- --------
Thermal coal price ($, nominal)(1) 66 62 61 61 64(2)
-------------------------------------- ----- ----- ----- ----- --------
Hard coking coal price ($, nominal)3 121 112 114 117 125(4)
-------------------------------------- ----- ----- ----- ----- --------
Exchange rate ($ / ZAR, nominal) 16.6 18.1 19.3 20.5 20.5(5)
-------------------------------------- ----- ----- ----- ----- --------
Discount rate4 16.1%
-------------------------------------- ------------------------------------
Inflation rates $ 2.0%
ZAR 5.5%
-------------------------------------- ------------------------------------
Production start date July 2019
-------------------------------------- ------------------------------------
(1) Management's assumptions reflect the Richards
Bay export thermal coal (API4) price.
(2) LT thermal coal price equivalent to $60
per tonne in 2017 dollars
(3) Management's assumption of the hard coking
coal price is made after considering relevant
broker forecasts
(4) LT hard coking coal price equivalent to
$115 per tonne in 2017 dollars
(5) From 2022, the exchange rate is derived
with reference to the 2021 assumption, and
inflated by the compounding differential between
$ and ZAR inflation rates
(6) Management prepared a nominal ZAR-denominated,
post-tax discount rate, which was calculated
with reference to the Capital Asset Pricing
Model (CAPM).
(7) The production start date assumes that
sufficient project finance is able to be raised
by management in order to commence production
in July 2019. Management is in the early stages
of considering the financing options available.
Impairment Assessment $ million
----------------------------------------------------- ----------
Carrying Value of Vele Cash Generating Unit 114
----------------------------------------------------- ----------
Value of Vele using the discounted cash flow method 111
----------------------------------------------------- ----------
Excluded from the value of the Vele Colliery
set out above, which has been derived using
the discounted cash flow model, is any value
attributable to resources remaining after the
projections made in the life of mine model.
In order to assess the potential value of resources
outside of the life of mine plan, we have extended
the life of mine model by an additional two
years. This results in a value of Vele using
the discounted cash flow method of $115 million.
Incorporating an additional 10 years (assuming
all other assumptions are unchanged) results
in a value of Vele using the discounted cash
flow method of $124 million.
Alternative valuation analysis of the resources
outside of the life of mine plan has been performed
by applying a resource multiple to these resources.
We note that applying a resource multiple of
a $0.25 per tonne to the primary saleable reserves
not included in the current mine plan would
increase the value of Vele such that it would
be greater than its carrying value.
13. Development, exploration and evaluation
expenditure (continued)
Sensitivity Analysis
Changes in key assumptions in the table below
would have the following approximate impact
on the recoverable amount of the Vele Colliery
as calculated using the discounted cash flow
method and excluding the effect of the value
attributable to resources outside the
LOM. Sensitivity Change in variable Effect on fair value less costs
of disposal using discounted
cash flow method ($ million)
--------------------------------- ------------------- --------------------------------
Long term coal prices +10.0% 36
-10.0% (36)
--------------------------------- ------------------- --------------------------------
Long term exchange rate +10.0% 33
-10.0% (33)
--------------------------------- ------------------- --------------------------------
Discount rate +1.0% (6)
-1.0% 7
--------------------------------- ------------------- --------------------------------
Operating costs +10.0% (18)
-10.0% 18
--------------------------------- ------------------- --------------------------------
Delays in production start date +12 months (6)
--------------------------------- ------------------- --------------------------------
14. Property, plant and equipment
Mining Mining Land Leasehold Motor Other Total
property, rights and improvements vehicle
plant buildings
and equipment
$'000 $'000 $'000 $'000 $'000 $'000 $'000
---------------------- ---------------- ------------------- ------------------- ------------------- ---------------- -------
30 June 2017
Cost
At beginning
of year 42 - 7,368 390 605 1,597 10,002
Additions - 5 - 7 152 164
Disposals - - - - (17) (4) (21)
Acquisition
of Uitkomst
Colliery (refer
note 36) 1,948 20,243 433 - 373 90 23,087
Exchange differences 6 - 977 48 80 202 1,313
---------------------- ---------------- ------------------- ------------------- ------------------- ---------------- -------
At end of
year 1,996 20,243 8,783 438 1,048 2,037 34,545
---------------------- ---------------- ------------------- ------------------- ------------------- ---------------- -------
Accumulated
depreciation
At beginning
of year 30 - 880 389 494 1,454 3,247
Depreciation
charge - - 181 - 66 107 354
Accumulated
depreciation
on disposals - - - - (17) (2) (19)
Exchange differences 4 - 123 49 67 189 432
---------------------- ---------------- ------------------- ------------------- ------------------- ---------------- -------
At end of
year 34 - 1,184 438 610 1,748 4,014
---------------------- ---------------- ------------------- ------------------- ------------------- ---------------- -------
Net carrying
value at end
of fiscal
year 2017 1,962 20,243 7,599 - 438 289 30,531
---------------------- ---------------- ------------------- ------------------- ------------------- ---------------- -------
14. Property, plant and equipment
(continued)
------------------
Mining Land Leasehold Motor Other Total
property, and improvements vehicle
plant buildings
and equipment
$'000 $'000 $'000 $'000 $'000 $'000
------------------ -------------- -------------- --------- ------- ------------------
30 June 2016
Cost
At beginning
of year 50 16,701 463 732 1,831 19,777
Additions - - - 56 58 114
Transferred
to development
assets - (6,501) - - - (6,501)
Disposals - - - (59) - (59)
Exchange
differences (8) (2,832) (73) (124) (292) (3,329)
------------------ -------------- -------------- --------- ------- ------------------
At end of year 42 7,368 390 605 1,597 10,002
------------------ -------------- -------------- --------- ------- ------------------
Accumulated
depreciation
At beginning
of year 36 857 462 517 1,646 3,518
Depreciation
charge - 171 - 103 77 351
Accumulated
depreciation
on disposals - - - (37) - (37)
Exchange
differences (6) (148) (73) (89) (269) (585)
------------------ -------------- -------------- --------- ------- ------------------
At end of year 30 880 389 494 1,454 3,247
------------------ -------------- -------------- --------- ------- ------------------
Net carrying
value at end
of fiscal year
2016 12 6,488 1 111 143 6,755
------------------ -------------- -------------- --------- ------- ------------------
15. Intangible assets
Year Year
ended ended
30 June 30 June
2017 2016
$'000 $'000
------------------------- ------- --------------
Balance at beginning of year 10,489 11,682
Amortisation - (848)
Impairment (10,624) -
Foreign exchange differences 135 (345)
------------------------- --------------
Balance at end of year - 10,489
------------------------- --------------
In August 2008 the Company entered into
a throughput agreement with Terminal de
Carvao da Matola ("TCM"), a subsidiary
of Grindrod, the operator of the Matola
Terminal, and CMR Engineers & Project Managers
Proprietary Limited.
This agreement granted the Company one
mtpa of port capacity through the Matola
terminal commencing 1 January 2009, for
an initial term of five years. This capacity
was increased to approximately three mtpa
in March 2011 and the Company had the right
to renew the agreement (subject to certain
conditions) at the end of the initial term,
for further periods of 3 successive periods
of 5 years each for a total of 15 years.
During the 2015 financial year the Company
reached an agreement with Grindrod to settle
the current liabilities to date as well
as cover all future take or pay obligations
until 31 December 2016. During the current
year CoAL decided
15. Intangible assets (continued)
not to renew the take or pay obligation
beyond 31 December 2016 to avoid any further
liabilities until production can be forecast
with certainty, and as a result impaired
the intangible asset in full, with no further
rights to port capacity currently existing
following termination.
New terms can be negotiated if required
to facilitate any production by its Vele
Colliery and Makhado Project.
16. Other receivables
Year Year
ended ended
30 June 30 June
2017 2016
$'000 $'000
------------------------- ------- --------------
Carrying amount of:
Nimag loan - 811
Other loans 237 202
------------------------- --------------
237 1,013
------------------------- --------------
Balance at beginning of year 1,013 1,746
Loans repaid (457) (444)
Interest 61
Other 7 -
Foreign exchange differences 108 (289)
Transfer Nimag loan to trade (495) -
and other receivables
------------------------- --------------
Balance at end of year 237 1,013
------------------------- --------------
Nimag loan
CoAL provided a loan as part of the NiMag
disposal to settle the balance of the purchase
consideration. The loan bears interest
at the South African prime overdraft rate
less 0.5%, payable quarterly in arrears.
