Source - RNS
RNS Number : 7381K
Prairie Mining Limited
26 September 2016
 

PRAIRIE MINING LIMITED

 

ANNUAL FINANCIAL REPORT

 

30 JUNE 2016

 

ABN 23 008 677 852

 

CORPORATE DIRECTORY

 

DIRECTORS:

Mr Ian Middlemas                  Chairman
Mr Benjamin Stoikovich        Director and CEO
Ms Carmel Daniele               Non-Executive Director
Mr Thomas Todd                    Non-Executive Director
Mr Mark Pearce                       Non-Executive Director
Mr Todd Hannigan                 Alternate Director

 

COMPANY SECRETARY:

Mr Dylan Browne

 

PRINCIPAL OFFICES:

London:

38 Jermyn Street

London SW1Y 6DN

United Kingdom

 

Poland:

Ul. Wspolna

35 lok. 4

00-519 Warsaw

 

Australia (Registered Office):

Level 9, BGC Centre
28 The Esplanade
Perth   WA   6000

Tel:      +61 8 9322 6322
Fax:     +61 8 9322 6558

 

AUDITOR:

Ernst & Young

 

SOLICITORS:

DLA Piper

 

BANKERS:

Australia and New Zealand Banking

 

SHARE REGISTRIES:

Australia:

Computershare Investor Services Pty Ltd
Level 11
172 St Georges Terrace
Perth   WA  6000

Tel:      1300 557 010
Int:       +61 8 9323 2000
Fax:     +61 8 9323 2033

 

United Kingdom:

Computershare Investor Services UK

The Pavilions

Bridgewater Road

Bristol BS13 8AE

Telephone: +44 370 702 0003

 

STOCK EXCHANGE LISTINGS:

Australia:

Australian Securities Exchange
Home Branch - Perth
2 The Esplanade
Perth  WA 6000

ASX Code: PDZ - fully paid ordinary shares

 

United Kingdom:

London Stock Exchange - Main Board

10 Paternoster Square

London ECM 7LS

LSE Code: PDZ - fully paid ordinary shares

 

Poland:

Warsaw Stock Exchange
Książęca 4

00-498 Warsaw
WSE Code: PDZ - fully paid ordinary shares

 

 

 

CONTENTS


Directors' Report


Consolidated Statement of Profit or Loss and other Comprehensive Income


Consolidated Statement of Financial Position


Consolidated Statement of Changes in Equity


Consolidated Statement of Cash Flows


Notes to and Forming Part of the Financial Statements




The following sections are available in the full version of the Annual Financial Report on Prairie Mining Limited's website: www.pdz.com.au  

Notes to and Forming Part of the Financial Statements


Directors' Declaration


Auditor's Independence Declaration


Independent Auditor's Report


 

The Directors of Prairie Mining Limited present their report on the Consolidated Entity consisting of Prairie Mining Limited ("Company" or "Prairie") and the entities it controlled at the end of, or during, the year ended 30 June 2016 ("Consolidated Entity" or "Group").

DIRECTORS

The names and details of the Group's Directors in office at any time during the financial year or since the end of the financial year are:

Current Directors:

Mr Ian Middlemas                   Chairman

Mr Benjamin Stoikovich        Director and CEO

Ms Carmel Daniele               Non-Executive Director (appointed 21 September 2015)

Mr Thomas Todd                    Non-Executive Director

Mr Mark Pearce                       Non-Executive Director

Mr Todd Hannigan                 Alternate Director

 

Former Directors:

Mr Anastasios Arima             Executive Director (resigned 21 September 2015)

Mr Emil Morfett                        Non-Executive Director (appointed 21 September 2015, resigned 31 July 2016)

Mr John Welborn                    Non-Executive Director (resigned 21 September 2015)

 

Unless otherwise stated, Directors held their office from 1 July 2015 until the date of this report.

CURRENT DIRECTORS AND OFFICERS

Mr Ian Middlemas  B.Com, CA

Chairman

Mr Middlemas is a Chartered Accountant, a member of the Financial Services Institute of Australasia and holds a Bachelor of Commerce degree. He worked for a large international Chartered Accounting firm before joining the Normandy Mining Group where he was a senior group executive for approximately 10 years. He has had extensive corporate and management experience, and is currently a Director with a number of publicly listed companies in the resources sector.

Mr Middlemas was appointed a Director of the Company on 25 August 2011. During the three year period to the end of the financial year, Mr Middlemas has held directorships in Cradle Resources Limited (May 2016 - present), Paringa Resources Limited (October 2013 - present), Berkeley Energia Limited (April 2012 - present), Syntonic Limited (April 2010 - present), Salt Lake Potash Limited (January 2010 - present), Equatorial Resources Limited (November 2009 - present), WCP Resources Limited (September 2009 - present), Sovereign Metals Limited (July 2006 - present), Papillon Resources Limited (May 2011 - October 2014), Sierra Mining Limited (January 2006 - June 2014) and Decimal Software Limited (July 2013 - April 2014).

 

Mr Benjamin Stoikovich  B.Eng, M.Eng, M.Sc, CEng, CEnv

Director and CEO

Mr Stoikovich is a mining engineer and professional corporate finance executive. He has extensive experience in the resources sector gained initially as an underground Longwall Coal Mining Engineer with BHP Billiton where he was responsible for underground longwall mine operations and permitting, and more recently as a senior executive within the investment banking sector in London where he gained experience in mergers and acquisitions, debt and off take financing.

 

He has a Bachelor of Mining Engineering degree from the University of NSW; a Master of Environmental Engineering from the University of Wollongong; and a M.Sc in Mineral Economics from Curtin University. Mr Stoikovich also holds a 1st Class Coal Mine Managers Ticket from the Coal Mine Qualifications Board (NSW, Australia) and is a registered Chartered Engineer (CEng) and Chartered Environmentalist (CEnv) in the United Kingdom.

 

Mr Stoikovich was appointed a Director of the Company on 17 June 2013. During the three year period to the end of the financial year, Mr Stoikovich has not held any other directorships in listed companies.

 

Ms Carmel Daniele B.Ec, CA

Non-Executive Director

 

Ms Carmel Daniele is the founder and Chief Investment Officer of CD Capital in London. Ms Daniele has over 20 years of global natural resources investment experience, ten of which was spent with Newmont Mining/Normandy Mining and acquired companies. As a Senior Executive (Corporate Advisory) at Newmont she structured cross-border M&As including the three-way merger between Franco-Nevada, Newmont and Normandy. Post-merger Ms Daniele structured the divestment of various non-core mining assets around the world for the merchant banking arm, Newmont Capital.  Ms Daniele started off her career at Deloitte Touche Tohmatsu. Prior to setting up CD Capital in London in 2006, Ms Daniele was an investment advisor to RAB Capital's Special Situations Fund on sourcing and negotiating natural resource private equity investments. Ms Daniele holds a Master of Laws (Corporate & Commercial) and Bachelor of Economics from the University of Adelaide and is a Fellow of the Institute of Chartered Accountants.

 

Ms Daniele was appointed a Director on 21 September 2015. During the three year period to the end of the financial year, Ms Daniele has not held any other directorships in listed companies.

 

Mr Thomas Todd  B.Sc (Hons), CA
Non-Executive Director


Mr Todd was the Chief Financial Officer of Aston Resources from 2009 to November 2011. Prior to Aston Resources, Mr Todd was Chief Financial Officer of Custom Mining, where his experience included project acquisition and funding of project development for the Middlemount project to the sale of the company to Macarthur Coal. A graduate of Imperial College, Mr Todd holds a Bachelor of Physics with first class Honours. He is a Chartered Accountant (The Institute of Chartered Accountants in England and Wales) and a graduate of the Australian Institute of Company Directors.

 

Mr Todd was appointed a Director on 16 September 2014. During the three year period to the end of the financial year, Mr Todd has been an alternate director in Paringa Resources Limited (May 2014 - Present).

Mr Mark Pearce  B.Bus, CA, FCIS, FFin

Non-Executive Director

Mr Pearce is a Chartered Accountant and is currently a Director of several listed companies that operate in the resources sector. He has had considerable experience in the formation and development of listed resource companies. Mr Pearce is also a Fellow of the Institute of Chartered Secretaries and Administrators and a Fellow of the Financial Services Institute of Australasia.

Mr Pearce was appointed a Director of the Company on 25 August 2011. During the three year period to the end of the financial year, Mr Pearce has held directorships in Salt Lake Potash Limited (August 2014 - present), Syntonic Limited (April 2010 - present), Equatorial Resources Limited (November 2009 - present), WCP Resources Limited (September 2009 - present), Sovereign Metals Limited (July 2006 - present) and Decimal Software Limited (July 2013 - April 2014).

