Source - RNS
RNS Number : 2699L
Coal of Africa Limited
30 September 2016
 



 

COAL OF AFRICA LIMITED

AUDITED ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 30 June 2016

(Expressed in United States Dollars unless otherwise stated)

 



Page



Directors' Report

2



Auditor's Independence Declaration

24



Corporate Governance Statement

25 



Directors' Declaration

37



Consolidated Statement of Profit or Loss and Other Comprehensive Income

38



Consolidated Statement of Financial Position

39



Consolidated Statement of Changes in Equity

40



Consolidated Statement of Cash Flows

41



Notes to the Consolidated Financial Statements

42



Independent Auditor's Report

95


The directors of Coal of Africa Limited ("CoAL" or the "Company") submit herewith the annual report of the Company and the entities controlled by the Company (its subsidiaries), collectively referred to as the "Group" or the "Consolidated Entity," for the financial year ended 30 June 2016. 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 Pryor

Independent Non-Executive Chairman

 

Mr Pryor is currently the chief executive officer of Alufer Mining Limited and was previously the chief executive officer of African Minerals Limited and prior to that the chief executive of Q Resources plc. Between 2006 and 2010 he held senior executive positions within Anglo American Plc as head of business development, and CEO of Anglo Ferrous Brazil Inc.

David Hugh Brown

Executive Director and Chief Executive Officer

 

 

 

 

Mr Brown is a Chartered Accountant, CA (SA) and completed his articles with Ernst & Young, graduating from the University of Cape Town. Mr Brown joined CoAL following a tenure of almost 14 years at Impala Platinum Holdings Limited ("Implats"). He joined the Impala Group in 1999 and served as chief financial officer and financial director of Implats before being appointed chief executive officer in 2006. He is currently an independent non-executive director of Vodacom Group Limited. In the past he has served as a non-executive director of Simmer & Jack Limited, as well as Edcon Holdings Limited and chairman of ASX listed Zimplats Holdings Limited.

De Wet Olivier Schutte

Executive Director and Chief Financial Officer

 

Mr De Wet Schutte is a Chartered Accountant, CA (SA) and completed an MBA at the University of Virginia in 2002. He has been involved at the senior level in the mining and natural resources industry for the past 16 years, most notably as Managing Director, Natural Resources at Macquarie Bank and CFO at the listed platinum producer, Atlatsa Resources Corporation. Prior to these positions he worked for Harmony Gold Mining (Pty) Ltd as its New Business and Exploration Executive for a period of three years.

 

Peter George Cordin

Independent Non-Executive Director

Mr Cordin has a Bachelor 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.

Khomotso Brian Mosehla

Independent Non-Executive Director

Mr Mosehla is a Chartered Accountant, CA (SA) and completed his articles with KPMG. Mr Mosehla  worked for five years at African Merchant Bank Limited, where he gained a broad range of experience, including management buy-out, leveraged buy-out and capital restructuring/raising transactions. In 2003, he established Mvelaphanda Corporate Finance, for the development of Mvelaphanda's mining and non-mining interests. Mr Mosehla served as a director on the boards of several companies, including Mvelaphanda Resources Limited, and he is currently the Chief Executive Officer of Mosomo Investment Holdings Proprietary Limited. Mr Mosehla is currently s director of Northam Platinum Ltd as well as Zambezi Platinum Limited

Rudolph Henry Torlage

Non-Executive Director

 

Mr Torlage is a Chartered Accountant and has over twenty years experience with ArcelorMittal South Africa. He is currently General Manager, Strategy and Special Projects and a Board member of various unlisted ArcelorMittal Group companies. He was previously the Executive Director Finance at ArcelorMittal South Africa.

Andrew David Mifflin

Independent Non-Executive Director

 

Mr Mifflin obtained his BSc. (Hons) Mining Engineering from Staffordshire University and has a Master's Degree in Business Administration. Andrew has over 30 years' experience specifically in the coal mining arena. His experience spans across various organisations such as British Coal Corporation, Xstrata and more recently GVK Resources. He has gained in depth knowledge in coal operations, both thermal and hard coking coal as well as in project development.

Thabo Felix Mosololi

Independent Non-Executive Director

Mr Mosololi is a Chartered Accountant, CA (SA)  qualified in South Africa and brings considerable expertise as a director of various companies as well as from his time as Finance Director and Operations Director with Tsogo Sun. Thabo has 20 years of experience within the South African corporate environment. Mr Mosololi is currently a director of Pan African Resources PLC.

No directors were appointed or resigned during the financial year end 30 June 2016.


Directorships of other listed companies

Directorships of other listed companies held by the directors in the three years immediately before the end of the financial year are as follows:

Director

Company

Period of directorship




Bernard Robert Pryor

African Minerals Limited

2011 - 2014

David Hugh Brown

Vodacom Group Limited

2012 - Present

De Wet Olivier Schutte

None


Peter George Cordin

Dragon Mining Limited

Vital Metals Limited

Aurora Minerals Limited

2006 - 2014

2009 - Present

2014 - Present

Khomotso Brian Mosehla

Northam Platinum Limited

Zambezi Platinum Limited

2015 - Present

2015 - Present

Rudolph Henry Torlage

None


Andrew David Mifflin

None


Thabo Felix Mosololi

Evraz Highveld Steel & Vanadium Limited

Pan African Resources PLC

 

2013 - 2015

2014 - Present

 



 

Directors' shareholdings

The following table sets out each director's relevant interest in shares or options in shares or debentures of the Company as at the date of this report.

Director

Ordinary shares

Performance Grants

Unlisted options





B Pryor(1)

150,000

-

1,000,000

D Brown(2)

825,000

9,714,021

10,575,000

D Schutte(3)

-

5,449,944

-

P Cordin(4)

1,371,059

-

1,000,000

K Mosehla(5)

-

-

1,000,000

R Torlage

-

-

-

A Mifflin(6)

-

-

1,000,000

T Mosololi(7)

10,000

-

1,000,000


2,356,059

15,163,965

15,575,000

*Subject to shareholder approval

1.   Mr Pryor was issued with the following share options:

·      1,000,000 share options on 28 November 2012 with an exercise price of GBP0.25 expiring three years from date of issue. These share options expired during the current financial period.

·      1,000,000 share options with an exercise price GBP0.375, and expiring three years from date of issue, were due to Mr Pryor on 6 August 2015. Mr Pryor has agreed to forfeit these options prior to issue and therefore will not be included for shareholder approval.

·      1,000,000 share options with an exercise price of GBP0.055, and expiring three years from date of issue, issued on 27 November 2015.

2.   Mr Brown was issued with the followings share options:

·      2,500,000 share options on 28 November 2012 with an exercise price of GBP0.25 expiring three years from date of issue, vesting immediately. These share options expired during the current financial period.

·      On appointment as Chief Executive Officer and Executive Director on 1 February 2014, Mr Brown received 10,575,000 options in accordance with the Company's employee share option plan exercisable in three equal tranches over a three-year period. The first tranche of 3,525,000 options are exercisable on 1 February 2015 at ZAR1.20 each, a further 3,525,000 options are exercisable on 1 February 2016 at an exercise price of  ZAR1.32 per option and the remaining 3,525,000 options are exercisable on 1 February 2017 at an exercise price of ZAR1.45. All 10,575,000 options expire on 1 February 2019.

·      9,714,021 unlisted conditional performance rights ("Performance Rights") were granted on 30 November 2015. The Performance Rights will be granted for no consideration. No exercise price is payable upon exercise of the Performance Rights.

 

3.   Mr Schutte was issued with the following share options:

·      On appointment as Chief Financial Officer and Executive Director on 22 June 2015 Mr Schutte received 6,600,000 options in accordance with the Company's employee share option plan. The options vest in three equal tranches over a three-year period and are subject to shareholder approval. The first tranche of 2,200,000 options are exercisable on 21 June 2016 at ZAR1.20 each, a further 2,200,000 options are exercisable on 21 June 2017 at ZAR1.32 per option and the remaining 2,200,000 options are exercisable on 21 June 2018 at an exercise price of ZAR1.45 each. These options are still subject to shareholder approval. All 6,600,000 options expire on 22 June 2020.

·      5,449,944 unlisted conditional performance rights granted on 30 November 2015. The Performance Rights will be granted for no consideration. No exercise price is payable upon exercise of the Performance Rights.

4.   958,300 shares are held by the Cordin Pty Ltd (The Cordin Family Trust) and 412,759 shares held by Cordin Pty Ltd (The Cordin Superannuation Fund). Mr Cordin is a beneficiary of both the trust and superannuation fund. Mr Cordin was issued 1,000,000 share options with an exercise price of GBP0.055, and expiring three years from date of issue, issued on 27 November 2015.

5.   Mr Mosehla was issued 1,000,000 share options with an exercise price of GBP0.055, and expiring three years from date of issue, issued on 27 November 2015.

6.   Mr Mifflin was issued 1,000,000 share options with an exercise price of GBP0.055, and expiring three years from date of issue, issued on 27 November 2015.



 

7.   Mr Mosololi was issued 1,000,000 share options with an exercise price of GBP0.055, and expiring three years from date of issue, issued on 27 November 2015.

Remuneration of directors and key management personnel

Information about the remuneration of directors and key management personnel is set out in the remuneration report of this directors' report, on pages 12 to 23.

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 82.

Company secretary

Mr Tony Bevan, a qualified Chartered Accountant with over 25 years' experience, is the Company Secretary and works with Endeavour Corporate Pty Ltd, the company engaged to provide contract secretarial, accounting and administration services to CoAL.



 

Principal activities

The Company is a limited company incorporated in Australia. Its common shares are listed on the Australian Securities Exchange ("ASX"), the AIM Market of the London Stock Exchange ("AIM") and the Johannesburg Stock Exchange ("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 Makhado hard coking and thermal coal project that has been granted a New Order Mining Right and has the potential to produce approximately 5.5 million tonnes per annum of saleable product.;

·     The Vele Colliery, a semi soft coking and thermal coal mine currently under care and maintenance with the potential to supply approximately 1.2million tonnes per annum of saleable product once all regulatory approvals have been obtained and plant modification completed.

·     four exploration and development stage coking and thermal coal projects, namely Chapudi, Generaal, Mopane, and Telema and Gray in the Soutpansberg Coalfield; and

·     the Mooiplaats colliery currently on care and maintenance and subject to a formal sale process which is expected to be completed by 30 June 2017.

Review of operations

The Company undertook the following activities during the year:

Operational salient features

·     No Fatalities (FY2015: none) and no lost time injuries recorded during the year (FY2015: none).

·     Mooiplaats Colliery is still on care and maintenance and is subject to a formal sale process.

·     The Integrated Water Use Licence ("IWUL") for its Vele Colliery in the Limpopo Province has been renewed for a further twenty years.

·      IWUL for its Makhado Project has been granted by the Department of Water and Sanitation ("DWS") for a period of 20 years. The IWUL was automatically suspended following an appeal to the DWS submitted by the Vhembe Mineral Resources Forum.

·     The South African Minister of the Department of Environmental Affairs ("DEA"), has dismissed the Appeal against the Environmental Authorisation ("EA") Amendment for the Vele Colliery in the Limpopo Province.

·     The Optimisation Study and Front End Engineering and Design ("FEED") for the Makhado Project has been completed by the International engineering and project delivery group DRA Projects South Africa ("DRA").

·     The Company signed a non-binding Memorandum of Understanding ("MOU") with Qingdao Hengshun Zhongsheng Group Co Ltd ("Hengshun") with respect to a proposed equity investment in Baobab Mining and Exploration (Pty) ("Baobab") a subsidiary of the Company. Baobab is the subsidiary of CoAL that owns the mining right for the Makhado Project.



 

Corporate salient features

·     The Company agreed the terms of a recommended offer to be made by CoAL for the entire issued and to be issued share capital of Universal Coal Plc ("Universal").

Legal

·     During the year the Company received a notice from Rio Tinto Minerals Development Limited ("Rio Tinto") and Kwezi Mining Proprietary Limited alleging that the Company is in breach of an obligation under the agreements pursuant to the acquired interests in Chapudi Coal Pty Ltd and Kwezi Mining Exploration Pty Ltd, and therefore all amounts owed by CoAL and MbeuYashu were claimed as due and payable. New payment terms have been negotiated with Rio Tinto for the outstanding liability FY2016: $16.5million (FY2015: $19.8 million) owing to Rio Tinto with the balance to be paid in monthly instalments of at least $650,000 plus interest, and final settlement date of June 2017 has remained unchanged.

Subsequent events

Post year end, the following significant operational events took place:

·     The Company announced on 15 July 2016 that the recommended offer by CoAL for the entire issued and to be issued share capital of Universal had lapsed.

There have been no other events between 30 June 2016 and the date of this report which necessitate adjustment to the consolidated statements of comprehensive income, consolidated statements of financial position, consolidated statements of changes in equity and the consolidated statements of cash flows at that date. 



 

Financial review

·     No revenue was generated during the year as result of all operations on care and maintenance (FY 2015 $nil).

·     Non-cash charges of $12.8 million (FY2015: $7.5 million) including:

§ Depreciation and amortisation of $1.2 million (FY2015: $1.4 million);

§ Unrealised foreign exchange loss of $9.5 million (FY2015: $18.9 million gain) as a result of the South African rand weakening against the United States dollar;  and

§ Share based payment expense of $0.2 million (FY2015: $3.1 million).

·     Total unrestricted cash balances at year-end, including cash held by operations available for sale of $19.5 million (FY2015: $17.8 million).

Future developments

The NOMR for the Makhado Project was granted in May 2015 as well as a section 11 approval for the transfer of the right to CoAL's 74% owned subsidiary, Baobab Mining. The Company was granted the IWUL in January 2016 for the period equal to life of mine. The Company completed a Definitive Feasibility Study ("DFS") for Makhado during FY2013 which indicates that the project has 344.8 million mineable tonnes in situ and a 16 year life of mine. The opencast project is expected to produce 12.6Mtpa of ROM coal yielding 2.3Mtpa of hard coking coal and 3.2Mtpa of thermal coal for domestic and export markets. The Makhado project finalised the FEED during the current financial year and is currently engaged with investors to complete the funding for the project.  Once funding is in place and regulatory approvals have been obtained the company expects board approval to commence construction by the second half of CY 2017.

The Company will continue to progress all outstanding regulatory matters as they relate to both the Makhado project and the Vele Colliery. With respect to the Vele Colliery the extension and amendment of the Vele IWUL was granted during the year under review. Given the prevailing commodity market conditions the company applied for all approvals to cover future mining areas which includes the diversion of two non-perennial streams. When the latest approval is finalised (expected toward the end of CY2016) the company will make the decision on the commencement of the plant modification taking into account the prevailing market conditions.

The exploration and development of the CoAL prospects in the Soutpansberg coalfield is the catalyst for the long-term growth of the Company. The DMR is considering the Company's NOMR applications for the Mopane, Generaal, Chapudi and Telema and Gray projects.