17. Other financial assets
Year Year
ended ended
30 June 30 June
2017 2016
$'000 $'000
------------------------- ------- --------------
Carrying value of financial
assets at fair value through
profit or loss
Listed securities
* Equity securities 5 188
Unlisted securities
* Equity securities in investment funds* 7,489 5,545
19 -
* Acquisition of Uitkomst Colliery
------------------------- --------------
7,513 5,733
------------------------- --------------
Fair value movements in other financial
assets are recognised in other (losses)/gains
in the consolidated statement of profit
or loss. Refer note 6.
* Listed investments are carried at the
market value as at the reporting date and
unlisted investments are valued with reference
to the investment company's fund statement.
Deposits 1,663 1,488
------------------------- --------------
9,176 7,221
------------------------- --------------
Other financial assets have been analysed
between current and non-current as follows:
Current 5 188
Non-current 9,171 7,033
------------------------- --------------
9,176 7,221
------------------------- --------------
Opening balance 7,221 3,879
Revaluations 521 (80)
Interest received 2 -
Disposal of investment (760) -
Deposit received (21) -
Acquisition of investments 1,181 3,336
Acquisition of Uitkomst Colliery 19 -
(refer note 36)
Foreign exchange differences 1,013 86
------------------------- --------------
Balance at end of year 9,176 7,221
------------------------- --------------
18. Inventories
Year Year
ended ended
30 June 30 June
2017 2016
$'000 $'000
------------------------- ------- --------------
Consumable stores 12 5
Other 292 -
Acquisition of Uitkomst (refer 1,384 -
note 36)
------------------------- --------------
1,688 5
------------------------- --------------
The Uitkomst inventory acquired consisted
of finished goods of $1.2 million (ZAR15.3
million), consumable stores of $0.2 million
(ZAR2.9 million) and a provision for obsolete
inventory of $0.02 million (ZAR0.2 million).
The cost of inventories recognised as an
expense during the year in respect of continuing
operations was $0.03 million (2016: $0.05
million).
19. Trade and other receivables
Trade receivables 127 48
Other receivables 1,519 963
Allowance for doubtful debts (390) (345)
Acquisition of Uitkomst Colliery 4,851 -
(refer note 36)
------------------------- --------------
6,107 666
------------------------- --------------
The carrying amount of trade and other
receivables approximate their fair value
due to their short-term maturity.
The maximum exposure to credit risk at
the reporting date is the carrying value
of each class of receivables as disclosed
above. The Group does not hold any collateral
as security.
Movements on the allowance for doubtful
debts are as follows:
Balance at beginning of year 345 414
Allowance for bad debts in - -
current year
Foreign exchange differences 45 (69)
------------------------- --------------
Balance at end of year 390 345
------------------------- --------------
19. Trade and other receivables
(continued)
Trade receivables are exposed to the credit
risk of end-user customers within the coal
mining industry.
The Group has an established credit policy
under which customers are analysed for
creditworthiness before the Group's payment
and delivery terms and conditions are offered.
Customer balances are monitored on an ongoing
basis to ensure that they remain within
the negotiated terms and conditions offered.
Year Year
ended ended
30 June 30 June
2017 2016
$'000 $'000
------------------------- ------- --------------
Credit quality of trade receivables
Not past due 127 48
Past due 0 to 30 days - -
Past due 31 to 60 days - -
Past due 61 to 90 days - -
------------------------- --------------
127 48
------------------------- --------------
Currency analysis of trade
receivables
SA Rand 127 48
------------------------- --------------
127 48
------------------------- --------------
20. Cash and cash equivalents
Bank balances 9,624 19,502
Bank balances included in
a disposal group held for
sale (refer note 21) 22 21
------------------------- --------------
9,646 19,523
------------------------- --------------
Restricted cash 52 249
Restricted cash included
in a disposal group held
for sale (refer note 21) - 219
------------------------- --------------
52 468
------------------------- --------------
The restricted cash balance of $0.1 million(2016
- $0.2 million) is held on behalf of subsidiary
companies in respect of the rehabilitation
guarantees issued to the DMR in respect
of environmental rehabilitation costs of
$6.3 million (2016: $6.3 million). This
cash is not available for use other than
for those specific purposes.
Credit risk
Cash at bank earns interest at a floating
rate based on daily bank deposit rates.
Cash is deposited at highly reputable financial
institutions of a high quality credit standing
within Australia, the United Kingdom and
the Republic of South Africa.
The fair value of cash and cash equivalents
equates to the values as disclosed in this
note.
21. Assets classified as
held for sale
Year Year
ended ended
30 June 30 June
2017 2016
$'000 $'000
------------------------- ------- --------------
Carrying amounts of
Langcarel Proprietary Limited
('Mooiplaats') 6,276 11,835
Acquisition of Uitkomst Colliery 101 -
(Property, plant and equipment
held for sale)
6,377 11,835
------------------------- --------------
Assets classified as held
for sale
Mooiplaats 9,690 14,567
Uitkomst property, plant 101 -
and equipment
9,791 14,567
------------------------- --------------
Liabilities associated with
assets held for sale
Mooiplaats 3,414 2,732
3,414 2,732
------------------------- --------------
Holfontein
During the period, the sale of Holfontein
was finalised and the Company received
the balance outstanding of $3 million (ZAR40
million). The sale resulted in a reversal
of prior period impairments of $3 million.
Opgoedenhoop
During the year, the Company received $0.1
million (ZAR1 million) of the balance outstanding
of $1.3 million (ZAR17.3 million) from
the prior year for the sale of the undeveloped
Opgoedenhoop mining right. The balance
outstanding at 30 June 2017 is $1.5 million
(ZAR19.1 million). The outstanding balance
is accruing interest at the South African
prime rate plus 4% as there has been a
default in the payment terms. The Company
is in constant communication with the purchaser
to recover the outstanding balance.
Uitkomst property
Uitkomst has signed an offer to purchase
for the sale of a building for $0.1 million
(ZAR1.3 million)
21. Assets classified as
held for sale (continued)
Year Year
ended ended
30 June 30 June
2017 2016
$'000 $'000
------------------------- ------- --------------
Assets classified as held
for sale
Property, plant and equipment 9,407 14,069
Other financial assets 239 202
Restricted cash - 219
Inventories 1 -
Trade and other receivables 21 56
Cash and cash equivalents 22 21
Uikomst property, plant and 101 -
equipment
9,791 14,567
------------------------- --------------
Liabilities classified as
held for sale
Provisions 2,937 2,332
Trade payables and accrued
expenses 477 400
3,414 2,732
------------------------- --------------
Net assets held for sale 6,377 11,835
------------------------- --------------
22. Deferred consideration
Deferred consideration 1,916 16,016
------------------------- --------------
1,916 16,016
------------------------- --------------
Opening balance 16,016 18,687
Uitkomst deferred consideration 1,916 -
(refer note 36)
Repaid during the year (18,247) (4,066)
Interest accrued 839 1,443
Foreign Exchange 1,392 (48)
------------------------- --------------
Balance at end of year 1,916 16,016
------------------------- --------------
Current - 16,016
Non-Current 1,916 -
------ -------
1,916 16,016
------ -------
22. Deferred consideration (continued)
The opening balance Deferred Consideration
relates to the second tranche (part of the
total acquisition price of $75 million for
Chapudi and Kwezi) of $30 million payable to
Rio Tinto. Full and final settlement of the
outstanding balance plus all accrued interest
was made in June 2017. The loan included interest
at 4% as per the original agreement.
The additional deferred consideration present
as at 30 June 2017 relates to a deferred amount
of $1.9 million (R25 million) included in the
acquisition price of $21.1 million (ZAR275
million), payable to Pan African Resources
Plc ("Pan African") for the acquisition by
the Company of PAR Coal (refer note 36). The
amount bears interest at the South African
prime rate and will be settled on 30 June 2019.
The Company is entitled to prepay any amounts
in respect of the deferred consideration at
any time until 30 June 2019. To the extent
that certain coal buy in opportunities are
not secured by or with the assistance of Pan
African, within 2 years from the effective
date, which could result in CoAL suffering
a lower economic benefit, the deferred consideration
can be reduced by such value, subject to a
maximum of $1.3 million (ZAR15 million).