 

Mr Todd Hannigan  B.Eng (Hons)

Alternate Director for Mr Thomas Todd

 

Mr Hannigan was the Chief Executive Officer of Aston Resources from 2010 to 2011. During this time, the company significantly progressed the Maules Creek project, including upgrades to the project's resources and reserves, completion of all technical and design work for the Definitive Feasibility Study, negotiation of two major project stake sales and joint venture agreements, securement of port and rail access and progression of planning approvals to final stages. Mr Hannigan has worked internationally in the mining and resources sector for over 18 years with Aston Resources, Xstrata Coal, Hanson PLC, BHP Billiton and MIM.

 

Mr Hannigan was appointed as Alternate for Mr Thomas Todd on 16 September 2014. During the three year period to the end of the financial year, Mr Hannigan has held a directorship in Paringa Resources Limited (May 2014 - Present).

 

Mr Dylan Browne  B.Com, CA, AGIA

Company Secretary

Mr Browne is a Chartered Accountant and Associate Member of the Governance Institute of Australia who commenced his career at a large international accounting firm and has since worked in the corporate office of a number of listed companies that operate in the resources sector. Mr Browne was appointed Company Secretary of the Company on 25 October 2012.    

 

PRINCIPAL ACTIVITIES

The principal activities of the Group during the financial year consisted of the exploration and development of resource projects. No significant change in nature of these activities occurred during the year.

OPERATING AND FINANCIAL REVIEW

 

Operations

 

Highlights during, and subsequent to, the financial year end include:

 

(i)    Cash in excess of $18 million at 30 June 2016, placing the Company in an excellent position to complete its planned development activities for the Jan Karski Mine at the Lublin Coal Project ("Project");

(ii)   Coal Markets continue to improve with global coal prices improving by 30% in 2016 and are forecast to recover further over the medium to long term. Coal is set to remain critical to Poland's economy, currently providing over 80% of the country's energy needs and providing critical raw materials for the steel industry;

(iii)  A Pre-Feasibility Study ("PFS") was completed during the year confirming the robust economics and technical viability of the Project to be developed as an ultra-low cost supplier of hard coal into major European markets;

(iv)  Development funding - preliminary discussions with strategic partners, EPC contractors, global project finance banks and potential offtakers have now commenced following the excellent results of the PFS published in the year;         

(v)   Completed an investment agreement ("Investment Agreement") with CD Capital Natural Resources Fund III LP ("CD Capital") for an investment in Prairie's 100% owned subsidiary, PDZ Holdings Pty Ltd ("PDZ Holdings"), of up to A$83 million to upgrade, expand and develop the Project, and included the issue of non-interest bearing convertible loan notes ("Convertible Notes") with an aggregate principal amount of $15 million to CD Capital, exchangeable for ordinary shares of Prairie at $0.335 per share;

(vi)  Secured a three year exclusive right to apply and be granted a mining concession for the Project following the approval of geological documentation by the Polish Ministry of Environment ("MoE");

(vii) Completed the admission of the Company's ordinary shares on the main market of the London Stock Exchange and the main market of the Warsaw Stock Exchange. Following the admissions, Prairie has enjoyed high volumes and good liquidity on the Warsaw Stock Exchange which has highlighted the strong local market support for the Company; and

(viii)        Prairie completed a number of significant work streams in relation to the ongoing mining concession application including completion of a draft Deposit Development Plan ("DDP"), substantial progress on the Environmental and Social Impact Assessment ("ESIA"); commencement of local land rezoning amendments in the Project mine area, continued with the land acquisition process aimed at securing access to the planned surface infrastructure sites for Project development, lodged application for power grid connection at the project and progressed with planning the railway spur line connection to the national railway network.

 

Jan Karski Mine at the Lublin Coal Project

 

Completion of Pre-Feasibility Study

 

In March 2016, the Company completed a PFS at the Project, confirming the robust economics and technical viability of the Project to be developed as an ultra-low cost supplier of hard coal into major European markets. Please refer to announcement released by the Company on 8 March 2016.

 

CD Capital to Invest up to $83m in Prairie's Project

 

On 21 September 2015, Prairie completed an investment agreement with CD Capital to raise up to $83 million. CD Capital have committed to be a key strategic funding partner in the upgrading, expansion and development of the Project.

 

The transaction was approved by shareholders on 21 September 2015 and is structured in three tranches as follows:

 

·           a private placement by PDZ Holdings (a wholly-owned subsidiary of Prairie which indirectly holds the LCP) of non-interest bearing Convertible Notes with an aggregate principal amount of $15 million to CD Capital, exchangeable for ordinary shares of Prairie at $0.335 per share;

·           on the conversion of the Convertible Notes, the grant of unlisted options in Prairie with an exercise price of A$0.60 per option ("CD Options") for a further $13 million once exercised; and

·           a priority right for CD Capital to invest a further A$55 million in any future funding conducted by Prairie.

 

The receipt by PDZ Holdings of the initial $15 million is being used to fund the de-risking of the Project towards a construction decision. The completion of the transaction will fully fund all required works up to a positive mine development decision at the Project, including the completion of a DFS and all required permitting.

 

CD Capital securing rights to provide $55 million as part of any future Prairie fund raising provides a solid platform for Prairie to progress project financing for the successful development of the LCP, which has now commenced.

 

Under the investment agreement, CD Capital has currently appointed Ms Carmel Daniele to the Board of Prairie.

 

CD Capital is a global natural resources private equity fund with a proven track record of successfully identifying and investing in world-class mining and resource assets at the growth equity stage. CD Capital unlocks value in high quality mining projects through a strategic hands-on approach to development and has a long term investment horizon. CD Capital's underlying investor base is made up of professional institutional investors with strong representation from endowments and foundations.

 

Approval of Geological Documentation

 

On 1 July 2015, Prairie announced that it had secured the Exclusive Right to apply for, and consequently be granted, a mining concession for the Project. This follows the approval by Poland's MoE of Prairie's previously submitted geological documentation and is in accordance with the terms of the Polish Geological and Mining Law (2011) ("GML"). Geological documentation is a resource estimate prepared according to the standards prescribed in the Polish resource reporting code and follows the successful completion of all required exploration works by Prairie under its concession commitments with the MoE.

 

As a result of its geological documentation being approved, Prairie is now the only entity that can lodge a mining concession application over the LCP within the next three (3) years. The Company is advancing technical and environmental feasibility programs for the LCP in accordance with standards of international best practice and intends to submit the mining concession application for the Project in mid-2017.

 

The approved Geological Documentation covers an area comprising all four of the original exploration concessions granted to Prairie (K-4-5, K-6-7, K-8 and K-9) and includes the full extent of the targeted resources within the mine plan for the Project. As part of its application for the approval of Geological Documentation, Prairie relinquished a small area to the north of the K-9 concession as the coal within this region has been deemed not of mineable thickness. In addition, Prairie's geological documentation does not include the Sawin-Zachod concession which may be added at a later date.

 

London Stock Exchange and Warsaw Stock Exchange Listings

 

In September 2015, the Company completed the admission of its ordinary shares on the main market of the London Stock Exchange and on the main market of the Warsaw Stock Exchange. Following the admissions, Prairie has enjoyed high volumes and good liquidity on the Warsaw Stock Exchange which has highlighted the strong local market support for the Company.

 

Divestment of Prairie Downs Metals Project ("BMP")

 

Subsequent to the end of the year, Prairie altered the terms of the farm-in agreement ("Farm-In Agreement") with Marindi Metals Limited ("Marindi"). Under the terms of the Farm-In Agreement, Marindi can earn a 100% interest in the BMP by electing to pay Prairie $0.5 million in cash (which Prairie received on 27 May 2015), $0.325 million on or before 30 September 2016 and $0.325 million on or before 31 March 2017, with Prairie retaining a 2.5% Net Smelter Royalty.  

 

The Farm-In Agreement allows Prairie to focus 100% of its time, energy and resources on the Polish coal operations.

