TIDMMCM
RNS Number : 5755A
MC Mining Limited
30 September 2020
ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
(Expressed in United States Dollars unless otherwise stated)
Page
Directors' Report 2
Auditor's Independence Declaration 19
Directors' Declaration 20
Consolidated Statement of Profit or Loss
and Other Comprehensive Income 21
Consolidated Statement of Financial Position 22
Consolidated Statement of Changes in Equity 23
Consolidated Statement of Cash Flows 24
Notes to the Consolidated Financial Statements 25
Independent Auditor's Report 80
The directors of MC Mining Limited submit herewith the annual
report of the Company and the entities controlled by the Company
(its subsidiaries), collectively referred to as the "Group", for
the financial year ended 30 June 2020. 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 a Chartered
Pryor Chairman Engineer and currently the
chief executive officer
of Alufer Mining Limited
and was previously the CEO
of African Minerals Limited
and prior to that the Chief
Executive of Q Resources
Plc. He is also a director
of Petra Diamonds Limited.
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 Brown Executive Director Mr Brown is a Chartered
and Chief Executive Accountant (CA (SA)) and
Officer completed his articles with
Ernst & Young, graduating
from the University of Cape
Town. Mr Brown joined MC
Mining following a tenure
of almost 14 years at Impala
Platinum Holdings Limited
(Implats). He joined the
Impala Group in 1999 and
served as CFO of Implats
before being appointed chief
executive officer in 2006.
He is currently an independent
Non-executive Director of
Vodacom Group Limited and
Northam Platinum Limited.
Brenda Berlin Executive Director, Ms Berlin was appointed
Chief Financial Officer as CFO and Executive Director
and Acting Chief Executive of MC Mining on 24 April
Officer 2018 from Implats where
she held the position of
Group CFO. Brenda joined
Implats in 2004 and held
a number of senior appointments
including head of group
corporate finance activities
until her appointment as
CFO in 2011. She is a CA
(SA) and obtained degrees
from the University of the
Witwatersrand and completed
her articles at PwC South
Africa. Prior to working
at Implats, Brenda worked
for Johnnic Holdings Limited
in the corporate finance
department and following
its unbundling, remained
with JCI Limited (JCI) assuming
responsibility for business
development. After leaving
JCI, Brenda commenced working
for Southern Mining Corporation
Limited.
An Chee Sin Non-executive Director Mr Chee Sin is an Accredited
Tax Practitioner with the
Singapore Institute of Accredited
Tax Professionals and is
also a Chartered Accountant
with the Institute of Singapore
Chartered Accountants. He
has more than 17 years of
extensive experience in
international and local
corporate taxation and co-founded
Pinnacle Tax Services Pte
Ltd (Pinnacle Tax) in 2004.
Prior to joining Pinnacle
Tax he held the position
of Director of Corporate
Tax with KPMG and has coordinated
various advisory projects,
including cross-border fund
structures, corporate restructurings,
treasury and mergers and
acquisitions.
Andrew David Independent Non-Executive Mr Mifflin obtained his
Mifflin Director 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.
Brian He Zhen Non-executive Director Mr Zhen holds a bachelor's
degree in business administration
from Sichuan University
and is currently Marketing
and Public Relations Executive
for Pan African Mining Pvt.
Ltd. Between 2012 and 2015,
Brian worked as Managing
Director of Real Gain Investment
Pvt. Ltd and was responsible
for infrastructure and construction
market development, as well
as overseas market investments.
He has previously served
as Construction Manager
for CRI - Eagle Investments
(Pty) Ltd and Eagle Canyon
Investments (Pty) Ltd.
Khomotso Brian Independent Non-Executive Mr Mosehla is a CA (SA)
Mosehla Director and completed his articles
with KPMG. Khomotso worked
at African Merchant Bank
Limited for five years 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. He is
currently the CFO of The
Housing Development Agency.
Mr Mosehla is currently
a Non-executive Director
of Northam Platinum Limited
as well as Zambezi Platinum
Limited.
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.
Sebastiano Randazzo Independent Non-Executive Sam Randazzo began his career
Director with Arthur Young (predecessor
firm to Ernst & Young) before
working as a consultant
across a variety of projects
in the USA, Australia, Canada,
Africa and South America
and is a member of Chartered
Accountants Australia and
New Zealand. He has over
25 years' experience in
the international mining
industry with extensive
public company management
expertise from roles as
chairman, director, chief
executive officer, chief
financial officer, company
secretary and executive
director positions of ASX,
TSX and AIM listed mineral
resource companies. Mr Randazzo
has completed numerous feasibility
studies, mergers and acquisitions
and capital-raisings and
has operational management
experience in Australia,
South America, USA, Canada
and the UK.
Shangren Ding Non-executive Director Mr Ding is an experienced
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.
Thabo Felix Independent Non-Executive Mr Mosololi is a CA (SA)
Mosololi Director 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.
Peter Cordin retired on 22 November 2019, Thabo Mosololi resigned
on 31 December 2019 and David Brown resigned on 31 January
2020. All other directors held office during and since the
end of the previous financial year.
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 Pryor Petra Diamonds Limited January 2019 -
Present
Brenda Berlin Impala Platinum Holdings Limited 2011-2017
Zimplats Holdings Limited 2011-2017
An Chee Sin None
Andrew Mifflin None
Brian He Zhen None
Khomotso Mosehla Northam Platinum Limited 2015 - Present
Zambezi Platinum Limited 2015 - Present
Sebastiano Randazzo Bardoc Gold Limited October 2018 -
Excelsior Gold Limited March 2019
October 2016 -
October 2018
Shangren Ding None
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 rights Unlisted options
--------------- ---------------- ------------------- -----------------
B Pryor 7,500 - -
B Berlin (1) - 1,371,775 -
A Chee Sin - - -
A Mifflin (3) - - -
H Zhen - - -
K Mosehla - - -
S Randazzo - - -
S Ding - - -
7,500 1,371,775 -
--------------- ---------------- ------------------- -----------------
1. Ms Berlin was issued with the following performance rights:
635,347 performance rights were granted on 23 November 2018. The
performance rights were granted for no consideration. No exercise
price is payable upon exercise of the performance rights. 736,428
performance rights were granted on 22 November 2019.
Remuneration of directors and key management personnel
Information about the remuneration of directors is set out in
the remuneration report of this directors' report, on pages 11 to
18. Shareholder nominee non-executive directors are not
remunerated. During the reporting period, no senior management
satisfy the criteria of 'key management personnel'.
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
18.
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 MC
Mining.
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 Uitkomst Colliery, an operating metallurgical and thermal
coal mine with a circa 18 year life of mine (LOM);
-- Makhado hard coking and thermal coal project;
-- The Vele Colliery, a semi-soft coking and thermal coal mine,
which remains on care and maintenance; and
-- Three exploration and development stage coking and thermal
coal projects, namely Chapudi, Generaal and Mopane in the
Soutpansberg Coalfield.
Review of operations - Operational salient features
-- No fatalities (FY2019: nil) and nine LTI's (FY2019: four);
-- Revised mining cycles implemented earlier in FY2020 as well
as changes in mine management and optimisation initiatives resulted
in Uitkomst's run-of-mine ("ROM") coal production improving;
-- The South African Government issued directives to contain the
spread of the COVID-19 virus, instituting a national lockdown (the
"Lockdown") from 26 March 2020. This was extended to 30 April 2020
with restrictions easing during May and June 2020;
-- The Lockdown resulted in the Uitkomst Colliery being placed
on care and maintenance and also impacted activities at the
Company's development projects in the Limpopo province;
-- As a result of the Lockdown, Uitkomst did not produce
run-of-mine ("ROM") coal in April. The colliery was limited to 50%
of labour capacity in May 2020 and normalised pre-Lockdown
production levels resumed at the end of June 2020;
-- The Lockdown also resulted in the majority of Uitkomst's
customers suspending operations and sales of high-grade
metallurgical, thermal and high-ash middlings coal were impacted
adversely;
-- Uitkomst's customers recommenced operations in June 2020 and
following this, normalised order volumes resumed in July 2020,
reducing inventory stockpiles
-- The Uitkomst Colliery produced 431,354 tonnes (t) (FY2019:
485,113 t) of raw coal comprising 431,354t (FY2019: 472,647t) of
run of mine (ROM) coal and nil t (FY2019: 12,466t) bought-in during
the period. No coal was purchased from third parties due to supply
contracts expiring in the previous financial year ;
-- The Colliery sold 254,193t (FY2019: 309,401t) of coal -
228,206t (FY2019: 295,051t) from ROM coal, 0t (FY2019: 6,035t) from
purchased coal, 25,987t (FY2019: 8,315t)of high ash, coarse discard
coal and 197t of small nuts (FY2019: 0t) - generating sales revenue
of $17,155 thousand (FY2019: $26,403 thousand);
-- Prior to the COVID-19 pandemic, thermal coal prices and
premium hard coking coal prices declined due to reduced demand and
a slowdown in the global economy. The COVID-19 pandemic resulted in
a significant decline in API4 export thermal coal prices, reducing
from the comparative June 2019 period's $66/t to $55/t in the
current period;
-- Activities at the Company's Makhado Project , Vele semi-soft
coking and thermal coal colliery ("Vele Colliery" or "Vele") and
Greater Soutpansberg Projects ("GSP") were suspended due to the
Lockdown and limited activities have recommenced.
-- The Vele processing plant is expected to be refurbished and
recommissioned as part of Phase 1 of the Makhado hard coking coal
project ("Makhado Project" or "Makhado") when financed;
Corporate salient features
-- Approval by the Industrial Development Corporation of South
Africa Limited ("IDC") Credit Committee of a term loan facility of
R245,000 thousand ($14,134 thousand million), the initial step in
the composite debt and equity funding package for the construction
of Phase 1 of the Makhado Project;
-- Commencement of composite debt/equity funding initiatives for
the Makhado Project. These were delayed and are expected to be
completed in H2 CY2020;
-- The South African Department of Mineral Resources ("DMR")
granted a mining right for the 74% owned Generaal coking and
thermal coal project ("Generaal Project"), one of the three
projects comprising the Company's GSP;
-- Ms Brenda Berlin was appointed as Acting Chief Executive
Officer ("CEO") following the resignation of Mr David Brown;
-- Uitkomst increased its ABSA Bank Limited ("ABSA") primary
lending facility from ZAR 20,000 thousand ($1,154 thousand) to
ZAR40,000 thousand ($2,308 thousand) to cover increased working
capital requirements to ramp up the operations after the
Lockdown.
Subsequent events
Funding
The existing IDC loan agreement was restructured resulting in
Baobab Mining and Exploration (Pty) Limited ("Baobab") being
entitled to drawdown $2,308 thousand (ZAR 40,000 thousand) of the
existing facility and the Company concluded an equity raise for a
collective $865 thousand (ZAR15,000 thousand).
In August 2020 13,331,433 shares were issued for a collective
$865 thousand resulting in MC Mining having 154,419,555 shares in
issue.
The Company also entered into a subscription agreement with
Columbia Skies Holdings (Pty) Limited for the issue of new shares
in MC Mining for an amount of $577 thousand (ZAR 10, 000
thousand).
Sale of land in Harrisia Investments Holdings Proprietary
Limited ("Harrisia")
Subsequent to year-end, the Company finalised the sale of land
and buildings held by its subsidiary Harrisia. These land and
buildings were classified as assets held for sale at 30 June
2020.
Financial review
-- Full and final settlement of the deferred consideration due
to Pan African Resources Plc for the acquisition of Pan African
Resources Coal Holdings.
-- Operations were impacted by the COVID-19 pandemic resulting
in a temporary nationwide lockdown. The Uitkomst Colliery was
placed under care and maintenance during this period. There was a
phased, risk based approach to lifting the Lockdown restrictions
and in May, Uitkomst was permitted to ramp up to 50% of labour
capacity.
-- Operating cash flows of $1,114 thousand generated by the Uitkomst Colliery;
-- The Company finalised the sale of land and buildings held by
its subsidiary Harrisia. These land and buildings were classified
as assets held for sale at 30 June 2019;
-- The Company negotiated and additional $1,154 thousand (ZAR
20,000 thousand) under the existing working capital ABSA Facility
for Uitkomst to alleviate the financial challenges during the
COVID-19 period. $2,214 thousand (ZAR 38,385 thousand) of the total
facility of $2,308 thousand (ZAR 40,000 thousand) was drawn at year
end. This additional facility is temporary and is payable over
twelve months commencing 1 July 2020 to 1 June 2021;
-- $6,923 thousand (ZAR120,000 thousand) of the $13,846 million
(ZAR240,000 thousand) three year Industrial Development Corporation
of South Africa Limited (IDC) loan was available at year-end;
-- The first tranche of the IDC loan that was drawn down was due
to be repaid with interest in May 2020 but a conditional
restructuring agreement was entered into with the IDC resulting in
a delay in repayment until November 2020;
-- The R/$ exchange rate continued to be volatile more so with
the impact of COVID-19 and gains/losses from these elements are
unpredictable;
-- Contributing to the loss of $12,190 thousand (2019: $33,726
thousand) were non-cash charges of $4,680 thousand (FY2019: $24,842
thousand) which includes the following:
o Net impairment expense of $1,257 thousand (FY2019: $21,916
thousand)
o depreciation and amortisation of $2,608 thousand (FY2019:
$2,318 thousand)
o share based payment expense of $416 thousand (FY2018: $852
thousand)
o unrealised foreign exchange loss of $ 399 thousand (FY2019:
gain $244 thousand)
-- Total unrestricted cash balances at year-end of $2,678
thousand (FY2019: $8,811 thousand) before the utilised ABSA
facility of $2,214.
Future developments
MC Mining aims to become the preeminent hard coking coal
producer in South Africa and will continue to build on the progress
made during FY2020. The main focus for FY2021 will be to secure the
funding for the construction of Makhado Phase 1, and once funding
is received to begin construction.
The Makhado Project is fully permitted and has 344.8 million
mineable tonnes of coal in situ. The Company has completed a
Competent Persons Report (CPR). The phased development of the
Makhado Project was approved by the Company's directors during
FY2019 and Phase 1 incorporates the development of the west pit and
modifications to the existing Vele Colliery processing plant. The
development of the project in phases reduces execution risk,
capital expenditure, shortens the mine's construction period and
ensures the scalability of the project. Phase 1 will produce
approximately 3Mtpa of ROM coal that will be screened and scalped
at Makhado. The resultant 2.0Mtpa of scalped ROM coal will be
transported to the Vele Colliery for final processing and will
yield approximately 0.54Mtpa of hard coking coal (HCC) and 0.57Mtpa
of an export quality thermal coal as a by-product. Phase 2 could
commence in circa CY2023, funding and market dependent, and
includes the construction of the east pit as well as the Makhado
processing plant and related infrastructure. This phase will result
in 4.0Mtpa of ROM coal producing 1.7Mtpa of saleable HCC and
thermal coal.
During the period, debt funding was approved by the IDC to fund
the construction of Phase 1. Off-take agreements have been signed
with AMSA for 350,000-450,000 tonnes per annum ("tpa") of Phase 1
HCC and one of the world's largest commodity traders signed a
marketing agreement for the Phase 1 thermal coal by-product. The
South African government's dismissal of the appeal against the
Makhado EA amendment during the prior year reinforces the
robustness of the project's permitting processes while the off-take
agreements reaffirmed the world-class quality of Makhado's coal and
satisfied a key requirement for funders.
The exploration and development of MC Mining's three
Soutpansberg coalfield projects namely the Chapudi, Mopane and
Generaal project areas, is the catalyst for the long-term growth of
the Company. The DMR granted a mining right ("MR") for the Generaal
Project during the period, The MR for the Chapudi Project was
granted in FY2019 but this was subsequently appealed. The MR
application for the Mopane Project is being processed and the
Company is hopeful that these licences will be granted during
FY2021.
Environmental regulations
The Group'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 environmental provisions in the Mineral and Petroleum
Resources Development Act (No 28 of 2002);
-- National Environmental Management Act (No. 107 of 1998);
-- National Water Act (No. 45 of 1965);
-- Environment Conservation Act (No. 73 of 1989); and
-- National Environmental Management Air Quality Act (No. 39 of 2004).
The Board believes that there are adequate systems 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 continues to monitor compliance.