23. Borrowings
Year ended Year ended
30 June 30 June
2017 2016
$'000 $'000
----------- --------------- --------------
Yishun Brightrise Investment
PTE Limited - 10,000
Industrial Development 8,197 -
Corporation
of South Africa Limited
----------- --------------
8,197 10,000
----------- --------------
Balance at beginning of year 10,000 -
Yishun Brightrise Investment
PTE Limited - 10,000
Yishun Brightrise Investment (10,000) -
PTE Limited - converted to equity
Industrial Development Corporation 9,004 -
of South Africa Limited
Debt issuance costs capitalised (91) -
-cash based
Debt issuance costs capitalised (1,096) -
- warrants
Interest 212 -
Foreign exchange 168 -
----------- --------------
Balance at end of year 8,197 10,000
----------- --------------
Yishun Brightrise Investment PTE Limited
During the prior period, a loan for $10 million
was provided to the Company by its shareholder
Yishun. The loan carried no interest and was
only repayable in limited circumstances, including
conditions relating to Baobab Mining and Exploration
Proprietary Limited.
During the financial year, the loan was converted
into the Company's shares (245,037,981 shares
were issued at a price of $0.04081 per share).
Industrial Development Corporation of South
Africa Limited
During the period, the Company entered into
a loan agreement (the "Loan Agreement") with
the Industrial Development Corporation of South
Africa Limited ("IDC") and Baobab Mining and
Exploration Proprietary Limited ("Baobab"),
a subsidiary of CoAL and owner of the mining
right for the Makhado Project. In terms of the
Loan Agreement, the IDC will advance loan funding
up to $18.4 million (ZAR240 million) to Baobab
for use in the Makhado
23. Borrowings (continued)
Project to advance the operations and implementation
of the project. The loan funding is to be provided
in two equal tranches of $9.2 million (ZAR120
million) upon written request from Baobab.
In May 2017, the first tranche was drawn down
by the Company. The loan is repayable on the
third anniversary of each advance. On the third
anniversary, the Company is required to repay
the loan amount plus an amount equal to the
after tax internal rate of return equal to 16%
of the amount of each advance.
CoAL is also required to issue warrants, in
respect of CoAL shares, to the IDC pursuant
to each advance date as soon as the relevant
shareholder approval is obtained. The warrants
for the first draw down equates to 2.5% of the
entire issued share capital of CoAL as at 5
December 2016. This equates to 48,175,033 shares.
The price at which IDC shall be entitled to
purchase the CoAL shares is equal to a thirty
percent premium to the 30 day volume weighted
average price of the CoAL shares as traded on
the JSE as at 5 December 2016 (R0.60 per share).
The IDC is entitled to exercise the warrants
for a period of five years from the date of
issue.
Furthermore, upon each advance date, Baobab
shall be required to issue new ordinary shares
in Baobab to the IDC equivalent to 5% of the
entire issued share capital of Baobab at such
time.
If the second tranche of $9.2 million (ZAR120
million) is not required by Baobab and therefore
not advanced by Baobab, the IDC may elect to
exercise one of the following rights:
* Baobab shall issue new ordinary shares in Baobab
equivalent to 5% of the entire issued share capital
of Baobab to the IDC for an aggregate subscription
price of $4.6 million (ZAR60 million); or
* Baobab shall issue ordinary shares in Baobab
equivalent to 1% of the entire issued share capital
of Baobab to the IDC for an aggregate share price of
$0.08 (ZAR1); or
* A penalty fee of $0.9 million (ZAR12 million) shall
be paid to the IDC by Baobab
Year ended Year ended
30 June 30 June
2017 2016
$'000 $'000
----------- --------------- --------------
Loan advanced 9,004 -
Debt issuance costs capitalised
- cash based (91) -
Debt issuance costs capitalised
warrants (1,133)
Interest accrued 212 -
Foreign exchange differences 205 -
----------- --------------
8,197 -
----------- --------------
24. Provisions
Employee provisions 381 207
Biodiversity offset provision 2,126 1,856
Rehabilitation provisions 5,558 2,338
----------- --------------
8,065 4,401
----------- --------------
Employee provisions
The provision for employees
represents unused annual leave
entitlements.
24. Provisions (continued)
Biodiversity offset provision
The Biodiversity offset agreement("BOA") was
signed by the Department of Environmental Affairs
("DEA"), South African National Parks Board
and the Company to the value of $4.7 million
( ZAR55 million ) over a 25 year period. The
BOA commits the Company to pay $4.7 million
(ZAR55 million ) to the South African National
Parks Board over a period of 25 years. The
following payment arrangement has been agreed:
Phase 1 - ZAR2 million paid in 2015
Phase 2 - ZAR15 million from year 2016 to 2021
(ZAR2.5 million annually)
Phase 3 - ZAR13million from year 2022 to 2028
(ZAR1.8 million annually)
Phase 4 - ZAR13million from 2029 to 2033 (ZAR2.6
million annually)
Phase 5 - ZAR12million from 2034 to 2038 (ZAR2.4
million annually)
For the purpose of the present value calculation
these payments have been assume as equal annual
payment and discounted at the South Africa
inflation rate of 6%.
Year ended Year ended
30 June 30 June
2017 2016
$'000 $'000
--------------- ----------- --------------------------
Rehabilitation provision
Balance at beginning of year 2,338 3,033
Unwinding of discount 120 -
Change in assumptions on rehabilitation
provisions 1,821 (186)
Acquisition of Uitkomst Colliery 888 -
(refer note 36)
Foreign exchange differences 391 (509)
--------------- --------------------------
Balance at end of year 5,558 2,338
--------------- --------------------------
The rehabilitation provision represents the
current cost of environmental liabilities as
at the respective year end. An annual estimate
of the quantum of closure costs is necessary
in order to fulfil the requirements of the DMR,
as well as meeting specific closure objectives
outlined in the mine's Environmental Management
Programme ('EMP').
Although the ultimate amount of the obligation
is uncertain, the fair value of the obligation
is based on information that is currently available.
This estimate includes costs for the removal
of all current mine infrastructure and the rehabilitation
of all disturbed areas to a condition as described
in the EMP.
The period assumed in the calculation of the
present value of the obligation is the aggregate
of the construction period of the mine and the
total estimated LOM.
The current estimate available is inflated by
the South African inflation rate of 6.8% annually
and the discount rate applied to establish the
current obligation is a South Africa government
bond rate at 30 June 2017 of 8.92% (2016: 8.75%)
annually.
Due to the delay on the Vele Colliery start-up
the estimated LOM has been extended causing
a decrease in the present value of the environmental
obligation.
The Makhado Project is still in Exploration
phase and no formal decision to mine is currently
in place.
24. Provisions (continued)
Provisions have been analysed
between current and non-current
as follows:
Year ended Year ended
30 June 30 June
2017 2016
$'000 $'000
--------------- ----------- --------------------------
Current 597 398
Non-current 7,468 4,003
--------------- --------------------------
8,065 4,401
--------------- --------------------------
25. Deferred tax
Deferred tax asset 5,713 4,773
Deferred tax liability - Acquisition (6,087) -
of Uitkomst Colliery (note 36)
--------------- --------------------------
Net deferred tax (liability)/asset (374) 4,773
--------------- --------------------------
The gross movement on the deferred
tax account is as follows:
Balance at beginning of year 4,773 2,320
Recognised on tax losses 296 1,437
Provisions (1) (5)
Capital allowances - 1,488
Acquisition of Uitkomst Colliery (6,087) -
Exchange differences 645 (467)
--------------- --------------------------
Balance at end of year (374) 4,773
--------------- --------------------------
The movement in deferred income tax assets and
liabilities during the year, without taking
into consideration the offsetting of balances
within the same tax jurisdiction, is as follows:
25. Deferred tax (continued)
Year ended Year ended
30 June 30 June
2017 2016
$'000 $'000
--------------- ----------- --------------------------
Deferred tax assets
Capital allowances (1) on development
assets 3,825 3,378
Tax losses 1,889 1,400
Acquisition of Uitkomst Colliery 377 -
- Provisions
--------------- --------------------------
Balance at end of year 6,091 4,778
Deferred tax liabilities
Provisions (1) (5)
Acquisition of UItkomst - Property, (6,464) -
plant and equipment
--------------- --------------------------
Balance at end of year (6,465) (5)
--------------- --------------------------
Net deferred tax (liabilities)/assets (374) 4,773
--------------- --------------------------
Deferred income tax assets are recognised for
tax loss carry-forwards to the extent that the
realisation of the related tax benefit through
future taxable profits is probable. The Group
did not recognise deferred income tax assets
of $105 million (2016: $99 million) in respect
of losses amounting to $213.5 million (2016:
$207 million) and unredeemed capital expenditure
of $149.5 million (2016: $134 million) that
can be carried forward against future taxable
income.
(1) - The deferred tax asset recognised on capital
allowances relates to a portion of the capital
expenditure on the construction of the Vele
plant. The deferred tax asset recognised on
assessed losses relates to taxable losses for
the Vele plant. The recognition of the asset
is supported by the LOM model as future profits
will be available to utilise the deferred tax
asset.