 

Results of Operations

 

The net loss of the Consolidated Entity for the year ended 30 June 2016 was $6,761,400 (2015: $5,152,146). Significant items contributing to the current year loss and the substantial differences from the previous financial year include:

 

(i)    Exploration and Evaluation expenses of $4,830,109 (2015: $7,301,685), which is attributable to the Group's accounting policy of expensing exploration and evaluation expenditure incurred by the Group subsequent to the acquisition of rights to explore and up to the commencement of a bankable feasibility study for each separate area of interest. As a direct result of exploration and evaluation activities conducted during the year, the Group achieved key milestones including (i) approval of geological documentation and securing a three year exclusive right to apply for a mining concession at the LCP; (ii) confirming the robust economics and technical viability of the Project to be developed as an ultra-low cost supplier of hard coal into major European markets; (iii) announcement of a maiden ore reserve for the Project; (iv) announcing an update coal resource estimate for the Project; and (v) continued progression of the DDP, ESIA and spatial planning process for the Project;

 

(ii)   Business development expenses of $1,219,309 (2015: $1,301,836) which includes expenses in relation to the Group's investor relations activities including, costs in relation to the admission of the Company's shares on the London Stock Exchange and Warsaw Stock Exchange in 2016 and other business development costs incurred during the year include brokerage fees, travel costs, attendances at conferences and consultant costs;

 

(iii)  Non-cash share-based payment expenses of $1,723,271 (2015: $1,576,867) due to incentive securities issued to key management personnel and other key employees and consultants of the Group as part of the long-term incentive plan to reward key management personnel and other key employees and consultants for the long term performance of the Group. The expense results from the Group's accounting policy of expensing the fair value (determined using an appropriate pricing model) of incentive securities granted on a straight-line basis over the vesting period of the options and rights. The slight decrease in share-based payment expenses in 2016 compared to 2015 is attributable to lower fair values of incentive securities being issued to key employees and consultants of the Group;

 

(iv)   Non-cash gain on the derecognition of available-for-sale financial assets of nil (2015: $9,593,775). At 1 July 2014, the Company held 10.0 million fully paid ordinary shares in Papillon Resources Limited ("Papillon") (ASX:PIR). During the prior year, Papillon implemented a scheme of arrangement by which B2Gold Corp (TSX:BTO) ("B2Gold") acquired all of the issued shares in Papillon ("Scheme"). In consideration for the Scheme, Prairie received 0.661 B2Gold shares for every Papillon share held. As a result of the Scheme, the Company was required to derecognise the Papillon available-for-sale asset. The Company subsequently recognised the B2Gold shares as a held-for-trading (fair value through profit and loss) financial asset;

 

(v)    Other income of $1,765,429 (2015: $1,823,851) which is the result of the non-cash fair value gain of $1,132,966 (2015: fair value loss of 1,063,846) on the B2Gold financial assets at fair value through  profit and loss due to the appreciation in the B2Gold share price and fair value during the year. A further non-cash fair value gain of $632,463 (2015: nil) is attributable to the fair value movement of the conversion right of the Convertible Notes accounted as a financial liability at fair value through profit and loss. In 2016, the Group recognised nil income (2015: $1,323,851) on the net gain on sale of available-for-sale financial assets, as in 2016 the Group derecognised the Papillon available-for-sale asset as discussed in point (iii) above. In 2016 the Company received nil (2015: $500,000) as a result of the Farm-In Agreement with Marindi; and

 

(vi)   An income tax expense of $nil (2015: $4,410,000) as a result of the sell down and derecognition of available-for-sale assets that occurred in 2015.

 

Financial Position

 

At 30 June 2016, the Company had cash reserves of $18,063,119 (2015: $2,076,409) placing it in an excellent position to conduct its planned development activities at the Project.

 

At 30 June 2016, the Company had net assets of $17,815,760 (2015: $9,399,258), an increase of 90% compared with the previous year. This is consistent with and largely attributable to the receipt of $15 million pursuant to the CD Capital Investment Agreement, the sale of and increase in value of the held-for-sale B2Gold listed securities held by the Company during the year. These gains have been offset by the current year's net loss after tax.

 

Business Strategies and Prospects for Future Financial Years

 

Prairie's strategy is to create long-term shareholder value by continuing to explore and develop the LCP in Poland.

 

To date, the Group has not commenced production of any minerals. To achieve its objective, the Group currently has the following business strategies and prospects:

·           a Definitive Feasibility Study will commence after all Project options have been suitably examined and an ultimate "go forward" case has been selected;

·           continue the mining concession process for the Project, having been granted the 3 year Priority Right, including the rezoning of land for mining use, the completion of a DDP and ESIA for the Project and submission of these to the relevant authorities for approval. Once approved the Company will apply for a mining concession for the Project;

·           continue financing discussions with strategic partners, EPC contractors, global project finance banks and potential offtakers following the excellent results of the PFS published in the year;

·           continuation of other required Project permitting activities including spatial planning and land acquisition;

·           review of new business opportunities that may compliment and / or add synergies to the Company's existing Project;

·           continued development activity across the Project specifically aimed at improving knowledge of hydrogeological conditions and confirming the definitive shaft site location; and

·           conduct additional exploration at the Sawin-Zachod exploration concession.

 

All of these activities are inherently risky and the Board is unable to provide certainty of the expected results of these activities, or that any or all of these likely activities will be achieved. The material business risks faced by the Group that could have an effect on the Group's future prospects, and how the Group manages these risks, include the following:

 

·           The Company's activities will require further capital in future years - The Company currently has cash in excess of $18 million which places it in an excellent position to conduct its current planned exploration and development activities. However, the ability of the Company to finance capital investment in future years for the development, construction and future operation of the Project is dependent, among other things, on the Company's ability to raise additional future funding either through equity or debt financing. Any failure to obtain sufficient future financing may result in delaying or indefinite postponement of any future development or construction of the Project or even a loss of property interest (in the future). The key items in respect of which the Company would require further funding in future years would be for the development and construction of the mine at the Project. In this regard however, and pursuant to the CD Capital investment agreement, CD Capital has a first right to invest a further $55 million in any future fund raise conducted by the Company. There is however no guarantee that CD Capital would take up this right in the future and there is a risk that the Company's obligation to offer CD Capital a first right of refusal on any future fund raising could prejudice the Company's ability to raise funds from investors other than CD Capital. However, the Company considers that it would not be necessary to undertake such development actions until it has secured financing to do so and the timing for commencement of such actions would accordingly depend on the date that such financing is secured. If, in the unlikely event that future financing cannot be secured, the Group has the flexibility and ability to significantly reduce its ongoing expenditure.

Furthermore, the Company's board of directors has a successful track record of fundraising for natural resources projects, including large scale coal projects, and has completed successful financing transactions with strategic partners, large institutional fund managers, off-take partners and traders and project finance lenders. There is however no guarantee that the then prevailing market conditions will allow for a future fundraising or that new investors will be prepared to subscribe for ordinary shares or at the price at which they are willing to do so in the future. Failure to obtain sufficient future financing may result in delaying or indefinite postponement of appraisal and any development of the Project in the future, a loss of the Company's personnel and ultimately a loss of its interest in the Project if it were unable to successfully apply for a mining concession for the Project before the expiry of the Priority Right. There can be no assurance that additional future capital or other types of financing will be available, if needed, or that, if available, the terms of such future financing will be favourable to the Company;

 

             If the Company obtains debt financing in the future, it will be exposed to the risk of leverage and its activities could become subject to restrictive loan and lease covenants and undertakings. If the Company obtains future equity financing other than on a pro rata basis to existing Shareholders, the future percentage ownership of the existing Shareholders may be reduced, Shareholders may then experience subsequent dilution and/or such securities may have preferred rights, options and pre-emption rights senior to the Ordinary Shares. There can be no assurance that the Company would be successful in overcoming these risks in the future or any other problems encountered in connection with such financings;

·           Risk of further challenges by Bogdanka - In April 2015 the MoE issued a decision approving geological documentation for the Project. During administrative proceedings related to the approval of the Company's geological documentation, Lubelski Wegiel Bogdanka ("Bogdanka") filed a motion to be admitted as a party to these. On 25 June 2015, the MoE issued its final decision rejecting Bogdanka's application to be admitted as a party to the proceedings relating to the approval of geological documentation. This means that the MoE decision approving the Company's geological documentation is final - providing the Company with a three year priority right to apply for a mining concession for the LCP and confirms that the Company's geological documentation complies with the legal requirements of the Polish Geological Mining Law. Furthermore in 2014, Bogdanka submitted a mining concession application over the Company's K-6-7 exploration concession. In September 2015, the MoE rejected Bogdanka's mining concession application over the K-6-7 concession which confirmed that Bogdanka's application was inadmissible. Bogdanka subsequently filed a case to reconsider with the MoE which was further rejected by the MoE confirming the Company's security of tenure and exclusive right to apply for a mining concession for the K-6-7 concession. In December 2014, Bogdanka appealed this final decision by the MoE with a regional administrative court, which was rejected by that court, in March 2016.