Corporate Governance
The Group recognises the need for the highest standards of
corporate behaviour and accountability. The Directors have
accordingly followed the recommendations set by the ASX Corporate
Governance Council. For further information on corporate governance
policies adopted by MC Mining Limited, refer to the website :
http://www.mcmining.co.za/corporate-governance/board-committees-and-charters
and the annual report.
Dividends
No dividend has been paid or proposed for the financial year
ended 30 June 2020 (FY2019: nil).
Shares under option or issued on exercise of options or
performance rights
There are no unissued shares under option as at the date of this
report.
Details of unissued performance rights granted as at the date of
this report are:
Number of shares Class of shares Exercise Expiry date
under performance price
rights
-------------------- ------------------- ---------------- --------- ------------
Performance rights 745,997 Ordinary Nil 23 November
2020
Performance rights 1,850,387 Ordinary Nil 22 November
2021
Performance rights 2,147,088 Ordinary Nil 22 November
2022
Total performance
rights 4,743,472
-------------------- ------------------- ---------------- --------- ------------
David Brown resigned as Chief Executive Officer and Executive
director on 31 January 2020. In lieu of his six-month notice
period, 208,537 shares have been issued to him, being one-third of
the 2017 performance rights granted to him. These shares issued
cannot be disposed of for a period of one year until 31 January
2021. The balance of his performance rights (2,211,214) were
forfeited.
No other shares or interests were issued during or since the end
of the financial year as a result of the exercising of options or
meeting of performance rights criteria.
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 four scheduled and eight unscheduled
board meetings were held as well as six Nomination and Remuneration
Committee, four Safety and Health Committee meetings and four Audit
and Risk Committee meetings were held.
Board Meetings Audit and Nomination Safety, Health
Risk Committee and Remuneration and Environment
Meetings Committee Committee
Meetings Meetings
Director Held Attended Held Attended Held Attended Held Attended
--------------- ------ --------- ------ ---------- ------- ----------- ------- ----------
B Pryor 12 12 - - 6 6 4 3
D Brown(1) 4 4 - - 3 3 2 2
B Berlin 12 12 - - - - - -
A Chee Sin 12 11 2 2 - - - -
A Mifflin 12 12 - - - - 4 4
H Zhen 12 11 - - - - - -
K Mosehla 12 12 4 4 3 2 - -
P Cordin(2) 2 2 - - - - 2 2
S Randazzo 12 12 4 4 3 3 - -
S Ding 12 11 - - - - - -
T Mosololi(3) 3 2 2 1 3 2 - -
1. Resigned on 31 January 2020.
2. Retired on 22 November 2019.
3. Resigned on 31 December 2019.
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 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 10 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 MC Mining
Limited's Directors and its senior management for the financial
year ended 30 June 2020. The prescribed details for each person
covered by this report are detailed below under the following
headings:
-- Director 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 commensurate with their required
level of service.
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
($687,690).
The Board has a Nomination and Remuneration Committee which was
made up as follows: Mr Pryor (Chairman), Mr Mosehla and Mr
Randazzo. 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 (1) Chief Executive Officer and Executive Director
-- B Berlin (2) Acting Chief Executive Officer and Executive
Director
-- A Chee Sin Non-Executive Director
-- A Mifflin Independent Non-Executive Director
-- H Zhen Non-Executive Director
-- K Mosehla Independent Non-Executive Director
-- P Cordin (3) Independent Non-Executive Director
-- S Randazzo Independent Non-Executive Director
-- S Ding Non-Executive Director
-- T Mosololi (4) Independent Non-Executive Director
1. Resigned on 31 January 2020
2. Appointed as Acting Chief Executive Officer on 1 February 2020
3. Retired on 22 November 2019
4. Resigned on 31 December 2019
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. Apart
from the Executive Directors, no employees satisfy the definition
of 'key management' to be separately disclosed in this remuneration
report.
Remuneration policy
The remuneration policy of MC Mining 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 Group's financial results. The Board of MC Mining
believes the remuneration policy to be appropriate and effective in
its ability to attract and retain management personnel to run and
manage the Group, as well as create goal congruence between
Directors, management and shareholders.
The Board's policy for determining the nature and amount of
remuneration for management personnel of the 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.
-- Management personnel receive a base salary (based on factors
such as length of service and experience), performance rights and
performance incentives.
-- Incentives paid in the form of cash and performance rights
are intended to align the interests of the Directors, management
and the Company with those of the shareholders.
The Nomination and Remuneration Committee reviews senior
management personnel packages annually by reference to the Group's
performance, executive performance and comparable information from
industry sectors.
The performance of senior 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 in line with each
individual's performance contract. The Board may, however, exercise
its discretion in relation to approving incentives, bonuses,
options or performance rights, 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 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 ($687,690).
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 Employee Share Option Plan 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.
The Company has a shareholder approved performance rights plan
(the Plan) to assist in the reward, retention and motivation of
eligible employees 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. Performance rights are 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
rate based the South African Consumer Price Index plus five percent
"(Hurdle Rate").
-- The Hurdle Rate will be compounded annually over the
three-year period but will be measured annually to determine
whether one third of the performance grants are cancelled or
earned.
-- The Hurdle Rate is a measure of the increase in the Company's
share price and is a target for the total shareholders return
("TSR").
-- The base price for the TSR calculation will be the volume
weighted average price (VWAP) of shares over the 30 days prior to
the grant date.
-- The end price for the TSR calculation will be the VWAP over
the last 30 days of the Performance Period.
Performance-based remuneration
The key performance indicators (KPIs) are set annually, which
includes consultation with 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 to position the
Group for future 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 executive 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 2020.
Year ended Year ended Year ended Year ended Year ended
30 June 30 June 30 June 30 June 30 June
2020 2019 2018 2017 2016
$'000 $'000 $'000 $'000 $'000
----------- ----------- ----------- ----------- -----------
Revenue 17,155 26,403 32,693 - -
Net loss before tax from
continuing operations 18,269* 33,522* 97,043* 17,662 23,903
Net loss after tax from
continuing operations 12,190 33,726 103,763 17,367 22,472
Share price at start of A$0.67 A$0.36 A$0.05 A$0.06 A$0.09
year (1)
Share price at end of year A$0.13 A$0.67 A$0.36 A$0.05 A$0.06
Basic and diluted loss per
share ($ cents) from continuing
operations 8.55* 23.72* 73.54* 17.26 1.19
---------------------------------- ----------- ----------- ----------- ----------- -----------
*includes net impairment expense of $1,257 thousand (2019:
includes the $23,268 thousand impairment of the Makhado Project
consolidated exploration asset) (FY2018: includes the $87,475
thousand impairment of the Vele Colliery assets)
(1) The share price at the start of the 2018 year is prior to
the share consolidation that took place in December 2017.
Remuneration of directors and key management personnel
Details of the nature and amount of each major element of the
remuneration of each director are:
Short term employee benefits Post-employment Share-based Total Share
benefits payments based % of
Total
-------------------------------- ---------------- ------------ ------------ ---------- -----------
2020 Salary Bonus Non Super-annuation Termination Options /
and fees -monetary benefits Shares
benefits
---------- -------- ---------- ---------------- ------------ ------------ ---------- -----------
$ $ $ $ $ $ $ %
---------- -------- ---------- ---------------- ------------ ------------ ---------- -----------
Non-Executive Directors
B Pryor(1) 69,326 - - - - - 69,326 -
A Chee - - - - - - - -
Sin
A Mifflin(1) 44,447 - - - - - 44,447 -
H Zhen - - - - - - - -
K Mosehla(1) 44,941 - - - - - 44,941 -
P Cordin 15,291 - - 1,453 - - 16,744 -
S
Randazzo(1) 44,154 - - 4,195 - - 48,349 -
S Ding - - - - - - - -
T Mosololi 20,975 - - - - - 20,975 -
Executive Directors
D Brown 242,185 218,790 - - 171,804 (2) - (3) 632,779 -
B Berlin 356,093 186,615 - - - 84,203 (3) 626,911 13
837,412 405,405 - 5,648 171,804 84,203 1,504,472 6
---------- -------- ---------- ---------------- ------------ ------------ ---------- -----------
1. The third and fourth quarter fees were accrued for but not
paid in the 2020 financial year
2. Mr Brown resigned on 31 January 2020 and in lieu of his
six-month notice period, 208,537 shares have been issued to him,
being one-third of the 2017 performance rights granted to him
($130,944). These shares issued cannot be disposed of for a period
of one year until 31 January 2021.
3. This is a non-cash cost expensed as employee costs. The
current and prior year non-cash costs for Mr Brown was reversed due
to his resignation.
No director appointed during the period received a payment as
part of his consideration for agreeing to hold the position.
In October 2019, performance bonuses of $405 thousand were paid
out in relation to certain performance targets met for the 2019
financial year. The performance targets were based on a combination
of individual performance and corporate key performance indicators
including; safety, operational targets and progression of raising
funding for Phase 1 of the Makhado project.
Short term employee benefits Post-employment Share-based Total Share
benefits payments based % of
Total
-------------------------------- ---------------- ------------ ------------ ---------- -----------
2019 Salary Bonus Non Super-annuation Termination Options /
and fees -monetary benefits Shares
benefits
---------- -------- ---------- ---------------- ------------ ------------ ---------- -----------
$ $ $ $ $ $ $ %
---------- -------- ---------- ---------------- ------------ ------------ ---------- -----------
Non-Executive Directors
B Pryor 71,186 - - - - - 71,186 -
A Chee - - - - - - - -
Sin
A Mifflin 44,951 - - - - - 44,951 -
H Zhen - - - - - - - -
K Mosehla 45,290 - - - - - 45,290 -
P Cordin 41,051 - - 3,900 - - 44,951 -
S
Randazzo(1) 12,989 - - - - - 12,989 -
S Ding - - - - - - - -
T Mosololi 45,290 - - - - - 45,290 -
Executive Directors
D Brown 440,851 209,474 - - - 279,279 (2) 929,604 30
B Berlin 377,336 58,751 - - - 48,635 (2) 484,722 10
1,078,944 268,225 - 3,900 - 327,914 1,678,983 20
---------- -------- ---------- ---------------- ------------ ------------ ---------- -----------
4. Mr S Randazzo was appointed on 29 March 2019
5. This is a non-cash cost expensed as employee costs
In September 2018, performance bonuses of $268 thousand were
paid out in relation to certain performance targets met for the
2018 financial year. The performance targets were based on a
combination of individual performance and corporate key performance
indicators including; safety, operational targets and the
achievement of a turnaround strategy.
Share-based payments granted as compensation for the current
financial year
During the financial year, certain share-based payment
arrangements expired as follows:
Exercise Grant
Grant Expiry price date Vesting
Option series Number date date value date
--------------- -------- ----------- ----------- --------- --------- --------
Performance
grant 562,747 30/11/2016 29/11/2019 - AUD0.047 (1)
1. 562,747 performance rights were granted to Mr Brown. The
vesting factored in a hurdle rate based on the compound annual
growth rate of total shareholder return across the period from the
grant date.
The following grants of share-based payment compensation to
executive management personnel relate to the current financial
year:
During the financial year
---------------------------------------------------------------------
% of
Name compensation
for the year
% of grant % of grant consisting of
Option series Number granted Number vested vested forfeited options
---------- ----------------- --------------- -------------- ----------------- ----------------- ----------------
Performance
D Brown grant (2) 915,852 - - 100 -(3)
Performance
B Berlin grant (2) 736,428 - - n/a 13
2. The vesting factored in a hurdle rate based on the compound
annual growth rate of total shareholder return across the period
from the grant date to be measured annually to determine whether
one third of the Performance Rights have been earned or will be
cancelled. If it is earned, it will only vest at the end of the
three year period
3. Mr Brown forfeited the performance grant due to his resignation on 31 January 2020.
During the year, none of the executive management personnel
exercised performance rights granted to them as part of their
compensation.
Key terms of employment contracts
The Company has entered into formal contractual employment
agreements with the Chief Executive Officer and the Chief Financial
Officer who are both Executive Directors of the Company. There are
no formal contractual employment agreements 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 CEO commenced on 1 February 2014
with an annual remuneration of ZAR6,433 thousand and a six-month
notice period. During the year, Mr Brown received 915,852
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 to be measured
annually to determine whether one third of the Performance Rights
have been earned or will be cancelled. If it is earned, it will
only vest at the end of the three-year period. Mr Brown resigned on
31 January 2020. In lieu of his six-month notice period, 208,537
shares have been issued to him, being one-third of the 2017
performance rights granted to him. These shares issued cannot be
disposed of for a period of one year until 31 January 2021. The
balance of his performance rights (2,211,214) were forfeited.
2. Ms Berlin was appointed on 24 April 2018 as CFO Financial
Director with an annual remuneration of ZAR5,534 thousand and a
six-month notice period. During the year Ms Berlin received 736,428
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 to be measured
annually to determine whether one third of the Performance Rights
have been earned or will be cancelled. If it is earned, it will
only vest at the end of the three-year period. On 1 February 2020,
Ms Berlin was appointed Acting CEO with no change in her annual
gross remuneration.
Loans from Key Management Personnel
No loans were provided to or received from Key Management
Personnel during the year ended 30 June 2020.
Other Transactions
No other transactions were entered into with any member of Key
Management Personnel other than those detailed in this Remuneration
Report.
Director equity holdings
Option holdings
No options exist as at 30 June 2020.
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 including their personally-related
entities, is as follows:
Held at Granted Exercised Expired/Other Held at
1 July as remuneration changes 30 June
2019 2020
--------------------- ---------- ----------------- ---------- -------------- ----------
Non-Executive
Directors
B Pryor - - - - -
A Chee Sin - - - - -
A Mifflin - - - - -
H Zhen - - - - -
K Mosehla - - - - -
P Cordin - - - - -
S Randazzo - - - - -
S Ding - - - - -
T Mosololi - - - - -
Executive Directors
D Brown (1) 2,066,646 915,852 (208,537) (2,773,961) -
B Berlin 635,347 736,428 - - 1,371,775
1. 562,747 performance rights that were granted on 30 November
2016, expired in November 2019. Mr Brown resigned on 31 January
2020 and in lieu of his six-month notice period, 208,537 shares
have been issued to him, being one-third of the 2017 performance
rights granted to him. These shares issued cannot be disposed of
for a period of one year until 31 January 2021. The balance of his
performance rights (2,211,214) have been forfeited
The movement during the reporting period in the number of
ordinary shares held, directly, indirectly or beneficially by each
director including their personally-related entities, is as
follows:
Held at Granted Exercised Expired/Other Held at
1 July as remuneration changes 30 June
2019 2020
--------------------- -------- ----------------- ---------- -------------- ---------
Non-Executive
Directors
B Pryor 7,500 - - - 7,500
A Chee Sin - - - - -
A Mifflin - - - - -
H Zhen - - - - -
K Mosehla - - - - -
P Cordin (1) 68,553 - - (68,553) -
S Randazzo - - - - -
S Ding - - - - -
T Mosololi (2) 500 - - (500) -
Executive Directors
D Brown (3) 41,250 208,537 - (249,787) -
B Berlin - - - - -
--------------------- -------- ----------------- ---------- -------------- ---------
1. Retired on 22 November 2019
2. Resigned on 31 December 2019
3. Resigned on 31 January 2020 and in lieu of his six-month
notice period, 208,537 shares have been issued to him, being
one-third of the 2017 performance rights granted to him ($130,944).
These shares issued cannot be disposed of for a period of one year
until 31 January 2021.
This marks the end of the remuneration report.
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 Brenda Berlin
Chairman Acting Chief Executive Officer
30 September 2020 30 September 2020
Auditor's Independence Declaration
As lead auditor for the audit of MC Mining Limited for the year
ended 30 June 2020, I declare that to the best of my knowledge and
belief, there have been:
1. no contraventions of the auditor independence requirements of
the Corporations Act 2001 in relation to the audit; and
2. no contraventions of any applicable code of professional
conduct in relation to the audit.
This declaration is in respect of MC Mining Limited and the
entities it controlled during the period.