 

Environmental regulations

The Consolidated Entity's operations are not subject to any significant environmental regulations under either Commonwealth or State legislation and there has consequently been no breach. The Group is subject to numerous environmental regulations in South Africa, including the

·      Environment Conservation Act (No. 73 of 1989),

·      National Water Act (No. 45 of 1965),

·      National Environmental Management Act (No. 107 of 1998),

·      the National Environmental Management Air Quality Act (No. 39 of 2004)

·      and the environmental provisions in the Mineral and Petroleum Resources Development Act (No 28 of 2002).

 

There is uncertainty regarding the interrelationship between these statutes in the mining context and as such complete compliance with all simultaneously is often difficult. The Board believes that the Consolidated Entity has adequate systems in place for the management of its environmental impacts but from time to time statutory non-compliances may occur. The Board takes these seriously and undertook a thorough review of all its activities during FY2013 to bring them into compliance and continues to monitor compliance thereof.

Dividends

No dividend has been paid or proposed for the financial year ended 30 June 2016 (FY2015: nil).

Shares under option or issued on exercise of options

Details of unissued shares under option as at the date of this report are:


Number of shares under option

Class of shares

Exercise price

Expiry date

ESOP Unlisted Options

2,670,000

Ordinary

ZAR7.60

14 February 2017

ESOP Unlisted Options

3,932,928

Ordinary

ZAR1.75

30 June 2017

Investec options

20,000,000

Ordinary

ZAR1.32

21 October 2018

ESOP Unlisted Options

3,525,000

Ordinary

ZAR1.20

1 February 2019

ESOP Unlisted Options

3,525,000

Ordinary

ZAR1.32

1 February 2019

ESOP Unlisted Options

3,525,000

Ordinary

ZAR1.45

1 February 2019

ESOP Unlisted Options

5,000,000

Ordinary

GBP0.055

27 November 2018

Total Unlisted Options

42,177,928




 

The holders of these options do not have the right, by virtue of the option, to participate in any share issue of the Company or of any other body corporate or registered scheme.

Details of unissued performance grants as at the date of this report are:


Number of shares under option

Class of shares

Exercise price

Expiry date

ESOP Performance Grant

9,714,021

Ordinary

Nil

1 December 2018

ESOP Performance Grant

5,449,944

Ordinary

Nil

1 December 2018

ESOP Performance Grant

18,285,159

Ordinary

Nil

1 December 2018

Total Performance Grant

33,449,124




 

No shares or interests were issued during or since the end of the financial year as a result of exercise of options.

Indemnification of officers and auditors

During the financial year, the Company paid a premium in respect of a contract insuring the directors of the Company, the company secretary, and all executive officers of the Company and of any related body corporate against a liability incurred by such a director, secretary or executive officer to the extent permitted by the Corporations Act 2001.

The Company has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred by such an officer or auditor.

Directors' meetings

The following table sets out the number of directors' meetings (including meetings of committees of directors) held during the financial year and the number of meetings attended by each director (while they were a director or committee member). During the financial year, a total of nine board meetings were held, four scheduled and five unscheduled, zero placing and bid committee meetings, four nomination and remuneration committee meeting, four audit committee meetings and four safety and health committee meeting were held.


Board Meetings

Audit Committee Meetings

Nomination and Remuneration Committee Meetings

Safety, Health and Environment Committee Meetings

Director

Held

Attended

Held

Attended

Held

Attended

Held

Attended

B Pryor

9

9

4

4

4

4

-

-

D Brown

9

9

-

-

4

4

4

4

D Schutte

9

9

-

-

-

-

-

-

P Cordin

9

9

-

-

-

-

4

4

K Mosehla

9

6

4

2

-

-

-

-

R Torlage

9

8

-

-

-

-

-

-

A Mifflin

9

9

-

-

-

-

4

4

T Mosololi

9

7

4

4

4

4

-

-

 

Proceedings on behalf of the Company

No persons applied for leave to bring or intervene in proceedings on behalf of the Company during or since the end of the financial year.

Non-audit services

Non-audit services were provided during the current financial year for services rendered relating to the offer for Universal and additional review procedures. Details of amounts paid or payable to the auditor for services provided during the year by the auditor are outlined in note 8 to the consolidated financial statements.

Auditor's independence declaration

The auditor's independence declaration is included on page 24 of these consolidated financial statements.

Remuneration report (Audited)

This remuneration report, which forms part of the directors' report, sets out information about the remuneration of Coal of Africa Limited's directors and its senior management for the financial year ended 30 June 2016. The prescribed details for each person covered by this report are detailed below under the following headings:

·      director and senior management details;

·      remuneration policy;

·      relationship between the remuneration policy and company performance;

·      remuneration of directors and senior management; and

·      key terms of employment contracts.

The Board is responsible for establishing remuneration packages applicable to the Board members of the Company. The policy adopted by the Board is to ensure that remuneration properly reflects an individual's duties and responsibilities and that remuneration is competitive in attracting, retaining and motivating people of the highest calibre.

Directors' remuneration packages are also assessed in the light of the condition of markets within which the Company operates, the Company's financial condition and the individual's contribution to the achievement of corporate objectives. Executive Directors are remunerated by way of a salary or consultancy fees, commensurate with their required level of service.

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 ($744,090).

The Board has nominated a Nomination and Remuneration Committee which was made up as follows: Mr Pryor (Chairman), Mr Mosololi and Mr Brown. The Company does not have any scheme relating to retirement benefits for Executive or Non-Executive Directors.

Director and key management personnel details

The following persons acted as directors of the Company during or since the end of the financial year:

·     B Pryor                             Independent Chairman

·     D Brown                           Chief Executive Officer and Executive Director

·     D Schutte                         Chief Financial Officer and Executive Director

·     P Cordin                           Independent Non-Executive Director

·     K Mosehla                       Independent Non-Executive Director

·     R Torlage                         Non-Executive Director

·     A Mifflin                          Independent Non-Executive Director

·     T Mosololi                      Independent Non-Executive Director

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity. The term 'key management' is used in this remuneration report to refer to the following persons.

 

·     C Bronn                            Chief Operating Officer

 

Except as noted, the named persons held their current position for the whole of the financial year and since the end of the financial year.

 

 

 

 

 

Remuneration policy

The remuneration policy of CoAL has been designed to align key management personnel objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives based on key performance areas affecting the consolidated Group's financial results. The Board of CoAL believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best key management personnel to run and manage the consolidated Group, as well as create goal congruence between Directors, key management and shareholders.

The Board's policy for determining the nature and amount of remuneration for key management personnel of the consolidated Group is as follows:

·     The remuneration structure is developed by the Nomination and Remuneration Committee and approved by the Board after professional advice is periodically sought from independent external consultants.

·     All key management personnel receive a base salary (based on factors such as length of service and experience), options and performance incentives.

·     Incentives paid in the form of cash and options are intended to align the interests of the Directors, key management and the Company with those of the shareholders.

The Nomination and Remuneration Committee reviews key management personnel packages annually by reference to the consolidated Group's performance, executive performance and comparable information from industry sectors.

The performance of key management personnel is measured against criteria agreed annually with each executive and bonuses and incentives are linked to predetermined performance criteria. The performance criteria vary and are determined in line with each individual's performance contract. The Board may, however, exercise its discretion in relation to approving incentives, bonuses and options, and can recommend changes to the Nomination and Remuneration Committee's recommendations. Any changes must be justified by reference to measurable performance criteria. The policy is designed to attract the highest calibre of executives and reward them for performance results leading to long-term growth in shareholder wealth.

All remuneration paid to key management personnel is valued at the cost to the Company and expensed.

The Board's policy is to remunerate Non-Executive Directors at market rates for time, commitment and responsibilities. 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 ($744,090).

To assist directors with independent judgement, it is the Board's policy that if a director considers it necessary to obtain independent professional advice to properly discharge the responsibility of their office as a director then, provided the director first obtains approval from the Chairman for incurring such expense, the Company will pay the reasonable expenses associated with obtaining such advice.

Options granted under the arrangement do not carry dividend or voting rights. Options are valued using a binomial option pricing model and the Black-Scholes option pricing model was used to validate the price calculated.

During the current financial year the Nomination and Remuneration Committee approved and implemented a performance rights plan. The purpose of the Plan is to assist in the reward, retention and motivation of eligible employee and to align the interest of eligible employee with the shareholders of the Company. Prior to a Performance Right being exercised the performance grants do not carry any dividend or voting rights. The Performance Rights will be granted for no consideration and no exercise price is payable upon exercise of the Performance Rights.

 

All the Performance Rights proposed to be granted are subject to the following vesting conditions.

 

Vesting of the Performance Rights will be subject to a hurdle based on the compound annual growth rate  in total shareholder return ("TSR") across the 3 years commencing on the grant date of the Performance Rights ("Performance Period"). TSR is a measure of the increase in the price as determined by the Company. The base price for the TSR calculation will be the volume weighted average price ("VWAP") of shares over the five days prior to the grant date. The end price for the TSR calculation will be the VWAP over the last five days of the Performance Period.

 

 

 

Performance - based remuneration

The key performance indicators (KPIs'') are set annually, which includes consultation with key management personnel to ensure buy-in. The measures are specifically tailored to the area each individual is involved in and has a level of control over. The KPIs target areas the Board believes hold greater potential for group expansion and profit, covering financial and non-financial as well as short and long-term goals.

Performance in relation to the KPIs is assessed annually, with bonuses being awarded depending on the number and deemed difficulty of the KPIs achieved.

Hedging of Management Remuneration

No member of key management entered into an arrangement during or since the end of the financial year to limit the risk relating to any element of that person's remuneration.

Relationship between remuneration policy and Company performance

The tables below set out summary information about the Group's earnings and movements in shareholder wealth for the five years to June 2016.   


Year ended

30 June 2016

$'000

Year ended

30 June 2015

$'000

Year ended

30 June 2014

$'000

Year ended

30 June 2013

$'000

Year ended

30 June 2012

$'000







Revenue

-

-

4,060

146,396

243,842

Net loss before tax

23,903

6,711

84,120

155,754

150,551

Net loss after tax

22,472

6,711

84,120

148,137

138,908








Year ended

30 June 2016

Year ended

30 June 2015

Year ended

30 June 2014

Year ended

30 June 2013

Year ended

30 June 2012







Share price at start of year

A$0.09

A$0.07

A$0.19

A$0.56

A$1.08

Share price at end of year

A$0.06

A$0.09

A$0.07

A$0.19

A$0.56

Basic and diluted loss per share ($ cents)

1.24

0.47

8.02

17.00

23.00

 



 

Remuneration of directors and key management personnel

Details of the nature and amount of each major element of the remuneration of each director and senior management personnel for the year are:


Short term employee benefits

Post-employment benefits

Termination benefits

Share-

based payments

Total

Share based % of Total

 

 

2016

Salary and fees

 

$

Bonus

 

 

$

Non -monetary benefits

$

Super-annuation

 

$

 

 

 

$

Options / Shares

 

$

 

 

 

$

 

 

 

%

Non-Executive Directors








B Pryor

56,608

-

-

-

-

17,478

74,086

24

P Cordin

47,070

-

-

4,472

-

17,478

69,020

25

K Mosehla

46,240

-

-

-

-

17,478

63,718

27

R Torlage

46,240

-

-

-

-

-

46,240

-

A Mifflin

47,070

-

-

4,472

-

17,478

69,020

25

T Mosololi

46,240

-

-

-

-

17,478

63,718

27


















Executive Directors








D Brown

405,424

31,782

-

-

-

78,876

516,082

15

D Schutte

251,964

-

-

-

-

25,053

277,017

9











946,856

31,782

-

8,944

-

191,319

1,178,901











C Bronn

227,227

17,335

-

-

-

17,437

261,999

7











1,174,083

49,117

-

8,944

-

208,756

1,440,900


 

No director or key management appointed during the period received a payment as part of his consideration for agreeing to hold the position.

In September 2015, performance bonuses were paid out in relation to certain performance targets met for the 2015 financial year.

 

 

 

 



 

Remuneration of directors and key management personnel (continued)

 


Short term employee benefits

Post-employment benefits

Termination benefits

Share-

based payments

Total

Share based % of Total

 

 

2015

Salary and fees

 

$

Bonus

 

 

$

Non -monetary benefits

$

Super-annuation

 

$

 

 

 

$

Options / Shares

 

$

 

 

 

$

 

 

 

%

Non-Executive Directors








B Pryor

62,940

-

-

-

-

-

62,940

-

P Cordin

37,226

-

-

4,785

-

-

42,011

-

K Mosehla

50,688

-

-

-

-

-

50,688

-

R Torlage

50,688

-

-

-

-

-

50,688

-

A Mifflin(1)

19,582

-

-

2,690

-

-

22,272

-

T Mosololi(1)

26,791

-

-

-

-

-

26,791

-

D Murray(2)

17,738

-

-

2,077

-

-

19,815

-









Executive Directors








D Brown

481,250

-

-

-

-

131,485

612,735

32

D Schutte(3)

8,497

-

-

-

-

-

8,497

-

M Meeser(4)

249,139

-

-

-

-

-

249,139

-


1,004,539

-

-

9,552

-

131,485

1,145,576

18










C Bronn

262,500

21,875

-

-

-

-

284,375

-











1,267,039

21,875

-

9,552

-

131,485

1,429,951

15

 

 

1.      Mr Mifflin and Mr Mosololi were appointed as Independent Non-Executive Directors on 12 December 2014.

2.      Mr Murray resigned as Senior Independent Non-Executive Director on 12 December 2014.

3.      Mr Schutte was appointed as Chief Financial Officer and Executive Director on 22 June 2015.

4.      Mr Meeser resigned as Chief Financial Officer and Executive Director on 30 April 2015.



 

Share-based payments granted as compensation for the current financial year

During the financial year, the following share-based payment arrangements were in existence:

Option series

Number

Grant date

Expiry date

Exercise price

Grant date value

Vesting date

 








 

Class C unlisted options

2,500,000

09/11/2010

09/11/2015

A$1.20

A$0.59

(1)

 

ESOP unlisted options

1,441,061

04/02/2011

30/09/2015

A$1.40

A$0.91

(2)

 

ESOP unlisted options

2,670,000

16/09/2011

14/02/2017

ZAR7.60

ZAR3.46

(3)

 

Class L unlisted options

3,500,000

28/11/2012

30/11/2015

GBP0.25

GBP0.032

(4)

 

ESOP unlisted options

3,932,928

22/11/2013

30/06/2017

ZAR1.75

ZAR0.52

(5)

 

ESOP unlisted options

1,375,000

22/11/2013

30/11/2015

ZAR2.00

ZAR0.56

(6)

 

ESOP unlisted options

3,525,000

28/11/2014

01/02/2019

ZAR1.20

ZAR0.15

(7)

 

ESOP unlisted options

3,525,000

28/11/2014

01/02/2019

ZAR1.32

ZAR0.14

(7)

 

ESOP unlisted options

3,525,000

28/11/2014

01/02/2019

ZAR1.45

ZAR0.12

(7)

 

ESOP unlisted options

5,000,000

27/11/2015

27/11/2018

GBP0.055

AUD0.024

(8)

 


30,993,989






 

1.   Mr Murray was issued a total of 2,500,000 options with an expiry date five years from the issue date, 1,000,000 vested 12 months after the date of issue, 750,000 vested 24 months after the date of issue and the remaining 750,000 vested 36 months from the date of issue. These options expired during the current financial year.