Bogdanka has since made a further appeal to the Supreme Administrative Court with no court hearing being scheduled to date. The Supreme Administrative Court has no authority to grant Bogdanka a concession but it may however cancel the MoE's original rejection decision. If the Supreme Administrative Court does cancel the MoE decision, the MoE will be required to re-assess Bogdanka's mining concession application. These proceedings do not relate to the Prairie's valid and existing priority right to apply for a mining concession over the K-6-7 area. As discussed above Bogdanka has in the past raised several appeals challenging the Company's title to the exploration concessions comprising the Project and to actions by government departments in the approval process for the Project. There is therefore no guarantee that Bogdanka will not seek to file further appeals to future decisions taken by government departments in the course of the Project development timeline;

·           The Company has limited operating history - The Company has a limited operating history on which it can base an evaluation of its prospects. Despite this, members of the Company's Board of Directors and management team have considerable experience in the exploration, appraisal, funding development and mining of coal projects both globally and within the Lublin Coal Basin. The future success of the Company is dependent upon a number of factors, including the successful: (i) completion of positive technical and feasibility studies which demonstrates that mining of coal can be economically undertaken at the Project; (ii) design, construction and commissioning of the infrastructure required for the Project; (iii) progression of permitting including acquiring a mining concession for the Project and the maintenance of title for Project; and (iv) identification of, and agreement with, strategic partners, offtakers and other financiers to fund and assist with the future development and operation of mining at the Project. The prospects of the Company must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development, particularly in the mineral exploration sector, which has a high level of inherent uncertainty;

·           Operations conducted in an emerging market - The Company's operations are located in Poland and will be exposed to related risks and uncertainties associated with this jurisdiction. Changes in mining or investment policies, laws or regulations (or the application thereof) or shifts in political attitude in Poland, in particular to mining, use of coal, and foreign ownership of coal projects may adversely affect the operation or profitability of the Company. The Company continues to consult with the various levels of Government but there can be no assurances that the future political developments in Poland will not directly impact the Company's operations or its ability to attract funding for its operations. The Company also competes with many other companies in Poland, including companies with established mining operations. Some of these companies have greater financial resources and political influence than the Company and, as a result, may be in a better position to compete with or impede the Company's current or future activities;

·           The Company may be adversely affected by fluctuations in coal prices - The price of coal can fluctuate widely and is affected by numerous factors beyond the control of the Company. Coal prices are currently depressed from previous levels and there is no guarantee that they will recover. Future production, if any, from the Company's mineral properties and its profitability will be dependent upon the price of coal being adequate to make these properties economic. The Company currently does not engage in any hedging or derivative transactions to manage commodity price risk. As the Company's operations change, this policy will be reviewed periodically going forward; and

·           Global financial conditions may adversely affect the Company's growth and profitability - Many industries, including the mineral resource industry, are impacted by these market conditions. Some of the key impacts of the current financial market turmoil include contraction in credit markets resulting in a widening of credit risk, devaluations and high volatility in global equity, commodity, foreign exchange and precious metal markets, and a lack of market liquidity. The exploration and any development of the Company's exploration properties will require substantial funding. Due to the current nature of the Company's activities, a slowdown in the financial markets or other economic conditions may adversely affect the Company's growth, or rate of growth, and ability to fund its activities. If these increased levels of volatility and market turmoil continue, the Company's activities could be adversely impacted and the trading price of the Company's shares could be adversely affected.

EARNINGS PER SHARE



2016
Cents


2015
Cents

Basic and diluted  loss per share

(4.52)

(3.81)

ENVIRONMENTAL REGULATION AND PERFORMANCE

The Group's operations are subject to various environmental laws and regulations under the relevant government's legislation. Full compliance with these laws and regulations is regarded as a minimum standard for all operations to achieve.

Instances of environmental non-compliance by an operation are identified either by external compliance audits or inspections by relevant government authorities.

There have been no significant known breaches by the Group during the financial year.

DIVIDENDS       

No dividends were paid or declared since the start of the financial year. No recommendation for payment of dividends has been made (2015: nil).

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

There were no significant changes in the state of affairs of the Group during the year other than the following:

(i)       On 1 July 2015, the Company announced that it had secured a three year exclusive right to apply and be granted a mining concession for the Project following the approval of its geological documentation by the Polish MoE;

(ii)      In September 2015, the Company commenced trading of its shares on the main boards of the London Stock Exchange and Warsaw Stock Exchange;

(iii)     On 21 September 2015, following shareholder approval, the Company completed an investment agreement with CD Capital for an investment in PDZ Holdings to raise up to A$83 million to upgrade, expand and develop the Project;

(iv)      On 21 September 2015, in accordance with the investment agreement with CD Capital, the Company appointed CD Capital's nominee directors, Ms Carmel Daniele and Mr Emil Morfett, as Non-Executive Directors of the Company. As a result of CD Capital director appointments, Mr Welborn and Mr Arima resigned as directors of the Company;

(v)       On 8 March 2016, the Company announced the results from a PFS on the Project which confirmed the robust economics and technical viability of the Project to be developed as an ultra-low cost supplier of hard coal into major European markets; and

(vi)      On 29 March 2016, the Company announced that a Warsaw administrative court had rejected Lubelski Węgiel BOGDANKA's administrative complaints against MoE regarding the Project which confirmed Prairie's security of tenure and exclusive right to take the K-6-7 concession, as part of the Project, through to mining production.

SIGNIFICANT EVENTS AFTER BALANCE DATE

(i)        On 13 July 2016, Mr Janusz Jakimowicz resigned from his position as President of the PD Co sp z o.o. Management Board;

(ii)       On 31 July 2016, Mr Emil Morfett resigned as a non-executive director of the Company; and

(iii)      On 12 September 2016, Prairie altered the terms of the Farm-In Agreement with Marindi allowing Marindi to earn a 100% interest in the BMP by electing to pay Prairie $0.5 million in cash (which Prairie received on 27 May 2015), $0.325 million in cash on or before 30 September 2016 and $0.325 million in cash on or before 31 March 2017.

 

Other than as outlined above, at the date of this report, there are no matters or circumstances, which have arisen since 30 June 2016 that have significantly affected or may significantly affect:

·      the operations, in financial years subsequent to 30 June 2016, of the Consolidated Entity;

·      the results of those operations, in financial years subsequent to 30 June 2016, of the Consolidated Entity; or

·      the state of affairs, in financial years subsequent to 30 June 2016, of the Consolidated Entity.

DIRECTORS' INTERESTS

As at the date of this report, the Directors' interests in the securities of the Company are as follows:

 


Interest in securities at the date of this report


Ordinary Shares1

Options2

Performance Rights3

Mr Ian Middlemas

10,600,000

-

-

Mr Benjamin Stoikovich

-

3,000,000

2,500,000

Ms Carmel Daniele4

-

-

-

Mr Thomas Todd

2,800,000

1,400,0005

-

Mr Mark Pearce

3,000,000

-

-

Mr Todd Hannigan

3,146,398

1,400,0005

-

Notes:

1   "Ordinary Shares" means fully paid Ordinary Shares in the capital of the Company.

2   "Options" means an option to subscribe for one Ordinary Share in the capital of the Company.

3   "Performance Rights" means Performance Rights issued by the Company that convert to one Ordinary Share in the capital of the Company upon vesting of various performance conditions.

4   As founder and controller of CD Capital, Ms Daniele has an interest in the Convertible Notes and the right of CD Capital to acquire 44,776,119 Ordinary Shares and 21,388,060 $0.60 CD Options which may result in the issue of an additional 21,388,060 Ordinary Shares.

5   On 11 September 2014, 1,400,000 Unlisted Options were issued to T2 Resources Pty Ltd, a Company in which Messrs Todd and Hannigan are directors and shareholders.

SHARE OPTIONS AND PERFORMANCE RIGHTS

At the date of this report the following options and rights have been issued over unissued Ordinary Shares of the Company:

·        1,600,000 Unlisted Options exercisable at $0.35 each on or before 30 June 2017;

·        4,460,000 Unlisted Options exercisable at $0.45 each on or before 30 June 2017;

·        765,000 Unlisted Options exercisable at $0.60 each on or before 30 June 2017;

·        1,400,000 Unlisted Options exercisable at $0.45 each on or before 30 June 2018;

·        9,397,000 Performance Rights with various vesting conditions and expiry dates between 30 June 2017 and 31 December 2020; and

·        Pursuant to the Investment Agreement, CD Capital has the right to acquire 44,776,119 Ordinary Shares (on conversion of the Convertible Notes) and 21,388,060 $0.60 CD Options which may result in the issue of an additional 21,388,060 Ordinary Shares.