Douglas Craig Perth
Partner 30 September 2020
PricewaterhouseCoopers
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 Brenda Berlin
Chairman Acting Chief Executive Officer
30 September 20120 30 September 2020
Year ended Year ended
30 June 30 June
2020 2019
Note $'000 $'000
--------------------------------------------- ----- ----------- -----------
Continuing operations
Revenue 5 17,155 26,403
Cost of sales 6 (18,269) (25,389)
----------- -----------
Gross (loss) profit (1,114) 1,014
Other operating income 7 192 1,606
Other operating gains /(losses) 8 (184) 969
Net impairment expense 9 (1,257) (21,916)
Administrative expenses 10 (7,578) (10,556)
Operating loss (9,941) (28,883)
Interest income 250 1,048
Finance costs 11 (3,159) (5,687)
Loss before tax (12,850) (33,522)
Income tax charge 12 660 (204)
----------- -----------
Net loss for the year from continuing
operations (12,190) (33,726)
LOSS FOR THE YEAR (12,190) (33,726)
----------- -----------
Other comprehensive loss, net of
income tax
Items that may be reclassified subsequently
to profit or loss
Exchange differences on translating
foreign operations (20,742) (5,708)
----------- -----------
Total comprehensive loss for the
year (32,932) (39,434)
----------- -----------
Loss for the year attributable to:
Owners of the Company (12,048) (33,421)
Non-controlling interests (142) (305)
----------- -----------
(12,190) (33,726)
----------- -----------
Total comprehensive loss attributable
to:
Owners of the Company (32,790) (39,129)
Non-controlling interests (142) (305)
----------- -----------
(32,932) (39,434)
----------- -----------
Loss per share 13
From continuing operations and discontinued
operations
Basic and diluted (cents per share) (8.55) (23.72)
From continuing operations
Basic and diluted (cents per share) (8.55) (23.72)
The accompanying notes are an integral part of
these consolidated financial statements.
30 June 2020 30 June
2019
Note $'000 $'000
-------------------------------------- ------ ------------- ----------
ASSETS
Non-current assets
Exploration and evaluation assets 14 78,714 94,871
Development assets 15 20,720 26,919
Property, plant and equipment 16 24,396 32,713
Right-of-use assets 17 1,819 -
Other receivables 18 - 219
Other financial assets 19 3,743 5,006
Restricted cash 22 57 68
Total non-current assets 129,449 159,796
------------- ----------
Current assets
Inventories 20 1,109 1,042
Trade and other receivables 21 1,311 2,996
Tax receivable 162 201
Other financial assets 19 - 23
Cash and cash equivalents 22 2,678 8,811
------------- ----------
Total current assets 5,260 13,073
Assets classified as held for
sale 274 939
------------- ----------
Total assets 134,983 173,808
------------- ----------
LIABILITIES
Non-current liabilities
Deferred consideration 23 2,220 2,665
Borrowings 24 566 898
Provisions 25 4,996 6,564
Deferred tax liability 26 4,078 5,750
Lease liabilities 27 1,622 689
Total non-current liabilities 13,482 16,566
------------- ----------
Current liabilities
Deferred consideration 23 101 1,406
Borrowings 24 13,029 13,401
Trade and other payables 29 6,463 8,850
Bank overdraft 22 2,214 -
Provisions 25 197 536
Other liabilities 28 - 176
Current tax liabilities 341 420
Lease liabilities 27 213 312
------------- ----------
Total current liabilities 22,558 25,101
------------- ----------
Total liabilities 36,040 41,667
------------- ----------
NET ASSETS 98,943 132,141
------------- ----------
EQUITY
Issued capital 29 1,041,080 1,040,950
Accumulated deficit 30 (895,591) (884,297)
Reserves 31 (45,918) (24,601)
------------- ----------
Equity attributable to owners
of the Company 99,571 132,052
Non-controlling interests 33 (628) 89
------------- ----------
TOTAL EQUITY 98,943 132,141
------------- ----------
The accompanying notes are an integral part of these consolidated
financial statements.
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 2019 1,040,950 (884,297) 2,234 91 1,134 (28,060) 132,052 89 132,141
Total
comprehensive
loss for
the year - (12,048) - - - (20,543) (32,591) (717) (33,308)
---------- ------------ -------- -------- --------- ------------ ------------- ---------------- ---------
Loss for the
year - (12,048) - - - - (12,048) (142) (12,190)
Freewheel
de-recognised - - - - - 199 199 (575) (376)
Other
comprehensive
loss,
net of tax - - - - - (20,742) (20,742) - (20,742)
---------- ------------ -------- -------- --------- ------------ ------------- ---------------- ---------
Performance
grants issued
to employees - - 769 - - - 769 - 769
Share options
expired - 754 (754) - - - - - -
Share options
forfeited - - (658) - - - (658) - (658)
Shares issued 131 - (131) - - - - - -
Share issue
costs (1) - - - - - (1) - (1)
---------- ------------ -------- -------- --------- ------------ ------------- ---------------- ---------
Balance at 30
June 2020 1,041,080 (895,591) 1,460 91 1,134 (48,603) 99,571 (628) 98,943
---------- ------------ -------- -------- --------- ------------ ------------- ---------------- ---------
Balance at 1
July 2018 1,040,950 (851,535) 2,052 91 1,134 (22,352) 170,340 394 170,734
Total
comprehensive
loss for
the year - (33,421) - - - (5,708) (39,129) (305) (39,434)
---------- ------------ -------- -------- --------- ------------ ------------- ---------------- ---------
Loss for the
year - (33,421) - - - - (33,421) (305) (33,726)
Other
comprehensive
loss,
net of tax - - - - - (5,708) (5,708) - (5,708)
---------- ------------ -------- -------- --------- ------------ ------------- ---------------- ---------
Dividends - (11) - - - - (11) - (11)
Performance
grants issued
to employees - - 852 - - - 852 - 852
Share options
expired - 670 (670) - - - - - -
Balance at 30
June 2019 1,040,950 (884,297) 2,234 91 1,134 (28,060) 132,052 89 132,141
---------- ------------ -------- -------- --------- ------------ ------------- ---------------- ---------
The accompanying notes are an integral part of these
consolidated
financial statements.
Year ended Year ended
30 June 30 June
2020 2019
Note $'000 $'000
-------------------------------------------- ----- ------------ -----------
Cash flows from operating activities
Receipts from customers 20,950 32,068
Payments to suppliers and employees (26,000) (37,345)
------------ -----------
Cash generated from/(used in)
operations 36 (5,050) (5,277)
Interest received 250 403
Interest paid (137) (48)
Dividend paid - (33)
Tax paid - (457)
------------ -----------
Net cash used in operating activities (4,937) (5,412)
------------ -----------
Cash flows from investing activities
Purchase of property, plant and
equipment 17 (569) (562)
Proceeds from the sale of property,
plant and equipment 1,719 3,499
Investment in development assets 16 (5) (5)
Investment in exploration assets 15 (1,266) (3,350)
Khethekile acquisition - consideration
paid 34 - (521)
Khethekile acquisition - deferred
consideration payment 23 (271) (239)
Pan African Resources deferred (1,004) -
consideration payment
Bio-diversity off-set agreement (84) -
payment
Net proceeds from the sale of
Mooiplaats Colliery 13 - 6,457
Decrease/(increase) in other
financial assets 19 320 (649)
Increase in restricted cash - (16)
Net cash (used in)/generated
from investing activities (1,160) 4,614
------------ -----------
Cash flows from financing activities
Borrowings repayments 24 (360) (692)
Lease repayments (994) (378)
Net cash used by financing activities (1,354) (1,070)
------------ -----------
Net decrease in cash and cash
equivalents (7,451) (1,868)
Net foreign exchange differences (896) (252)
Cash and cash equivalents at
beginning of the year 8,811 10,931
------------ -----------
Cash and cash equivalents at
the end of the year 22 464 8,811
------------ -----------
The accompanying notes are an integral part of these consolidated
financial statements.
1. GENERAL INFORMATION
MC Mining Limited ("MCM" 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;
-- The Makhado hard coking and thermal coal project that has
been granted a mining right ("MR"), 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 and has been granted the final
IWUL relating to the new perennial stream diversion application ;
and
-- Three exploration and development stage coking and thermal
coal projects, namely Chapudi, Generaal and Mopane.
Going Concern
The Consolidated Entity has incurred a net loss after tax for
the year ended 30 June 2020 of $12,190 thousand (30 June 2019: loss
of $33,726 thousand). The prior period loss included a non-cash
impairment of $21,916 mainly related to the impairment of
Australian dollar payments made by the Group in 2007 for the
acquisition of new order prospecting rights, which have been
incorporated into the Makhado new order mining right. During the
twelve-month period ended 30 June 2020, net cash outflows from
operating activities were $4,937 thousand (30 June 2019 net
outflow: $5,412 thousand). As at 30 June 2020 the Consolidated
Entity had a net current liability position of $17,298 thousand (30
June 2019: net current liability position of $11,089 thousand).
The current liability position as at 30 June 2020 is primarily a
result of borrowings of $12,587 thousand payable to the Industrial
Development Corporation of South Africa ("IDC") in November
2020.
The directors have prepared a cash flow forecast for the
twelve-month period ended 30 September 2021, taking into account
available facilities, additional funding that is expected to be
raised, capital expenditure that is expected to be incurred and
expected cash flows to be generated by Uitkomst, which indicates
that the Consolidated Entity will have sufficient cash to fund
their operations for at least the twelve-month period from the date
of signing this report.
These cash flow forecasts referred to above include the
following assumptions:
-- Meeting commitments to creditors arising from continuing operations;
-- A negotiated deferred settlement over time of tranche 1 of
the IDC loan (capital amount of $6,923 thousand) to when Makhado
Phase 1 is at steady state production as opposed to being payable
in November 2020 (refer note 24). The settlement could also
potentially be in equity;
-- The settlement of the $2,308 thousand of tranche 2 of the IDC loan payable in November 2020
-- A drawdown of the new IDC term facility of $14,134 thousand (ZAR245,000 thousand),
-- In addition to the $14,134 thousand (ZAR245,000 thousand)
referred to above, further funding of approximately $19,326
thousand (ZAR335,000 thousand) is required ("Additional
Funding")
The Company is exploring and progressing a number of
alternatives to raise the Additional Funding including, but not
limited to:
-- The issue of new equity for cash in the Company to potential new shareholders;
-- The issue of new equity for cash in the corporate entities holding the Makhado project;
-- The sale of minority stakes in the corporate entities holding the Makhado project;
-- Further debt funding;
1. GENERAL INFORMATION (CONTINUED)
-- Contractor funding such as build, own, operate, transfer ("BOOT") arrangements.
The conclusion of the debt and equity raise is by its nature an
involved process and is subject to successful negotiations with the
external funders and shareholders. An equity raise may be subject
to a due diligence process.
Subject to raising the Additional Funding, the development of
Phase 1 of the Makhado project will subsequently commence within
the twelve months following the signing of these annual financial
statements. In addition, the Consolidated Entity's ability to
continue as a going concern for the twelve months following the
signing of these annual financial statements is dependent on the
raising of the above-mentioned Additional Funding The Consolidated
Entity's ability to continue as a going concern beyond the twelve
months following the signing of these annual financial statements
is dependent on the successful development of Phase 1 of the
Makhado project and its subsequent ramp-up to planned levels of
production.
These conditions give rise to a material uncertainty that may
cast significant doubt on the Consolidated Entity's ability to
continue as a going concern, and therefore, that it may be unable
to realise its assets and discharge its liabilities in the normal
course of business.
These consolidated annual financial statements do not give
effect to adjustments that would be necessary to the carrying value
and classification of assets and liabilities, should the
Consolidated Entity be unable to continue as a going concern. Such
adjustments could be material.
The Group has a history of successful capital raisings to meet
the Consolidated Entity's funding requirements. The directors
believe that at the date of signing the annual financial statements
there are reasonable grounds to believe that they will be
successful in achieving the matters set out above and that the
Consolidated Entity will have sufficient funds to meet their
obligations as and 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 30 September 2020.
1.2. Basis of Preparation
T he 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 102 or fair value less costs to sell in
AASB 136.
1. GENERAL INFORMATION (CONTINUED)
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 40 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.
2. ACCOUNTING POLICIES (CONTINUED)
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.
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 a financial asset or liability is remeasured
at subsequent reporting dates in accordance with AASB 9 'Financial
Instruments', or AASB 137 'Provisions, Contingent Liabilities and
Contingent Assets', as appropriate, with the corresponding gain or
loss being recognised in profit or loss.
2. ACCOUNTING POLICIES (CONTINUED)
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 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 disposal of the net investment in the
foreign operation.
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.
2. ACCOUNTING POLICIES (CONTINUED)
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.
2.5. 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 2.12.
Exploration and evaluation expenditure that has been capitalised
is reclassified to 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. ACCOUNTING POLICIES (CONTINUED)
2.6. 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
2.12.
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.
2.7. 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
2.12.
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 all of the following criteria are met: (a) it is
probable that future economic benefits will flow to the entity; (b)
the entity can identify the component of the ore body to which the
access has been improved; and (c) the cost incurred can be measured
reliably. 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. Deferred stripping
costs are amortised on a systematic basis over the expected useful
life of the identified component of the ore body that becomes more
accessible as a result of the stripping activity, or over the
expected remaining life of the ore body if the stripping activity
provides improved access to the whole of the remaining ore body.
The units-of-production method is applied for amortisation of
deferred stripping costs.
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.
2. ACCOUNTING POLICIES (CONTINUED)
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.
2.10. 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.
2. ACCOUNTING POLICIES (CONTINUED)
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
2.12.
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 of
disposal and value-in-use. In assessing fair value less costs to
sell, the estimated future cash flows were 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 due to a market price not being
available.
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 isrecognised 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
As explained in note 2.26. below, the group has changed its
accounting policy for leases where the group is the lessee. The new
policy and the impact of the change is described in note 2.26.
Until 30 June 2019, leases of property, plant and equipment
where the group, as lessee, had substantially all the risks and
rewards of ownership were classified as finance leases. Finance
leases were capitalised at the lease's inception at the fair value
of the leased property or, if lower, the present value of the
minimum lease payments. The corresponding rental obligations, net
of finance charges, were included in other short-term and long-term
payables. Each lease payment was allocated between the liability
and finance cost. The finance cost was charged to profit or loss
over the lease period so as to produce a constant periodic rate of
interest on the remaining balance of the liability for each period.
The property, plant and equipment acquired under finance leases was
depreciated over the asset's useful life, or over the shorter of
the asset's useful life and the lease term if there is no
reasonable certainty that the group will obtain ownership at the
end of the lease term.
Leases in which a significant portion of the risks and rewards
of ownership were not transferred to the group as lessee were
classified as operating leases. Payments made under operating
leases (net of any incentives received from the lessor) were
charged to profit or loss on a straight-line basis over the period
of the lease.
2. ACCOUNTING POLICIES (CONTINUED)
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.
2.15. Trade receivables
Trade receivables are classified as financial assets at
amortised cost. They have been classified in this manner because
their contractual terms give rise, on specified dates to cash flows
that are solely payments of principal and interest on the principal
outstanding, and the group's business model is to collect the
contractual cash flows on trade receivables. Trade receivables are
recognised when the group becomes a party to the contractual
provisions of the receivables. They are initially measured at fair
value and subsequently measured at amortised cost.
The group recognises a loss allowance for expected credit losses
on trade receivables. The amount of expected credit losses is
updated at each reporting date.
The group makes use of a simplified approach as a practical
expedient to the determination of expected credit losses on trade
receivables. The group applies the AASB 9 simplified approach to
measure expected credit losses, which uses a lifetime expected
credit loss allowance, for trade receivables. Trade receivables
that are more than 30 days past-due are assessed to have an
increase in credit risk. The simplified approach is based on
historic credit loss experience, adjusted for factors that are
specific to the debtors, general economic conditions and an
assessment of both the current and forecast direction of conditions
at the reporting date, including the time value of money, where
appropriate.
An impairment gain or loss is recognised in profit or loss with
a corresponding adjustment to the carrying amount of trade
receivables through use of a loss allowance account. Trade
receivables are written off when there is no reasonable expectation
of recovery. Indicators that there is no reasonable expectation of
recovery include, among others, the failure of a debtor to engage
in a repayment plan with the Group, and a failure to make
contractual payments for a period of greater than 90 days past due
date. Impairment losses is included in operating expenses in profit
or loss.
2.16. Cash and cash equivalents
Cash and cash equivalents comprise cash balances and short-term
deposits. Cash and cash equivalents are accounted for at amortised
cost.
Restricted cash comprise cash balances which are encumbered and
the Group does therefore not have unrestricted access to these
funds.