2.   These options were issued to employees and vest in three equal tranches on 30 September 2011, 30 September 2012 and the remaining third on 30 September 2013. These options expired during the current financial year.

3.   These options were issued to employees and one third vested on 1 July 2012, one third on 1 July 2013 and the remaining third on 1 July 2014.

4.   These options all vested on 28 November 2012 and all option expired during the current financial year.

5.   These options were issued to employees and two thirds vested immediately on granting and one third vesting on 1 July 2014.

6.   Mr Meeser (resigned 30 April 2015) was issued a total of 4,125,000 options vesting in three equal tranches on 1 June 2014, 1 June 2015 and 1 June 2016. 2,750,000 of these options had not vested and were cancelled on Mr Meeser's resignation. The remainder of his share options expired during the current financial year.

7.   A total of 10,575,000 options were granted to Mr Brown on his appointment as Chief Executive Officer and vest in three equal tranches on 1 February 2015, 1 February 2016 and 1 February 2017.

8.   A total of 5,000,000 options were granted to non-executive directors Mr Cordin, Mr Mosehla, Mr Pryor, Mr Mifflin and Mr Mosololi vesting immediately on grant date.                                                      

 

 

 

The following grants of share-based payment compensation to key management personnel relate to the current financial year:



During the financial year


 

 

 

 

Name

Option series

Number granted

Number vested

% of grant vested

% of grant forfeited

% of compensation for the year consisting of options

D Brown

ESOP unlisted options

10,575,000

3,525,000

33

n/a

7

D Brown

Performance Grant

9,714,021

-

-

n/a

8

D Schutte

Performance Grant

5,449,944

-

-

n/a

9

C Bronn

Performance Grant

3,793,298

-

-

n/a

7

During the year, none of the key management personnel exercised options that were granted to them as part of their compensation.

 

Key terms of employment contracts

The Company entered into formal contractual employment agreements with the Chief Executive Officer and the Chief Financial Officer only and not with any other member of the Board. The employment conditions of the Chief Executive Officer and Chief Financial Officer are:

Current

1.   Mr Brown's appointment as Chief Executive Officer commenced on 1 February 2014 with an annual remuneration of ZAR5.5 million and a three month notice period and received 10,575,000 options in accordance with the Company's employee share option plan. The options are exercisable in three equal tranches over three years at ZAR1.20, ZAR1.32 and ZAR1.40 vesting on 1 February 2015, 1 February 2016 and 1 February 2017 respectively.

2.   Mr Schutte serves as Financial Director with an annual remuneration of ZAR3.6 million and a three month notice period. On appointment as Chief Financial Officer and Executive Director Mr Schutte received 6,600,000 options in accordance with the Company's employee share option plan. The options vest in three equal tranches over a three-year period and are subject to shareholder approval. The first tranche of 2,200,000 options are exercisable on 21 June 2016 at ZAR1.20 each, a further 2,200,000 options are exercisable on 21 June 2017 at ZAR1.32 per option and the remaining 2,200,000 options are exercisable on 21 June 2018 at an exercise price of ZAR1.45 each. These share options are still subject to shareholder approval.

The employment conditions of the following specified executives have been formalised in employment contracts:

1.   Mr Bronn is employed by CoAL in the capacity of Chief Operations Officer, at an annual remuneration of ZAR3.0 million. This permanent employment contract may be terminated by written notice of two months.

 

 

 

 

Key management personnel equity holdings

Option holdings

The movement during the reporting period in the number of options over ordinary shares exercisable at A$1.20 on or before 9 November 2015 held directly, indirectly or beneficially by each director and key management personnel including their personally-related entities, is as follows:


Held at

1 July 2015

Granted as remuneration

Exercised

Expired/Other changes

Held at

30 June 2016

Non-Executive Directors






B Pryor

-

-

-

-

-

D Murray(1)

2,500,000

-

-

(2,500,000)

-

P Cordin

-

-

-

-

-

K Mosehla

-

-

-

-

-

R Torlage

-

-

-

-

-

A Mifflin

-

-

-

-

-

T Mosololi

-

-

-

-

-







Executive Directors






D Brown

-

-

-

-

-

D Schutte

-

-

-

-

-







Key management

-

-

-

-

-

(1)      Resigned 12 December 2014

 


Key management personnel equity holdings (continued)

The movement during the reporting period in the number of options over ordinary shares exercisable at A$1.40 or ZAR9.50 on or before 30 September 2015 held directly, indirectly or beneficially by each director and key management personnel including their personally-related entities, is as follows:


Held at

1 July 2015

Granted as remuneration

Exercised

Expired/Other changes

Held at

30 June 2016

Non-Executive Directors






B Pryor

-

-

-

-

-

P Cordin

-

-

-

-

-

K Mosehla

-

-

-

-

-

R Torlage

-

-

-

-

-

A Mifflin

-

-

-

-

-

T Mosololi

-

-

-

-

-







Executive Directors






D Brown

-

-

-

-

-

D Schutte

-

-

-

-

-

M Meeser

-

-

-

-

-







Key management






C Bronn

135,000

-

-

(135,000)

-

The movement during the reporting period in the number of options over ordinary shares exercisable at GBP0.25 on or before 30 November 2015 held directly, indirectly or beneficially by each director and key management personnel including their personally-related entities, is as follows:


Held at

1 July 2015

Granted as remuneration

Exercised

Expired/Other changes

Held at

30 June 2016

Non-Executive Directors






B Pryor

1,000,000

-

-

(1,000,000)

-

P Cordin

-

-

-

-

-

K Mosehla

-

-

-

-

-

R Torlage

-

-

-

-

-

A Mifflin

-

-

-

-

-

T Mosololi

-

-

-

-

-







Executive Directors






D Brown

2,500,000

-

-

(2,500,000)

-

D Schutte

-

-

-

-

-

M Meeser

-

-

-

-

-







Key management

-

-

-

-

-

 


Key management personnel equity holdings (continued)

The movement during the reporting period in the number of options over ordinary shares exercisable at ZAR1.75 on or before 30 June 2017 held directly, indirectly or beneficially by each director and key management personnel including their personally-related entities, is as follows:


Held at

1 July 2015

Granted as remuneration

Exercised

Expired/Other changes

Held at

30 June 2016

Non-Executive Directors






B Pryor

-

-

-

-

-

P Cordin

-

-

-

-

-

K Mosehla

-

-

-

-

-

R Torlage

-

-

-

-

-

A Mifflin

-

-

-

-

-

T Mosololi

-

-

-

-

-







Executive Directors






D Brown

-

-

-

-

-

D Schutte

-

-

-

-

-







Key management






 C Bronn

174,696

-

-

-

174,696

The movement during the reporting period in the number of options over ordinary shares exercisable at ZAR2.00 on or before 1 June 2018 held directly, indirectly or beneficially by each director and key management personnel including their personally-related entities, is as follows:


Held at

1 July 2015

Granted as remuneration

Exercised

Expired/Other changes

Held at

30 June 2016

Non-Executive Directors






B Pryor

-

-

-

-

-

P Cordin

-

-

-

-

-

K Mosehla

-

-

-

-

-

R Torlage

-

-

-

-

-

A Mifflin

-

-

-

-

-

T Mosololi

-

-

-

-

-







Executive Directors






D Brown

-

-

-

-

-

D Schutte

-

-

-

-

-

M Meeser(1)

1,375,000

-

-

(1,375,000)

-







Key management

-

-

-

-

-

(1)      Resigned 30 April 2015

 

 

 

 

Key management personnel equity holdings (continued)

The movement during the reporting period in the number of options over ordinary shares exercisable in three equal tranches at ZAR1.20 on or before 1 February 2015, ZAR1.32 on or before 1 February 2016 and ZAR1.45 on or before 1 February 2017 held directly, indirectly or beneficially by each director and key management personnel including their personally-related entities, is as follows:


Held at

1 July 2015

Granted as remuneration

Exercised

Expired/Other changes

Held at

30 June 2016

Non-Executive Directors






B Pryor

-

-

-

-

-

P Cordin

-

-

-

-

-

K Mosehla

-

-

-

-

-

R Torlage

-

-

-

-

-

A Mifflin

-

-

-

-

-

T Mosololi

-

-

-

-

-







Executive Directors






D Brown

10,575,000

-

-

-

10,575,000

D Schutte

-

-

-

-

-







Key management

-

-

-

-

-

Key management personnel equity holdings

The movement during the reporting period in the number of options over ordinary shares at GBP 0.055, vesting immediately held directly, indirectly or beneficially by each director and key management personnel including their personally-related entities, is as follows:


Held at

1 July 2015

Granted as remuneration

Exercised

Expired/Other changes

Held at

30 June 2016

Non-Executive Directors






B Pryor


1,000,000

-

-

1,000,000

P Cordin

-

1,000,000

-

-

1,000,000

K Mosehla

-

1,000,000

-

-

1,000,000

R Torlage

-

-

-

-

-

A Mifflin

-

1,000,000

-

-

1,000,000

T Mosololi

-

1,000,000

-

-

1,000,000







Executive Directors






D Brown

-

-

-

-

-

D Schutte

-

-

-

-

-







Key management

-

-

-

-

-

 

 

 

Key management personnel equity holdings

The movement during the reporting period in the number of performance grants over ordinary shares exercisable in three years' time subject to performance criteria, held directly, indirectly or beneficially by each director and key management personnel including their personally-related entities, is as follows:


Held at

1 July 2015

Granted as remuneration

Exercised

Expired/Other changes

Held at

30 June 2016

 

Non-Executive Directors






 

B Pryor

-

-

-

-

-

 

P Cordin

-

-

-

-

-

 

K Mosehla

-

-

-

-

-

R Torlage

-

-

-

-

-

A Mifflin

-

-

-

-

-

T Mosololi

-

-

-

-

-







Executive Directors






D Brown

-

9,714,021

-

-

9,714,021

D Schutte

-

5,449,944

-

-

5,449,944







Key management

-

3,793,298

-

-

3,793,298

Equity holdings and transactions of Directors and key management personnel

The movement during the reporting period in the number of ordinary shares held, directly, indirectly or beneficially by each key management personnel including their personally-related entities, is as follows:


Held at

1 July 2015

Granted as remuneration

Exercised

Expired/Other changes

Held at

30 June 2016

Non-Executive Directors






B Pryor

150,000

-

-

-

150,000

P Cordin

1,371,059

-

-

-

1,371,059

K Mosehla

-

-

-

-

-

R Torlage

-

-

-

-

-

A Mifflin

-

-

-

-

-

T Mosololi(1)

10,000

-

-

-

10,000







Executive Directors






D Brown

825,000

-

-

-

825,000

D Schutte

-

-

-

-

-







Key management

-

-

-

-

-

(1)      Purchased prior to being appointed as a Non-Executive Director.

 

 

 

 

This directors' report is signed in accordance with a resolution of directors made pursuant to s298(2) of the Corporations Act 2001.

 

On behalf of the Directors

 

                                          

Bernard Robert Pryor

David Hugh Brown

Chairman

Chief Executive Officer

30 September 2016

30 September 2016

 



 

The Board of Directors
Coal of Africa Limited
Suite 8, 7 The Esplanade
Mount Pleasant WA 6153
 
Deloitte Touche Tohmatsu
ABN 74 490 121 060
 
Brookfield Place, Tower 2
123 St Georges Terrace
Perth WA 6000
GPO Box A46
Perth WA 6837 Australia
 
Tel: +61 8 9365 7000
Fax: +61 8 9365 7001
www.deloitte.com.au
 

30 September 2016

 

 

Dear Board Members

 

Auditor's Independence Declaration to Coal of Africa Limited

 

In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Coal of Africa Limited.

 

As lead audit partner for the audit of the financial statements of Coal of Africa Limited for the financial year ended 30 June 2016, I declare that to the best of my knowledge and belief, there have been no contraventions of:

 

(i)    the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

(ii)   any applicable code of professional conduct in relation to the audit. 

 

 

 

 

Yours sincerely

 

 

 

DELOITTE TOUCHE TOHMATSU

 

 

 

 

David Newman

Partner

Chartered Accountants

 

 

 

 

 

 

CORPORATE GOVERNANCE STATEMENT

 

The Board of Directors of Coal of Africa Limited is responsible for the establishment of a corporate governance framework that has regard to the best practice recommendations set by the ASX Corporate Governance Council.

 

This statement summarises the corporate governance practices that have been adopted by the Board. In addition to the information contained in this statement, the Company's website at www.coalofafrica.com contains additional details of its corporate governance procedures and practices.

 

The Company has followed the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations (Third Edition) ("ASX Principles") where the Board has considered the recommendation to be an appropriate benchmark for its corporate governance principles. Where the Company considered it was not appropriate to presently comply with a particular recommendation, the reasons are set out in the relevant section of this statement.

 

 

PRINCIPLE 1: LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT

 

A listed entity should establish and disclose the respective roles and responsibilities of its board and management and how their performance is monitored and evaluated.

 

ASX Principles Recommendation 1.1: A listed entity should disclose:

a)      the respective roles and responsibilities of its board and management; and

b)      those matters expressly reserved to the board and those delegated to management.

 

The Board has established a Board Charter which sets out functions reserved to Board and those delegated to senior executives. This Charter is available on the Company's website.

 

The role of the Board is to provide leadership for and supervision of the Company's senior management. The Board provides the strategic direction of the Company and regularly measures the progression by senior management of that strategic direction.

 

The key responsibilities of the Board include:

a)    overseeing the Company, including its control and accountability systems;

b)    appointing the Chief Executive Officer, or equivalent, for a period and on terms as the Directors see fit and, where appropriate, removing the Chief Executive Officer, or equivalent;

c)     ratifying the appointment and, where appropriate, the removal of senior executives, including the Chief Financial Officer and the Company Secretary;

d)    ensuring the Company's policy and procedure for selection and (re)appointment of directors is reviewed in accordance with the Company's Nomination Committee Charter;

e)    approving the Company's policies on risk oversight and management, internal compliance and control, Code of Conduct, and legal compliance;

f)     satisfying itself that senior management has developed and implemented a sound system of risk management and internal control in relation to financial reporting risks and reviewed the effectiveness of the operation of that system;

g)     assessing the effectiveness of senior management's implementation of systems for managing material business risk including the making of additional enquiries and to request assurances regarding the management of material business risk, as appropriate;

h)    monitoring, reviewing and challenging senior management's performance and implementation of strategy;

i)     ensuring appropriate resources are available to senior management;

j)      approving and monitoring the progress of major capital expenditure, capital management, and acquisitions and divestitures;

k)     monitoring the financial performance of the Company;

l)     ensuring the integrity of the Company's financial (with the assistance of the Audit and Risk Committee) and other reporting through approval and monitoring;

m)   providing overall corporate governance of the Company, including conducting regular reviews of the balance of responsibilities within the Company to ensure division of functions remain appropriate to the needs of the Company;

n)    appointing the external auditor (where applicable, based on recommendations of the Audit and Risk Committee) and the appointment of a new external auditor when any vacancy arises, provided that any appointment made by the Board must be ratified by shareholders at the next annual general meeting of the Company;

o)    engaging with the Company's external auditors and Audit and Risk Committee;

p)    monitoring compliance with all of the Company's legal obligations, such as those obligations relating to the environment, native title, cultural heritage and occupational health and safety; and

q)    making regular assessment of whether each non-executive Director is independent in accordance with the Company's policy on assessing the independence of directors.