26. Trade and other payables
Trade payables 2,925 956
Accrued expenses 1,107 1,333
Other 192 34
------- -------
4,224 2,323
------- -------
The average credit period is 30 days. Interest
at the South African prime overdraft rate is
charged on overdue creditors.
27. Issued capital
Year ended Year
ended
30 June 30 June
2017 2016
$'000 $'000
-------------- ----------
Fully paid ordinary shares
2,817,587,529 (2016: 1,927,001,328)
fully paid ordinary shares 1,040,950 1,006,435
Movements in fully paid ordinary Number $'000
shares
-------------- ----------
At 30 June 2015 1,743,568,613 992,374
Issue of shares, net of issuance
costs 183,432,715 14,061
-------------- ----------
At 30 June 2016 1,927,001,328 1,006,435
Issue of shares, net of issuance
costs 890,586,201 34,515
-------------- ----------
At 30 Jun 2017 2,817,587,529 1,040,950
-------------- ----------
Holders of ordinary shares are entitled to receive
dividends as declared from time to time and
are entitled to one vote per share at shareholders
meetings.
In the event of winding up of the Company ordinary
shareholders rank after all other shareholders
and creditors and are fully entitled to any
proceeds of liquidation.
Changes to the then Corporations Law abolished
the authorised capital and par value concept
in relation to share capital from 1 July 1998.
Therefore, the Company does not have a limited
amount of authorised capital and issued shares
do not have a par value.
Share options granted
Share options granted under the Company's employee
share option plan and performance rights carry
no rights to dividends and no voting rights.
Further details of the employee share option
plan are provided in note 30.
28. Accumulated deficit
Accumulated deficit at the beginning
of the financial year (736,403) (718,081)
Net loss attributed to Owners
of the Company (15,536) (23,445)
Transferred from share based
payment reserve 1,839 5,123
-------------- ----------
Accumulated deficit at the end
of the financial year (750,100) (736,403)
-------------- ----------
29. Reserves
Year ended Year ended
30 June 30 June
2017 2016
$'000 $'000
----------- -------------
Capital profits reserve 91 91
Share based payment reserve 713 2,274
Warrants reserve 1,134 -
Foreign currency translation
reserve (20,473) (36,530)
----------- -------------
(18,535) (34,165)
----------- -------------
Movements for the year can be
reconciled as follows:
Share-based payments reserve
Opening balance 2,274 7,205
Share options issued during
the year 466 275
Transfer from share based payment
reserve (1,839) (5,123)
Share options cancelled/forfeited (188) (83)
----------- -------------
Closing balance 713 2,274
----------- -------------
Foreign currency translation
reserve
Opening balance (36,530) (7,609)
Exchange differences on translating
foreign operations 19,079 (28,921)
----------- -----------
Closing balance (17,451) (36,530)
----------- -----------
Warrants reserve
Opening balance - -
Warrants issued to the IDC 1,134 -
----------- -----------
Closing balance 1,134 -
----------- -----------
Nature and purpose of reserves:
Capital reserve
The capital profits reserve contains capital
profits derived during previous financial years.
Share-based payment reserve
Share based payments represent the value of
unexercised share options to directors and employees.
29. Reserves (continued)
Foreign currency translation
reserve
The foreign currency translation reserve records
the foreign currency differences arising from
the translation of foreign operations.
Warrants reserve
The warrants reserve relates to the warrants
issued to the IDC in terms of the Loan Agreement
to advance funding to Baobab. Refer note 23.
30. Share-based payments
Employee share option plan
The Group maintains certain Employee Share Option Plans
('ESOP's') for executives and senior employees of the Group as per
the rules approved by shareholders on 30 November 2009. In
accordance with the terms of the schemes, eligible executives and
senior employees may be granted options to purchase ordinary
shares.
Share options granted to Directors and Officers
The Group also grants share options to directors, officers,
lenders and equity funders of the Group outside the ESOP. In
accordance with the Group's policies, directors and officers may be
granted options to purchase ordinary shares.
Share Option Terms, Vesting Requirements and Options Outstanding
at 30 June 2017
Each option converts into one ordinary share of the Company on
exercise. No amounts are paid or payable by the recipient on
receipt of the option. The options hold no voting or dividend
rights, and are not transferable. Upon exercise of the options the
ordinary shares received rank equally with existing ordinary
shares.
The following share-based payment arrangements existed during
the financial period ended 30 June 2017:
-- 2,670,000 options were issued on 16 September 2011 to
eligible employees of CoAL as part of the ESOP. The options issued
were exercisable prior to 14 February 2017 and had an exercise
price of A$1.40 or ZAR7.60. The options vested in equal tranches on
1 July 2012, 1 July 2013 and 1 July 2014. Upon conversion the
shares would have ranked equally with existing shares, were not
transferable and held no voting or dividend rights. These options
expired during the period.
-- 3,932,928 options were granted on 22 November 2013 to
eligible employees of CoAL as part of the ESOP. The options were
exercisable prior to 30 June 2017 and had an exercise price of
ZAR1.75. Two thirds of the options vested immediately and the
remaining third on 1 July 2014. Upon conversion the shares would
have ranked equally with existing shares, were not transferable and
held no voting or dividend rights. These options expired during the
period.
-- The Company finalised an 18-month, ZAR210 million working
capital facility from Investec Bank Limited during October 2013 and
announced that it would issue 20,000,000 Options to Investec. The
20,000,000 shareholder approved options were issued on 30 January
2015 and have an exercise price of ZAR1.32 and expire on 21 October
2018. Upon conversion the shares will rank equally with existing
shares, are not transferable and hold no voting or dividend rights.
At reporting date, none of the options had been taken up or had
lapsed.
-- 10,575,000 options were awarded to Mr Brown on his
appointment as Chief Executive Officer and Executive Director of
the Company. The options were approved by shareholders on 28
November 2014 and issued on 1 February 2015 under the ESOP vesting
in three equal tranches of 3,525,000 options on 1 February 2015, 1
February 2016 and 1 February 2017 respectively. The Options were to
expire on 1 February 2019 and were otherwise subject to the terms
of the ESOP. Upon conversion the shares would have rank equally
with existing shares, were not transferable and held no voting or
dividend rights. In November 2016, these options were cancelled at
the Company's Annual General Meeting.
30. Share-based payments (continued)
-- On 27 November 2015, 1,000,000 options were awarded and
vested to each of the five independent non-executive directors at a
price of GBP0.055 per option. The options expire on 27 November
2018. Upon conversion the shares will rank equally with existing
shares, are not transferable and hold no voting or dividend rights.
At reporting date, none of the options had been taken up or had
lapsed.
There has been no alteration of the terms and conditions of the
above share based payment arrangements since the grant date. The
following share-based payment arrangements were in existence at the
end of the current year:
Fair Weighted
value average
at remaining
Grant Expiry Exercise grant contractual
Option series Number date date price date life
------------------- ----------- ----------- ----------- ----------- -------- -------------
Investec options 1.3
20,000,000 30/01/2015 21/10/2018 ZAR1.32 ZAR0.75 years
Non-executive 27/11/2015 27/11/2018 GBP0.055 ZAR0.77 1.4
director options 5,000,000 years
-----------
25,000,000
-----------
Fair value of share options granted during the year
There were no share options granted during the period.
Options were priced using a binomial option pricing model and
the Black-Scholes option pricing model was used to validate the
price calculated. Where relevant, the expected life used in the
model has been adjusted based on management's best estimate of the
effects of non-transferability, exercise restrictions (including
the probability of meeting market conditions attached to the
option), and behavioural considerations.
Expected volatility is calculated by Hoadley's volatility
calculator for one, two and three year periods and a future
estimated volatility level of 100% was used in the pricing
model.
Inputs into the binomial option pricing model for the prior
financial year were as follows (validated using the Black-Scholes
valuation model):
NED grants(1)
----------------------------------- --------------
Closing share price on issue date AUD0.051
Exercise price GBP0.055
Expected volatility 100%
Option life remaining 3.01 years
Dividend yield 0%
Risk free interest rate 2.09%
1. Options granted to non-executive directors.
The total share based payment expense reversal recognised in the
current financial year is $0.2 million.