2.17. Financial instruments
Financial instruments held by the Group are classified in
accordance with the provisions of AASB 9 Financial Instruments. For
details on reclassifications and re-measurements in terms of AASB 9
compared to AASB 139, please refer to note 2.26.
Broadly, the classification possibilities, which are adopted by
the Group, as applicable, are as follows:
Financial assets
-- Amortised cost
-- Fair Value Through Profit or Loss
2. ACCOUNTING POLICIES (CONTINUED)
Financial liabilities
-- Amortised cost
When a financial liability is contingent consideration in a
business combination, the Group classifies it as a financial
liability at fair value through profit or loss.
Financial assets at amortised cost
The following financial assets are classified as financial
assets at amortised cost:
-- Trade and other receivables
-- Cash and cash equivalents
-- Loan receivable
-- Other financial assets
Classification
Assets are classified in this category because the contractual
terms give rise, on specific dates, to cash flows that are solely
payments of principal and interest on the principal outstanding,
and it is the Group's business model to collect the contractual
cash flows on these assets.
Measurement
Financial assets at amortised cost are recognised when the Group
becomes a party to the contractual provisions of the asset. These
financial assets are recognised initially at the amount of
consideration that is unconditional, unless they contain
significant financing components, when they are recognised at fair
value. These financial assets are subsequently measured at
amortised cost. The amortised cost is the amount recognised on the
receivable, minus principal repayments, plus cumulative
amortisation (interest) using the effective interest rate method,
of any difference between the initial amount and the maturity
amount, adjusted for any loss allowance.
Interest income is calculated using the effective interest rate
method, and is included in profit or loss in interest income.
The application of the effective interest method to calculate
interest income on a receivable is dependent on the credit risk of
the receivable as follows:
-- The effective interest rate is applied to the gross carrying
amount of the financial asset, provided it is not credit impaired.
The gross carrying amount is the amortised cost before adjusting
for a loss allowance.
-- If a financial asset was not purchased or originally
credit-impaired, but it has subsequently become credit-impaired,
then the effective interest rate is applied to the amortised cost
of the financial asset in the determination of interest. If, in
subsequent periods, the financial asset is no longer credit
impaired, then the interest calculation reverts to applying the
effective interest rate to the gross carrying amount.
When a financial asset is denominated in a foreign currency, the
carrying amount of the financial asset is determined in the foreign
currency. The carrying amount is then translated to using the spot
rate at the end of each reporting period. Any resulting foreign
exchange gains or losses are recognised in profit or loss in other
operating gains/(losses).
Impairment
The Group assesses on a forward-looking basis the Expected
Credit Losses ("ECLs") associated with its financial assets carried
at amortised cost. ECLs are a probability-weighted estimate of
credit losses. Credit losses are measured as the present value of
all cash shortfalls (ie the difference between the cash flows due
to the Group in accordance with the contract and the cash flows
that the Group and Company expects to receive).
2. ACCOUNTING POLICIES (CONTINUED)
Expected credit loss allowances are measured on either of the
following bases:
-- 12-month ECLs: these are ECLs that result from possible
default events within the 12 months after the reporting date;
and
-- lifetime ECLs: these are ECLs that result from all possible
default events over the expected life of a financial
instrument.
The Group considers a financial asset to be in default when
contractual payment term has lapsed. However, in certain cases, the
Croup and Company may also consider a financial asset to be in
default when internal or external information indicates that the
Group is unlikely to receive the outstanding contractual amounts in
full before taking into account any credit enhancements held by the
Group.
Financial assets at Fair Value Through Profit or Loss
The following financial assets are classified at Fair Value
Through Profit or Loss:
-- Other Financial Assets
Classification
Investments held by the Group as equity securities in investment
funds are classified as Fair Value Through Profit or Loss. Assets
are classified in this category because the Group does not hold
these investments solely to collect payments of principal and
interest on the principal outstanding, and the Group manages these
investments based on their fair value.
Measurement
Financial assets at Fair Value Through Profit or Los are
recognised when the Group becomes a party to the contractual
provisions of the investment. These financial assets are recognised
initially at fair value. These financial assets are subsequently
re-measured at fair value with all gains or losses recognised
directly in profit or loss.
Financial liabilities at amortised cost
Classification
The following financial liabilities are classified as financial
liabilities at amortised cost:
-- Borrowings
-- Finance lease liabilities
-- Trade and other payables
Measurement
Liabilities at amortised cost are recognised when the Group
becomes a party to the contractual provisions of the liability. The
liabilities are initially measured, at initial recognition, at fair
value plus transaction costs, if any. They are subsequently
measured at amortised cost.
The effective interest method is a method of calculating the
amortised cost of a financial liability and of allocating an
interest expense over the relevant period. The effective interest
rate is the rate that exactly discounts estimated future cash
payments (including all fees and 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
financial liability, or (where appropriate) a shorter period, to
the amortised cost of a financial liability.
Interest expense, calculated on the effective interest method,
is included in profit or loss in finance costs.
2. ACCOUNTING POLICIES (CONTINUED)
When financial liabilities are denominated in a foreign
currency, the carrying amount of the payables are determined in the
foreign currency. The carrying amount is then translated to using
the spot rate at the end of each reporting period. Any resulting
foreign exchange gains or losses are recognised in profit or loss
in the other operating gains/(losses).
Modification of financial liabilities
A substantial modification of the terms of an existing debt
instrument or part of it is accounted for as an extinguishment of
the original debt instrument and the recognition of a new debt
instrument.
Derecognition
Financial assets are derecognised when the rights to receive
cash flows from the assets have expired or have been transferred
and the Group has transferred substantially all risks and rewards
of ownership. Financial liabilities are derecognised when the
obligations specified in the contracts are discharged, cancelled or
expire. On derecognition of a financial asset/liability, any
difference between the carrying amount extinguished and the
consideration paid is recognised in profit or loss.
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.
2.19. 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 other comprehensive income.
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.
2. ACCOUNTING POLICIES (CONTINUED)
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 Group
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 32.
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 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.
Accounting for BEE transactions
Where equity instruments are issued to a 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 income.
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.
2. ACCOUNTING POLICIES (CONTINUED)
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.
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. ACCOUNTING POLICIES (CONTINUED)
2.22. Revenue recognition
Revenue is recognised at fair value of the consideration
received net of the amount of applicable sales tax.
Sale of coal - AASB 15: Revenue from contracts with
customers
Revenue is measured based on the consideration specified in a
contract with a customer. The Group recognises revenue when it
transfers control over coal sold to a customer, which is generally
indicated as follows:
-- The entity has a present right to payment for the coal sold
-- The customer has legal title to the coal sold
-- The entity has transferred physical possession of the coal sold
-- The customer has the significant risks and rewards of ownership of the coal sold
-- The customer has accepted the coal sold
Transport of coal (where applicable) is also recognised as
revenue at this point. No discounts are provided for coal
sales.
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.
2.23. 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.
2.24. 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.
2.25. 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).
2.26. Adoption of new and revised Accounting Standards and
Interpretations
In the current year the Group has adopted all of the new and
revised standards and interpretation issued by the Australian
Accounting Standards Board (AASB) that are relevant to its
operations and effective for the current annual reported period.
New and revised standards, amendments thereof, and interpretations
effective for the current reporting period that are relevant to the
Group include:
-- AASB 16 Leases which resulted in almost all leases being
recognised on the Statement of Financial Position, as the
distinction between operating and finance leases was removed for
lessees.
2. ACCOUNTING POLICIES (CONTINUED)
AASB 16 - Leases
The group has adopted AASB 16 Leases retrospectively from 1 July
2019, but has not restated comparatives for the 2019 reporting
period, as permitted under the specific transition provisions in
the standard. The reclassifications and the adjustments arising
from the new leasing rules are therefore recognised in the opening
balance sheet on 1 July 2019. On adoption of AASB 16, the group
recognised lease liabilities in relation to leases, which had
previously been classified as 'operating leases' under the
principles of AASB 117 Leases. These liabilities were measured at
the present value of the remaining lease payments, discounted using
the lessee's incremental borrowing rate as of 1 July 2019. The
weighted average lessee's incremental borrowing rate applied to the
lease liabilities on 1 July 2019 was 12%.
For leases previously classified as finance leases, the entity
recognised the carrying amount of the lease asset and lease
liability immediately before transition as the carrying amount of
the right of use asset and the lease liability at the date of
initial application. The measurement principles of AASB 16 are only
applied after that date. The application of these amendments does
not have any material impact on the disclosures or the amounts
recognised in the Group's condensed consolidated half-year
report.
(i) Practical expedients applied
In applying AASB 16 for the first time, the Group has used the
following practical expedients permitted
by the standard:
-- applying a single discount rate to a portfolio of leases with
reasonably similar characteristics
-- relying on previous assessments on whether leases are onerous
as an alternative to performing
an impairment review - there were no onerous contracts as at 1
July 2019
-- accounting for operating leases with a remaining lease term
of less than 12 months as at 1 July 2019 as short-term leases
-- The low value lease exemption - the group has elected to take
the low value exemption with a value of $5 thousand for the
individual leased asset value
The Group has also elected not to reassess whether a contract
is, or contains a lease at the date of initial application.
Instead, for contracts entered into before the transition date the
group relied on its assessment made applying AASB 117 and
Interpretation 4 Determining whether an Arrangement contains a
Lease.
(ii) Adjustments recognised in the Statement of Financial
Position on 1 July 2019
The change in accounting policy affected the following items in
the Statement of Financial Position on 1 July 2019:
-- property, plant and equipment - decrease by $1,042 thousand
-- right-of-use assets - increase by $2,935 thousand
-- lease liabilities - increase by $1,893 thousand.
Certain new accounting standards and interpretations have been
published that are not mandatory for 30 June 2020 reporting periods
and have not been early adopted by the group. These standards are
not expected to have a material impact on the entity in the current
or future reporting periods and on foreseeable future
transactions.
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.
3.1 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 fair value less cost to
sell calculations, which incorporate various key assumptions. Key
assumptions include future coal prices, future operating costs,
discount rates, foreign exchange rates and coal reserves.
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.
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.
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; and
-- The Company has the appropriate skills and resources to develop and operate the project.
Impairment assessment
Long-term mining assets forming part of board-approved projects
are valued based on estimates of future discounted cash flows
(DCFs) of the latest board-approved business forecasts regarding
production volumes, costs of production, capital expenditure, coal
prices and market forecasts for foreign exchange rates. The
discount rate is a risk adjusted discount rate, taking into account
specific risks relating to the Cash Generating Unit (CGU) where
cash flows have not been adjusted for the risk. This methodology is
typically applied to CGUs classified as Development Assets (e.g.
Vele Colliery) and as Property, Plant and Equipment (e.g. Uitkomst
Colliery).
Coal resources outside approved mine plans are valued based on
an in situ resource multiple based value. Comparable market
transactions are used as a source of evidence. This methodology is
typically applied to CGUs classified as Exploration and Evaluation
assets (e.g. Greater Soutpansberg Project, Makhado Project,
Uitkomst North adit). For Exploration and Evaluation projects that
are at an advanced stage of evaluation and conditionally approved
by the Board (e.g. Makhado Project), DCFs are also used and
validated by in situ resource multiple based values.
3. CRITICAL ACCOUNTING ESTIMATES AND KEY JUDGEMENTS (CONTINUED)
The key financial assumptions used in the current year's
impairment calculations are:
Hard coking coal (HCC) price (real US$ $130 (i)
per ton)
Thermal coal price (real US$ per ton) $65 (ii)
------------------
Rand/US dollar exchange rate 15.50 (iii)
------------------
Real discount rates 8% - 11% (iv)
------------------
In situ resource multiple valuation range ZAR1 - ZAR5 (v)
(SA Rand per ton)
------------------
(i) Estimated with reference to the short-term future quotes for
hard coking coal free-on-board Australia. Management's models
considered a HCC price range of between $124 per tonne and $140 per
ton, with a base case of $130 per tonne.
(ii) Estimated with reference to the forward curve for API4
thermal coal free-on-board Richards Bay. Management's models
considered a real long-term thermal coal price range of between $60
per tonne and $70 per tonne, with a base case of $65 per tonne.
(iii) Estimated with reference to the prevailing exchange rates
and consensus outlooks. Management's models considered a Rand vs US
Dollar exchange rate range of between R15.00 and R16.50 with a base
case of R15.50.
(iv) Post-tax real discount rates that reflect management's
assessments of market conditions and risks specific to the various
projects. Management's models considered between 8% and 10% for
established and producing projects and between 9% and 12% for
developing and future projects, with a base case of 8.5% for
established and producing projects and between 9% and 11% for
developing and future projects.
(v) Based on historic thermal and premium coal transactions in
South Africa a weighted range of between R1 and R5 per mineable ton
in situ was determined reasonable for the Group's impairment
assessment purposes. The carrying values of the Group's exploration
and evaluation projects were comfortably supported within this
range after adjusting for project risk factors.
Sensitivity analysis for DCF calculations
Sensitivity Change Effect on estimated recoverable
amount
US$ million
Uitkomst Vele Colliery Makhado Project
Colliery
------------ ----------- -------------- ----------------
Long-term HCC
prices +10% N/A 8 30
N/A (i)
* 5% * 8 * 31
------------ ----------- -------------- ----------------
Long-term thermal +7.5% 4 8 15 (ii)
prices * 7.5% * 4 * 8 * 15
Long-term exchange
rate +6% 3.0 14 39
(iii)
* 3% * 1.5 * 7 * 20
------------ ----------- -------------- ----------------
Discount rate +1% (iv)
* 1.3 * 4 * 11
* 1% 1.5 5 12
------------ ----------- -------------- ----------------
3. CRITICAL ACCOUNTING ESTIMATES AND KEY JUDGEMENTS (CONTINUED)
(i) Keeping all other inputs constant, this sensitivity scenario
would not result in an impairment at either the Vele Colliery or
the Makhado Project.
(ii) Keeping all other inputs constant, this sensitivity
scenario would result in an impairment charge of $3.5 million for
the Uitkomst Colliery with no impairment charges for the Vele
Colliery or the Makhado Project.
(iii) Keeping all other inputs constant, this sensitivity
scenario would result in an impairment charge of $1.0 million for
the Uitkomst Colliery, with no impairment charges for the Vele
Colliery or the Makhado Project.
(iv) Keeping all other inputs constant, this sensitivity
scenario would result in an impairment charge of $1.0 million for
the Uitkomst Colliery, with no impairment charges for the Vele
Colliery or the Makhado Project
The key financial assumptions used in the prior year's
impairment calculations were:
Hard coking coal (HCC) price (real US$ $138 (i)
per ton)
Thermal coal price (real US$ per ton) $74 (ii)
-----------------
Rand/US dollar exchange rate 14.50 (iii)
-----------------
Real discount rates 8% - 11% (iv)
-----------------
In situ resource multiple valuation range ZAR1- ZAR5 (v)
(SA Rand per ton)
-----------------
(i) Estimated with reference to the short-term future quotes for
hard coking coal free-on-board Australia. Management's models
considered a HCC price range of between $124 per ton and $160 per
ton, with a base case of $138 per ton.
(ii) Estimated with reference to the forward curve for API4
thermal coal free-on-board Richards Bay. Management's models
considered a Thermal coal price range of between $66 per ton and
$81 per ton, with a base case of $74 per ton.
(iii) Estimated with reference to the prevailing exchange rates.
Management's models considered a Rand vs US Dollar exchange rate
range of between R13.80 and R15.24 with a base case of R14.50.
(iv) Post-tax discount rates that reflect management's
assessments of market conditions and risks specific to the various
projects. Management's models considered between 8% and 10% for
established and producing projects and between 9% and 12% for
developing and future projects, with a base case of 8% for
established and producing projects and between 9% and 11% for
developing and future projects.
(v) Based on recent thermal and premium coal transactions in
South Africa a weighted range of between R1 and R5 per mineable ton
in situ was determined reasonable for the Group's impairment
assessment purposes. The carrying values of the Group's exploration
and evaluation projects were comfortably supported within this
range after adjusting for project risk factors.