 

The Board has delegated responsibilities and authorities to management to enable them to conduct the Company's day-to-day activities. Matters which are not covered by these delegations, such as approvals which exceed certain limits, require Board approval.

 

Details of meeting attendance of members of the Board for FY2016 is contained in the following table:

 


Number of Board meetings attended in FY2016 while a member

Number of Board meetings held in FY2016 while a member

Bernard Pryor (Chairman)

9

9

David Brown

9

9

Peter Cordin

9

9

Khomotso Mosehla

6

9

Rudolph Torlage

8

9

Andrew Mifflin

9

9

Thabo Mosololi

7

9

De Wet Schutte

9

9

 

The Board has established three standing Committees to assist it to meet its responsibilities:

·      Audit and Risk Committee

·      Nomination and Remuneration Committee

·      Safety, Health and Environment Committee

 

Each standing Committee has a formal Charter approved by the Board setting out the matters relevant to composition, terms of reference, process and administration of that Committee. These Committees are described in further detail elsewhere in this Corporate Governance Statement.

 

The Board Charter requires the Board to convene regular meetings with such frequency as is sufficient to appropriately discharge its responsibilities.

 

Standing Committee meetings are held as required, generally the day prior to the scheduled Board meeting. The Chairman sets the agenda for each meeting in conjunction with the Chief Executive Officer and Company Secretary. Any Director may request additional matters on the agenda. Members of senior management attend meetings of the Board and its Committees by invitation and are available for questioning by Directors.

 

ASX Principles Recommendation 1.2: A listed entity should:

a)      undertake appropriate checks before appointing a person, or putting forward to security holders a candidate for election, as a director; and

b)      provide security holders with all material information in its possession relevant to a decision on whether or not to elect or re-elect a director.

 

The Company performs checks on all potential Directors which include checks on a person's character, experience, education, criminal record and bankruptcy history. Potential Director's are required to provide their consent for the Company to conduct any background or other check and also acknowledge that they will have sufficient time available to fulfil their responsibilities as Director of the Company.

 

Newly appointed Directors must stand for reappointment at the next Annual General Meeting (AGM) of the Company. The Notice of Meeting for the AGM provides shareholders with information about each Director standing for election or re-election including details regarding their length of tenure, relevant skills and experience. 

 

ASX Principles Recommendation 1.3: A listed entity should have a written agreement with each director and senior executive setting out the terms of their appointment.

 

The Company has written agreements in place with each director in the form of an appointment letter. The letter among other matters summarises the terms of appointment including remuneration, the requirement to comply with key corporate policies including the Code of Conduct and Share Trading Policy and indemnity and insurance arrangements.

 

All senior executives including the Chief Executive Officer and the Chief Financial Officer have their position descriptions, roles and responsibilities set out in writing in an employment contract.

 

ASX Principles Recommendation 1.4: The Company Secretary of a listed entity should be accountable directly to the board, through the chair, on all matters to do with the proper functioning of the board.

 

The Company Secretary has an important role in supporting the effectiveness of the Board and its committees. The role of the Company Secretary includes:

·      advising the Board and its committees on governance matters;

·      monitoring that Board and committee policy and procedures are followed; and

·      ensuring that the business at Board and committee meetings is accurately reflected in the minutes.

 

All Directors have direct access to the Company Secretary and vice versa.

 

The appointment and removal of the Company Secretary is a matter for decision by the Board as a whole.

 

ASX Principles Recommendation 1.5: A listed entity should

a)      have a diversity policy which includes requirements for the board or a relevant committee of the board to set measurable objectives for achieving gender diversity and to assess annually both the objectives and the entity's progress in achieving them;

b)      disclose the policy or a summary of it; and

c)      disclose at the end of each reporting period the measurable objectives for achieving gender diversity set by the board or a relevant committee of the board in accordance with the entity's diversity policy and its progress towards achieving them and either:

1.     the respective proportions of men and women on the board, in senior executive positions and across the whole organisation; or

2.     if the entity is a "relevant employer" under the Workplace Gender Equality Act, the entity's most recent "Gender Equality Indicators", as defined in and published under that Act.

 

The Company is committed to developing a diverse workforce and providing a work environment in which all employees are treated fairly and with respect. To this end, the Company has in place an Employment Equity Policy which details its commitment to being an equal opportunity employer and is in line with the South African Mining Charter and Employment Equity legislation in South Africa. A copy of the Employment Equity Policy and the Diversity Policy are available on the Company's website.

 

The Mining Charter requires that a company establish measurable objectives for achieving gender diversity and assess such objectives and progress toward achieving them. The targets set for CoAL include 10% female representation in core mining positions. Employment Equity targets as these relate to designated groups (one of which is women) are included as part of the business key performance areas which are included in all management performance contracts.

 

As at end of the 2016 financial year, the proportion of women employees in the organisation is:

 

Employees                            45%

Management                        44%

Senior Executive                   25%

Board                                     0%

 

The Company is not considered a relevant employer under the Australian Workplace Gender Equality Act as the number of employees in Australia is below the threshold.

 

ASX Principles Recommendation 1.6: A listed entity should:

a)      have and disclose a process for periodically evaluating the performance of its board, its committees and individual directors; and

b)      disclose in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process.

 

The Board reviews its performance and the performance of individual Directors annually. The most recent review, which was conducted during the year, involved the completion of a detailed questionnaire by each Director. The process was managed by the Company Secretary and the Chairman and the results of the review were discussed at a subsequent board meeting.

 

The Board considers its processes for reviewing the performance of the Board appropriate for the size and stage of development of the Company.

 

 

 

ASX Principles Recommendation 1.7: A listed entity should:

a)      have and disclose a process for periodically evaluating the performance of its senior executives; and

b)      disclose in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process.

 

The Chief Executive Officer is responsible for assessing the performance of the key executives within the Company. This is performed at least annually through a formal process involving a formal meeting with each senior executive. A performance evaluation of senior executives was completed in the financial year in accordance with this process.

 

 

PRINCIPLE 2: STRUCTURE THE BOARD TO ADD VALUE

 

A listed entity should have a board of an appropriate size, composition, skills and commitment to enable it to discharge its duties effectively.

 

 

ASX Principles Recommendation 2.1: The board of a listed entity should:

a)      have a nomination committee which:

1.     has at least three members, a majority of whom are independent directors; and

2.     is chaired by an independent director; and disclose

3.     the charter of the committee;

4.     the members of the committee; and

5.     as at the end of the reporting period the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or

b)      if it does not have a nomination committee, disclose that fact and the processes it employs to address board succession issues and to ensure that the board has the appropriate balance of skills, knowledge, experience, independence and diversity to enable it to discharge its duties and responsibilities effectively.

 

The Company has established a Nomination and Remuneration Committee and adopted a Charter that set out the committee's role and responsibilities, composition and membership requirements. That Charter has been published on the Company's website.

 

The Committee's nomination responsibilities include ensuring that the Board has the appropriate blend of Directors with the necessary expertise and relevant industry experience. As such the Charter requires the Committee to:

·      regularly review the size and composition of the Board, and make recommendations to the Board on any appropriate changes;

·      identify and assess necessary and desirable director competences and provide advice on the competency levels of directors with a view to enhancing the Board;

·      make recommendations on the appointment and removal of directors;

·      make recommendations on whether any directors whose term of office is due to expire should be nominated for re-election; and

·      regularly review the time required from non-executive Directors and whether non-executive Directors are meeting that requirement.

 

The responsibilities of this Committee with respect to remuneration matters are set out elsewhere in this statement.

 

The Committee Charter states that the composition should include a minimum of three members, the majority of whom must be independent, and a Chairman who is an independent Director. Membership is consistent with the composition requirements of the Charter and the recommendations of the ASX Principles.

 

Details of meeting attendance of members of the Nomination and Remuneration Committee for FY2016 is contained in the following table:

 


Number of Committee meetings attended in FY2016 while a member

Number of Committee meetings held in FY2016 while a member

Bernard Pryor (Chairman)

4

4

Thabo Mosololi

4

4

David Brown

4

4

 

 

ASX Principles Recommendation 2.2: A listed entity should have and disclose a board skills matrix setting out the skills and diversity that the board currently has or is looking to achieve in its membership.

 

The Company's website contains details on the procedures for the selection and appointment of new Directors and the re-election of incumbent Directors, together with the Board's policy for the nomination and appointment of Directors.

 

The Board has developed a structured process for selection and appointment of new Directors to the Board. As part of this procedure, the Board has committed to:

·      the evaluation and identification of the diversity, skills, experience and expertise that will best complement Board effectiveness;

·      the development of a competencies review process for identifying and assessing Director competencies;

·      the conduct of a competencies review of the Board before a candidate is recommended for appointment; and

·      the periodic review of the Board's succession plan.

 

The following board skills matrix sets out the mix of skills, experience & expertise the board currently has across its membership:

 

Competencies

Rating

South African politics

Strategic thinking

Gender

X

Technical

Financial

Commercial

Mergers & Acquisitions

Coal markets

International affairs

Shareholder relations

Project development

Equity markets

Debt markets / Banking experience

X

Executive leadership

Listed board experience

SHE & Sustainability

 

X - The CoAL board is working to increase these skills.

 

ASX Principles Recommendation 2.3: A listed entity should disclose:

a)      the names of the directors considered by the board to be independent directors;

b)      if a director has an interest, position, association or relationship of the type that might cause doubts about the independence of that director but the board is of the opinion that it does not compromise the independence of the director; the nature of the interest, position, association or relationship in question and an explanation of why the board is of that opinion; and

c)      the length of service of each director.

 

ASX Principles Recommendation 2.4: A majority of the board of a listed entity should be independent Directors.

 

ASX Principles Recommendation 2.5: The chair of the board of a listed entity should be an independent Director and, in particular;  should not be the same person as the CEO of the entity.

 

The Board currently comprises two executive Directors and six non-executive Directors. Five of the non-executive directors are considered to be independent. The Chairman, Mr B Pryor, is one of the independent Directors.

 

The Board agrees that all Directors should bring an independent judgement to bear in decision-making. The Board has adopted a formal policy on access to independent professional advice which provides that Directors are entitled to seek independent professional advice for the purposes of the proper performance of their duties. The advice is at the Company's expense and advice so obtained is to be made available to all Directors.

 

A Director's obligations to avoid a conflict of interest are set out in the Code of Conduct, available on the Company's website. Directors must also comply strictly with Corporations Act requirements for the avoidance of conflicts.

 

The Board considers an independent Director to be a non-executive Director who meets the criteria for independence set out the ASX Principles. In determining a Director's independence, the Board considers the relationships that may affect independence.

 

Criteria that the Board takes into account when determining Director independence include:

·      substantial shareholdings in the Company;

·      past or current employment in an executive capacity;

·      whether or not the Director has been a principal of a material professional adviser or a material consultant to the Company in the past three years;

·      material supplier or customer relationships with the Company;

·      material contractual relationships or payments for services other than as a Director; and

·      family ties and cross-directorships.

 

Materiality for these purposes is based on quantitative and qualitative thresholds, set out in the Board Charter available from the Company's website.

 

The Board has reviewed and considered the positions and associations of each of the Directors in office at the date of this report and consider that a majority of the Directors are independent. Bernard Pryor, Peter Cordin, Khomotsu Mosehla, Andrew Mifflin and Thabo Mosololi are considered independent. Executive Directors David Brown and De Wet Schutte and non-executive Director Rudolph Torlage are not considered independent. Non-executive Director Rudolph Torlage is an officer/senior employee of ArcelorMittal South Africa Ltd, a substantial shareholder in the Company and as such does not meet the Board's criteria for independence.

 

The period of office held by each Director in office is as follows:

 

Director

Date Appointed

Period in office

Due for Re-election or Retirement

Bernard Pryor

6 August 2012

4 years

2016 AGM

David Brown

6 August 2012

4 years

2018 AGM

De Wet Schutte

22 June 2015

1 year

2017 AGM

Peter Cordin

8 December 1997

18 years

2016 AGM

Khomotso Mosehla

18 November 2010

5 years

2016 AGM

Rudolph Torlage

18 November 2010

5 years

2017 AGM

Andrew Mifflin

12 December 2014

1 year

2017 AGM

Thabo Mosololi

12 December 2014

1 year

2018 AGM

 

 

Directors must retire at the third AGM following their election or most recent re-election. At least one third of Directors must stand for election at each AGM. Any Director appointed to fill a casual vacancy since the date of the previous AGM must submit themselves to shareholders for election at the next AGM. Re-appointment of Directors by rotation is not automatic.

 

ASX Principles Recommendation 2.6: A listed entity should have a program for inducting new directors and provide appropriate professional development opportunities for directors to develop and maintain the skills and knowledge needed to perform their role as directors effectively.

 

As part of the induction process, meetings are arranged with other Board members and key executives prior to the Director's appointment.

 

All Directors are expected to maintain the skills required to discharge their obligations to the Company. Directors are encouraged to undertake continuing professional education and where this involves industry seminars and approved education courses, this is paid for by the Company where appropriate.

 

The skills, experience and expertise relevant to the position of director held by each director in office at the date of this integrated report is set out in the Directors' report.

 

 

 

 

PRINCIPLE 3: ACT ETHICALLY AND RESPONSIBLY

 

A listed entity should act ethically and responsibly.

 

ASX Principles Recommendation 3.1: A listed entity should:

a)      have a code of conduct for its directors, senior executives and employees; and

b)      disclose that code or a summary of it.

 

CODE OF CONDUCT

 

The Board encourages appropriate standards of conduct and behaviour from Directors, officers, employees and contractors of the Company. The Board has adopted a Code of Conduct in relation to Directors and employees, available from the Company's website. This Code of Conduct is regularly reviewed and updated as necessary to ensure that it reflects the highest standards of behaviour and professionalism and the practices necessary to maintain confidence in the Company's integrity.

 

A fundamental theme is that all business affairs are conducted legally, ethically and with strict observance of the highest standards of integrity and propriety.

 

SECURITIES TRADING POLICY

 

The Board has adopted a Securities Trading Policy which regulates dealings by Directors, officers and employees in securities issued by the Company. The policy is intended to assist in maintaining market confidence in the integrity of dealings in the Company's securities.