30. Share-based payments (continued)
Movement in share options
Year ended Year ended
30 June 30 June
2017 2016
Number Number
Options outstanding at beginning
of year 42,177,928 85,993,989
Options expired (6,602,928) (47,441,061)
Options cancelled (10,575,000) (1,375,000)
Options granted - 5,000,000
Options outstanding at end of
year 25,000,000 42,177,928
------------- -------------
Weighted average exercise price
(A$) 0.07 0.08
Options exercisable 25,000,000 38,652,928
Share options exercised during the year
No share options were exercised during the period.
Share options outstanding at the end of the year
The share options outstanding at the end of the year had a
weighted average exercise price of A$0.07 (2016: A$0.08) and a
weighted average contractual life of 1.32 years (2016: 1.32
years).
Performance Rights Plan
The Performance Rights factor in a hurdle rate based on the
compound annual growth rate of total shareholder return across the
period from the grant date. The Performance Rights were valued
using a hybrid employee share option pricing model to simulate the
total shareholder return of CoAL at the expiry date using a
Monte-Carlo model.
On 30 November 2016, 35,409,403 Performance Rights were issued
to senior management.
Inputs into the model for the current financial year were as
follows:
Performance
rights
Spot 5 day VWAP AUD0.047
Exercise price Nil
Expiry date 29 November
2019
Performance period 3.00
Risk free interest
rate 8.24%
The total share based payment expense recognised in relation to
the Performance Rights in the current financial year is $0.4
million.
In the prior period, 33,449,124 Performance Rights were issued
to senior management.
30. Share-based payments (continued)
Inputs into the model for the prior financial year were as
follows:
Performance
rights
Spot 5 day VWAP AUD0.047
Exercise price Nil
Expiry date 1 December
2018
Performance period 3.01
Risk free interest
rate 2.09%
The total share based payment expense recognised in relation to
the performance rights in the prior financial year is $0.1
million.
Movement in Performance Rights
Year Year ended
ended 30 June
30 June 2016
2017
$'000 $'000
------------- ---------------
Performance rights outstanding 35,409,503 -
at beginning of year
Performance rights forfeited (13,223,390) -
Performance rights granted 33,449,124 35,409,503
------------- ---------------
Options outstanding at end
of year 55,635,237 35,409,503
------------- ---------------
31. Non-controlling interest
Non-controlling interests comprise
the following:
Freewheel Trade and Invest 37
Proprietary Limited 575 575
Baobab non-controlling interest (16) -
----- ----
559 575
----- ----
32. Financial instruments
32.1 Capital management
The Group manages its capital to ensure that entities in the
Group will be able to continue as a going concern while maximising
the return to stakeholders through the optimisation of the debt and
equity balance. The Group's overall strategy remains unchanged.
The capital structure of the Group consists of net debt
(borrowings as detailed in note 23) and equity of the Group
(comprising issued capital, reserves, retained earnings and
non-controlling interests as detailed in notes 27 to 29).
The Group is not subject to any externally imposed capital
requirements.
The Group's risk management committee reviews the capital
structure of the Group on a semi-annual basis. As part of this
review, the committee considers the cost of capital and the risks
associated with each class of capital. The Group revised its target
gearing ratio, determined as the proportion of net debt to equity,
from 0% to 15%. This was to enable the Company to raise the loan
from the IDC.
32. Financial instruments (continued)
Year ended Year
30 June ended
2017 30 June
2016
$'000 $'000
----------- ---------
Debt (1) 9,271 10,000
Equity (2) 272,874 235,867
----------- ---------
Debt to equity ratio 0.03 0.04
----------- ---------
1. Debt is defined as long-term and short-term borrowings as described in note 23.
2. Equity includes all capital and reserves of the Group that are managed as capital.
32.2 Categories of financial instruments
The accounting policies for financial
instruments have been applied
to the line items below:
Financial assets
Other receivables 237 1,013
Trade and other receivables 6,107 666
Cash and cash equivalents 9,624 19,502
Restricted cash 52 249
Other Financial Assets 9,176 7,221
------- -------
Total financial assets 25,196 28,651
------- -------
Financial liabilities
Deferred consideration 1,916 16,016
Borrowings 8,197 10,000
Trade and other payables 4,224 2,323
------- -------
Total financial liabilities 14,337 28,339
------- -------
Fair value of financial assets
and liabilities
The fair value of a financial asset or a financial
liability is the amount at which the asset could
be exchanged or liability settled in a current
transaction between willing parties in an arm's
length transaction. The fair values of the Group's
financial assets and liabilities approximate
their carrying values, as a result of their
short maturity or because they carry floating
rates of interest.
All financial assets and liabilities recorded
in the consolidated financial statements approximate
their respective fair values.
The following table provides an analysis of
financial instruments that are measured subsequent
to initial recognition at fair value, grouped
into Level 1 to 3, based on the degree to which
the fair value is observable.
Level 1 fair value measurements are those derived
from quoted prices in active markets for identical
assets or liabilities.
32. Financial instruments (continued)
Level 1 financial assets comprise deposits and
listed securities (note 17).
Level 2 fair value measurements are those derived
from inputs other than quoted prices included
within Level 1 that are observable for the asset
or liability, either directly or indirectly.
Level 2 financial assets comprise investments
with investment firms. These investments serve
as collateral for rehabilitation guarantees.
The fair value has been determined by the investment
firms' fund statement (note 17).
Level 3 fair value measurements are those derived
from valuation techniques that include inputs
for the asset or liability that are not based
on observable market data.
There were no assets reclassified into / out
of FVTPL during the year nor were any assets
transferred between levels.
As at 30 Level 1 Level Level Total
June 2017 2 3
------------ ----------- ------ ------ ------
Financial
assets at
FVTPL 5 7,507 - 7,512
------------ ----------- ------ ------ ------
As at 30 Level 1 Level Level Total
June 2016 2 3
------------ ----------- ------ ------ ------
Financial
assets at
FVTPL 188 5,545 - 5,733
32.3 Financial risk management objectives
The Group's Corporate Treasury function provides services to the
business, co-ordinates access to domestic and international
financial markets, monitors and manages the financial risks
relating to the operations of the Group through internal risk
reports which analyse exposures by degree and magnitude of risks.
These risks include market risk (including currency risk, fair
value interest rate risk and price risk), credit risk, liquidity
risk and cash flow interest rate risk.
The Corporate Treasury function reports quarterly to the Group's
risk management committee, an independent body that monitors risks
and policies implemented to mitigate risk exposures.
32.4 Market risk
Foreign exchange risk
The Group operates internationally and is exposed to foreign
exchange risk arising from various currency exposures, primarily
with respect to the Australian dollar and the US dollar. Foreign
exchange risk arises from future commitments, assets and
liabilities that are denominated in a currency that is not the
functional currency. Most of the Company's purchases are
denominated in SA rand. However, certain items during the
exploration, development and plant construction phase as well as
long lead-capital items are denominated in US dollars, Euros or
Australian dollars. These have to be acquired by the South African
operating company due to the South African Reserve Bank's Foreign
Exchange Control Rulings. This exposes the South African subsidiary
companies to changes in the foreign exchange rates.
The Group's cash deposits are largely denominated in US dollar
and SA rand. A foreign exchange risk arises from the funds
deposited in US dollar which will have to be exchanged into the
functional currency for working capital purposes.
The Group generally does not enter into forward sales,
derivatives or other hedging arrangements to manage this risk.
32. Financial instruments (continued)
At financial period end, the financial instruments exposed to
foreign currency risk movements are as follows:
Held Held Held Held Total
Balances at in ZAR in GBP in AUD in USD $'000
30 June 2017 $'000 $'000 $'000 $'000
-------------------------- -------- -------- -------- ---------- -------
Financial assets
Other receivables 237 - - - 237
Trade and
other receivables 6,107 - - - 6,107
Cash(1) and
cash equivalents 5,698 559 21 3,398 9,676
-------- -------- -------- ---------- -------
Total financial
assets 12,042 559 21 3,398 16,020
-------- -------- -------- ---------- -------
(1) . Cash
includes restricted
cash
Financial liabilities
Deferred consideration 1,916 - - - 1,916
Borrowings 8,197 - - 8,197
Trade and
other payables 3,475 9 40 700 4,224
Total financial
liabilities 13,588 9 40 700 14,337
-------- -------- -------- ---------- -------
Held Held Held Held Total
Balances at in ZAR in GBP in AUD in USD $'000
30 June 2016 $'000 $'000 $'000 $'000
-------------------------- -------- -------- -------- ----------- -------
Financial assets
Other receivables 1,013 - - - 1,013
Trade and
other receivables 616 - 50 - 666
Cash(1) and
cash equivalents 3,642 4,692 22 11,395 19,751
-------- -------- -------- ----------- -------
Total financial
assets 5,271 4,692 72 11,395 21,430
-------- -------- -------- ----------- -------
(1) . Cash
includes restricted
cash
Financial liabilities
Deferred consideration - - - 16,016 16,016
Borrowings - - - 10,000 10,000
Trade and
other payables 1,199 1,124 - 2,323
-------- -------- -------- ----------- -------
Total financial
liabilities 1,199 - 1,124 26,016 28,339
-------- -------- -------- ----------- -------
32. Financial instruments (continued)
Balances classified as held for sale are not included in the
above tables, or discussed in the subsequent narrative.