3. CRITICAL ACCOUNTING ESTIMATES AND KEY JUDGEMENTS (CONTINUED)
Sensitivity analysis for DCF calculations (prior year)
Sensitivity Change Effect on estimated recoverable
amount
US$ million
Uitkomst Vele Colliery Makhado Project
Collierty
------------- ----------------- -------------------- ----------------------
Long-term HCC and +10% 10 24 47
thermal coal
prices -10% -10 -19 -34 (i)
------------- ----------------- -------------------- ----------------------
Long-term
exchange
rate +5% 3 14 38
-5% -3 -12 -34 (ii)
------------- ----------------- -------------------- ----------------------
Discount rate +1% -2 -7 -7 (iii)
-1% 2 8 8
------------- ----------------- -------------------- ----------------------
(i) Keeping all other inputs constant, this sensitivity scenario
would result in an impairment charge for Uitkomst Colliery of $5.5
million, no further impairment at Vele Colliery and an additional
impairment charge for the Makhado Project of $34 million (i.e.
remaining carrying value).
(ii) Keeping all other inputs constant, this sensitivity
scenario would not result in any impairment charge for Uitkomst
Colliery, no further impairment charge for Vele Colliery and an
additional impairment charge for the Makhado Project of $34 million
(i.e. remaining carrying value).
(iii) Keeping all other inputs constant, this sensitivity
scenario would not result in any impairment charge for Uitkomst
Colliery, no further impairment charge for Vele Colliery and an
additional impairment charge for the Makhado Project of $7
million.
3.2 Coal reserves
E conomically 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 and mining
operations conducted, 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.
3. CRITICAL ACCOUNTING ESTIMATES AND KEY JUDGEMENTS (CONTINUED)
3.3 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 25.
3.4 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.
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 2020, projects within this reportable segment include four
exploration stage coking and thermal coal complexes, namely Chapudi
(which comprises the Chapudi project, the Chapudi West project and
the Wildebeesthoek project), Generaal (which comprises the Generaal
project and the Mount Stuart project), Mopane (which comprises the
Voorburg project and the Jutland project) and Makhado (comprising
the Makhado project and the Makhado Extension 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 2020, the only project included within
this reportable segment is the Vele Colliery, in the early
operational and development stage.
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 Uitkomst Colliery and the
Klipspruit project.
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.
4. SEGMENT INFORMATION (CONTINUED)
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).
For the year ended 30 June 2020
Exploration Development Mining Total
Revenue - - 17,155 17,155
Cost of sales - - (18,269) (18,269)
----------------------- ----------------------- -------------------- --------------------
Gross profit - - (1,114) (1,114)
Other income 77 25 35 137
Other operating (losses)/gains (75) (109) - (184)
Administrative expenses (919) (695) (103) (1,717)
Impairment (expense)/reversal (1,804) 547 - (1,257)
----------------------- ----------------------- -------------------- --------------------
Operating (loss)/profit (2,721) (232) (1,182) (4,135)
Interest income 16 - 7 23
Finance costs (2,209) (342) (607) (3,158)
----------------------- ----------------------- -------------------- --------------------
(Loss)/profit before
tax (4,914) (574) (1,782) (7,270)
Income tax charge - - 661 661
----------------------- ----------------------- -------------------- --------------------
Segment net (loss)/profit
after tax (4,914) (574) (1,121) (6,609)
----------------------- ----------------------- -------------------- --------------------
Segment assets 83,423 21,811 23,852 129,086
Items included in
the Group's measure
of segment assets
* Addition to non-current assets 1,266 5 503 1,774
Segment liabilities (19,023) (4,231) (11,818) (35,072)
4. SEGMENT INFORMATION (CONTINUED)
For the year ended 30 June 2019
Exploration Development Mining Total
Revenue - - 26,403 26,403
Cost of sales - - (25,389) (25,389)
----------------------- ----------------------- -------------------- --------------------
Gross profit - - 1,014 1,014
Other income 42 9 175 226
Other operating (losses)/gains (362) - - (362)
Administrative expenses (1,610) (1,025) (327) (2,962)
Impairment (expense)/reversal (23,268) 1,525 (132) (21,875)
----------------------- ----------------------- -------------------- --------------------
Operating (loss)/profit (25,198) 509 730 (23,959)
Interest income 14 - 177 191
Finance costs (4,913) (364) (399) (5,676)
----------------------- ----------------------- -------------------- --------------------
(Loss)/profit before
tax (30,097) 145 508 (29,444)
Income tax charge - - 67 67
----------------------- ----------------------- -------------------- --------------------
Segment net (loss)/profit
after tax (30,097) 145 575 (29,377)
----------------------- ----------------------- -------------------- --------------------
Segment assets 99,931 27,029 31,601 158,561
Items included in
the Group's measure
of segment assets
* Addition to non-current assets 5,819 5 1,981 7,805
Segment liabilities (21,190) (5,552) (12,271) (39,013)
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
2020 2019
$'000 $'000
----------- --- -----------
Total loss for reportable segments (6,609) (29,377)
Reconciling items:
Other operating income 55 1,380
Other operating gains/(losses) - 1,331
Administrative expenses (5,862) (7,593)
Impairment - (41)
Interest income 227 856
Finance costs (1) (11)
Income tax (charge)/credit - (271)
----------- -----------
Loss for the year (12,190) (33,726)
4. SEGMENT INFORMATION (CONTINUED)
Total segment assets 129,086 158,561
Reconciling items:
Unallocated property, plant and equipment 225 2,178
Other financial assets 3,233 4,403
Other receivables 65 -
Unallocated current assets 2,374 8,666
Total assets 134,983 173,808
--------- ---------
Total segment liabilities (35,072) (39,013)
Reconciling items:
Deferred consideration - (1,108)
Unallocated liabilities (968) (1,546)
Total liabilities (36,040) (41,667)
--------- ---------
The Group operates in two principal geographical areas -
Australia (country of domicile) and South Africa (country of
operations).
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.
Year ended Year ended
30 June 30 June
2020 2019
$'000 $'000
----------- --- -----------
Revenue by location of operations
South Africa 17,155 26,403
Australia - -
----------- -----------
Total revenue 17,155 26,403
----------- -----------
Non-current assets by location of operations
South Africa 129,449 159,796
Australia -
----------- -----------
Total non-current assets 129,449 159,796
----------- -----------
5. REVENUE
Revenue consists of the sale of coal by the Uitkomst Colliery.
All coal sales during the period were made to
customers in South Africa, mainly in the steel industry.
Revenue from contracts with customers
Sale of coal 16,707 , 25,207
Transport and other 448 1,196
17,155 26,403
----------- -----------
5. REVENUE (CONTINUED)
Disaggregation of revenue by location
of customers
South Africa 17,155 26,403
Other - -
17,155 26,403
----------- -----------
6. COST OF SALES
Cost of sales consists of:
Year ended Year ended
30 June 2020 30 June
2019
$'000 $'000
------------------ ------- ---------------
Employee costs (7,168) (8,304)
Depreciation and amortisation (2,494) (2,101)
Inventory 273 (262)
Mining contractor - (1,469)
Underground mining (2,544) (4,731)
Utilities (638) (681)
Human resources (765) (1,063)
Training (62) (102)
Wash plant (333) (386)
Administration (1,422) (1,744)
Environmental (9) (65)
Logistics (487) (829)
Engineering (2,087) (3,074)
Safety (168) (128)
Security (247) (243)
Royalties (118) (207)
------------------ ---------------
(18,269) (25,389)
------------------ ---------------
7. OTHER OPERATING INCOME
Other operating income includes:
Profit on sale of Opgoedenhoop surface
right - 1,174
Rental income 45 185
Scrap sales 13 23
Insurance recoveries 73 -
Other 61 224
-------- ----------
192 1,606
-------- ----------
8. OTHER OPERATING GAINS/(LOSSES)
Other operating gains/(losses) include:
Foreign exchange (loss)/gain
- unrealized (399) 244
- realized (120) 78
Fair value adjustments (127) 839
Loss on sale of Tshipise - (311)
Loss on sale of assets (123)
De-recognition of Freewheel non-controlling
interest 575
Other 10 119
---------- ----------
(184) 969
---------- ----------
9. NET IMPAIRMENT EXPENSE
The net impairment expense includes:
Year ended Year ended
30 June 2020 30 June 2019
$'000 $'000
------------------ ------- ------------------
Impairment of Freewheel at acquisition (1,804) -
asset recognised(i)
Exploration and Evaluation Assets (ii) - (23,309)
Development Assets (iii) 547 1,277
Property, Plant and Equipment (iii) - 116
(1,257) (21,916)
------------------ ------------------
(i) The impairment arose on liquidation of Freewheel Trade and Invest 37 (Pty) Ltd.
(ii) In terms of AASB 6 - Exploration and Evaluation Assets,
management identified in the current and prior year that indicators
existed that the Makhado Project asset may be impaired and
performed a formal impairment assessment at 30 June 2020 and 30
June 2019. No impairment was required for the 2020FY. In the 2019
FY an impairment of $23,268 thousand was recognised. Refer to note
14 for details of the impairment.
In addition, in the prior year, exploration costs amounting to
$41 thousand incurred in Tshikunda Mining Proprietary Limited were
impaired as a result of a sale agreement entered into for the sale
of the company.
(iii) The current year impairment reversals relate to the
Harissia Investment Holdings (Pty) Ltd properties sold ($499
thousand) and the Vele Colliery plant sale ($48 thousand). These
assets were previously impaired.
In the prior period a sale agreement was entered into for land
that was impaired as part of the historical Vele impairment. As a
result, an impairment reversal of $1,277 thousand was recognised
based on the selling price. The sale was concluded in the current
period.
During the prior period, certain previously impaired land was
disposed of resulting in an impairment reversal of $248 thousand.
In addition, certain vehicles amounting to $132 thousand were
impaired.
10. ADMINISTRATIVE EXPENSES
Employee expense (3,939) (4,904)
Depreciation (114) (217)
Professional fees (203) (250)
Legal expenses (353) (714)
Impairment of Mooiplaats receivable - (1,144)
Other overheads (2,969) (3,327)
------------ -------------
(7,578) (10,556)
------------ -------------
10. ADMINISTRATIVE EXPENSES (CONTINUED)
Included in administrative expenses is auditors' remuneration as
follows:
Remuneration for audit and review of the financial report:
Year ended Year ended
30 June 2020 30 June
2019
$'000 $'000
------------------ ------- ---------------
PWC - Australia (87) (89)
PWC - South Africa (233) (223)
------------------ ---------------
(320) (312)
------------------ ---------------
Non-audit related services performed:
PWC - Australia (6) (6)
PWC - South Africa - -
-------- --------
(6) (6)
-------- --------
11. FINANCE COSTS
Interest on borrowings (2,159) (2,981)
Unwinding of discount (431) (482)
Leases (258) (83)
Other (311) (2,141)
------------ ------------
(3,159) (5,687)
------------ ------------
12. INCOME TAX CHARGE
Income tax recognised in profit or loss from continuing
operations
Current tax
Tax expense in respect of the current - -
year
Tax expense in respect of the prior
year (1) (291)
Deferred tax (Note 26)
Current year deferred tax 610 18
Prior year deferred tax 51 71
Withholding taxes - (2)
-------- ----------
Total income tax (expense)/credit recognised 660 (204)
-------- ----------
12. INCOME TAX CHARGE (CONTINUED)
The Group's effective tax rate for the year from continuing
operations was (5.1)% (2019: 0.6%). The tax rate used for the 2020
and 2019 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 2020 30 June
2019
$'000 $'000
------------------ ------- ---------------
Loss from continuing operations before
income tax (12,850) (33,522)
Income tax benefit calculated at 30%
(2019: 30%) 3,855 10,057
Tax effects of:
Expenses that are not deductible for
tax purposes (2,558) (9,666)
Differences in tax rates (46) (76)
Income not taxable 315 922
Other temporary differences not recognized (1,385) (1,313)
Other 429 92
Prior year adjustments 50 (220)
Income tax (expense)/credit 660 (204)
------------------ ---------------
13. LOSS PER SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY
13.1. Basic loss per share
Cents per Cents per
share share
From continuing operations (8.55) (23.72)
(8.55) (23.72)
-------------- --------------
Loss for the year attributable to owners
of the Company (12,048) (33,421)
Loss used in the calculation of basic
loss per share from continuing operations (12,048) (33,421)
------------- -------------
Weighted number of ordinary shares
'000 shares '000 shares
---------------- ----------------
Weighted average number of ordinary
shares for the purposes of basic loss
per share 140,959 140,880
---------------- ----------------
13.2. 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 2020, 2,408,752 warrants (2019 - 2,408,752
warrants), were excluded from the computation of the loss per share
as their impact is anti-dilutive.
13. LOSS PER SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY (CONTINUED)
13.3. Headline loss per share (in line with JSE
requirements)
The calculation of headline loss per share at 30 June 2020 was
based on the headline loss attributable to ordinary equity holders
of the Company of $11,044 thousand (2019: $12,429 thousand) and a
weighted average number of ordinary shares outstanding during the
period ended 30 June 2020 of 140,959,000 (2019: 140,879,585).
The adjustments made to arrive at the headline loss are as
follows:
Year ended Year ended
30 June 2020 30 June
2019
$'000 $'000
------------------ ------- ---------------
Loss for the period attributable to
ordinary shareholders (12,048) (33,421)
Adjust for:
Impairment expense 1,804 23,404
Impairment reversal (547) (1,525)
Loss/(profit) on disposal of property,
plant and equipment 123 (887)
De-recognition of Freewheel non-controlling (575) -
interest
Freewheel foreign currency translation 199 -
reserve recognised
------------------ ---------------
Headline earnings (11,044) (12,429)
------------------ ---------------
Headline loss per share (cents per share) (7.83) (8.82)
14. EXPLORATION AND EVALUATION ASSETS
A reconciliation of exploration and evaluation assets is
presented below:
Exploration and evaluation assets
Balance at beginning of year 94,871 116,889
Additions 1,266 5,819
Movement in Rehabilitation asset (28) 19
Disposals - (570)
Impairment (1,804) (23,309)
Foreign exchange differences (15,591) (3,977)
------------- -------------
Balance at end of year 78,714 94,871
------------- -------------
As of 30 June 2020, the net book value of the following project
assets were classified as Exploration and Evaluation assets:
-- Greater Soutpansberg Project: $49,573 thousand
-- Makhado Project: $28,109 thousand
-- Uitkomst North adit: $281 thousand
-- Vele Colliery: $751 thousand
14. EXPLORATION AND EVALUATION ASSETS (CONTINUED)
Impairment testing
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 indicators of impairment for its Exploration and Evaluation
assets exist as at 30 June 2020 and performed a formal assessment
and no impairment was required at 30 June 2020. In the prior year,
an impairment charge of $23,268 thousand was recognised, relating
to the Makhado project.
The discount between the Group's market capitalisation and net
asset value at 30 June 2020, together with the deterioration in
thermal and premium coal prices during the second half of the year
and subsequent to year-end respectively, prompted management to
perform an impairment assessment.
Details of the key assumptions used in the calculations are set
out in note 3.1.
Impairment charge (2019)
2019 USD '000
Carrying value of the Makhado Project
before impairment charge 57,456
----------------
Estimated recoverable value 34,188
----------------
Impairment expense 23,268 (i)
----------------------------------------- ----------------
(i) The impairment expense is all allocated to the historical
carrying value of A$33 million, which relates to amounts paid by MC
Mining in 2007 for the acquisition of new order prospecting rights
over certain of the Makhado project properties. The recoverable
value all relates to the carrying value of the exploration costs in
the Baobab corporate entity on which no impairment in
necessary.
15. DEVELOPMENT
A reconciliation of development, exploration and evaluation
expenditure is presented below:
Development assets
Year ended Year ended
30 June 2020 30 June
2019
$'000 $'000
------------------ ------- ---------------
Balance at beginning of year 26,919 28,033
Additions 5 5
Disposals (502) (1,880)
Movement in Rehabilitation asset (530) 802
Reversal of impairment* 48 1,277
Transfer to assets classified as held
for sale (274) (607)
Foreign exchange differences (4,946) (711)
------------------ ---------------
Balance at end of year 20,720 26,919
------------------ ---------------
* The reversal of impairment during the year related to the sale
of plant and in the prior year the sale of land
that had previously been impaired.
15. DEVELOPMENT (CONTINUED)
Impairment testing
As of 30 June 2020 the net book value of the following project
assets were included in Development Assets:
-- Vele Colliery: $20,720 thousand
The discount between the Group's market capitalisation and net
asset value at 30 June 2020, together with the deterioration in
thermal and premium coal prices during the second half of the year
and subsequent to year-end respectively, prompted management to
perform an impairment assessment.