During the year ended 30 June 2016, nil Ordinary Shares have been issued as a result of the exercise of Unlisted Options, and 3,649,000 Ordinary Shares have been issued as a result of the conversion of 3,649,000 Performance Rights. Subsequent to year end and up until the date of this report, nil Ordinary Shares have been issued as a result of the exercise of Unlisted Options, and nil Ordinary Shares have been issued as a result of the conversion of Performance Rights.

INDEMNIFICATION AND INSURANCE OF OFFICERS AND AUDITORS

The Constitution of the Company requires the Company, to the extent permitted by law, to indemnify any person who is or has been a Director or officer of the Company or Group for any liability caused as such a Director or officer and any legal costs incurred by a Director or officer in defending an action for any liability caused as such a Director or officer.

During or since the end of the financial year, no amounts have been paid by the Company or Group in relation to the above indemnities.

During the financial year, an annualised insurance premium was paid to provide adequate insurance cover for directors and officers against any potential liability and the associated legal costs of a proceeding.

 

To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial year.

REMUNERATION REPORT (AUDITED)

This Remuneration Report, which forms part of the Directors' Report, sets out information about the remuneration of Key Management Personnel ("KMP") of the Group.

Details of Key Management Personnel

Details of the KMP of the Group during or since the end of the financial year are set out below:

Directors

Mr Ian Middlemas                  Chairman

Mr Benjamin Stoikovich        Director and CEO

Ms Carmel Daniele               Non-Executive Director (appointed 21 September 2015)

Mr Thomas Todd                    Non-Executive Director

Mr Mark Pearce                       Non-Executive Director

Mr Todd Hannigan                 Alternate Director

 

Former Directors

Mr Anastasios Arima                          Executive Director (resigned 21 September 2015)

Mr Emil Morfett                        Non-Executive Director (appointed 21 September 2015, resigned 31 July 2016)

Mr John Welborn                    Non-Executive Director (resigned 21 September 2015)

 

Other KMP

Mr Janusz Jakimowicz          President of the PD Co sp z o.o. Management Board (resigned 13 July 2016)

Mr Artur Kluczny                      Vice President of the PD Co sp z o.o. Management Board

Mr Hugo Schumann              Executive - Corporate Development (ceased 31 December 2015)

Mr Dylan Browne                    Company Secretary

 

Unless otherwise disclosed, the KMP held their position from 1 July until the date of this report.

Remuneration Policy

The Group's remuneration policy for its KMP has been developed by the Board taking into account the size of the Group, the size of the management team for the Group, the nature and stage of development of the Group's current operations, and market conditions and comparable salary levels for companies of a similar size and operating in similar sectors. In addition to considering the above general factors, the Board has also placed emphasis on the following specific issues in determining the remuneration policy for KMP:

(a)    the Group is currently focused on undertaking exploration, appraisal and development activities;

(b)    risks associated with small cap resource companies whilst exploring and developing projects; and

(c)     other than profit which may be generated from asset sales, the Company does not expect to be undertaking profitable operations until sometime after the commencement of commercial production on any of its projects.

Executive Remuneration

The Group's remuneration policy is to provide a fixed remuneration component and a performance based component (short term incentive and long term incentive). The Board believes that this remuneration policy is appropriate given the considerations discussed in the section above and is appropriate in aligning executives' objectives with shareholder and business objectives.

Fixed Remuneration

Fixed remuneration consists of base salaries, as well as employer contributions to superannuation funds and other non-cash benefits. Non-cash benefits may include provision of car parking and health care benefits.

Fixed remuneration is reviewed annually by the Board. The process consists of a review of company and individual performance, relevant comparative remuneration externally and internally and, where appropriate, external advice on policies and practices.

Performance Based Remuneration - Short Term Incentive ("STI")

Some executives are entitled to an annual cash incentive payment upon achieving various key performance indicators ("KPI's"), as set by the Board. Having regard to the current size, nature and opportunities of the Company, the Board has determined that these KPI's will include measures such as successful commencement and/or completion of exploration activities (e.g. commencement/completion of exploration programs within budgeted timeframes and costs), establishment of government relationship (e.g. establish and maintain sound working relationships with government and officialdom), development activities (e.g. completion of infrastructure studies and commercial agreements), corporate activities (e.g. recruitment of key personnel and representation of the company at international conferences) and business development activities (e.g. corporate transactions and capital raisings). These measures were chosen as the Board believes they represent the key drivers in the short and medium term success of the Project's development. On an annual basis, subsequent to year end, the Board assesses performance against each individual executive's KPI criteria. During the 2016 financial year, and due to market conditions a total cash incentive payment sum of nil (2015: $213,465) was paid, or is payable, to KMP.

 

Performance Based Remuneration - Long Term Incentive

 

The Group has adopted a long-term incentive plan ("LTIP") comprising the "Prairie Employee and Contractors Performance Rights Plan" (the "Plan") to reward KMP and key staff (including eligible employees and contractors) for long-term performance. Shareholders approved the Plan in November 2013 at an Annual General Meeting of Shareholders. On 21 September 2015, shareholders approved an amendment to the Plan.

The Plan provides for the issuance of unlisted performance share rights ("Performance Rights") which, upon satisfaction of the relevant performance conditions attached to the Performance Rights, will result in the issue of an Ordinary Share for each Performance Right. Performance Rights are issued for no consideration and no amount is payable upon conversion thereof.

 

To achieve its corporate objectives the Company needs to attract and retain its key staff, whether employees or contractors. Performance Rights granted to eligible participants under the Plan, will assist with the Company's employment strategy and will:

(a)        enable the Company to recruit, incentivise and retain KMP and other eligible employees and contractors to assist with the completion of feasibility studies for the LCP to achieve the Company's strategic objectives;

(b)        link the reward of eligible employees and contractors with the achievements of strategic goals and the long term performance of the Company;

(c)        align the financial interests of eligible participants of the Plan with those of Shareholders; and

(d)        provide incentives to eligible employees and contractors of the Plan to focus on superior performance that creates Shareholder value.

Performance Rights granted under the Plan to eligible participants will be linked to the achievement by the Company of certain performance conditions as determined by the Board from time to time. These performance conditions must be satisfied in order for the Performance Rights to vest. The Performance Rights also vest where there is a change of control of the Company. Upon Performance Rights vesting, Ordinary Shares are automatically issued for no consideration. If a performance condition of a Performance Right is not achieved by the expiry date then the Performance Right will lapse.

During the financial year, Performance Rights were granted (and were on issue) to certain KMP and other employees with the following performance conditions:

(a)        Tranche 1 - Achievement of Geological Documentation Milestone on or before 30 September 2015;

(b)        Tranche 2 - Achievement of Mine Permit and Definitive Feasibility Study on or before 30 June 2017;

(c)        Tranche 3 - Award of Mine Permit Milestone on or before 31 December 2017;

(d)        Tranche 4 -  Decision to Commence Construction Milestone on or before 31 December 2018; and

(e)        Tranche 5 - Initial Production Milestone on or before 31 December 2020.

In addition, the Group may choose to provide unlisted incentive options ("Unlisted Options") to some KMP as part of their remuneration and incentive arrangements in order to attract and retain their services and to provide an incentive linked to the performance of the Group. The Board's policy is to grant Unlisted Options to KMP with exercise prices at or above market share price (at the time of agreement). As such, any Unlisted Options granted to KMP are generally only of benefit if the KMP performed to the level whereby the value of the Group increased sufficiently to warrant exercising the unlisted Options granted.

Other than service-based vesting conditions (if any), there are generally no additional performance criteria attached to any Unlisted Options granted to KMP, as given the speculative nature of the Group's activities and the small management team responsible for its running, it is considered that the performance of the KMP and the performance and value of the Group are closely related.

 

The Company prohibits executives entering into arrangements to limit their exposure to Unlisted Options and Performance Rights granted as part of their remuneration package.

Non-Executive Director Remuneration

The Board's policy is for fees to Non-Executive Directors to be no greater than market rates for comparable companies for time, commitment and responsibilities. Given the current size, nature and risks of the Company, Unlisted Options may also be used to attract and retain Non-Executive Directors. The Board determines payments to the Non-Executive Directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required.