The following table details the Group's sensitivity to a 10%
increase and decrease in the US dollar against the relevant foreign
currencies. 10% is the sensitivity rate used when reporting foreign
currency risk internally to key management personnel and represents
management's assessment of the reasonably possible change in
foreign exchange rates. The sensitivity analysis includes only
outstanding foreign currency denominated monetary items and adjusts
their translation at the year-end for a 10% change in foreign
currency rates. The sensitivity analysis includes external loans as
well as loans to foreign operations within the Group where the
denomination of the loan is in a currency other than the functional
currency of the lender or the borrower. A positive number below
indicates an increase in profit or equity where the US dollar
strengthens 10% against the relevant currency. For a 10% weakening
of the US dollar against the relevant currency, there would be a
comparable impact on the profit or equity, and the balances below
would be negative.
Year Year ended
ended
30 June 30 June
2017 2016
$'000 $'000
----------------------------------- --------- -------- -----------
Impact on profit / (loss)
Judgements on reasonable possible
movements
USD/ZAR increase by 10% (2,000) (2,345)
USD/ZAR decrease by 10% 2,000 2,345
----------------------------------- --------- --------
32.5 Interest rate risk management
The Group's interest rate risk arises mainly from short-term
borrowings, cash and bank balances and restricted cash. The Group
has variable interest rate borrowings. Variable rate borrowings
expose the Group to cash flow interest rate risk.
The Group has not entered into any agreements, such as hedging,
to manage this risk.
The following table summarises the sensitivity of the financial
instruments held at the reporting date, following a movement in
variable interest rates, with all other variables held constant.
The sensitivities are based on reasonably possible changes over a
financial period, using the observed range of actual historical
rates.
Year ended Year ended
30 June 30 June
2017 2016
$'000 $'000
----------------------------------- ----------- ------- -----------
Impact on profit / (loss)
Judgements on reasonable possible
movements
Increase of 0.2% in LIBOR 24 38
Decrease of 0.2% in LIBOR (24) (38)
Increase of 1.0% in JIBAR 121 188
Decrease of 1.0% in JIBAR (121) (188)
----------------------------------- ----------- ------
The impact is calculated on the net financial instruments
exposed to variable interest rates as at reporting date and does
not take into account any repayments of short-term borrowings.
32. Financial instruments (continued)
32.6 Credit risk
Credit risk is the risk that a contracting entity will not
complete its obligation under a financial instrument that will
result in a financial loss to the Group. The carrying amount of
financial assets represents the maximum credit exposure. Receivable
balances are monitored on an ongoing basis with the result that the
Group's exposure to bad debts is not significant.
At year end there is no significant concentration of credit risk
represented in the cash and cash equivalents, restricted cash and
trade accounts receivables balance. The Group manages its credit
risk by predominantly dealing with counterparties with a positive
credit rating.
The credit risk on liquid funds and derivative financial
instruments is limited because the counterparties are banks with
high credit-ratings assigned by international credit-rating
agencies.
32.7 Liquidity risk
The liquidity position of the Group is managed to ensure
sufficient liquid funds are available to meet financial commitments
in a timely and cost effective manner. The Group's Executive
continually reviews the liquidity position including cash flow
forecasts to determine the forecast liquidity position and maintain
appropriate liquidity levels.
The concentration of cash balances on hand in geographical areas
was as follows:
United Australia South Total
Balances at 30 June Kingdom $'000 Africa $'000
2017 $'000 $'000
--------------------------- --------- ---------- -------- -------
Cash and cash equivalents
and restricted cash 3,967 21 5,688 9,676
--------- ---------- -------- -------
3,967 21 5,688 9,676
--------- ---------- -------- -------
United Australia South Total
Balances at 30 June Kingdom $'000 Africa $'000
2016 $'000 $'000
--------------------------- --------- ---------- -------- -------
Cash and cash equivalents
and restricted cash 16,096 22 3,633 19,751
--------- ---------- -------- -------
16,096 22 3,633 19,751
--------- ---------- -------- -------
The contractual maturities of the Group's financial liabilities
at the reporting date were as follows:
Less than Between Greater Total
6 months 6 - 12 than 12
Balances at $'000 months months $'000
30 June 2017 $'000 $'000
------------------------ ---------- -------- --------- -------
Deferred consideration - - 1,916 1,916
Borrowings(2) - - 8,197 8,197
Trade and other
payables 4,224 - - 4,224
---------- -------- --------- -------
4,224 - 10,113 14,337
---------- -------- --------- -------
1. Interest bearing at rates between 10 % and 16 %
32. Financial instruments (continued)
Less Between Greater Total
than 6 - 12 than 12
Balances at 30 6 months months months $'000
June 2017 $'000 $'000 $'000
------------------------ ---------- -------- --------- -------
Other Receivables - 237 237
Trade and Other
Receivables 6,107 - - 6,107
Cash and Cash
Equivalents 9,624 - - 9,624
Restricted Cash 52 - - 52
Other financial
assets 5 - 9,170 9,175
---------- -------- --------- -------
15,788 - 9,407 25,195
---------- -------- --------- -------
Less than Between Greater Total
6 months 6 - 12 than 12
Balances at 30 $'000 months months $'000
June 2016 $'000 $'000
------------------------ ---------- -------- --------- -------
Deferred consideration 5,250 10,766 - 16,016
Borrowings(1) - 10,000 - 10,000
Trade and other
payables 2,323 - - 2,323
---------- -------- --------- -------
7,573 20,766 - 28,339
---------- -------- --------- -------
2. Not interest bearing
Less than Between Greater Total
6 months 6 - 12 than 12
Balances at 30 $'000 months months $'000
June 2016 $'000 $'000
------------------- ---------- -------- --------- -------
Other receivables - - 1,013 1,013
Trade and other
receivables 666 - - 666
Cash and cash
equivalents 19,502 - - 19,502
Restricted cash 249 - - 249
Other financial
assets 188 - 7,033 7,221
---------- -------- --------- -------
20,605 - 8,046 28,651
---------- -------- --------- -------
33. Notes to the
statement of cash
flows
Reconciliation of cash
For the purposes of the consolidated statement
of cash flows, cash and cash equivalents include
cash on hand and in banks, net of outstanding
bank overdrafts. Cash and cash equivalents
at the end of the reporting period as shown
in the consolidated statement of cash flows
can be reconciled to the related items in
the consolidated statement of financial position
as follows:
Year ended Year
ended
Note 30 June 30 June
2017 2016
$'000 $'000
------- ----------- ---------
Cash and bank balances 20 9,646 19,523
33. Notes to the statement
of cash flows (continued)
Year ended Year
ended
30 June 30 June
2017 2016
$'000 $'000
----------- ---------
Reconciliation of loss
before tax to net cash
used in operations
Loss before tax (continuing
and discontinuing operations) (15,847) (24,876)
Add back:
Depreciation 354 351
Amortisation - 848
Net impairment expense 7,602 360
Share-based payment 272 193
Re-valuation of investments (526) 76
Write off of inventory - 198
Sundry income (non-cash) -
Movement in provisions 326 (181)
Finance costs (net) 503 849
Profit on sale of assets (1) (8)
Foreign exchange (gains)
/ losses on operating activities (1,971) 9,568
Changes in working capital
Increase in inventories (287) 8
Decrease in trade and
other receivables 2,057 265
Decrease in trade and
other payables (2,706) (788)
----------- ---------
Cash used in operations (10,224) (13,137)
----------- ---------
34. Contingencies and commitments
Contingent liabilities
The Group is currently involved in litigation as outlined below
($ amounts presented within have been computed using the exchange
rate as of 30 June 2017 unless otherwise stated):
Ferret Mining & Environmental Services Proprietary
Limited
During the 2015 financial year, Ferret's 26% shareholding in
Mooiplaats Mining Limited was re-instated. Although they are not
entitled to any assets or claims in the Mooiplaats group, they are
entitled to receive ZAR15million (US$1.2 million) upon the
successful disposal of the Mooiplaats Colliery.