Details of the key assumptions used in the impairment assessment
are set out in note 3.1. No additional impairment charge or
reversal was required for Vele Colliery at 30 June 2020 following
the impairment assessment.
16. PROPERTY, PLANT AND EQUIPMENT
Mining Mining Land Leasehold Motor Other Total
property, rights and buildings improvements vehicle
plant and
equipment
$'000 $'000 $'000 $'000 $'000 $'000 $'000
----------- -------- --------------- -------------- --------- ------ --------
30 June 2020
Cost
At beginning
of year 8,414 18,779 8,846 116 970 1,625 38,750
Additions 262 - 253 - 51 3 569
Disposals - - (264) - - (3) (267)
Rehabilitation
asset (258) - - - - - (258)
Impairment reversal - - 82 - - - 82
Transfer to right-of-use
assets (1,011) - - - (31) - (1,042)
Transfer from
right-of-use
assets 37 - - - 24 - 61
Transfer to assets - - - - - - -
classified as
held for sale
Exchange differences (1,394) (3,522) (1,406) (16) (184) (302) (6,824)
----------- -------- --------------- -------------- --------- ------ --------
At end of year 6,050 15,257 7,511 100 830 1,323 31,071
----------- -------- --------------- -------------- --------- ------ --------
Accumulated depreciation
At beginning
of year 882 1,873 1,036 116 616 1,514 6,037
Depreciation
charge 648 859 219 - 87 58 1,871
Accumulated depreciation
on disposals - - - - (3) (3)
Transfer to assets - - - - - - -
classified as
held for sale
Exchange differences (233) (441) (128) (16) (124) (288) (1,230)
----------- -------- --------------- -------------- --------- ------ --------
At end of year 1,297 2,291 1,127 100 579 1,281 6,675
----------- -------- --------------- -------------- --------- ------ --------
Net carrying
value at end
of fiscal year
2020 4,753 12,966 6,384 - 251 42 24,396
----------- -------- --------------- -------------- --------- ------ --------
16. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Mining Mining Land Leasehold Motor Other Total
property, rights and buildings improvements vehicle
plant and
equipment
$'000 $'000 $'000 $'000 $'000 $'000 $'000
----------- -------- --------------- -------------- --------- ------ --------
30 June 2019
Cost
At beginning
of year 2,348 19,268 9,658 120 947 1,927 34,268
Additions 1,687 - 398 - 38 73 2,196
Disposals - - (570) - (186) (325) (1,081)
Rehabilitation
asset (82) - - - - - (82)
Impairment reversal - - 248 - - - 248
Khethikile acquisition 4,479 - - - 197 - 4,676
Transfer to assets
classified as
held for sale - - (644) - - - (644)
Exchange differences (18) (489) (244) (4) (26) (50) (831)
----------- -------- --------------- -------------- --------- ------ --------
At end of year 8,414 18,779 8,846 116 970 1,625 38,750
----------- -------- --------------- -------------- --------- ------ --------
Accumulated depreciation
At beginning
of year 163 910 1,311 120 555 1,757 4,816
Depreciation
charge 720 979 270 - 227 122 2,318
Accumulated depreciation
on disposals - (199) - (153) (319) (671)
Transfer to assets
classified as
held for sale - - (312) - - - (312)
Exchange differences (1) (16) (34) (4) (13) (46) (114)
----------- -------- --------------- -------------- --------- ------ --------
At end of year 882 1,873 1,036 116 616 1,514 6,037
----------- -------- --------------- -------------- --------- ------ --------
Net carrying
value at end
of fiscal year
2019 7,532 16,906 7,810 - 354 111 32,713
----------- -------- --------------- -------------- --------- ------ --------
As of 30 June 2020 the net book value of the following operating
assets were included in Property, Plant and Equipment:
-- Uitkomst Colliery: $19,144 thousand
The discount between the Group's market capitalisation and net
asset value at 30 June 2020, together with the deterioration in
thermal coal prices during the second half of the year and
subsequent to year-end respectively, prompted management to perform
an impairment assessment.
Details of the key assumptions used in the impairment assessment
are set out in note 3.1. No impairment charge was required for the
Uitkomst Colliery at 30 June 2020.
17. RIGHT-OF-USE ASSETS
The Group leases various assets including land, buildings, plant
and machinery and vehicles. The movement in the right-of-use assets
is as follows:
30 June 30 Jun
2020 2019
$'000 $'000
--------- -------
Balance at beginning of the period - -
Impact of adopting AASB16 - 1 July 2019 1,893 -
Transfer from Property plant and equipment 1,042 -
Additions 162 -
Depreciation (737) -
Transfer to PPE (60) -
Foreign exchange differences (481) -
--------- -------
Balance at end of period 1,819 -
--------- -------
18. OTHER RECEIVABLES
Carrying amount of: Year ended Year ended
30 June 2020 30 June
2019
$'000 $'000
------------------- -------- ---------------
Other loans - 219
----------------------------- ---------------
Balance at beginning of year 219 226
Increase in receivable 17 -
Written-off (179) -
Foreign exchange differences (57) (7)
Balance at end of year - 219
---------- --------
19. OTHER FINANCIAL ASSETS
Carrying value of financial assets at fair value through profit
or loss
Year ended Year ended
30 June 2020 30 June
2019
$'000 $'000
------------------ ------- ---------------
Listed securities
* Equity securities - 23
Unlisted securities
- Equity securities in investment funds* 3,407 4,592
3,407 4,615
------------------ ---------------
Deposits** 336 414
---------- ----------
3,743 5,029
---------- ----------
Fair value movements in other financial assets are recognised in
other (losses)/gains in the consolidated statement of profit or
loss. Refer note 8.
* 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 are classified as financial assets at amortised
cost.
19. OTHER FINANCIAL ASSETS (CONTINUED)
The equity securities in investment funds are for the
rehabilitation provisions and the Eskom guarantees.
Balance at beginning of year 5,029 4,328
Revaluations (69) 157
Interest received 90 81
Disposal of investment (855) (121)
Acquisition of investments 452 689
Foreign exchange differences (904) (105)
---------- ----------
Balance at end of year 3,743 5,029
---------- ----------
20. INVENTORIES
Finished goods 591 360
Consumable stores 474 470
Other 115 235
Provision for obsolete inventory (71) (23)
---------- ----------
1,109 1,042
---------- ----------
The cost of inventories recognised as a credit during the year
in respect of continuing operations was $273 thousand (2019 expense
: $262 thousand).
21. TRADE AND OTHER RECEIVABLES
Trade receivables 923 2,444
Other receivables 388 552
1,311 2,996
---------- ----------
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.
Trade receivables inherently expose the Group to credit risk,
being the risk that the Group will incur financial loss if
customers fail to make payments as they fall due. In order to
mitigate the risk of financial loss from defaults, the Group only
deals with reputable customers with consistent payment histories.
Each customer is analysed individually for creditworthiness before
terms and conditions are offered. Customer credit limits are in
place and are reviewed on a regular basis. The exposure to credit
risk and the creditworthiness of customers is continuously
monitored.
The average credit period on trade receivables is 30 days (2019:
30 days).
A loss allowance is considered for all trade receivables, in
accordance with AASB 9 Financial Instruments, and is monitored at
the end of each reporting period. The Group measures the possible
loss allowance for trade receivables by applying the simplified
approach which is prescribed by AASB 9. In accordance with this
approach, the loss allowance on trade receivables is determined as
the lifetime expected credit losses (ECLs) on trade receivables. To
measure the ECLs, trade receivables are grouped based on shared
credit risk characteristics and the days past due to identify
non-performing receivables. In addition, forward-looking macro
economic conditions and factors are considered when determining the
ECLs for trade receivables, namely trading conditions in the
regional coal user markets, as well as economic growth and
inflationary outlook in the short-term. Trade receivables are
written off when there is no reasonable expectation of recovery.
Indicators that there is no reasonable expectation of recovery
include, among others, the failure of a debtor to engage in a
repayment plan with the Group, and a failure to make contractual
payments for a period of greater than 90 days past due. Based on
the year-end ECL assessment performed, no material loss allowance
provision was required at the end of the financial year.
21. TRADE AND OTHER RECEIVABLES (CONTINUED)
No trade receivables were past due at the end of the current or
previous financial year.
All trade receivables at the end of the current and previous
financial year are denominated in South African Rand.
22. CASH AND CASH EQUIVALENTS
Year ended Year ended
30 June 2020 30 June
2019
$'000 $'000
------------------ ------- ---------------
Bank balances 2,678 8,811
Bank overdraft (2,214) -
464 8,811
------------------ ---------------
Restricted cash 57 68
57 68
------- -------
The bank overdraft relates to an ABSA facility that was secured
during the 2019 financial year, from ABSA Bank for $1,154 thousand
(ZAR 20,000 thousand). The facility is for short-term working
capital requirements and potential expansion opportunities. It has
a floating coupon at the South African Prime rate (currently 7.25%
per annum) plus 1.0%, with the operating mine, Uitkomst Colliery,
debtors ceded as security. The facility is subject to annual
review. The short-term working facility was increased by an
additional $1,154 thousand in May 2020 to alleviate the financial
challenges during the COVID-19 period. This additional facility is
temporary and is payable over twelve months commencing 1 July 2020
to 1 June 2021. The same interest rate applies.
The restricted cash balance of $0.1 million (2019 - $0.1
million) is held on behalf of subsidiary companies mainly in
respect of the rehabilitation guarantees issued to the DMR in
respect of environmental rehabilitation costs of $5.4 million
(2019: $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.
23. DEFERRED CONSIDERATION
Year ended Year ended
30 June 2020 30 June
2019
$'000 $'000
------------------ ------- ----------------------
Deferred consideration 2,321 4,071
------------------ ----------------------
Balance at beginning of year 4,071 2,017
Deferred consideration on Khethekile
acquisition - 629
Deferred consideration on the acquisition
of Lukin and Salaita - 2,527
Repaid during the year - Khethekile (271) (239)
Repaid during the year - Pan African (1,004) -
Interest accrued 175 162
Deferred finance charges - (33)
Fair value adjustment - (839)
Foreign Exchange (650) (153)
----------
Balance at end of year 2,321 4,071
------------ ----------
23. DEFERRED CONSIDERATION (CONTINUED)
Current 101 1,406
Non-Current 2,220 2,665
----------
2,321 4,071
---------- ----------
Included in the prior year balance is the deferred consideration
for the acquisition of PAR Coal from Pan African Resources Plc
("Pan African") on 30 June 2017. The final amount was settled on 1
July 2019.
Khethekile acquisition deferred consideration
During the prior period, as part of the acquisition of
Khethekile (refer note 34), the transaction included a deferred
consideration of $629 thousand (ZAR8,281 thousand) of the
acquisition price. This amount is payable in monthly instalments of
$20 thousand (ZAR350 thousand) over 27 months. There is no interest
payable on the outstanding balance. This obligation has been
accounted for using an effective interest rate of 11%.
Lukin and Salaita deferred consideration
In the prior year, the Company's subsidiary, Baobab Mining and
Exploration (Pty) Ltd ("Baobab"), completed the acquisition of the
properties Lukin and Salaita, the key surface rights required for
its Makhado hard coking and thermal coal project for an acquisition
price of $4,038 thousand (ZAR70,000 thousand). $2,019 thousand
(ZAR35,000 thousand) of the acquisition price has been deferred to
the earlier of:
-- the third anniversary of the transfer of the properties; or
-- the first anniversary of production of coal underlying the properties; or
-- completion of a potential land claims and expropriation
process. In terms of current legislation, this will result in
Baobab receiving market related compensation and will be followed
by negotiations with the Minister of Land Affairs and the
successful claimants, who are shareholders in Baobab, for long-term
access to the Properties.
The deferred consideration accrues interest at the South African
prime interest rate (currently 7%) less 3.0%.
24. BORROWINGS
Year ended Year ended
30 June 2020 30 June
2019
$'000 $'000
------------------ ------- ---------------
Industrial Development Corporation of
South Africa Limited 12,587 12,782
Pan African Resources Management Services
(Pty) Ltd 1,008 1,363
Environmental and Process Technologies
(Pty) Ltd - 154
------------------ ---------------
13,595 14,299
------------------ ---------------
Balance at beginning of year 14,299 10,191
PARMS loan acquired - 1,550
Enprotec loan - 579
Repayment - PARMS (220) (231)
Repayment Enprotec (140) (461)
Interest accrued 2,566 2,981
Deferred finance charges - (1)
Foreign Exchange (2,910) (309)
-----------
Balance at end of year 13,595 14,299
------------ -----------
24. BORROWINGS (CONTINUED)
Industrial Development Corporation of South Africa Limited
The Company entered into a loan agreement (the "Loan Agreement")
with the IDC and Baobab, a subsidiary of MC Mining and owner of the
mining right for the Makhado Project ("the Project"). In terms of
the Loan Agreement, the IDC will advance loan funding up to $13,846
thousand (ZAR240,000 thousand) to Baobab for use in the Project to
advance the operations and implementation of the Project. Under the
Loan Agreement, the loan funding is to be provided in two equal
tranches of $6,923 thousand (ZAR120,000 thousand) upon written
request from Baobab.
In May 2017, the first tranche was drawn down by the Company.
This 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.
MCM is also required to issue warrants under the Loan Agreement,
in respect of MCM 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 MCM as at 5 December 2016. This equated to
2,408,752 shares. The price at which IDC shall be entitled to
purchase the MCM shares is equal to a thirty percent premium to the
30 day volume weighted average price of the MCM shares as traded on
the JSE as at 5 December 2016 (ZAR12 per share post the share
consolidation). 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. New
ordinary shares equivalent to 5% in Baobab were issued to the IDC
following the first advance.
If the second tranche of $8,521 thousand (ZAR120,000 thousand)
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 $4.3 million (ZAR60,000
thousand); 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 $0.07 (ZAR1); or
-- A penalty fee of $852 thousand (ZAR12,000 thousand) shall be paid to the IDC by Baobab.
In July 2019, the Company secured a term loan facility ("Term
Loan") from the IDC for the construction of Phase 1 of the Makhado
Project subject to various conditions precedent including:
-- MC Mining issuing additional equity to shareholders for a
minimum of R240,000 thousand ($13,846 thousand);
-- Settlement of the existing 2017 Loan Agreement with the IDC; and
-- Cancellation of the undrawn second Tranche of the existing Loan Agreement
The Company was in advanced discussions to secure the necessary
funding when the COVID-19 pandemic arose. This resulted in a
conditional restructuring of the existing Loan Agreement subsequent
to the year-end. The IDC agreed that Baobab could draw down $2,308
thousand (ZAR40,000 thousand) of the second Tranche and that the
Phase 1 Term Loan will still form part of the composite Makhado
Phase 1 funding package provided that the $2,308 thousand
(ZAR40,000 thousand) is repaid prior to 30 November 2020. In
addition, the repayment of the First Tranche (which should have
taken place in May 2020), plus accrued interest will be delayed
until November 2020.
This agreement was conditional upon the Company raising $865
thousand (ZAR15,000 thousand) in the form of new
equity. This condition was satisfied in August 2020 (refer for details)
The second tranche remains undrawn at the date of this
report.
Pan African Resources Management Services (Pty) Ltd
As part of the acquisition of the underground mining equipment
and liabilities of Khethekile (refer note 34), the Group assumed a
loan of $1,458 thousand (ZAR20,539 thousand) from Pan African
Resources Management Services (Pty) Ltd ("PARMS"). The loan bears
interest at the South African Prime rate and is compounded monthly.
It is repayable in 48 monthly instalments of approximately $31
thousand (ZAR543 thousand) per month.
24. BORROWINGS (CONTINUED)
Environmental and Process Technologies (Pty) Ltd
("Enprotec")
During the prior period, Uitkomst Colliery entered into an
agreement with Enprotec for the supply and installation of an
upgrade to modify its plant for the purchase price of $503 thousand
(ZAR8,717 thousand). This was to facilitate the production of an
additional high ash, coarse discard product. The purchase price was
payable over 12 instalments of $42 thousand (ZAR726 thousand). This
obligation was accounted for using an effective interest rate of
11% and was fully settled in the current period.