The maximum aggregate amount of fees that can be paid to Non-Executive Directors is subject to approval by shareholders at a General Meeting. Director's fees paid to Non-Executive Directors accrue on a daily basis. Fees for Non-Executive Directors are not linked to the performance of the economic entity. However, to align Directors' interests with shareholder interests, the Directors are encouraged to hold shares in the Company and given the current size, nature and opportunities of the Company, Non-Executive Directors may receive Unlisted Options in order to secure and retain their services.

Relationship between Remuneration of KMP and Shareholder Wealth

During the Company's exploration and development phases of its business, the Board anticipates that the Company will retain earnings (if any) and other cash resources for the exploration and development of its resource projects. Accordingly, the Company does not currently have a policy with respect to the payment of dividends and returns of capital. Therefore there was no relationship between the Board's policy for determining, or in relation to, the nature and amount of remuneration of KMP and dividends paid and returns of capital by the Company during the current and previous four financial years.

The Board did not determine, and in relation to, the nature and amount of remuneration of the KMP by reference to changes in the price at which shares in the Company traded between the beginning and end of the current and the previous four financial years. Discretionary annual cash incentive payments are based upon achieving various non-financial key performance indicators as detailed under "Performance Based Remuneration - Short Term Incentive" and are not based on share price or earnings. However, as noted above, certain KMP may receive Unlisted Options in the future which generally will be of greater value to KMP if the value of the Company's shares increases sufficiently to warrant exercising the Unlisted Options.

Relationship between Remuneration of KMP and Earnings

As discussed above, the Company is currently undertaking exploration and development activities, and does not expect to be undertaking profitable operations (other than by way of material asset sales, none of which is currently planned) until sometime after the successful commercialisation, production and sales of commodities from one or more of its projects. Accordingly the Board does not consider earnings during the current and previous four financial years when determining, and in relation to, the nature and amount of remuneration of KMP.

Emoluments of Directors and Executives

Details of the nature and amount of each element of the emoluments of each Director and KMP of Prairie Mining Limited are as follows:

 



Short-term benefits


Post-employment benefits
$


Share-based payments
$




Total
$


Perfor-mance related
%



Salary & fees
$

Cash Incentive Payments
$

Living Allow-ance
$

Directors









Ian Middlemas

2016

36,000

-

-

3,420

-

39,420

-


2015

36,000

-

-

3,420

-

39,420

-

Benjamin Stoikovich

2016

452,718

-

-

-

276,999

729,717

38.0%


2015

432,531

164,204

-

-

175,712

772,447

44.0%

Carmel Daniele1

2016

-

-

-

-

-

-

-

Emil Morfett1,2

2016

30,147

-

-

-

-

30,147

-

Anastasios Arima3

2016

11,174

-

-

1,062

-

12,236

-


2015

79,167

-

-

7,521

-

86,688

-

Thomas Todd

2016

20,000

-

-

1,900

-

21,900

-


2015

15,889

-

-

1,509

359,800

377,198

95.4%

John Welborn3

2016

4,470

-

-

425

-

4,895

-


2015

23,219

-

-

2,206

-

25,425

-

Mark Pearce

2016

20,000

-

-

1,900

-

21,900



2015

23,219

-

-

2,206

-

25,425

-

Todd Hannigan

2016

-

-

-

-

-

-

-


2015

-

-

-

-

-

-

-

Other KMP









Janusz Jakimowicz

2016

332,504

-

49,437

-

592,433

974,374

60.8%


2015

331,983

-

48,061

-

456,122

836,166

54.5%

Artur Kluczny

2016

131,776

-

-

-

146,081

277,857

52.6%


2015

77,343

-

-

-

122,229

199,572

61.2%

Hugo Schumann4

2016

79,767

-

-

-

283,500

363,267

78.0%


2015

141,828

49,261

-

-

68,287

259,376

45.3%

Dylan Browne5

2016

102,177

-

-

-

64,151

166,328

38.6%


2015

-

-

-

-

25,640

25,640

100.0%

Total

2016

1,220,733

-

49,437

8,707

1,363,164

2,642,041



2015

1,161,179

213,465

48,061

16,862

1,207,790

2,647,357


Notes:

1   Ms Daniele was appointed on 21 September 2015. During the year Ms Daniele waived her Non-Executive Director remuneration and directed that it be paid to Mr Morfett. 

2   Mr Morfett was appointed on 21 September 2015 and resigned on 31 July 2016.

3   Messrs Arima and Welborn resigned on 21 September 2015.            

4   Mr Schumann resigned 31 December 2015

5   Mr Browne was appointed 25 October 2012. For the period 1 July 2015 to 30 September 2015, Mr Browne provided services as the Company Secretary through a services agreement with Apollo Group Pty Ltd ('Apollo'). For the period 1 July 2015 to 30 September 2015 Apollo was paid, or was payable, $62,000 (2015: 296,000) for the provision of a fully serviced office and administrative, accounting and company secretarial services to the Group. Please refer to the "Employment Contracts with Directors and KMP" section below for further details on Mr Browne's consultancy agreement with the Company.

Options and Performance Rights Granted to KMP

Details of Unlisted Options and Performance Rights granted as part of remuneration by the Company to each KMP of the Group during the financial year is as follows:

2016

Security

Grant
Date

Expiry Date

Vesting Date

Exercise Price

$

Grant Date Fair Value1

$

Number Granted

Number Vested

Director









Benjamin Stoikovich

Rights

2-Oct-15

30-Jun-17

30-Jun-17

-

0.3150

1,000,000

-


Rights

2-Oct-15

31-Dec-17

31-Dec-17

-

0.3150

1,000,000

-


Rights

2-Oct-15

31-Dec-18

31-Dec-18

-

0.3150

500,000

-

Other KMP









Janusz Jakimowicz

Rights

2-Oct-15

31-Mar-16

31-Mar-16

-

0.3150

1,000,000

1,000,0003

Artur Kluczny

Rights

2-Oct-15

31-Mar-16

31-Mar-16

-

0.3150

180,000

180,0003


Rights

2-Oct-15

31-Dec-17

31-Dec-17

-

0.3150

200,000

-


Rights

2-Oct-15

31-Dec-18

31-Dec-18

-

0.3150

250,000

-

Hugo Schumann

Rights

2-Oct-15

31-Mar-16

31-Mar-16

-

0.3150

50,000

50,0003


Rights

2-Oct-15

31-Dec-17

31-Dec-17

-

0.3150

300,000

-


Rights

2-Oct-15

30-Jun-17

30-Jun-17

-

0.3150

300,000

-


Rights

2-Oct-15

31-Dec-18

31-Dec-18

-

0.3150

250,000

-

Dylan Browne

Rights

2-Oct-15

30-Jun-17

30-Jun-17

-

0.3150

200,000

-


Rights

2-Oct-15

31-Dec-17

31-Dec-17

-

0.3150

200,000

-


Rights

2-Oct-15

31-Dec-18

31-Dec-18

-

0.3150

150,000

-

Notes:

1   For details on the valuation of the Unlisted Options and Performance Rights, including models and assumptions used, please refer to Note 18 to the financial statements.

2   Each Unlisted Option or Performance Right converts into one Ordinary Share of Prairie Mining Limited.

3   Converted to shares on 16 March 2016.

 

Details of the values of Unlisted Options granted, exercised or lapsed for each KMP of the Group during the 2016 financial year are as follows:

2016

Value of Options Granted during the Year1

$

Value of Options exercised during the year

$

Value of Options lapsed during the year

$

Value of Options included in remuneration report for the year

$

Remuneration for the year that consists of options

%

Director






Benjamin Stoikovich

-

-

-2

$42,184

5.80%

Notes:

1   For details on the valuation of the Unlisted Options, including models and assumptions used, please refer to Note 18.

2   On 21 September 2015, shareholders approved to cancel 1,500,000 unlisted options exercisable at $0.60 each on or before 30 June 2017, previously issued to the Company's Chief Executive Officer, in return for the issue of 2,500,000 performance rights with various vesting conditions and expiry dates between 30 June 2017 and 31 December 2018.

 

Employment Contracts with Directors and KMP

Mr Stoikovich has signed an appointment letter with an effective appointment date of 17 June 2013, under the terms of which he agrees to serve as a Director of the Company. Mr Stoikovich's appointment letter is terminable, pursuant to the Company's Constitution, by giving the Company notice in writing. Mr Stoikovich receives a fixed fee of £25,000 per annum pursuant to this appointment letter.

Windellama Capital Limited, a company of which Mr. Stoikovich is a director and shareholder, has a consulting agreement with the Company to provide project management and capital raising services (CEO services) related principally to the Lublin Coal Project.