 

Under the policy, which is available on the Company's website, Directors, officers and employees of the Company must not, whether in their own capacity or as an agent for another, subscribe for, purchase or sell, or enter into an agreement to subscribe for, purchase or sell, any securities (ie. shares or options) in the Company, or procure another person to do so:

a)    if that Director, officer or employee possesses information that a reasonable person would expect to have a material effect on the price or value of the securities if the information was generally available;

b)    if the Director, officer or employee knows or ought reasonably to know, that:

·        the information is not generally available; and

·        if it were generally available, it might have a material effect on the price or value of the securities in the Company; and

c)     without the written acknowledgement of the Chair.

 

Further, Directors, officers and employees must not either directly or indirectly pass on this kind of information to another person if they know, or ought reasonably to know, that this other person is likely to deal in the securities of the Company or procure another person to do so.

 

The policy regulates trading by key management personnel within defined closed periods, as well as providing details of trading not subject to the policy, exceptional circumstances in which key management personnel may be permitted to trade during a prohibited period with prior written clearance and the procedure for obtaining written clearance.

 

Directors, officers and employees must not enter into transactions or arrangements which operate to limit the economic risk of their security holding in the Company without first seeking and obtaining written acknowledgement from the Chair.

 

Executives are also prohibited from entering into transactions or arrangements which limit the economic risk of participating in unvested entitlements.

 

PRIVACY

 

The Company has resolved to comply with the National Privacy Principles contained in the Privacy Act 1988, to the extent required for a company the size and nature of CoAL.

 

 

 

 

 

PRINCIPLE 4: SAFEGUARD INTEGRITY IN CORPORATE REPORTING

 

A listed entity should have formal and rigorous processes that independently verify and safeguard the integrity of its corporate reporting.

 

ASX Principles Recommendation 4.1: The board of a listed entity should:

a)      have an audit committee which:

1.     has at least three members, all of whom are non-executive directors and a majority of whom are independent directors; and

2.     is chaired by an independent director, who is not the chair of the board,  and disclose

3.     the charter of the committee;

4.     the relevant qualifications and experience of the members of the committee; and

5.     in relation to each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or

b)      if it does not have an audit committee, disclose that fact and the processes it employs that independently  verify and safeguard the integrity of its corporate reporting, including the processes for the appointment and removal of the external auditor and the rotation of the audit engagement partner.

 

AUDIT COMMITTEE

 

The Company has established an Audit and Risk Committee which is comprised of a majority of independent non-executive Directors.

 

The role of the Audit and Risk Committee is to:

·      monitor and review the integrity of the financial reporting of the Company, reviewing significant financial reporting judgments;

·      review the Company's internal financial control system and, unless expressly addressed by a separate risk committee or by the Board itself, risk management systems;

·      monitor, review and oversee the external audit function including matters concerning appointment and remuneration, independence and non-audit services;

·      monitor and review compliance with the Company's Code of Conduct; and

·      perform such other functions as assigned by law, the Company's Constitution, or the Board.

 

The Board has determined that the Audit and Risk Committee should comprise:

·      at least three members;

·      a majority of independent non-executive Directors; and

·      an independent chair who is not the Chair of the Board.

 

In addition, the Audit and Risk Committee should include:

·      members who are financially literate i.e. able to read and understand financial statements;

·      at least one member with relevant qualifications and experience, i.e. a qualified accountant or other finance professional with experience of financial and accounting matters; and

·      at least one member with an understanding of the industry in which the entity operates.

 

Membership is now consistent with the composition requirements of the Charter and the recommendations of the ASX Principles. At the start of the year, while new Directors were introduced and settled in, the Chair of the Committee was Mr B Pryor who is also the Chair of the Board. In August 2015 Mr T Mosololi was appointed as the independent chair of the Committee.

 

The Charter is published on the Company's website. The website also contains information on the procedures for the selection and appointment of the external auditor and for the rotation of external audit partners.

 

Details of meeting attendance of members of the Audit and Risk Committee for FY2016 is contained in the following table:

 


Number of Committee meetings attended in FY2016 while a member

Number of Committee meetings held in FY2016 while a member

Thabo Mosololi (Chairman)

4

4

Bernard Pryor

4

4

Khomotso Mosehla

2

4

 

 

ASX Principles Recommendation 4.2: The board of a listed entity should, before it approves the entity's financial statements for a financial period, receive from the CEO and CFO a declaration that, in their opinion, the financial records of the entity have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.

 

The Chief Executive Officer and Chief Financial Officer confirm in writing to the Board that:

a)    the Company's annual financial reports present a true and fair view, in all material respects, of the Company's financial condition and operational results are in accordance with relevant accounting standards;

b)    the above confirmation is founded on a sound system of risk management and internal compliance and control which implements the policies of the Board; and

c)     the Company's risk management and internal compliance and control system is operating efficiently and effectively in all material respects.

 

This declaration was obtained for the relevant reporting period.

 

ASX Principles Recommendation 4.3: A listed entity that has an AGM should ensure that its external auditor attends its AGM and is available to answer questions from security holders relevant to the audit.

 

The auditor attends the AGM, usually by telephone as the meeting is held in the United Kingdom. Shareholders are able to ask questions on the conduct of the audit and the preparation and content of the audit report, in accordance with the requirements of the Corporations Act 2001.

 

 

PRINCIPLE 5: MAKE TIMELY AND BALANCED DISCLOSURE

 

A listed entity should make timely and balanced disclosure of all matters concerning it that a reasonable person would expect to have a material effect on the price or value of its securities.

 

The Company is committed to ensuring that:

·      all investors have equal and timely access to material information concerning the Company - including its financial situation, performance, ownership and governance; and

·      Company announcements are factual and presented in a clear and balanced way.

 

ASX Principles Recommendation 5.1: A listed entity should:

a)      should have a written policy for complying with its continuous disclosure obligations under the Listing Rules; and

b)      disclose that policy or a summary of it.

 

The Board has an established Shareholder Communication Policy which is available from the Company's website. The Company has adopted certain procedures to ensure that it complies with its continuous disclosure obligations and has appointed a Responsible Officer who is responsible for ensuring the procedures are complied with.

 

 

PRINCIPLE 6: RESPECT THE RIGHTS OF SECURITY HOLDERS

 

A listed entity should respect the rights of its security holders by providing them with appropriate information and facilities to allow them to exercise those rights effectively.

 

ASX Principles Recommendation 6.1: A listed entity should provide information about itself and its governance to investors via its website.

 

ASX Principles Recommendation 6.2: A listed entity should design and implement an investor relations program to facilitate effective two-way communication with investors.

 

ASX Principles Recommendation 6.3: A listed entity should disclose the policies and processes it has in place to facilitate and encourage participation at meetings of security holders.

 

ASX Principles Recommendation 6.4: A listed entity should give security holders the option to receive communications from, and send communications to, the entity and its security register electronically.

 

The Board has established a communications strategy which is available from the Company's website.

 

The Board aims to ensure that the shareholders are informed of all major developments affecting the Company. All shareholders receive the Company's annual report, and may also request copies of the Company's half-yearly and quarterly reports.

 

The Company maintains a website at www.coalofafrica.com and makes comprehensive information available on a regular and up-to date basis. The Company provides shareholder materials directly to shareholders through electronic means. A shareholder may request a hard copy of the Company's annual report to be posted to them.

 

Shareholders are encouraged at annual general meetings to ask questions of Directors and senior management and also the Company's external auditors, who attend the Company's annual general meetings.

 

 

PRINCIPLE 7: RECOGNISE AND MANAGE RISK

 

A listed entity should establish a sound risk management framework and periodically review the effectiveness of that framework.

 

ASX Principles Recommendation 7.1: The board of a listed entity should:

a)      have a committee or committees to oversee risk, each of which:

1.     has at least three members, a majority of whom are independent directors; and

2.     is chaired by an independent director; and disclose

3.     the charter of the committee;

4.     the members of the committee; and

5.     as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or

b)      it does not have a risk committee or committee that satisfies (a) above, disclose that fact and the processes it employs for overseeing the entity's risk management framework. 

 

The Company has a policy for the oversight and management of material business risks, which is available on the Company's website. The Board is responsible for approving the Company's policies on risk oversight and management and satisfying itself that management has developed and implemented a sound system of risk management and internal control.

 

Implementation of the risk management system and day-to-day management of risk is the responsibility of the Chief Executive Officer, with the assistance of senior management, as required.

 

The Chief Executive Officer has responsibility for identifying, assessing, monitoring and managing risks. The Chief Executive Officer is also responsible for identifying any material changes to the Company's risk profile and ensuring, with approval of the Board, the risk profile of the Company is updated to reflect any material change.

 

The Chief Executive Officer is required to report on the progress of, and on all matters associated with, risk management on a regular basis, and at least annually. During the reporting period, the Chief Executive Officer regularly reported to the Board as to the effectiveness of the Company's management of its material business risks.

 

The Audit and Risk Committee also has responsibility for reviewing the Company's internal financial control system and risk management systems and reporting to the Board. Details of the composition and Charter of the Audit and Risk Committee has been disclosed earlier in this document (refer Principle 4). 

 

In addition, the Board has also established a Safety, Health and Environment Committee to assist the Board in the effective discharge of its responsibilities in relation to safety, health and environmental ("SHE") issues for CoAL, and the oversight of risks relating to these issues. The Committee's responsibilities include to:

·      Understand the risks of SHE issues involving CoAL's activities;

·      Ensure that the systems and processes for identifying, assessing and managing SHE risks of CoAL are adequately monitored;

·      Regularly review and ensure compliance with the SHE strategies and policies of CoAL and the supporting management systems and processes; and

·      Monitor developments in relevant SHE-related legislation and regulations and monitor CoAL's compliance with relevant legislation, including through audits.

 

Details of meeting attendance of members of the Audit and Risk Committee for FY2016 are contained in a table earlier in this document (refer Principle 4).

 

 

ASX Principles Recommendation 7.2: The board or committee of the board should:

a)      review the entity's risk management framework at least annually to satisfy itself that it continues to be sound; and

b)      disclose, in relation to each reporting period, whether such a review has taken place.

 

The risk management framework was reviewed by the Committee during the reporting period.

 

ASX Principles Recommendation 7.3: A listed entity should disclose:

a)      if it has an internal audit function, how the function is structured and what role it performs; or

b)      if it does not have an internal audit function, that fact and the processes it employs for evaluating and continually improving the effectiveness of its risk management and internal control processes.

 

Due to the size of the Company and its current level of activity and operations, the Company does not have a formal internal audit function.

 

The Board believe that the Company's risk management and internal control systems establish a sufficient control environment to manage business risks.

 

ASX Principles Recommendation 7.4: A listed entity should disclose whether it has any material exposure to economic, environmental and socially sustainable risks and, if it does, how it manages or intends to manage those risks.

 

The Company is very aware of its impact on the economy, the environment and the community in which it operates, and the risks associated with not dealing with aspects appropriately.

 

The Company annually reports on these aspects through its Sustainable Development Review in the Integrated (Annual) Report. This report is available on the Company website.

 

 

PRINCIPLE 8: REMUNERATE FAIRLY AND RESPONSIBLY

 

A listed entity should pay director remuneration sufficient to attract and retain high quality directors and design its executive remuneration to attract, retain and motivate high quality senior executives and to align their interests with the creation of value for security holders.

 

ASX Principles Recommendation 8.1: The Board of a listed entity should:

a)      have a remuneration committee which:

1.     has at least three members, a majority of whom are independent directors; and

2.     is chaired by an independent director; and disclose

3.     the charter of the committee;

4.     the members of the committee; and

5.     as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or

b)      if it does not have a remuneration committee, disclose that fact and the processes it employs for setting the level and composition of remuneration for directors and senior executives and ensuring that such remuneration is appropriate and not excessive. 

 

The Board has established a Nomination and Remuneration Committee and adopted a Charter that sets out the committee's roles and responsibilities, composition and membership requirements. The Charter is available on the Company's website.

 

The Committee Charter states that the composition should include a minimum of three members, the majority of whom must be independent, and a Chairman who is an independent Director. Membership is consistent with the composition requirements of the Charter and the recommendations of the ASX Principles.

 

Details of meeting attendance of members of the Nomination and Remuneration Committee for FY201 are contained in a table earlier in this document (refer Principle 2).

 

ASX Principles: Recommendation 8.2: A listed entity should separately disclose its policies and practices regarding the remuneration of non-executive directors and the remuneration of executive directors and other senior executives.

 

The Charter of the Remuneration Committee details the Company's approach to the structure of executive and non-executive remuneration. Executive Directors and key executives are remunerated by way of a salary or consultancy fees, commensurate with their required level of services. Non-executive Directors receive a fixed monthly fee for their services. Total aggregated non-executive Directors' fees are currently capped at A$1,000,000 per annum.

 

The Company does not have any scheme relating to retirement benefits for non-executive Directors.

 

The remuneration report contained in the Directors' report contains details of remuneration paid to Directors and key executives during the year.

 

Disclosure of the Company's remuneration policies is best served through a transparent and readily understandable framework for executive remuneration that details the costs and benefits. The Company intends to meet its transparency obligations in the following manner:

·      publishing a detailed remuneration report in the annual report each year;

·      continuous disclosure of employment agreements with key executives where those agreements, or obligations falling due under those agreements, may trigger a continuous disclosure obligation under ASX Listing Rule 3.1;

·      presentation of the remuneration report to shareholders for their consideration and nonbinding vote at the Company's AGM;

·      taking into account the outcome of the nonbinding shareholder vote when determining future remuneration policy; and

·      responding to shareholder questions on policy and practice in a frank and open manner.

 

ASX Principles: Recommendation 8.3: A listed entity which has an equity-based remuneration scheme should:

a)      have a policy on whether participants are permitted to enter into transactions (whether through the use of derivatives or otherwise) which limit the economic risk of participating in the scheme; and

b)      disclose that policy or a summary of it. Companies should clearly distinguish the structure of nonexecutive Directors' remuneration from that of executive directors and senior executives.

 

The Company has an Employee Share Option Plan which was approved by Shareholders at the 2013 AGM. A summary of the plan was included in the Company's 2013 Notice of General Meeting, a copy of which is available on the Company's website.

 

The Company's Policy for Trading in Company Securities prohibits Directors, Officers and Employees from entering into transactions or arrangements which operate to limit the economic risk of their security holding in the Company without first seeking and obtaining written clearance from the Chairman.

 

A copy of the Company's Policy for Trading in Company Securities can be found on the Company's website. 

 

 

 

 




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 financial statements are in compliance with International Financial Reporting Standards, as stated in note 1.1 to the financial statements;

 

c)     in the directors' opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the Consolidated Entity; and

 

d)    the directors have been given the declarations required by s.295A of the Corporations Act 2001.

 

 

Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001.