Makhado Water Commitment
CoAL has agreed to acquire water allocation for the Makhado
Project from water users situated near the proposed colliery and
the Company has undertaken to increase supply assurance without
impacting negatively on the water available for agriculture. The
parties have in principle agreed to avoid endangering local
agriculture by creating new water, primarily by reducing losses,
improving distribution and countering leakages and evaporation. The
creation of new water will be financed either through CoAL's funds,
outside funding or a Public-Private-Partnership with one or more
organs of State or other appropriate entities.
The overall objective is the co-existence of mining and
agriculture and includes a feasibility study and the completion of
projects identified in the study which will facilitate the creation
of new water. In terms of the agreement, the Company will be
required to pay a total of $7.9 million. The first payments of $1.8
million are due 90 and 180 days
34. Contingencies and commitments (continued)
after the granting of the IWUL, a further $0.6 million is
payable eight months after the IWUL is granted and the balance
within five years of the granting.
Commitments
In addition to the commitments of the parent entity as disclosed
under note 38, subsidiary companies have financial commitments in
terms of the NOMR granted by the South African DMR. The commitments
are based on the revenue generated by the colliery during the
financial year, and/or quantities of coal sold by the colliery
during the financial year.
There are no other significant contingent liabilities as at 30
June 2017.
35. Related party disclosures
The aggregate compensation made to directors and other members
of key management personnel of the Company and the Group is set out
below:
Year ended Year
ended
30 June 30 June
2017 2016
$'000 $'000
------------------------------ ----------- ---------------------
Short-term employee benefits 1,557 1,223
Post-employment benefits 7 9
Termination benefits - -
Share-based payments 254 209
----------- ---------------------
1,818 1,441
----------- ---------------------
The Group has not provided any of its key management personnel
with loans.
Balances and transactions between the Company and its
subsidiaries, which are related parties of the Company, have been
eliminated on consolidation and are not disclosed in this note.
36. Business combinations
Subsidiaries acquired
During the period, the Company entered into a sale of shares and
claims agreement ("the Agreement") with Pan African to acquire 100%
of the shares in and claims against PAR Coal for a purchase price
of $21.1 million (ZAR275 million). PAR Coal holds a 91%
shareholding in Uitkomst Colliery with the remaining 9% held by
broad-based trusts (including employees and communities) and a
strategic entrepreneur's trust.
Uitkomst is a high grade thermal export quality coal deposit
with metallurgical applications, which is situated in the Utrecht
coal fields in KwaZulu Natal, South Africa. Uitkomst consists of an
existing underground coal mine (Uitkomst-South mine) and a planned
life of mine extension into the northern area (Klipspruit-North
mine). The South mine is an easily accessible and well established
operating mine. Existing infrastructure such as power supply, water
supply, buildings, workshops, weighbridge, water storage and
management facilities are all in place. Uitkomst currently employs
approximately 520 employees (including contractors).
The acquisition was effective on 30 June 2017.
Consideration transferred
In terms of the Agreement, the acquisition price was settled as
follows:
-- $9.4 million (ZAR125 million) paid in cash;
-- $1.9 million (ZAR25 million) deferred consideration. The
deferred consideration can be paid by CoAL at any time prior to the
24 month anniversary of the effective date of acquisition. The
deferred consideration bears interest at the South African prime
rate and shall be paid on the second anniversary of the effective
date. CoAL is entitled to prepay any amounts in respect of the
deferred consideration. If it is not settled after 24 months, the
balance outstanding can be settled through the issue of new CoAL
shares at the 30 day volume
36. Business combinations (continued)
weighted average price as traded on the JSE (CoAL "VWAP") on the
date immediately prior to the date on which Pan African gives its
election. To the extent that certain coal buy in opportunities are
not secured by
or with the assistance of Pan African, within 2 years from the
effective date, which could result in CoAL suffering a lower
economic benefit, the deferred consideration can be reduced by such
value, subject to a maximum of $1.3 million (ZAR15 million);
and
-- CoAL issued 261,287,625 new shares (equivalent to $9.6 million (ZAR125 million))
Acquisition related costs amounting to $0.2 million, have been
excluded from the consideration transferred and have been
recognised as an expense in profit or loss in the current year,
within the "other expenses" line item.
Assets acquired and liabilities recognised at the date of
acquisition
The following summarises the amounts of assets acquired and
liabilities recognised at the acquisition date:
Carrying Fair value
Value
Non-current assets
Development, exploration
and evaluation expenditure 249 249
Property, plant and
equipment 13,666 23,087
Other financial assets 19 19
Current assets
Inventories 1,383 1,383
Trade and other receivables 4,851 4,851
Cash and cash equivalents 999 999
Tax receivable 326 326
Assets classified as
held for sale 101 101
Non-current liabilities
Provisions (888) (888)
Deferred tax liability (3,449) (6,087)
Current liabilities
Trade and other payables (2,989) (2,989)
--------- -----------
Total identifiable net
assets 14,268 21,051
--------- -----------
Non-controlling interests
There was no non-controlling interest recognised on acquisition
as the trusts that own shares in Uitkomst are effectively
controlled by Uitkomst and the "N" shares held by the trust do not
rank equally to the ordinary shares and therefore the trust do not
participate in the profits and losses of Uitkomst.
Fair value
Fair value was estimated by an income-based valuation approach.
The following were the key model inputs used in determining the
fair value:
-- Calculated cost of equity for Uitkomst discount rate 10.3%
-- Average saleable production of 328,347 tonnes per annum
-- Average selling price of ZAR957 per tonne
36. Business combinations (continued)
At the time the financial statements were authorised for issue,
the fair values of the assets and liabilities disclosed above have
only been determined provisionally as the independent valuations
have not been finalised.
Goodwill
No goodwill arose on acquisition.
Net cash outflow on acquisition of subsidiaries
Consideration paid in cash (ZAR125
million) 9,393
Less: cash and cash equivalent balances
acquired (999)
------
8,394
------
Impact of acquisition on the results of the Group
Had this business combination been effected on 1 July 2016, the
revenue of the Group from continuing operations would have been
$31.8 million and the loss for the year from continuing operations
would have been $13 million. The directors consider these
"pro-forma" numbers to represent an approximate measure of the
performance of the combined group on an annualised basis and to
provide a reference point for comparison in future periods.
In determining the "pro-forma" revenue and profit of the Group
had Uitkomst been acquired at the beginning of the current year,
the directors have:
-- Calculated depreciation of the mining asset on the basis of
the fair value arising in the initial accounting of the business
combination rather than the carrying amounts recognised in the
pre-acquisition financial statement.
37. Controlled entities
Particulars in relation to controlled
entities.
Year Year
ended ended
30 30
June June
2017 2016
Country
of incorporation % %
Bakstaan Boerdery Proprietary South
Limited * Africa 100 100
Baobab Mining & Exploration South
Proprietary Limited** Africa
Chapudi Coal Proprietary Limited South
*** Africa
Coal of Africa Plc**** Jersey
Coal of Africa & ArcelorMittal South
Analytical Laboratories Proprietary Africa
Limited Australia
Cove Mining NL Australia
Evoc Mining NL**** South
Freewheel Trade and Invest 37 Africa
Proprietary Limited South
Fumaria Property Holdings Proprietary Africa
Limited Australia
Golden Valley Services Proprietary Australia
Limited South
Greenstone Gold Mines NL**** Africa
GVM Metals Administration (South South
Africa) Proprietary Limited Africa
Harrisia Investments Holdings South 95 100
Proprietary Limited Africa 74 74
Holfontein Investments Proprietary South - -
Limited Africa 50 50
Kwezi Mining Exploration Proprietary South 100 100
Limited *** Africa - -
Langcarel Proprietary Limited South 74 74
***** Africa 100 100
Limpopo Coal Company Proprietary South 100 100
Limited Africa - -
MbeuYahsu Proprietary Limited South 100 100
Mooiplaats Mining Limited Africa 100 100
Pan African Resources Coal Holdings South - 74
Proprietary Limited Africa 74 74
Regulus Investment Holdings South 74 74
Proprietary Limited Africa 100 100
Silkwood Trading 14 Proprietary South 74 74
Limited Africa 74 74
Tshikunda Mining Proprietary South 100 -
Limited Africa 100 100
Tshipise Energy Investments South 100 100
Proprietary Limited Africa 60 60
Uitkomst Colliery Proprietary South 50 50
Limited Africa 100 -
---------------------------------------------------- --------------------- ------- -------
* Subsidiary company of Fumaria Property
Holdings Proprietary Limite
** 74% on completion of the Makhado Project
BBBEE transactions
*** Subsidiary companies of MbeuYashu Proprietary
Limited
**** Deregistered
***** Subsidiary company of Mooiplaats Mining
Limited
38. Events after the reporting period
There have been no events between 30 June 2017
and the date of this report which necessitate
adjustment to the consolidated statements of
comprehensive income, consolidated statements
of financial position, consolidated statements
of changes in equity and the consolidated statements
of cash flows at that date.