The contract with Windellama Capital Limited commenced effectively from 9 July 2015 (previously Cordeaux Capital Limited). Under this agreement, Windellama Capital Limited is paid a fixed fee of £200,000 per annum and an annual incentive payment of up to £80,000 payable upon the successful completion of key project milestones as determined by the Board. In addition, Windellama Capital Limited will be entitled to receive a payment incentive of £112,500 in the event of a change of control clause being triggered with the Company. The consulting contract may be terminated by either Windellama Capital Limited or the Company by giving six months' notice. No amount is payable to Windellama in the event of termination of the contract arising from negligence or incompetence in regard to the performance of services specified in the contract. 

Mr Jakimowicz, President PD Co sp z o.o. has a consultancy agreement with the company dated 4 February 2013. The contract specifies the duties and obligations to be fulfilled by the President of PD Co sp z o.o. The contract may be terminated by either party by giving three months' notice. Mr Jakimowicz receives a consulting fee of $26,150, Management Board (PD Co sp. z o.o.) fees of PLN4,400 and an in-country living allowance of PLN11,630 per month.

Mr Kluczny, was appointed as Vice-President PD Co sp z o.o on 25 November 2014. He has a consultancy agreement with the company dated 12 December 2013 and amended effective 1 November 2014, which provides for a consulting fee of PLN26,600 per month for strategic advisory services. The contract may be terminated by either party by giving three months' notice. Mr Kluczny also receives a fixed Management Board (PD Co sp. z o.o.) fee of PLN4,400 per month.

Mr Dylan Browne, Company Secretary, has a letter of appointment dated 1 October 2015 confirming the terms and conditions of his appointment. Mr Browne's appointment letter is terminable pursuant to the Company's Constitution. Mr Browne receives a fee of £6,000 per annum pursuant to this appointment letter. In addition Candyl Limited ('Candyl'), a company of which Mr Browne is a director and shareholder, has a consultancy agreement with the Company, which specifies the duties and obligations to be fulfilled by Mr Browne as the Company Secretary. Either party may terminate the agreement with three months written notice. No amount is payable in the event of termination for material breach of contract, gross misconduct or neglect. Candyl receives an annual consultancy fee of £63,000.

Loans from Key Management Personnel


No loans were provided to or received from Key Management Personnel during the year ended 30 June 2016 (2015: Nil).

 

Other Transactions

 

Apollo Group Pty Ltd, a Company of which Mr Mark Pearce is a Director and beneficial shareholder, was paid or is payable $217,000 (2015: $296,000) for the provision of serviced office facilities and administration services. The amount is based on a monthly retainer due and payable in advance, with no fixed term, and is able to be terminated by either party with one month's notice. This item has been recognised as an expense in the Statement of Profit or Loss and other Comprehensive Income. At 30 June 2016, $12,500 (2015: $22,000) was included as a current liability in the Statement of Financial Position.

 

Equity instruments held by KMP

Option and Performance Right holdings of Key Management Personnel

2016

Held at
1 July 2015

Granted as Remuner-ation

Options Exercised/
Rights Converted

Net Other Change

Held at
30 June 2016

Vested and exercise-  able at 30 June 2016

Directors







Ian Middlemas

-

-

-

-

-

-

Benjamin Stoikovich

4,500,000

2,500,0001

-

(1,500,000)1

5,500,000

3,000,000

Carmel Daniele

-2

-

-

-

-

-

Emil Morfett

-2

-

-

-

-

-

Anastasios Arima

1,500,000

-

-

-

1,500,0003

1,500,0003

Thomas Todd

1,400,000

-

-

-

1,400,000

-

John Welborn

-

-

-

-

-3

-3

Mark Pearce

-

-

-

-

-

-

Todd Hannigan

1,400,000

-

-

-

1,400,000

-

Other KMP







Janusz Jakimowicz

3,400,000

1,000,000

(2,000,000)

-

2,400,000

-

Artur Kluczny

750,000

630,000

(455,000)

-

925,000

-

Hugo Schumann

1,050,000

900,000

(50,000)

-

1,900,0003

1,050,0003

Dylan Browne

575,000

550,000

-

(250,000)4

875,000

325,000

Notes:

1  On 21 September 2015, shareholders approved to cancel 1,500,000 unlisted options exercisable at $0.60 each on or before 30 June 2017, previously issued to the Company's Chief Executive Officer, in return for the issue of 2,500,000 performance rights with various vesting conditions and expiry dates between 30 June 2017 and 31 December 2018         

2    As at date of appointment

3   As at date of resignation

4   Expiry of Unlisted Options exercisable at $0.25 on or before 30 June 2016

Shareholdings of Key Management Personnel

2016

Held at
1 July 2015

Granted as Remuneration

Options Exercised/
Rights Converted

Net Other Change

Held at
30 June 2016






Ian Middlemas

10,000,000

-

-

600,0001

10,600,000

Benjamin Stoikovich

-

-

-

-

-

Carmel Daniele

-2

-

-

-

-

Emil Morfett

-2

-

-

-

-

Anastasios Arima

2,910,000

-

-

(500,000)3

2,410,0004

Thomas Todd

2,800,000

-

-

-

2,800,000

John Welborn

4,500,000

-

-

-

4,500,0004

Mark Pearce

3,000,000

-

-

-

3,000,000

Todd Hannigan

3,146,398

-

-

-

3,146,398

Other KMP






Janusz Jakimowicz

1,541,931

-

2,000,000

-

3,451,931

Artur Kluczny

20,000

-

455,000

95,2381

570,238

Hugo Schumann

-

-

50,000

-

50,0003

Dylan Browne

-

-

-

-

-

Notes:

1   On market purchases

2    As at date of appointment.

3   Off-market transfer as part of the full and final settlement of divorce proceedings in accordance with the Family Court of WA.

4   As at date of resignation.

End of Remuneration Report

DIRECTORS' MEETINGS

The number of meetings of Directors held during the year and the number of meetings attended by each Director was as follows (there were no Board committees during the financial year):

 


Board Meetings


Number eligible to attend

Number attended

Ian Middlemas

2

2

Benjamin Stoikovich

2

2

Carmel Daniele

1

1

Emil Morfett

1

1

Thomas Todd

2

2

Anastasios Arima

1

1

John Welborn

1

1

Mark Pearce

2

2

Todd Hannigan

-

-

NON-AUDIT SERVICES

Non-audit services provided by our auditors, Ernst & Young and related entities, are set out below. The Directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised.

 


2016

$

2015

$

Preparation of income tax return

8,000

8,000

Professional fees in relation to the London and Warsaw Stock Exchange listings

-

19,703


8,000

27,703

DIVIDENDS

No dividends have been declared, provided for or paid in respect of the financial year ended 30 June 2016 (2015: nil).

AUDITOR'S INDEPENDENCE DECLARATION

The lead auditor's independence declaration for the year ended 30 June 2016 has been received and can be found on page 20 of the Directors' Report.

 

Signed in accordance with a resolution of the Directors.

 

 

 

Benjamin Stoikovich

Director

 

23 September 2016

 

Forward Looking Statements

This release may include forward-looking statements. These forward-looking statements are based on Prairie's expectations and beliefs concerning future events. Forward looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside the control of Prairie, which could cause actual results to differ materially from such statements. Prairie makes no undertaking to subsequently update or revise the forward-looking statements made in this release, to reflect the circumstances or events after the date of that release.

Competent Person Statements

The information in this report that relates to Exploration Results, Coal Resources, Coal Reserves, Mining, Coal Preparation, Infrastructure, Production Targets and Cost Estimation was extracted from Prairie's announcement dated 8 March 2016 entitled 'Pre-Feasibility Study Confirms LCP as One of the Lowest Cost Global Coal Suppliers Into Europe' which is available to view on the Company's website at www.pdz.com.au.

The information in the original announcement that related to Coal Reserves, Mining, Coal Preparation, Infrastructure, Production Targets and Cost Estimation is based on, and fairly represents, information compiled or reviewed by Mr Stephen Newson, a Competent Person who is a Chartered Engineer and Fellow of the Institute of Materials, Minerals and Mining (UK) and has a 1st Class Mine Manager's Certificate of Competency. Mr Newson is employed by independent consultants Golder Associates (UK). Mr Newson has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'.

The information in the original announcement that related to Exploration Results and Coal Resources is based on, and fairly represents, information compiled or reviewed by, Mr Samuel Moorhouse, a Competent Person who is a Chartered Geologist and is employed by independent consultants Royal HaskoningDHV UK Limited. Mr Moorhouse has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Mr Moorhouse consents to the inclusion in the report of the matters based on their information in the form and context in which it appears.