On behalf of the Directors

 

                                                 

Bernard Pryor                                                                                                         David Brown

Chairman                                                                                                               Chief Executive Officer

30 September 2016                                                                                              30 September 2016


 

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

 

 


Year ended

30 June 2016


Year ended

30 June 2015


Note

$'000


$'000






Continuing operations





Revenue

5

-


-

Investment income

6

753


828

Other income

7

257


324

Other (losses)/gains

7

(354)


1,580

Depreciation and amortisation

7

(1,199)


(1,472)

Foreign exchange (losses)/gains

7

(10,654)


14,504

Employee benefits expense

7

(3,765)


(4,936)

Finance costs

9

(1,578)


(1,286)

Consulting expense


(624)


(777)

Other expenses


(6,739)


(13,300)

Loss before tax


(23,903)


(4,535)

Income tax credit

10

1,431


-

Net loss for the year from continuing operations


(22,472)


(4,535)






Discontinued operations





Loss for the year from operations classified as held for sale

11

(973)


(2,176)

LOSS FOR THE YEAR


(23,445)


(6,711)






Other comprehensive loss, net of income tax





Items that may be reclassified subsequently to profit or loss





Exchange differences on translating foreign operations


(28,921)


(59,872)

Total comprehensive loss for the year


(52,366)


(66,583)






Loss for the year attributable to:





     Owners of the Company


(23,445)


(6,711)

     Non-controlling interests


-


-



(23,445)


(6,711)






Total comprehensive loss attributable to:





     Owners of the Company


(52,366)


(66,583)

     Non-controlling interests


-


-



(52,366)


(66,583)






Loss per share

12




From continuing operations and discontinued operations





     Basic and diluted (cents per share)


(1.24)


(0.47)






From continuing operations





     Basic and diluted (cents per share)


(1.19)


(0.32)






The accompanying notes are an integral part of these consolidated financial statements.



 

 

 

 


CONSOLIDATED STATEMENT OF FINANCIAL POSITION


 


Year ended

30 June 2016


Year ended

30 June 2015


Note

$'000


$'000






ASSETS





Non-current assets





   Development, exploration and evaluation expenditure

13

207,923


232,813

   Property, plant and equipment

14

6,755


16,259

   Intangible assets

15

10,489


11,682

   Other receivables

16

1,013


1,746

   Other financial assets

17

7,033


3,411

   Restricted cash

20

249


1,023

   Deferred tax assets

25

4,773


2,320

Total non-current assets


238,235


269,254






Current assets





   Inventories

18

5


236

   Trade and other receivables

19

666


792

Other financial assets

17

188


468

   Cash and cash equivalents

20

19,502


17,759



20,361


19,255

Assets classified as held for sale

21

14,567


18,118

Total current assets


34,928


37,373






Total assets


273,163


306,627






LIABILITIES





Non-current liabilities





Deferred consideration

22

-


15,422

   Provisions

24

4,003


5,733

Total non-current liabilities


4,003


21,155






Current liabilities





Deferred consideration

22

16,016


3,265

   Trade and other payables

26

2,323


2,719

   Borrowings

23

10,000


-

   Provisions

24

398


294

   Current tax liabilities


1,249


1,285



29,986


7,563

Liabilities associated with assets held for sale

21

2,732


3,354

Total current liabilities


32,718


10,917






Total liabilities


36,721


32,072

NET ASSETS


236,442


274,555






EQUITY





Issued capital

27

1,006,435


992,374

Accumulated deficit

28

(736,403)


(718,081)

Reserves

29

(34,165)


(313)

Equity attributable to owners of the Company


235,867


273,980

Non-controlling interests

31

575


575

TOTAL EQUITY


236,442


274,555






The accompanying notes are an integral part of these consolidated financial statements.




 

 

 


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY


 

Issued capital

Accumulated deficit

Share based payment reserve

Capital profits reserve

Foreign currency translation reserve

Attributable to owners of the parent

Non-controlling interests

Total equity


$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000










Balance at 1 July 2015

992,374

(718,081)

7,205

91

(7,609)

273,980

575

274,555

Total comprehensive loss for the year


(23,445)



(28,921)

(52,366)


(52,366)

Loss for the year

-

(23,445)

-

-

-

(23,445)

-

(23,445)

Other comprehensive loss, net of tax

-

-

-

-

(28,921)

(28,921)

-

(28,921)



















Shares issued for capital raising (net of costs)

13,707

-

-

-

-

13,707

-

13,707

Shares issued for the acquisition of subsidiary

354

-

-

-

-

354

-

354

Shares issued to employees

-

-

275

-

-

275

-

275

Share options expired

-

5,123

(5,123)

-

-

-

-

-

Share options cancelled

-

-

(83)

-

-

(83)

-

(83)

Balance at 30 June 2016

1,006,435

(736,403)

2,274

91

(36,530)

235,867

575

236,442










Balance at 1 July 2014

935,891

(790,964)

82,464

91

52,263

279,745

575

280,320

Total comprehensive loss for the year

-

(6,711)

-

-

(59,872)

(66,583)

-

(66,583)

Loss for the year

-

(6,711)

-

-

-

(6,711)

-

(6,711)

Other comprehensive loss, net of tax

-

-

-

-

(59,872)

(59,872)

-

(59,872)


935,891

(797,675)

82,464

91

(7,609)

213,162

575

213,737










Shares issued for capital raising (net of costs)

56,483

-

-

-

-

56,483

-

56,483

Shares issued to employees

-

-

4,335

-

-

4,335

-

4,335

Share options expired

-

79,594

(79,594)

-

-

-

-

-

Balance at 30 June 2015

992,374

(718,081)

7,205

91

(7,609)

273,980

575

274,555



















 










 










 

The accompanying notes are an integral part of these consolidated financial statements.





 

 


CONSOLIDATED STATEMENT OF CASH FLOWS


 


Year ended

 30 June 2016


Year ended

 30 June 2015


Note

$'000


$'000






Cash flows from operating activities





Receipts from customers


311


1,003

Payments to suppliers and employees


(13,448)


(16,124)

Cash used in operations

33

(13,137)


(15,121)

Interest received


585


628

Interest paid


(140)


(1,182)

Net cash used in operating activities


(12,692)


(15,675)






Cash flows from investing activities





Purchase of property, plant and equipment


(114)


(1,358)

Proceeds from the sale of property, plant and equipment


29


1

Investment in development assets


-


(991)

Investment in exploration assets


(1,187)


(86)

(Purchase)/sale of other financial assets


(3,336)


134

Settlement of Envicoal matter


-


(2,431)

Decrease in restricted cash


774


4,761

Net cash (used)/generated from investing activities


(3,834)


30






Cash flows from financing activities





Settlement in export trade finance facility


-


(10,367)

Payment of Investec Facility


-


(5,909)

Payment of deferred consideration


(4,066)


(11,619)

Proceeds from loans payable


10,000


-

Proceeds from loans receivable


444


1,579

Proceeds from the issue of shares (net of share issuance costs)


13,707


57,926

Net cash generated by financing activities


20,085


31,610






Net increase in cash and cash equivalents


3,559


15,965

Net foreign  exchange differences


(1,918)


(182)

Cash and cash equivalents at beginning of the year


17,882


2,099

Cash and cash equivalents at the end of the year

20

19,523


17,882











The accompanying notes are an integral part of these consolidated financial statements.




















 


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

1.      General Information

Coal of Africa Limited ("CoAL" or the "Company") is a limited company incorporated in Australia. Its common shares are listed on the Australian Securities Exchange ('ASX'), the Alternative Investment Market of the London Stock Exchange ('AIM') and the Johannesburg Securities Exchange ('JSE') in South Africa. The addresses of its registered office and principal places of business is Suite 8, 7 The Esplanade, Mt Pleasant, Perth, Western Australia 6000.

The principal activities of the Company and its subsidiaries ('the Group' or 'the Consolidated Entity') are the acquisition, exploration, development and operation of metallurgical and thermal coal projects in South Africa.

The Group's principal assets and projects include:

·     The Makhado hard coking and thermal coal project that has been granted a New Order Mining Right and has the potential to produce approximately 5.5 million tonnes per annum of saleable product.;

·     The Vele Colliery, a semi soft coking and thermal coal mine currently under care and maintenance with the potential to supply approximately 1.2million tonnes per annum of saleable product once all regulatory approvals have been obtained and plant modification completed;

·     four exploration and development stage coking and thermal coal projects, namely Chapudi, Generaal, Mopane and Telema&Gray in the Soutpansberg Coalfield; and

·     the Mooiplaats colliery currently on care and maintenance and subject to a formal sale process.

Going Concern

These consolidated financial statements have been prepared on the going concern basis, which contemplates the continuity of normal business activities and the realisation of assets and the settlement of liabilities in the normal course of business.

The Consolidated Entity has incurred a net loss after tax for the year ended 30 June 2016 of $22.5 million (30 June 2015: loss of $4.5 million), including a foreign exchange loss of $10.7 million and depreciation and amortisation charges of $1.2 million. During the twelve month period under review, net cash outflows from operating activities were $12.9 million (30 June 2015 net outflow: $15.7 million) and net cash outflow from investing activities were $3.8 million (30 June 2015 net inflow: $0.03 million). As at 30 June 2016 the Consolidated Entity had a net current liability position of $9.6 million (30 June 2015: net current asset position of $11.7 million), excluding assets and liabilities associated with discontinued operations.

The current liability position as at 30 June 2016 is primarily a result of borrowings of $10 million due to Yishun Brightrise Investment PTE Limited, which is only due for repayment in limited circumstances (refer to note 23 for additional information), combined with deferred consideration payments totalling $16 million due by the Consolidated Entity to Rio Tinto Minerals Development Limited prior to 30 June 2017 (refer to note 22 for additional information).

The directors have prepared a cash flow forecast for the period ending 31 December 2017, which indicates that the Company and Consolidated Entity will have sufficient cash flow to fund their operations for at least the twelve month period from the date of signing this report, which has been based on the following assumptions:

a)   Sale of the Mooiplaats Colliery, and receipt of funds prior to May 2017

 

b)   None of the limited circumstances arise during the forecast period that would require the repayment of the $10 million loan to Yishun Brightrise Investment PTE Limited.

 

   The Company has a history of successful capital raisings to meet the Company and Consolidated Entity's funding requirements.  The directors believe that at the date of signing the financial statements there are reasonable grounds to believe that they will be successful in achieving the matters set out above and that the Company and 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. 

 

 

 

 

 

 

1.     General Information (continued)

 

In addition to the above the Company and Consolidated Entity is actively engaged in various opportunities to secure the growth and long term cash flow requirements of the Company and Consolidated Entity. These include:

 

(i)  Current negotiations for the acquisition of a cash generating entity, which if successfully completed will also make available secured funding from an existing shareholder.

(ii) Current negotiations regarding additional external investment via debt or equity in the operations of the Consolidated Entity.

 

Should the Company and Consolidated Entity be unable to achieve the sale of the Mooiplaats Colliery by May 2017, and be unable to complete any of the other fund raising options noted above by May 2017, a material uncertainty would exist as to whether the Company and Consolidated Entity will be able to continue as going concerns and therefore whether they will realise their assets and discharge their liabilities in the normal course of business. 

The financial report does not include adjustments relating to the recoverability and classification of recorded asset amounts, or to the amounts and classification of liabilities that might be necessary should the company and consolidated entity not continue as going concerns.

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 2016.

1.2. Basis of Preparation

The consolidated financial statements have been prepared on the basis of historical cost, except for other financial assets and financial instruments that are measured at revalued amounts or fair values, as explained in the accounting policies below. Historical cost is generally based on the fair values of the consideration given in exchange for assets.

All amounts are presented in United States dollars, and rounded to nearest thousand unless otherwise noted.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of AASB 2, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in AASB 2 or value in use in AASB 136.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

·        Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

·        Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

·        Level 3 inputs are unobservable inputs for the asset or liability.



 

2.      Accounting policies

2.1.                Basis of Consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved when the Company:

·     has power over the investee;

•    is exposed, or has rights, to variable returns from its involvement with the investee; and

•    has the ability to use its power to affect its returns.

The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company's voting rights in an investee are sufficient to give it power, including:

•    the size of the Company's holding of voting rights relative to the size and dispersion of holdings of the other vote holders;

•    potential voting rights held by the Company, other vote holders or other parties;

•    rights arising from other contractual arrangements; and

·   any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders' meetings.

Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

A list of controlled entities is contained in note 36 to the consolidated financial statements.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.

All inter-group transactions, balances, income and expenses are eliminated in full on consolidation.

Changes in the Group's ownership interests in subsidiaries that do not result in the Group losing control are accounted for as equity transactions. The carrying amounts of the Group's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.

When the Group loses control of a subsidiary, a gain or loss is recognised in profit or loss and is calculated as the difference between

(i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and

(ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-

      controlling interests.

When assets of the subsidiary are carried at revalued amounts or fair values and the related cumulative gain or loss has been recognised in other comprehensive income and accumulated in equity, the amounts previously recognised in other comprehensive income and accumulated in equity are accounted for as if the Company had directly disposed of the relevant assets (i.e. reclassified to profit or loss or transferred directly to any category of equity as specified by applicable Standards). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under Accounting Standard AASB 139 'Financial Instruments: Recognition and Measurement' or, when applicable, the cost on initial recognition of an investment in an associate or joint venture.

2.     
Accounting policies (continued)

2.2.                Business combinations

Business combinations occur where an acquirer obtains control over one or more businesses and results in the consolidation of its assets and liabilities.

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value which is calculated as the sum of the acquisition-date fair values of assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except that:

·     deferred tax assets or liabilities are recognised and measured in accordance with AASB 112 'Income Taxes';

·     assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with AASB 119 'Employee Benefits';

·     liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with AASB 2 'Share-based Payment' at the acquisition date; and

·     assets (or disposal groups) that are classified as held for sale in accordance with AASB 5 'Non-current Assets Held for Sale and Discontinued Operations' are measured in accordance with that Standard.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.

Non-controlling interests that represent ownership interests and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests' proportionate share of the recognised amounts of the acquiree's identifiable net assets. Non-controlling interests are measured at fair value or, when applicable, on the basis specified in another Standard.

Where the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the 'measurement period' (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.

The subsequent accounting for changes in the fair value of contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or liability is remeasured at subsequent reporting dates in accordance with AASB 139, or AASB 137 'Provisions, Contingent Liabilities and Contingent Assets', as appropriate, with the corresponding gain or loss being recognised in profit or loss.

Where a business combination is achieved in stages, the Group's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date (i.e. the date when the Group attains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are 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.      Accounting policies (continued)

2.3.                Functional and presentation currency

The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each group entity are expressed in United Sates dollars ('$'), which is the presentation currency for the consolidated financial statements.

 

Transactions in foreign currencies are initially recorded in the functional currency at the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated to the spot rate of exchange ruling at the reporting date. All differences are taken to the consolidated statement of profit or loss and other comprehensive income.

 

Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange

rates at the date of the initial transaction.

Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for:

·     exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings;

·     exchange differences on transactions entered into in order to hedge certain foreign currency risks; and

·     exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on repayment of the monetary items.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated into United States dollars using the spot rate of exchange ruling at the reporting date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity (attributed to non-controlling interests as appropriate).

On the disposal of a foreign operation (i.e. a disposal of the Group's entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, loss of joint control over a jointly controlled entity that includes a foreign operation, or loss of significant influence over an associate that includes a foreign operation), all of the accumulated exchange differences in respect of that operation attributable to the Group are reclassified to profit or loss.