25. PROVISIONS
Year ended Year ended
30 June 2020 30 June
2019
$'000 $'000
------------------ ------- ----------------------
Employee provisions 197 350
Biodiversity offset provision 1,834 2,219
Rehabilitation provisions 3,162 4,531
----------------------
5,193 7,100
------------------ ----------------------
Employee provisions
The provision for employees represents unused annual leave
entitlements.
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 $3,905 thousand (
ZAR55,000 thousand ) over a 25 year period. The BOA commits the
Company to pay $3,173 thousand (ZAR55,000 thousand ) to the South
African National Parks Board over a period of 25 years. The
following payment arrangement has been agreed:
Phase 1 - ZAR2,000 thousand paid in 2015
Phase 2 - ZAR15,000 thousand from year 2016 to 2021 (*ZAR2,500
thousand annually)
Phase 3 - ZAR13,000 thousand from year 2022 to 2028 (*ZAR1,8000
thousand annually)
Phase 4 - ZAR13,000 thousand from 2029 to 2033 (*ZAR2,600
thousand annually)
Phase 5 - ZAR12,000 thousand from 2034 to 2038 (*ZAR2,400
thousand annually)
*For the purpose of the present value calculation, these
payments per phase have been assumed as equal annual payments and
discounted at the South Africa inflation rate of 6%.
Rehabilitation provision
Balance at beginning of year 4,531 3,503
Unwinding of discount 312 355
Change in assumptions on rehabilitation
provisions (892) 754
Foreign Exchange (789) (81)
----------
Balance at end of year 3,162 4,531
---------- ----------
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 shorter of the remaining period of the mining
licence and the aggregate of the construction period of the mine
and the total estimated LOM.
25. PROVISIONS (CONTINUED)
The current estimate available is inflated by the long-term
South African inflation rate of 4.8% annually and the discount rate
applied to establish the current obligation is a South Africa
government bond rate at 30 June 2020 of 9.17% (2019: 8.09%)
annually.
Due to the changes in assumptions the Vele Colliery, the Makhado
Project and Uitkomst Colliery had 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.
Provisions have been analysed between current and non-current as
follows:
Year ended Year ended
30 June 2020 30 June
2019
$'000 $'000
------------------ ------- ---------------
Current 197 536
Non-current 4,996 6,564
---------------
5,193 7,100
------------------ ---------------
26. DEFERRED TAX
Deferred tax liability 4,078 5,750
---------- ----------
The gross movement on the deferred tax account is as
follows:
Balance at beginning of year 5,750 5,991
Provisions 66 6
Capital allowances (475) (25)
Prepayments - (11)
Prior year adjustment (34) (71)
Foreign Exchange (1,229) (140)
----------
Balance at end of year 4,078 5,750
------------ ----------
The deferred tax balances at year-end are represented by:
Deferred tax assets
Provisions 292 361
Prepayments - 11
Balance at end of year 292 372
Deferred tax liabilities
Capital allowances on property plant
and equipment (4,370) (6,122)
------------ ------------
Balance at end of year (4,370) (6,122)
------------ ------------
Net deferred tax liabilities (4,078) (5,750)
------------ ------------
Deferred income tax assets are recognised for tax losses
carried-forward to the extent that the realisation of the related
tax benefit through future taxable profits is probable. The
deferred tax assets recognised relate to Uitkomst Colliery. The
Group did not recognise deferred income tax assets of $45,571
thousand (2019: $53,630 thousand) in respect of losses amounting to
$13,152 thousand (2019: $16,006 thousand) and unredeemed capital
expenditure of $45,571 thousand (2019: $37,624 thousand) that can
be carried forward against future taxable income.
26. LEASES
During the prior period, as part of the acquisition of
Khethekile (refer note 34), Uitkomst Colliery assumed certain
vehicle leases.
In addition, Uitkomst Colliery also entered into an asset
financing arrangement with ABSA Bank Limited for the acquisition of
new underground mining equipment. The rolling five-year facility is
subject to a floating coupon at the South African prime rate
(currently 10% per annum) plus 0.5% and is secured by the mining
equipment purchased.
In the previous year, the group only recognised lease
liabilities in relation to leases that were classified as 'finance
leases' under AASB 117 Leases. The assets were presented in
property, plant and equipment. In the current period previously,
classified "operating leases" have been classified in terms of AASB
16 as disclosed in note 1.
The movement in the lease liabilities is as follows:
30 June 30 Jun
2020 2019
$'000 $'000
--------- -------
Balance at beginning of the period 1,001 -
Acquired on acquisition of Khethekile (note
20) - 92
Impact of adopting AASB16 - 1 July 2019 1,893 -
Additions 162 960
Interest 258 328
Repayments (994) (378)
Foreign exchange differences (485) (1)
--------- -------
Balance at end of period 1,835 1,001
--------- -------
The maturity of the Group's undiscounted lease payments is as
follows:
30 June 30 Jun
2020 2019
$'000 $'000
--------- -------
Not later than one year 928 312
Later than one year and not later than five
years 1,122 941
Later than five years 108 -
--------- -------
2,158 1,253
Less future finance charges (323) (252)
--------- -------
Present value of minimum lease payments 1,835 1,001
--------- -------
Reconciliation between lease commitments as at 30 June 2019 and
IFRS 16 lease liability as at 1 July 2019:
1 July 2019
$'000
-------------
Lease commitments as at 30 June 2019 2,618
Short term leases (145)
Low value leases (4)
Discounting of lease liabilities (572)
Foreign exchange (4)
-------------
Impact of adopting IFRS 16 - 1 July 2019 1,893
-------------
27. OTHER LIABILITIES
This liability related to a retention agreement entered into
with employees to provide a retention payment to encourage
employees to remain with the Company, perform in a highly effective
manner and proactively execute the commercial strategy that the
Company employs.
28. TRADE AND OTHER PAYABLES
Year ended Year ended
30 June 2020 30 June
2019
$'000 $'000
------------------ ------- ---------------
Trade payables 1,404 1,777
Accrued expenses 3,999 6,199
Other 1,060 874
------------------ ---------------
6,463 8,850
------------------ ---------------
The average credit period is 30 days. Interest at the South
African prime overdraft rate is charged on overdue creditors.
29. ISSUED CAPITAL
During the reporting period, the only shares issued were 208,537
shares to David Brown who resigned as Chief Executive Officer on 31
January 2020. These shares were issued in lieu of his six-month
notice period, being
one-third of the 2017 performance rights granted to him .
Fully paid ordinary shares
141,088,122 (2019: 140,879,585) fully
paid ordinary shares 1,041,080 1,040,950
Movements in fully paid ordinary shares Number $'000
---------------- --------------
At 30 June 2019 140,879,585 1,040,950
Shares issued 208,537 131
Share issue cost - (1)
---------------- --------------
At 30 June 2020 141,088,122 1,041,080
---------------- --------------
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 32.
30. ACCUMULATED DEFICIT
Year ended Year ended
30 June 2020 30 June
2019
$'000 $'000
------------------ ------- ---------------
Accumulated deficit at the beginning
of the financial year (884,297) (851,535)
Net loss attributed to Owners of the
Company (12,048) (33,421)
Transferred from share based payment
reserve 754 670
Dividend expense - (11)
------------------ ---------------
Accumulated deficit at the end of the
financial year (895,591) (884,297)
------------------ ---------------
31. RESERVES
Capital profits reserve 91 91
Share based payment reserve 1,460 2,234
Warrants reserve 1,134 1,134
Foreign currency translation reserve (48,603) (28,060)
------------- -------------
(45,918) (24,601)
------------- -------------
Movements for the year can be reconciled as follows:
Share-based payments reserve
Opening balance 2,234 2,052
Share options issued during the year 769 852
Share options cancelled/forfeited/expired (1,412) (670)
Shares issued (131) -
------------ ----------
Closing balance 1,460 2,234
------------ ----------
Foreign currency translation reserve
Opening balance (28,060) (22,352)
Exchange differences on translating
foreign operations (20,742) (5,708)
Liquidation of Freewheel 199 -
------------- -------------
Closing balance (48,603) (28,060)
------------- -------------
Warrants reserve
Opening balance 1,134 1,134
Warrants issued - -
----------
Closing balance 1,134 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 payment reserve represent the value of unexercised
share options and performance rights to directors and employees. It
also includes IFRS2 Black Economic Empowerment charges.
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 24.
32. 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 have not been granted to employees.
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 2020
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.
There were no share-based payments existing at 30 June 2020
Fair value of share options granted during the year
There were no share options granted during the period.
Prior 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.
The total share based payment expense recognised in the current
financial year is disclosed in the statement of changes in
equity.
Movement in share options (post share consolidation)
Year ended Year ended
30 June 2020 30 June
2019
--------------- ----------------
Options outstanding at beginning of
year - 1,250,000
Options expired - (1,250,000)
Options outstanding at end of year - -
--------------- ----------------
Weighted average exercise price (A$) 1.40
Options exercisable - -
32. SHARE-BASED PAYMENTS (CONTINUED)
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 were NIL.
The options in the prior year had a weighted average exercise price
of A$1.40.
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 MC Mining at the expiry date using a
Monte-Carlo model.
On 22 November 2019, 3,722,907 performance rights were issued to
senior management. The number of rights are split between three
tranches. The market based vesting conditions are to be measured
over the one-year period from 22 November 2019 to 22 November 2020
for Tranche 1, the two-year period from 22 November 2019 to 22
November 2021 for Tranche 2 and the three-year period from 22
November 2019 to 22 November 2022 for Tranche 3.
Inputs into the model were as follows:
Tranche 1 Tranche 2 Tranche 3
Number of rights 1,246,487 1,246,487 1,246,487
22 November 2019 closing ZAR4.80 ZAR4.80 ZAR4.80
price
Exercise price Nil Nil Nil
Expiry date 22 November 22 November 22 November
2022 2022 2022
Performance period
(years) 1 2 3
Risk free interest
rate 7.42% 7.42% 7.42%
On 23 November 2018, 3,465,558 Performance Rights were issued to
senior management.
Inputs into the model were as follows:
Performance rights
Spot 5 day VWAP ZAR7.5
Exercise price Nil
Expiry date 22 November 2021
Performance period 3.00
Risk free interest rate 7.28%
On 24 November 2017, 1,722,383 Performance Rights were issued to
senior management.
Inputs into the model were as follows:
Performance rights
Spot 5 day VWAP ZAR8.8
Exercise price Nil
Expiry date 23 November 2020
Performance period 3.00
Risk free interest rate 8.09%
32. SHARE-BASED PAYMENTS (CONTINUED)
Performance Rights issued on 30 November 2016 expired during the
current year on 29 November 2019.
The total share based payment expense recognised in relation to
the Performance Rights in the current financial year is $416
thousand (FY2019: $852 thousand).
Movement in Performance Rights
Year ended Year ended
30 June 2019 30 June
2019
---------------- ----------------------
Performance rights outstanding at beginning
of year 6,270,814 3,832,467
Performance rights expired (1,082,875) (1,027,209)
Performance rights forfeited (3,958,837) -
Performance rights granted 3,722,907 3,465,556
Performance rights shares issued (208,537)
---------------- ----------------------
Performance rights outstanding at end
of year 4,743,472 6,270,814
---------------- ----------------------
33. NON-CONTROLLING INTEREST
Non-controlling interests comprise the following:
Freewheel Trade and Invest 37 Proprietary
Limited - 575
Baobab non-controlling interest (628) (486)
----------
(628) 89
---------- ----------
34. BUSINESS COMBINATIONS
The underground operations at Uitkomst Colliery were
historically undertaken by an independent mining contractor,
Khethekile Mining (Pty) Ltd ("Khethekile"). During the prior
period, Uitkomst acquired all of Khethekile's mining equipment,
loans, trade payables, accrued expenses and took transfer of the
Khethekile employees working at Uitkomst Colliery.
The acquisition of the Khethekile business was agreed to be
settled as follows:
-- A cash consideration of $1,238 thousand (ZAR16,400 thousand)
of which $521 thousand (ZAR6,900 thousand) was payable on closing
and the balance, $717 thousand (ZAR9,500 million) payable in 27
monthly instalments
Fair value of assets and liabilities acquired:
1 August
2018
$'000
Non-current assets
Plant and equipment 5,008
Non-current liabilities
Loans 1,263
Finance lease liabilities 11
Current liabilities
Trade and other liabilities 1,479
Loans 1,024
Finance lease liabilities 81
-------------
1,150
-------------
34. BUSINESS COMBINATIONS (CONTINUED)
Purchase consideration
1 August
2018
$'000
----------
Cash consideration paid 521
Cash consideration deferred 629
----------
1,150
----------
Goodwill
No goodwill arose on the acquisition of the assets, as the fair
value of the assets were equivalent to the acquisition value of the
assets.
35. FINANCIAL INSTRUMENTS
36.1. 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 deferred
consideration and debt (as detailed in notes 23 and 24) (net of
cash) and equity of the Group (comprising issued capital, reserves,
retained earnings and non-controlling interests as detailed in
notes 30 to 32).
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 maintained its
target-gearing ratio, determined as the proportion of net debt to
equity, at 15%. This was to enable the Company to raise the loan
from the IDC.
Year ended Year ended
30 June 2020 30 June
2019
$'000 $'000
------------------ ------- ---------------
Net debt (1) 15,452 9,559
Equity (2) 98,943 132,141
---------------
Debt to equity ratio 16% 7%
1. Debt is defined as long-term and short-term borrowings as
described in notes 23 and 24 less unrestricted cash and cash
equivalents.
2. Equity includes all capital and reserves of the Group that are managed as capital
36. FINANCIAL INSTRUMENTS (CONTINUED)
36.2. Categories of financial instruments
The accounting policies for financial instruments have been
applied to the line items below:
Financial assets
Other receivables - 219
Trade and other receivables 1,311 2,996
Cash and cash equivalents 2,678 8,811
Restricted cash 57 68
Other Financial Assets 3,743 5,029
----------- -----------
Total financial assets 7,789 17,123
----------- -----------
Financial liabilities
Deferred consideration 2,321 4,071
Borrowings 13,595 14,298
Bank overdraft 2,214 -
Trade and other payables 6,463 8,850
----------- -----------
Total financial liabilities 24,593 27,219
----------- -----------
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. The
balances classed here are financial assets comprising deposits and
listed securities (note 19).
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. The financial assets classed as Level 2 comprise of
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 19).
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 June Level 1 Level Level 3 Total
2020 2
------------------ ----------- ------ -------- ------
Financial assets
at FVTPL - 3,407 - 3,407
------------------ ----------- ------ -------- ------
As at 30 June Level 1 Level Level 3 Total
2019 2
------------------ ----------- ------ -------- ------
Financial assets
at FVTPL 23 4,581 - 4,604
36. FINANCIAL INSTRUMENTS (CONTINUED)
36.3. 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.
36.4. 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.
At financial period end, the financial instruments exposed to
foreign currency risk movements are as follows:
Held in Held in Held in Total
Balances at 30 GBP AUD USD $'000
June 2020 $'000 $'000 $'000
----------------------- -------- -------- -------- -------
Financial assets
Cash and cash
equivalents (1) - 7 35 42
-------- -------- -------- -------
Total financial
assets - 7 35 42
-------- -------- -------- -------
(1) Cash includes
restricted cash
Financial liabilities
Trade and other
payables 7 50 - 57
Total financial
liabilities 7 50 - 57
-------- -------- -------- -------
Held in Held in Held in Total
Balances at 30 GBP AUD USD $'000
June 2019 $'000 $'000 $'000
----------------------- -------- -------- -------- -------
Financial assets
Cash and cash
equivalents (1) - 77 748 825
-------- -------- -------- -------
Total financial
assets - 77 748 825
-------- -------- -------- -------
(1) Cash includes
restricted cash
Financial liabilities
Trade and other
payables 12 102 25 139
Total financial
liabilities 12 102 25 139
-------- -------- -------- -------
36. FINANCIAL INSTRUMENTS (CONTINUED)
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.
Impact on profit / (loss)
Year ended Year ended
30 June 2020 30 June
2019
$'000 $'000
------------------ ------- ---------------
Judgements on reasonable possible movements
USD/ZAR increase by 10% 2 (69)
USD/ZAR decrease by 10% (2) 69
36.5. Interest rate risk management
The Group's interest rate risk arises mainly from short-term
borrowings, long-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.