Prairie confirms that: a) it is not aware of any new information or data that materially affects the information included in the original announcement; b) all material assumptions and technical parameters underpinning the Coal Resource, Coal Reserve, Production Target, and related forecast financial information derived from the Production Target included in the original announcement continue to apply and have not materially changed; and c) the form and context in which the relevant Competent Persons' findings are presented in this presentation have not been materially modified from the original announcement.

 

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2016

 


 

Notes

 

2016

 

2015



$

$

CONTINUING OPERATIONS




Revenue

2(a)

309,969

34,912

Other income

2(b)

1,765,429

1,823,851

Gain on the derecognition of available-for-sale financial assets

7

-

9,593,775

Exploration and evaluation expenses


(4,830,109)

(7,301,685)

Employment expenses

3(a)

(289,008)

(175,372)

Administration and corporate expenses


(310,083)

(285,947)

Occupancy expenses


(465,018)

(489,131)

Share-based payment expenses

3(a)

(1,723,271)

(1,576,867)

Business development expenses


(1,219,309)

(1,301,836)

Other expenses

3(b)

-

(1,063,846)

Loss before income tax


(6,761,400)

(742,196)

Income tax expense

4

-

(4,410,000)

Net loss for the year


(6,761,400)

(5,152,146)





Net loss attributable to members of Prairie Mining Limited


(6,761,400)

(5,152,146)





Other comprehensive income




Items that may be reclassified subsequently to profit or loss:




Changes in fair value of available-for-sale financial assets


-

(3,642,124)

Deferred tax on available-for-sale financial assets

4

-

1,096,845

Net realised gain on available-for-sale financial assets transferred to other income


-

(1,323,851)

Deferred tax on sale of available-for-sale financial assets

4

-

397,155

Gain on derecognition of  available-for-sale financial assets transferred to other income

7

-

(9,593,775)

Deferred tax on gain on derecognition of  available-for-sale financial assets

4

-

2,916,000

Exchange differences on translation of foreign operations


10,230

38,121

Total other comprehensive income/(loss) for the year, net of tax


10,230

(10,111,629)

Total comprehensive loss for the year, net of tax


(6,751,170)

(15,263,775)





Total comprehensive loss attributable to members of Prairie Mining Limited


(6,751,170)

(15,263,775)





Basic and diluted loss per share from continuing operations (cents per share)

14

(4.52)

(3.81)

 

The above Consolidated Statement of Profit or Loss and other Comprehensive Income should be read in conjunction with the accompanying notes.

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2016

 



 

2016

 

2015


Notes

$

$

ASSETS




Current Assets




Cash and cash equivalents

13(b)

18,063,119

2,076,409

Trade and other receivables           

5

265,635

197,878

Other financial assets

6

-

7,569,754

Total Current Assets


18,328,754

9,844,041





Non-current Assets




Other financial assets

7

-

-

Property, plant and equipment


98,140

58,097

Exploration and evaluation assets

8

530,000

530,000

Total Non-current Assets


628,140

588,097





TOTAL ASSETS


18,956,894

10,432,138





LIABILITIES




Current Liabilities




Trade and other payables

9

805,313

1,032,880

Other financial liabilities

10

335,821

-

Total Current Liabilities


1,141,134

1,032,880









TOTAL LIABILITIES


1,141,134

1,032,880





NET ASSETS


17,815,760

9,399,258





EQUITY




Contributed equity

11

51,298,932

36,649,571

Reserves

12

3,043,493

2,620,683

Accumulated losses


(36,526,665)

(29,870,996)

TOTAL EQUITY


17,815,760

9,399,258

 

The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

AS AT 30 JUNE 2016

 


Ordinary Shares

Available-For-Sale Reserve

Share- Based Payments Reserve

Foreign Currency Translation Reserve

Accumulated Losses

Total
Equity


$

$

$

$

$

$








Balance at 1 July 2015

36,649,571

-

2,597,720

22,963

(29,870,996)

9,399,258








Net loss for the year

-

-

-

-

(6,761,400)

(6,761,400)

Other comprehensive income:







Exchange differences on translation of foreign operations

-

-

-

10,230

-

10,230

Total comprehensive income/(loss) for the period

-

-

-

10,230

(6,761,400)

(6,751,170)








Transactions with owners recorded directly in equity







Issue of ordinary shares

321,248

-

-

-

-

321,248

Share issue costs

(4,900)

-

-

-

-

(4,900)

Issue of Convertible Note (Note 11)

15,000,000

-

-

-

-

15,000,000

Recognition of  Conversion right attached to Convertible Note (Note 11)

(968,284)





(968,284)

Costs to issue convertible note

(903,663)

-

-

-

-

(903,663)

Transfer from share-based payments

1,204,960

-

(1,204,960)

-

-

-

Lapse of performance Rights

-

-

(8,356)

-

8,356

-

Lapse of Unlisted Options

-

-

(97,375)

-

97,375

-

Recognition of share-based payments

-

-

1,723,271

-

-

1,723,271

Balance at 30 June 2016

51,298,932

-

3,010,300

33,193

(36,526,665)

17,815,760








Balance at 1 July 2014

34,864,888

10,149,750

1,051,658

(15,158)

(24,718,850)

21,332,288








Net loss for the year

-

-

-

-

(5,152,146)

(5,152,146)

Other comprehensive income:







Changes In fair value of available-for-sale financial assets

-

(3,642,124)

-

-

-

(3,642,124)

Deferred tax  available-for-sale financial assets

-

1,096,845

-

-

-

1,096,845

Net realised gain on available-for-sale financial assets transferred to other income

-

(1,323,851)

-

-

-

(1,323,851)

Deferred tax on sale of available-for-sale financial assets

-

397,155

-

-

-

397,155

Gain on derecognition of  available-for-sale financial assets transferred to other income

-

(9,593,775)

-

-

-

(9,593,775)

Deferred tax on  gain on de-recognition of  available-for-sale financial assets

-

2,916,000

-

-

-

2,916,000

Exchange differences on translation of foreign operations

-

-

-

38,121

-

38,121

Total comprehensive income/(loss) for the period

-

(10,149,750)

-

38,121

(5,152,146)

(15,263,775)








Transactions with owners recorded directly in equity







Issue of ordinary shares

1,768,133

-

-

-

-

1,768,133

Share issue costs

(14,255)

-

-

-

-

(14,255)

Exercise of Unlisted Options

30,805

-

(30,805)

-

-

-

Recognition of share-based payments

-

-

1,576,867

-

-

1,576,867

Balance at 30 June 2015

36,649,571

-

2,597,720

22,963

(29,870,996)

9,399,258

 

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes

 

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2016

 


Notes

 

2016

 

2015



$

$

CASH FLOWS FROM OPERATING ACTIVITIES




Payments to suppliers and employees     


(7,304,600)

(9,265,398)

Interest received from third parties


254,470

58,667

Proceeds from retirement of performance bonds


-

22,111

NET CASH FLOWS USED IN OPERATING ACTIVITIES

13(a)

(7,050,130)

(9,184,620)





CASH FLOWS FROM INVESTING ACTIVITIES




Payments for plant and equipment


(76,600)

(37,896)

Proceeds from sale of listed securities


8,702,720

6,459,932

Proceeds from Farm-In Agreement


-

500,000

NET CASH FLOWS FROM IN INVESTING ACTIVITIES


8,626,120

6,922,036





CASH FLOWS FROM FINANCING ACTIVITIES




Proceeds from issue of shares


-

1,768,133

Payments for share issue costs


(16,135)

(5,327)

Proceeds from issues of convertible note


15,000,000

-

Payments for issue of convertible note


(566,735)

-

NET CASH FLOWS FROM FINANCING ACTIVITIES


14,417,130

1,762,806





Net increase/(decrease) in cash and cash equivalents


15,993,120

(499,778)

Net foreign exchange differences


(6,410)

1,887

Cash and cash equivalents at beginning of year


2,076,409

2,574,300

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

13(b)

18,063,119

2,076,409

 

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes

 

The following sections are available in the full version of the Annual Financial Report on Prairie Mining Limited's website: www.pdz.com.au  

Notes to and Forming Part of the Financial Statements


Directors' Declaration


Auditor's Independence Declaration


Independent Auditor's Report


 

Ben Stoikovich

Artur Kluczny


Chief Executive Officer

Group Executive - Poland


+44 207 478 3900

+48 22 351 73 80

[email protected]

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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