Goodwill and fair value adjustments on identifiable assets and liabilities arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the spot rate of exchange ruling at the reporting date. Exchange differences arising are recognised in equity.

 

2.4.                Non-current assets held for sale

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the non-current asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

When the criteria above are met and the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as assets held for sale and liabilities associated with assets held for sale in the consolidated statement of financial position. The income and expenses from these operations are not included in the various line items in the consolidated statement of profit or loss and other comprehensive income but the net results from these operations classified as held for sale are disclosed as a separate line within the statement of profit or loss.

Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell.

 

2.     Accounting policies (continued)

2.5.                Exploration and evaluation expenditure

(i) Pre-licence costs

Pre-licence costs relate to costs incurred before the Group has obtained legal rights to explore in a specific area. Such costs may include the acquisition of exploration data and the associated costs of analysing that data. These costs are expensed in the period in which they are incurred.

(ii) Exploration and evaluation expenditure

Exploration and evaluation activity involves the search for mineral resources, the determination of technical feasibility and the assessment of commercial viability of an identified resource.

 

Exploration and evaluation activity includes:

i.      Researching and analysing historical exploration data

ii.    Gathering exploration data through geophysical studies

iii.   Exploratory drilling and sampling

iv.    Determining and examining the volume and grade of the resource

v.     Surveying transportation and infrastructure requirements

vi.    Conducting market and finance studies

 

Licence costs paid in connection with a right to explore in an existing exploration area are capitalised and

amortised over the term of the permit.

 

Once the legal right to explore has been acquired, exploration and evaluation expenditure is charged to profit or loss as incurred, unless the Group conclude that a future economic benefit is more likely than not to be realised.

Capitalised expenditure includes costs directly related to exploration and evaluation activities in the relevant area of interest, including materials and fuel used, surveying costs, drilling costs and payments made to contractors. General and administrative costs are allocated to an exploration or evaluation area of interest and capitalised as an asset only to the extent that those costs can be related directly to operational activities in the relevant area of interest.

Exploration and evaluation assets acquired in a business combination are initially recognised at fair value, including resources and exploration potential that are valued beyond proven and probable reserves. Similarly, the costs associated with acquiring an exploration and evaluation asset (that does not represent a business) are also capitalised. They are subsequently measured at cost less accumulated impairment.

All capitalised exploration and evaluation expenditure is written off where the above conditions are no longer satisfied, and assessed for impairment if facts and circumstances indicate that an impairment may exist. See note 2.11.

Exploration and evaluation expenditure that has been capitalised is reclassified to property, plant and equipment - development assets, when the technical feasibility and commercial viability of extracting a mineral resource are demonstrable. Prior to such reclassification, exploration and evaluation expenditure capitalised is tested for impairment.

2.6.                Property, plant and equipment - Development assets

Development expenditure incurred by or on behalf of the Group is accumulated separately for each area of interest in which economically recoverable resources have been identified. Such expenditure comprises costs directly attributable to the construction of a mine and the related infrastructure.

No depreciation is recognised in respect of development assets.

Development assets are assessed for impairment if facts and circumstances indicate that an impairment may exist. See note 2.11.

A development asset is reclassified as a 'mining property' at the end of the commissioning phase, when the mine is capable of operating in the manner intended by management. Immediately prior to such reclassification, development assets are tested for impairment.

 

 

 

2.      Accounting policies (continued)

2.7.                Property, plant and equipment - Mining property

Mining property includes expenditure that has been incurred through the exploration and development phases, and, in addition, further development expenditure that is incurred in respect of a mining property after the commencement of production, provided that, in all instances, it is probable that additional future economic benefits associated with the expenditure will flow to the Group. Otherwise such expenditure is classified as cost of sales.

Mining property includes plant and equipment associated with the mining property.

 

When a mine construction project moves into the production phase, the capitalisation of certain mine construction costs ceases, and costs are either regarded as part of the cost of inventory or expensed, except for costs which qualify for capitalisation relating to mining asset additions, improvements or new developments, underground mine development or mineable reserve development.

Depreciation on plant and equipment included within mining property is computed on a straight-line basis over five years.

Depreciation on other components of mining property, is charged using the units-of-production method, with separate calculations being made for each area of interest. The units-of-production basis results in a depreciation charge proportional to the depletion of proved and probable reserves.

Mining property is assessed for impairment if facts and circumstances indicate that an impairment may exist. See note 2.11.

2.8.                Deferred stripping costs

Stripping costs comprise the removal of overburden and other waste products from a mine. Stripping costs incurred in the development of a mine before production commences are capitalised as part of the cost of constructing the mine (initially within development assets) and are subsequently depreciated over the life of the operation.

Stripping costs incurred during the production stage of a mine are deferred when this is considered the most appropriate basis for matching the costs against the related economic benefits. The amount deferred is based on the waste-to-ore ratio ('stripping ratio'), which is calculated by dividing the tonnage of waste mined by the quantity of ore mined. Stripping costs incurred in a period are deferred to the extent that the current period ratio exceeds the expected life-of mine-ratio. Such deferred costs are then charged to the consolidated statement of profit or loss and other comprehensive loss to the extent that, in subsequent periods, the current period ratio falls below the life-of mine-ratio. The life-of-mine stripping ratio is calculated based on proved and probable reserves. Any changes to the life-of-mine ratio are accounted for prospectively.

Where a mine operates more than one open pit that is regarded as a separate operation for the purpose of mine planning, stripping costs are accounted for separately by reference to the ore from each separate pit. If, however, the pits are highly integrated for the purpose of the mine planning, the second and subsequent pits are regarded as extensions of the first pit in accounting for stripping costs. In such cases, the initial stripping (i.e. overburden and other waste removal) of the second and subsequent pits is considered to be production phase stripping relating to the combined operation.

Deferred stripping costs are included in the cost base of assets when determining a cash-generating unit for impairment assessment purposes.

2.      Accounting policies (continued)

2.9.                Property, plant and equipment (excluding development assets and mining property)

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

2.10.  Intangible assets, excluding goodwill

An intangible asset is recognised at cost if it is probable that future economic benefits will flow to the Group and the cost can be reliably measured. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses, if any.

Intangible assets are amortised on a straight-line basis over their estimated useful lives. The amortisation method used and the estimated remaining useful lives are reviewed at least annually.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the consolidated statement of profit or loss and other comprehensive income  when the asset is derecognised.

Intangible assets are assessed for impairment if facts and circumstances indicate that an impairment may exist. See note 2.11.



 

2.      Accounting policies (continued)

2.11.  Impairment of tangible and intangible assets other than goodwill

The carrying amounts of the Group's tangible and intangible assets are reviewed at each reporting date to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).

Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less costs to sell and value-in-use. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a post-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

2.12.  Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are initially recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated statement of financial position as a finance lease obligation.

Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group's general policy on borrowing costs (see 2.24 below). Contingent rentals are recognised as expenses in the periods in which they are incurred.

Operating lease payments are recognised as an expense on the straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

2.13.  Inventories

Inventories are stated at the lower of cost and net realisable value. Costs of inventories include expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition.

Cost is determined by using the weighted-average method and comprises direct purchase costs and an appropriate portion of fixed and variable overhead costs, including depreciation and amortisation, incurred in converting materials into finished goods, based on the normal production capacity

 

Any provision for obsolescence is determined by reference to specific items of stock. A regular review is undertaken to determine the extent of any provision for obsolescence.

 

Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

2.      Accounting policies (continued)

2.14.  Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the consolidated statement of profit or loss. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited in the consolidated statement of profit or loss and other comprehensive loss.

2.15.  Cash and cash equivalents

Cash and cash equivalents comprise cash balances and short-term deposits.

Restricted cash comprise cash balances which are encumbered and the Group does therefore not have access to these funds.

2.16.  Financial instruments

Recognition

Financial assets and financial liabilities are recognised when a Group entity becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating interest over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Income is recognised on an effective interest basis for debt instruments other than those financial assets classified as at fair value through profit or loss ('FVTPL').

Financial assets

Financial assets are classified into the following specified categories: FVTPL, 'held-to-maturity' investments, 'available-for-sale' ('AFS') financial assets and 'loans and receivables'. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.



 

2.      Accounting policies (continued)

2.17.  Financial instruments (continued)

Financial assets at FVTPL

Financial assets are classified as at FVTPL when the financial asset is either held for trading or it is designated as at FVTPL.

A financial asset is classified as held for trading if:

•    it has been acquired principally for the purpose of selling it in the near term; or

•    on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or

•    it is a derivative that is not designated and effective as a hedging instrument.

A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial recognition if:

•    such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

•    the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group's documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

•    it forms part of a contract containing one or more embedded derivatives, and AASB 139 'Financial Instruments: Recognition and Measurement' permits the entire combined contract (asset or liability) to be designated as at FVTPL.

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the 'other gains and losses' line item. Fair value is determined in the manner described in note 32.

Held to maturity investments

Non-derivative financial assets with fixed or determinable payments and fixed maturity dates that management has the intent and ability to hold to maturity are classified as held to maturity. These investments are included in non-current assets, except for maturities within 12 months from the financial year-end date, which are classified as current assets. Held to maturity investments are carried at amortised cost using the effective interest rate method less any impairment.

Loans and receivables

Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as 'loans and receivables'. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the effect of discounting is immaterial.

Available for sale investments

AFS financial assets are non-derivatives that are either designated as AFS or are not classified as (a) loans and receivables, (b) held-to-maturity investments or (c) financial assets at FVTPL.

Changes in the carrying amount of AFS monetary financial assets relating to changes in foreign currency rates (see below), interest income calculated using the effective interest method and dividends on AFS equity investments are recognised in profit or loss. Other changes in the carrying amount of AFS financial assets are recognised in other comprehensive loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the equity is reclassified to profit or loss.

The fair value of AFS monetary financial assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate prevailing at the end of the reporting period. The foreign exchange gains and losses that are recognised in profit or loss are determined based on the amortised cost of the monetary asset. Other foreign exchange gains and losses are recognised in other comprehensive loss.

Dividends on AFS equity instruments are recognised in profit or loss when the Group's right to receive the dividends is established.

AFS equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment losses at the end of each reporting period.

2.      Accounting policies (continued)

2.17.  Financial instruments (continued)

Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For listed or unlisted equity investments classified as AFS, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group's past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original effective interest rate.

For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset's carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognised in other comprehensive income are reclassified to profit or loss in the period.

For financial assets measured at amortised cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

In respect of AFS equity securities, impairment losses previously recognised in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income and accumulated under the heading of investments revaluation reserve. In respect of AFS debt securities, impairment losses are subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.



 

2.      Accounting policies (continued)

2.17.  Financial instruments (continued)

Derecognition

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. Any interest in financial assets transferred that is created or retained by the group is recognised as a separate asset or liability.

The Group may enter into transactions whereby it transfers assets recognised on its consolidated statement of financial position, but retains either all risks and rewards of the transferred assets or a portion of them. If all, or substantially all, risks and rewards are retained, then the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

On derecognition of a financial asset in its entirety, the difference between the asset's carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.

On derecognition of a financial asset other than in its entirety (e.g. when the Group retains an option to repurchase part of a transferred asset or retains a residual interest that does not result in the retention of substantially all the risks and rewards of ownership and the Group retains control), the Group allocates the previous carrying amount of the financial asset between the part it continues to recognise under continuing involvement, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in other comprehensive income is recognised in profit or loss. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts.

Financial liabilities

Financial liabilities are initially measured at fair value. Financial liabilities comprise short-term and long-term interest-bearing borrowings and trade and other payables (excluding income received in advance).

Subsequent to initial measurement, such liabilities are carried at amortised cost using the effective interest method.

Borrowings

Borrowings comprise short-term and long-term interest-bearing borrowings. Premiums or discounts arising from the difference between the fair value of borrowings raised and the amount repayable at maturity date are recognised in the consolidated statement of profit or loss as borrowing costs based on the effective interest rate method.

Derecognition

Financial liabilities are derecognised when the associated obligation has been discharged, cancelled or has expired.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities, and includes ordinary share capital. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

2.18.  Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.



 

2.      Accounting policies (continued)

2.19.  Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that the Group will be required to settle the obligation, and the amount can be reliably estimated. Provisions are not recognised for future operating losses.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material). The increase in provisions due to the passage of time is included in the finance cost line item in the consolidated statement of profit or loss and comprehensive loss.

Rehabilitation provision

A provision for rehabilitation is recognised when there is a present obligation as a result of exploration, development or production activities undertaken, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the provision can be measured reliably.

The nature of these restoration activities includes: dismantling and removing structures; rehabilitating mines and tailings dams; dismantling operating facilities; closing plant and waste sites; and restoring, reclaiming and revegetating affected areas.

 

The provision for future rehabilitation costs is the best estimate of the present value of the expenditure required to settle the rehabilitation obligation at the reporting date, based on current legal and other requirements and technology. Future rehabilitation costs are reviewed annually and any changes in the estimate are reflected in the present value of the rehabilitation provision at each reporting date.

The initial estimate of the rehabilitation provision relating to exploration, development and production facilities is capitalised into the cost of the related asset and depreciated or amortised on the same basis as the related asset. Changes in the estimate of the provision are treated in the same manner, except that the unwinding of the effect of discounting on the provision is recognised as a finance cost rather than being capitalised into the cost of the related asset.

2.20.  Share-based payments transactions of the Company

Equity-settled

Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 30.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on the straight-line basis over the vesting period, based on the Group's estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefits reserve.

Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.



 

2.      Accounting policies (continued)

2.20.  Share-based payments transactions of the Company (continued)

Accounting for BEE transactions

Where equity instruments are issued to a broad based black economic empowerment ('BEE') party at less than fair value, these are accounted for as share-based payments. Any difference between the fair value of the equity instrument issued and the consideration received is accounted for as an expense in the consolidated statement of profit or loss and other comprehensive loss.

A restriction on the BEE party to transfer the equity instrument subsequent to its vesting is not treated as a vesting condition, but is factored into the fair value determination of the instrument.

2.21.  Taxation, including sales tax

The income tax expense or income for the period represents the sum of the tax currently payable or recoverable and deferred tax.

Current taxation

The tax currently payable or recoverable is based on taxable profit or loss for the year. Taxable profit or loss differs from profit or loss as reported in the consolidated statement of profit or loss and other comprehensive loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted at the reporting date in countries where the Group operates and generates taxable income.

Deferred taxation

Deferred taxation is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit or loss. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if a taxable temporary difference arises from the initial recognition of goodwill or any temporary difference arises from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax balances are calculated using the tax rates that are expected to apply to the reporting period or periods when the temporary difference reverse, based on tax rates and tax laws enacted or substantively enacted at the end of the reporting period.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Deferred tax liabilities are recognised for temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.



 

2.      Accounting policies (continued)

2.22.  Taxation, including sales tax (continued)

Current and deferred tax for the year

Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case the current and deferred tax are also recognised in other comprehensive income or directly in equity, respectively.

Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

Sales tax

Revenues, expenses and assets are recognised net of the amount of the applicable sales tax, except:

·        where the amount of sales tax incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or

·        for receivables and payables which are recognised inclusive of sales tax.