Impact on profit / (loss)
Year ended Year ended
30 June 2020 30 June
2019
$'000 $'000
------------------ ------- ---------------
Judgements on reasonable possible movements
Increase of 0.2% in interest rate 6 8
Decrease of 0.2% in interest rate (6) (8)
Increase of 1.0% in interest rate 28 38
Decrease of 1.0% in interest rate (28) (38)
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.
36.6. 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 credit losses not being 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.
36.7 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.
36. FINANCIAL INSTRUMENTS (CONTINUED)
The concentration of cash balances on hand in geographical areas
was as follows:
United Kingdom Australia South Total
Balances at 30 June 2020 $'000 $'000 Africa $'000
$'000
---------------------------- ---------------- ---------- -------- -------
Cash and cash equivalents
and restricted cash - 7 2,728 2,735
---------------- ---------- -------- -------
- 7 2,728 2,735
--------------------------------------------- ---------- -------- -------
United Kingdom Australia South Total
Balances at 30 June 2019 $'000 $'000 Africa $'000
$'000
---------------------------- --------------- ---------- -------- -------
Cash and cash equivalents
and restricted cash 748 77 8,054 8,879
--------------- ---------- -------- -------
748 77 8,054 8,879
--------------- ---------- -------- -------
The contractual maturities of the Group's financial assets and
liabilities at the reporting date were as follows:
Less than Between Greater than Total
6 months 6 - 12 months 12 months
Balances at 30 June $'000 $'000 $'000 $'000
2020
----------------------------- ---------- --------------- ------------- -------
Deferred consideration
(1) 104 - 2,371 2,475
Borrowings (1) 12,808 221 663 13,692
Trade and other payables 6,463 - - 6,463
---------- --------------- ------------- -------
19,375 221 3,034 22,630
---------- --------------- ------------- -------
Less than Between Greater than Total
6 months 6 - 12 months 12 months
Balances at 30 June $'000 $'000 $'000 $'000
2020
----------------------------- ---------- --------------- ------------- -------
Trade and Other Receivables 1,311 - - 1,311
Cash and Cash Equivalents 2,678 - - 2,678
Restricted Cash - - 57 57
Other financial assets - 3,743 3,743
----------------------------- ---------- --------------- ------------- -------
3,989 - 3,800 7,789
----------------------------- ---------- --------------- ------------- -------
1. Interest bearing at rates between
4 % and 22.2 %
36. FINANCIAL INSTRUMENTS (CONTINUED)
Less than Between Greater than Total
6 months 6 - 12 months 12 months
Balances at 30 June $'000 $'000 $'000 $'000
2019
----------------------------- ---------- --------------- ------------- -------
Deferred consideration
(2) 1,257 149 3,206 4,612
Borrowings (2) 310 15,968 898 17,176
Trade and other payables 6,843 - - 6,843
---------- --------------- ------------- -------
8,410 16,117 4,104 28,631
---------- --------------- ------------- -------
Less than Between Greater than Total
6 months 6 - 12 months 12 months
Balances at 30 June $'000 $'000 $'000 $'000
2019
----------------------------- ---------- --------------- ------------- -------
Other Receivables - - 219 219
Trade and Other Receivables 2,996 - - 2,996
Cash and Cash Equivalents 8,811 - - 8,811
Restricted Cash - - 68 68
Other financial assets 23 - 4,995 5,018
----------------------------- ---------- --------------- ------------- -------
11,830 5,282 17,112
----------------------------- ---------- --------------- ------------- -------
2. Interest bearing at rates between
7 % and 22.2 %
37. 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
30 June 2020 30 June
2019
$'000 $'000
------------------ ------- --------------
Cash and bank balances 22 464 8,811
37. NOTES TO THE STATEMENT OF CASH FLOWS (CONTINUED)
Reconciliation of loss before tax to net cash used in
operations
Year ended Year ended
30 June 2020 30 June
2019
$'000 $'000
------------------ ------- -----------------
Loss before tax (continuing and discontinuing
operations) (12,850) (33,522)
Add back:
Depreciation 2,608 2,318
Net impairment expense 1,257 21,916
Share-based payment 416 852
Bad debt written off 182 1,100
Employee incentive - -
Fair value adjustment 58 (839)
Re-valuation of investments 69 (82)
Movement in provisions (155) (31)
Finance costs (net) 2,909 4,639
Disposal of assets 113 (904)
Freewheel NCI written-off (575) -
Foreign exchange loss/(gains) on operating
activities 598 (244)
Changes in working capital:
Increase in inventories (350) (401)
Decrease in trade and other receivables 1,250 1,656
Decrease in trade and other payables (580) (1,735)
------------------ ---------------
Cash used in operations (5,050) (5,277)
------------------ ---------------
38. CONTINGENCIES AND COMMITMENTS
Contingent liabilities
The Group has no significant contingent liabilities at the
reporting date.
Commitments
In addition to the commitments of the parent entity as disclosed
under note 42, subsidiary companies have typical financial
commitments associated with their MR's granted by the South African
DMR.
39. 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:
Short-term employee benefits 1,242 1,347
Post-employment benefits 6 4
Termination benefits 172 -
Share-based payments 84 328
----------
1,504 1,679
---------- ----------
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.
40. CONTROLLED ENTITIES
Particulars in relation to controlled entities.
Year Year
ended ended
30 June 30 June
2020 2019
Country
of incorporation % %
Bakstaan Boerdery Proprietary Limited * South Africa 100 100
Baobab Mining & Exploration Proprietary
Limited**
Chapudi Coal Proprietary Limited ***
Coal of Africa & ArcelorMittal Analytical
Laboratories Proprietary Limited
Cove Mining NL
Freewheel Trade and Invest 37 Proprietary
Limited****
Fumaria Property Holdings Proprietary
Limited South Africa 95 95
Golden Valley Services Proprietary Limited South Africa 74 74
GVM Metals Administration (South Africa) South Africa 50 50
Proprietary Limited Australia 100 100
Harrisia Investments Holdings Proprietary South Africa 74 74
Limited South Africa 100 100
Kwezi Mining Exploration Proprietary Limited Australia 100 100
*** South Africa 100 100
Limpopo Coal Company Proprietary Limited South Africa 100 100
Makhado Centre of Learning NPC** South Africa 74 74
MbeuYashu Proprietary Limited South Africa 100 100
Newshelf 1384 Proprietary Limited South Africa 95 95
Nyambose Mining Proprietary Limited South Africa 74 74
Pan African Resources Coal Holdings Proprietary South Africa 100 100
Limited South Africa 100 100
Regulus Investment Holdings Proprietary South Africa 100 100
Limited South Africa 100 100
Silkwood Trading 14 Proprietary Limited South Africa 100 100
Uitkomst Colliery Proprietary Limited South Africa 100 100
------------------------------------------------------ -------------------- --------- ---------
* Subsidiary company of Fumaria Property Holdings
Proprietary Limited
** 69% on completion of the Makhado Project BBBEE transactions
*** Subsidiary companies of MbeuYashu Proprietary Limited
41. EVENTS AFTER THE REPORTING PERIOD
Funding
Restructuring of the loan agreement with the IDC resulting in a
drawdown of ZAR40,000 thousand ($2,308 thousand) of the existing
facility and a MC Mining equity raise for a collective ZAR15,000
thousand ($865 thousand).
In August 2020 13,331,433 shares were issued for a collective
$865 thousand resulting in MC Mining having 154,419,555 shares in
issue.
The Company also entered into a subscription agreement with
Columbia Skies Holdings (Pty) Limited for the issue of new shares
in MC Mining for an amount of $577 thousand (ZAR 10, 000
thousand).
Sale of land in Harrisia Investments Holdings Proprietary
Limited ("Harrisia")
Subsequent to year-end, the Company finalised the sale of land
and buildings held by its subsidiary Harrisia. These land and
buildings were classified as assets held for sale at 30 June
2020.
42. PARENT ENTITY FINANCIAL INFORMATION
Parent entity
Year ended Year ended
30 June 30 June
2020 2019
$'000 $'000
Summary financial information
Non-current assets 99,332 133,026
Current assets 75 886
----------- -----------
Total assets 99,407 133,912
----------- -----------
Non-current liabilities - -
Current liabilities 688 1,771
----------- -----------
Total liabilities 688 1,771
----------- -----------
Net assets 98,719 132,141
----------- -----------
Shareholders' Equity
Issued capital 1,041,080 1,040,950
Accumulated deficit and reserves (942,361) (908,809)
98,719 132,141
----------- -----------
Profit/(Loss) for the year (3,632) (23,871)
----------- -----------
Total comprehensive loss (3,632) (23,871)
----------- -----------
Contingencies and commitments
-- MC Mining has subordinated all loans to subsidiary companies
-- MC Mining has provided surety for the IDC borrowing facility
entered into by Baobab (refer note 24)
Independent auditor's report
To the members of MC Mining Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of MC Mining Limited (the
Company) and its controlled entities (together the Group) is in
accordance with the Corporations Act 2001, including:
a) giving a true and fair view of the Group's financial position
as at 30 June 2020 and of its financial performance for the year
then ended
b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
-- the consolidated statement of financial position as at 30 June 2020
-- the consolidated statement of changes in equity for the year then ended
-- the consolidated statement of cash flows for the year then ended
-- the consolidated statement of profit or loss and other
comprehensive income for the year then ended
-- the notes to the consolidated financial statements, which
include a summary of significant accounting policies
-- the directors' declaration.
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 believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Independence
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 & Ethical
Standards Board's APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (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.
Material uncertainty related to going concern
We draw attention to Note 1 in the consolidated financial
report, which indicates that the Group incurred a consolidated net
loss of US$12,190,000 during the year ended 30 June 2020 and as at
30 June 2020 had a consolidated net cash outflow from operating
activities of US$4,937,000, and consolidated net current
liabilities of US$17,298,000.
Note 1 indicates that the Group is dependent on the deferral and
the settlement of debt tranches relating to the existing IDC term
facility. The note further states that additional financing or
raising additional capital is also required to enable the Group to
continue its normal business activities, including the commencement
of the development of Phase 1 of the Makhado project.
These conditions, along with other matters set forth in Note 1,
indicate that a material uncertainty exists that may cast
significant doubt on the Group's ability to continue as a going
concern. Our conclusion is not modified in respect of this
matter.
Our audit approach
An audit is designed to provide reasonable assurance about
whether the financial report is free from material misstatement.
Misstatements may arise due to fraud or error. They are considered
material if individually or in aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the
basis of the financial report.
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial report
as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and
the industry in which it operates.
For the purpose of our audit we used overall Group Our audit focused on where the Group made subjective
materiality of US $1.350 million, which judgements; for example, significant
represents 1% of the Group's consolidated total assets . accounting estimates involving assumptions and inherently
We chose the Group's consolidated total assets as the uncertain future events.
benchmark, because in our view, it is
the benchmark which reflects the key focus of the users
of the consolidated financial report,
and is a generally accepted benchmark. This is because
the Group is still in the exploration
and development phase and as such users are interested in
determining if the Group is achieving
its strategy of becoming a sustainable mid-tier coal
producer. We chose 1% which is consistent
with quantitative materiality thresholds used for
companies that are in the exploration and
development phase.
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 key audit 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. Further, any commentary on the
outcomes of a particular audit procedure is made in that context.
We communicated the key audit matters to the Audit and Risk
Committee.
In addition to the matter described in the Material Uncertainty
Related to Going Concern section, we have determined the matter
described below to be the key audit matter to be communicated in
our report.
Impairment assessment of exploration and evaluation Our audit addressed the key audit matter as follows:
assets, development assets and property, Through discussions with management, we obtained an
plant and equipment understanding of their impairment assessments
and the methodologies and models used in determining the
Refer to the following notes to the consolidated recoverable amounts of the CGUs.
financial report for detail: We obtained the Group's assessments and evaluated the
* Note 3.1: Asset carrying values and impairment reasonableness of the recoverable amount
charges; for the CGUs by performing the following procedures:
* Making use of our valuation expertise, we assessed
these methodologies and models applied by the Group
* Note 14: Exploration and evaluation of assets; and found these to be in line with industry norms.
* Note 15: Development assets; and * We tested the mathematical accuracy of the discounted
cash flow models.
* Note 16: Property plant and equipment.
* We assessed the impairment models against the
requirements of Australian Accounting Standards and
generally accepted methodologies.
At 30 June 2020, the Group held exploration and
evaluation assets with a carrying amount of
US$78,714,000, development assets of US$20,720,000, * We assessed the appropriateness of the indicators
and property, plant and equipment of US$24,396,000, identified by the Group in their assessment by
respectively. At each reporting date, the Group comparing the Group's consolidated net asset value
evaluates whether there are events and conditions with its market capitalisation and considering trends
specific to the Group that could be indicative of in thermal and premium coal prices during the second
impairment triggers. half of the year, and subsequent to year-end.
In the current year, the Group has concluded that
there were indicators of impairment as a * Using our knowledge of the Group's operations and
result of the discount between the Group's market internal Group reporting structure, we evaluated
capitalisation and net asset value, together whether the CGUs identified by the Group in their
with the deterioration in thermal and premium coal assessment represent the smallest identifiable groups
prices during the second half of the year, of assets that can generate largely independent cash
and subsequent to year-end, respectively. inflows. Based on our work performed, we accepted the
Group's identification of CGUs as being consistent
The recoverable amounts for the Group's with the Group's operations and internal Group
cash-generating units (CGUs) are assessed using fair reporting.
value less costs to sell calculations, which
incorporate various key assumptions such as future
coal prices, future operating costs, discount rates, * Through inspection and enquiry from management we
foreign exchange rates and coal reserves. evaluated whether the CGUs included assets,
liabilities and cash flows directly attributable to
For CGUs classified as development assets and each CGU and a reasonable allocation of corporate
property, plant and equipment, the values are assets and overheads.
based on estimates of future discounted cash flows
per the latest board-approved business
forecasts regarding production volumes, costs of * Making use of our valuations expertise, we assessed
production, capital expenditure, coal prices the reasonableness of the key financial assumptions
and market forecasts for foreign exchange rates. used in the Group's calculations by performing the
following procedures:
For exploration and evaluation asset CGUs the values
are determined based on in situ resource
multiple based values (fair value less costs to o We assessed the reasonableness of the thermal, hard
sell). coking coal prices and Rand/US dollar
exchange rates by comparing these key financial assumptions
Further detail of the key financial assumptions and to a range of observable external
methodologies used in the determination forecasts issued by market analysts.
of the recoverable amounts of the CGUs are disclosed o We evaluated the real discount rates by assessing
in note 3.1 to the consolidated financial relevant comparable third-party sources
report. and market data such as the cost of debt, risk-free rates,
market risk premiums, debt to equity
As described in note 9 to the consolidated financial ratios and betas of comparable companies.
report, no impairment was recognised
in respect of exploration and evaluation assets, * We considered whether the Group's assumptions
development assets and property, plant and relating to production volumes and operating cash
equipment for the year ended 30 June 2020. outflows used in the discounted cash flow models are
consistent with the Group's mine plans, resource
We considered the impairment assessment of statements prepared by the competent person and
exploration and evaluation assets, development operating budgets, as well as actual performance
assets and property, plant and equipment to be a outcomes achieved to date (where applicable), by
matter of most significance to the current performing the following procedures:
year audit due to the significant judgements applied
by the Group in determining the recoverable
amounts of the CGUs to which these assets belong. o We agreed the cost to the approved budgets.
o We assessed the approved budgets against prior period
actual results for consistency.
o We agreed the life-of-mine to the approved mine plan
received from the competent person.
o We assessed the assumptions used by the Group against
market related rates.
o We evaluated the competence, experience, objectivity and
qualifications of the Group's competent
person.
* We considered the reasonableness of the Group's
sensitivity analysis in relation to the key financial
assumptions used in the impairment model by
performing an independent calculation to assess under
which assumptions an impairment would occur.
We evaluated the adequacy of the disclosures made in note
3.1 to the consolidated financial
report against the requirements of Australian Accounting
Standards.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the annual
report for the year ended 30 June 2020, 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 accordingly 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 on the other information
that we obtained prior to the date of this auditor's report, 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 have 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
the financial report.
A further description of our responsibilities for the audit of
the financial report is located at the Auditing and Assurance
Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf .
This description forms part of our auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 11 to
18 of the directors' report for the year ended 30 June 2020.
In our opinion, the remuneration report of MC Mining Limited for
the year ended 30 June 2020 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.
PricewaterhouseCoopers
Douglas Craig Perth
Partner 30 September 2020
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