39. Parent entity financial
information
Parent entity
Year ended Year ended
30 June 30 June
2017 2016
$'000 $'000
Summary financial information
Non-current assets 273,541 234,664
Current assets 4,058 16,553
------------- -----------
Total assets 277,599 251,217
------------- -----------
Non-current liabilities 1,916
Current liabilities 2,809 14,775
------------- -----------
Total liabilities 4,725 14,775
------------- -----------
Net assets 272,874 236,442
------------- -----------
Shareholders' Equity
Issued capital 1,040,950 1,006,435
Accumulated deficit (1,026,378) (952,060)
Reserves 258,302 182,067
------------- -----------
272,874 236,442
------------- -----------
Loss for the year (74,318) (64,224)
------------- -----------
Total comprehensive loss (74,318) (64,224)
------------- -----------
Contingencies and commitments
-- CoAL has subordinated all loans to subsidiary companies
-- CoAL has entered into a guarantee for the IDC borrowing
facility entered into by Baobab (refer note 23)
AUDIT OPINION
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Tower 2, Brookfield Place
123 St Georges Terrace
Perth WA 6000
GPO Box A46
Perth WA 6837 Australia
Tel: +61 8 9365 7000
Fax: +61 8 9365 7001
www.deloitte.com.au
Independent Auditor's Report to the members of Coal of Africa
Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Coal of Africa Limited
(the "Company") and its subsidiaries (the "Group") which comprises
the consolidated statement of financial position as at 30 June
2017, 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 year
then ended, and notes to the financial statements, including a
summary of significant accounting policies and other explanatory
information, and the directors' declaration.
In our opinion, the accompanying financial report of the Group
is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the Group's financial
position as at 30 June 2017 and of its financial performance for
the year then ended; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing
Standards. Our responsibilities under those standards are further
described in the Auditor's Responsibilities for the Audit of the
Financial Report section of our report. We are independent of the
Group in accordance with the auditor independence requirements of
the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board's APES 110 Code
of Ethics for Professional Accountants (the Code) that are relevant
to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the
Code.
We confirm that the independence declaration required by the
Corporations Act 2001, which has been given to the directors of the
Company, would be in the same terms if given to the directors as at
the time of this auditor's report.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
report for the current period. These matters were addressed in the
context of our audit of the financial report as a whole, and in
forming our opinion thereon, and we do not provide a separate
opinion on these matters.
Carrying value of the
Vele Colliery Development In conjunction with our
Assets valuation experts, our
As at 30 June 2017 the carrying value of the Vele Colliery development assets is procedures included, but
$114.2 million were not limited to:
as disclosed in Note 13. * evaluating management's assessment as to whether an
impairment indicator existed;
The assessment of the recoverable value of the development assets requires
management to exercise
significant judgement, including the application of the following assumptions * testing the mathematical accuracy of the impairment
within the impairment model and the carrying value of the Vele Colliery;
model:
* forecast production quantities;
* assessing key macroeconomic and corporate tax
assumptions with reference to external evidence
* forecast long-term coal prices; including: coal prices, inflation rates, exchange
rates, and corporate tax rates;
* forecast long-term exchange rates;
* assessing management's underlying mine plan and
forecast capital expenditures;
* forecast capital expenditure;
* assessing the reasonableness of changes to any
* forecast operating costs; underlying assumptions within the mine plan including
capital expenditure;
* discount rate; and
* assessing the reasonableness of the discount rate
applied; and
* corporate tax rate.
* performing sensitivity analysis of the recoverable
value of the Vele Colliery to changes in assumptions.
We also assessed the appropriateness
of the disclosures in Note
13 to the financial statements.
---------------------------------------------------------------------------------------- ------------------------------------------------------------------
Classification of Mooiplaats Our procedures included,
Colliery as held for but were not limited to:
sale * assessing whether the criteria outlined in the
applicable accounting standards was met to classify
The assets and liabilities assets and liabilities as held for sale, including
of the Mooiplaats Colliery whether the sale is highly probable to complete
continue to be classified within 12 months of the reporting date;
as held for sale at
30 June 2017.
* reviewing the terms and conditions of sale and
Given that this classification purchase agreements, to assess that the assets and
has been maintained liabilities are not carried in excess of their fair
for greater than 12 values less costs of disposal; and
months, management is
required to exercise
significant judgement * inspecting the supporting documentation provided by
to determine whether the proposed purchaser and assessing their ability to
this classification complete the sale transaction.
remains appropriate.
We also assessed the appropriateness
of the disclosures in Notes
11 and 21 to the financial
statements.
---------------------------------------------------------------------------------------- ------------------------------------------------------------------
Uitkomst acquisition
accounting In conjunction with our
valuation experts, our
Effective 30 June 2017 procedures included, but
the Group acquired 100% were not limited to:
of the Uitkomst Colliery * reviewing the share purchase agreement to understand
("Uitkomst"), for a the key terms and conditions of the transaction and
purchase price of US$21.1 the applicable accounting treatment;
million (ZAR275 million)
as disclosed in Note
36. * assessing the appropriateness of the methodologies
and assumptions utilised by management and their
Accounting for this experts in relation to the value of both tangible
transaction is complex, assets and acquired mining rights;
requiring management
to exercise significant
judgement to determine * assessing the independence, competence and
the fair value of acquired objectivity of management's experts.
assets and liabilities
and determining the
allocation of purchase * performing an audit of the acquired mine as at the
consideration to tangible acquisition date, to assess the fair presentation of
and intangible assets. the statement of financial position, and to assess
the value of the decommissioning and rehabilitation
provisions; and
* assessing the appropriate corporate tax and deferred
tax treatment of the transaction for the various
purchase price adjustments.
We also assessed the appropriateness
of the disclosures in Note
36 to the financial statements.
---------------------------------------------------------------------------------------- ------------------------------------------------------------------
Other Information
The directors are responsible for the other information. The
other information comprises the information included in the Group's
annual report for the year ended 30 June 2017, but does not include
the financial report and our auditor's report thereon.
Our opinion on the financial report does not cover the other
information and we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial report, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial report 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 the Directors for the Financial Report
The directors of the Company are responsible for the preparation
of the 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
financial report that gives a true and fair view and is free from
material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible
for assessing the ability of the Group to continue as a going
concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial
Report
Our objectives are to obtain reasonable assurance about whether
the financial report as a whole is free from material misstatement,
whether due to fraud or error, and to issue an auditor's report
that includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in
accordance with the Australian Auditing Standards 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
this financial report.
As part of an audit in accordance with the Australian Auditing
Standards, we exercise professional judgement and maintain
professional scepticism throughout the audit. We also:
-- Identify and assess the risks of material misstatement of the
financial report, whether due to fraud or error, design and perform
audit procedures 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 Group's internal control.
-- Evaluate the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related disclosures
made by the directors.
-- Conclude on the appropriateness of the director'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 auditor's report to the related disclosures in the financial
report 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 auditor's 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 financial report, including the disclosures, and whether the
financial report represents 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 financial report. We are
responsible for the direction, supervision and performance of the
Group's audit. We remain solely responsible for our audit
opinion.
We communicate with the directors 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.
We also provide the directors with a statement that we have
complied with relevant ethical requirements regarding independence,
and to communicate with them all relationships and other matters
that may reasonably be thought to bear on our independence, and
where applicable, related safeguards.
From the matters communicated with the directors, we determine
those matters that were of most significance in the audit of the
financial report of the current period and are therefore the key
audit matters. We describe these matters in our auditor's report
unless law or regulation precludes public disclosure about the
matter or when, in extremely rare circumstances, we determine that
a matter should not be communicated in our report because the
adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 9 to
17 of the Director's Report for the year ended 30 June 2017.
In our opinion, the Remuneration Report of the Company, for the
year ended 30 June 2017, complies with section 300A of the
Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation
and presentation of the Remuneration Report in accordance with
section 300A of the Corporations Act 2001. Our responsibility is to
express an opinion on the Remuneration Report, based on our audit
conducted in accordance with Australian Auditing Standards.
DELOITTE TOUCHE TOHMATSU
David Newman
Partner
Chartered Accountants
Perth, 29 September 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
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