The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables.

Cash flows are included in the cash flow statement on a gross basis. The sales tax component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified within operating cash flows.

2.23.  Revenue recognition

Revenue is recognised at fair value of the consideration received net of the amount of applicable sales tax.

Sale of goods

Revenue from the sale of goods is recognised when all the following conditions are satisfied:

·        the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;

·        the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

·        the amount of revenue can be measured reliably;

·        it is probable that the economic benefits associated with the transaction will flow to the Group; and

·        the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Specifically, revenue from the sale of goods is recognised when goods are delivered and legal title is passed.

Many of the Group's sales are subject to an adjustment based on inspection of the shipment by the customer. In such cases, revenue is recognised based on the Group's best estimate of the grade at the time of shipment, and any subsequent adjustments are recorded against revenue when advised. Historically, the differences between estimated and actual grade have not been significant.

Interest income

Interest income is recognised when it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate. Interest income is recognised in investment income on the consolidated statement of profit or loss and other comprehensive income.

2.24.  Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

2.25.  Employee benefits

A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and sick leave when it is probable that settlement will be required and they are capable of being measured reliably.

2.      Accounting policies (continued)

2.26.  Segment information

Reportable segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Company's executive committee.

Management has determined the reportable segments of the Group based on the reports reviewed by the Company's executive committee that are used to make strategic decisions. The Group has three reportable segments: Exploration, Development and Mining (see note 4).

2.27.  Adoption of new and revised Accounting Standards and Interpretations

 

The key new and amended reporting requirements that must be applied for the first time this year include:

·        AASB 2015-3 Amendments to Australian Accounting Standards arising from the withdrawal of AASB 1031 Materiality: this amendment completes the withdrawal of AASB 1031 in all Australian Accounting Standards and Interpretations, allowing the standard to be effectively withdrawn.

The application of these amendments does not have any material impact on the disclosures or the amounts recognised in the Group's consolidated financial statements.

At the date of the authorisation of the financial report, a number of Standards and Interpretations were in issue but not yet effective. The potential effect of the revised Standards / Interpretations on the Groups' financial statement has not yet been determined.

 

Standard

Effective for the annual reporting periods beginning on or after

Expected to be initially applied in the financial year ending

·     AASB 9 'Financial Instruments' and the relevant amending standards

1 January 2018

30 June 2019

·     AASB 15 Revenue from Contracts with Customers

1 January 2018

30 June 2019

·     AASB 16 Leases

1 January 2019

30 June 2020

·     AASB 2014-3 Amendments to Australian Accounting Standards -Accounting for Acquisitions of Interest in Joint operations

1 January 2016

30 June 2017

·     AASB 2014-4 Amendments to Australian Accounting Standards -Clarification of Acceptable Methods of Depreciation and Amortisation

1 January 2016

30 June 2017

·     AASB 2015-1 Amendments to Australian Accounting

       Standards - Annual Improvements to Australian Accounting

             Standards 2012-2014 Cycle

1 January 2016

 

30 June 2017

 

·     AASB 2015-2 Amendments to Australian Accounting

Standards - Disclosure Initiative: Amendments to AASB 101

1 January 2016

30 June 2017

·     AASB 2016-1 Amendments to Australian Accounting
Standards - Recognition of Deferred Tax Assets for Unrealised
Losses

1 January 2017

30 June 2018

 

 

 

 

3.      Critical accounting estimates and key judgements

 

Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. The primary areas in which estimates and judgements are applied are discussed below.

 

Asset carrying values and impairment charges

 

The Group assesses impairment at the end of each reporting period by evaluating conditions and events specific to the Group that may be indicative of impairment triggers.  Recoverable amounts of relevant assets are reassessed using value-in-use calculations which incorporate various key assumptions. Key assumptions include future coal prices, future operating costs, discount rates, foreign exchange rates and coal reserves. Refer to note 13.

 

Coal reserves

Economically recoverable coal reserves relate to the estimated quantity of coal in an area of interest that can be expected to be profitably extracted, processed and sold.

The Group determines and reports coal reserves under the Australasian Code of Reporting of Mineral Resources and Ore Reserves (the 'JORC Code'). This includes estimates and assumptions in relation to geological, technical and economic factors, including: quantities, grades, production techniques, recovery rates, production costs, transport costs, exchange rates and expected coal demand and prices.

Because the economic assumptions used to estimate reserves change from period to period, and because additional geological data is generated during the course of operations, estimates of reserves may change from period to period. Changes in reported reserves may affect the Group's financial results and financial position in a number of ways, including the following:

·         asset carrying values may be affected due to changes in estimated future cash flows; and

·         depreciation and amortisation charges may change where such charges are determined by the units of production basis, or where the useful economic lives of assets change.

Depreciation and amortisation charges in the consolidated statement of profit or loss may change where such charges are determined by the units of production basis, or where the useful economic lives of assets change.

Exploration and evaluation assets

Determining the recoverability of exploration and evaluation expenditure capitalised requires estimates and assumptions as to future events and circumstances, in particular, whether successful development and commercial exploitation, or alternatively sale, of the respective areas of interest will be achieved. The Group applies the principles of AASB 6 and recognises exploration and evaluation assets when the rights of tenure of the area of interest are current, and the exploration and evaluation expenditures incurred are expected to be recouped through successful development and exploitation of the area. If, after having capitalised the expenditure under the Group's accounting policy, a judgment is made that recovery of the carrying amount is unlikely, an impairment loss is recorded in profit or loss. Refer to note 13.

 

 

3.      Critical accounting estimates and key judgements (continued)

Development expenditure

Development activities commence after the commercial viability and technical feasibility of the project is established. Judgment is applied by management in determining when a project is commercially viable and technically feasible. Any judgments may change as new information becomes available. If, after having commenced the development activity, a judgment is made that a development asset is impaired, the appropriate amount will be written off to the consolidated statement of comprehensive income. Refer to note 13.

The Company considers the following items as pre-requisites prior to concluding on commercial viability:

·         All requisite regulatory approvals from government departments in South Africa have been received and are not subject to realistic legal challenges

·         The Company has the necessary funding to engage in the construction and development of the project as well as general working capital until the project is cash generative

·         A JORC compliant resource proving the quantity and quality of the project as well as a detailed Mine Plan reflecting that the colliery can be developed and will deliver the required return hurdle rates

·         The Company has secured off-take and/or logistics agreements for a significant portion of the product produced by the mine and the pricing has been agreed

·         The Company has the appropriate skills and resources to develop and operate the project

Rehabilitation and restoration provisions

Certain estimates and assumptions are required to be made in determining the cost of rehabilitation and restoration of the areas disturbed during mining activities and the cost of dismantling of mining infrastructure. The amount the Group is expected to incur to settle its future obligations includes estimates regarding:

·         the future expected costs of rehabilitation, restoration and dismantling.

·         the expected timing of the cash flows and the expected life of mine (which is based on coal reserves noted above);

·         the application of relevant environmental legislation; and

·         the appropriate rate at which to discount the liability;

Changes in the estimates and assumptions used could have a material impact on the carrying value of the rehabilitation provision and related asset. The provision is reviewed at each reporting date and updated based on the best available estimates and assumptions at that time. The carrying amount of the rehabilitation provision is set out in note 24.

Recoverability of non-current assets

As set out in note 13, certain assumptions are required to be made in order to assess the recoverability of non-current assets where there is an impairment indicator. Key assumptions include future coal prices, future operating costs, discount rate, foreign exchange rates and estimates of coal reserves. Estimates of coal reserves in themselves are dependent on various assumptions (refer above). Changes in these assumptions could therefore affect estimates of future cash flows used in the assessment of recoverable amounts, estimates of the life of mine and depreciation. Refer to note 13.

Contingent liabilities - litigation

Certain claims have been made against the Group.  Judgments about the validity of the claims have been made by the Directors. Further details are included in note 34.



 

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 2016, projects within this reportable segment include three exploration stage coking and thermal coal complexes, namely the Chapudi Complex (which comprises the Chapudi project, the Chapudi West project and the Wildebeesthoek project), the Soutpansberg Complex (which comprises the Voorburg project, the Mt Stuart project and the Jutland project) and the Makhado Complex (comprising the Makhado project, the Makhado Extension project and the Generaal project).

The Development segment is engaged in establishing access to and commissioning facilities to extract, treat and transport production from the mineral reserve, and other preparations for commercial production.  As of 30 June 2016, projects included within this reportable segment include project, namely 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 the Mooiplaats Colliery.  As of 30 June 2016 the Mooiplaats Colliery has been classified as operations held for sale.

The accounting policies of the reportable segments are the same as those described in Note 2, Accounting policies.

The Group evaluates performance on the basis of segment profitability, which represents net operating (loss) / profit earned by each reportable segment.

Each reportable segment is managed separately because, amongst other things, each reportable segment has substantially different risks. 

 

The Group accounts for intersegment sales and transfers as if the sales or transfers were to third parties, i.e. at current market prices.

The Group's reportable segments focus on the stage of project development and the product offerings of coal mines in production.

In order to reconcile the segment results with the consolidated statement of profit or loss and other comprehensive income, the discontinuing operations should be deducted from the segment total and the corporate results (as per the reconciliation later in the note should be included.

 


Continuing operations

Discontinuing operations


 

For the year ended 30 June 2016

Exploration

$'000

Development

$'000

Mining

$'000

Total

$'000






Revenues from external customers

-

-

-

-

Inter-segment revenues

-

-

-

-

Revenue (1)

-

-

-

-






Segment loss

(5,246)

(136)

(973)

(6,355)

Items included within the Group's measure of segment profitability





 - Depreciation and amortisation

(63)

(42)

-

(105)

 - Finance income

-

-

150

150

 - Finance cost

(1,455)

(112)

(1)

(1,568)

 - Income tax expense

-

1,431

-

1,431






(1)  Revenues represent sale of product









Segment assets

112,242

105,941

14,567

232,750

Items included within the Group's measure of segment assets

- Additions to non-current assets

1,169

18

-

1,187






Segment liabilities

16,947

4,076

2,732

23,755

 

4.    Segment information (continued)








 


Continuing operations

Discontinuing operations


 

 

For the year ended 30 June 2015

Exploration

$'000

Development

$'000

Mining

$'000

Total

$'000

 






 

Revenues from external customers

-

-

-

-

 

Inter-segment revenues

-

-

-

-

 

Revenue

-

-

-

-

 






 

Segment loss

(4,387)

(1,958)

(2,176)

(8,521)

 

Items included within the Group's measure of segment profitability





 

 - Depreciation and amortisation

(84)

(63)

-

(147)

 

- Finance income

22

47

97

166

 

 - Finance cost

(978)

(80)

(605)

(1,663)

 






 






 

Segment assets

124,715

117,160

18,118

259,993

 

Items included within the Group's measure of segment assets

- Additions to non-current assets

2,454

145

-

2,599

 






 

Segment liabilities

20,788

5,153

3,354

29,295

 

 

Reconciliations of the total segment amounts to respective items included in the consolidated financial statements are as follows:


Year ended

30 June 2016

$'000


Year ended

30 June 2015

$'000





Total loss for reportable segments

6,355


8,521

Reconciling items:




Unallocated corporate costs

8,654


15,681

Depreciation and amortisation

1,094


1,325

Foreign exchange  loss/(gain)

7,342


(18,816)

Loss for the year

23,445


6,711





Total segment assets

232,750


259,993

Reconciling items:




Unallocated  property, plant and equipment

3,379


10,336

Intangible assets

10,489


11,682

Other financial assets

5,611


3,879

Other receivables

1,013


1,745

Unallocated current assets

19,921


18,992

Total assets

273,163


306,627





Total segment liabilities

23,755


29,295

Reconciling items:




Borrowings

10,000


-

Unallocated  liabilities

2,966


2,777

Total liabilities

36,721


32,072

 

 

4.       Segment information (continued)






Year ended

30 June 2016


Year ended

30 June 2015


$'000


$'000

The Group operates in two principal geographical areas - Australia (country of domicile) and South Africa.

The Group's revenue from external customers by location of operations and information about its non-current assets by location of assets are detailed below. 








Revenue by location of operations




South Africa

-


-

Australia

-


-

Total revenue

-


-









Non-current assets by location of operations




South Africa

238,235


269,254

Australia

-


-

Total non-current assets

238,235


269,254










5.       Revenue





The following is an analysis of the Group's revenue for the year from continuing operations (excluding investment income - see note 6)


Revenue from the rendering of services

-


-


-


-





6.       Investment income




Continuing operations








Rental income

172


134





Interest income




Bank deposits

479


646

Interest on loans

90


48

Interest on other financial assets

12


-

Total interest income

581


694





Total investment income

753


828





7.       Loss for the year from continuing operations




Loss for the year from continuing operations has been arrived at after            (charging) or crediting:




Other income




Non-refundable deposits received for sale of non-core assets (Holfontein- refer note 11)

250


324

Other

7


-

Total other income

257


324













 

 

7.      Loss for the year from continuing operations (continued)




 


Year ended

30 June 2016


Year ended

30 June 2015

 


$'000


$'000

 

 Other (losses)/gains




 

 Profit on disposal of property, plant and equipment

8


-

 

 Fair value gain on renegotiated Rio Tinto deferred consideration

-


1,303

 

 Revaluation of investments

(80)


277

 

 Fair value adjustment

78


-

 

 Impairment of investment

(360)


-

 

 Total other gains and (losses)

(354)


1,580

 





 

 Depreciation and amortisation




 





 

 Depreciation




 

 Depreciation of property, plant and equipment (note 14)

(351)


(497)

 

 Total depreciation

(351)


(497)

 





 

 Amortisation




 

 Amortisation of intangible asset (note 15)

(848)


(975)

 

 Total amortisation

(848)


(975)

 





 

 Total depreciation and amortisation

(1,199)


(1,472)

 





 

 

 Foreign exchange (loss)/profit




 

 Unrealised

(9,568)


18,991

 

 Realised

(1,086)


(4,487)

 


(10,654)


14,504

 





 

Employee benefits expenses




 

Share-based payments

(193)


(131)

 

Super-annuation

(9)


(10)

 

Salaries and wages

(3,563)


(4,795)

 

Total employee benefits expense

(3,765)


(4,936)

 





 





 

8.       Auditors' remuneration




 





 

Deloitte - Australia




 

    Audit and review of financial reports

77


102

 

    Non-audit related services

11


-

 


88


102

 





 

Deloitte - Johannesburg




 

    Audit and review of financial reports

176


229

 

    Non-audit related services

96


-

 


272


229

 





 

 

 

 

 




 





 


Year ended

30 June 2016


Year ended

30 June 2015

 


$'000


$'000

 





 

9.       Finance cost




 





 

Finance costs




 

Interest on loans

1,457


1,191

 

Interest on overdraft

9


9

 

Unwinding of interest

112


86

 


1,578


1,286

 





 

10.     Income tax and deferred tax




 





 

Income tax recognised in profit or loss from continuing operations




 

Current tax




 

Current tax expense in respect of the current year

-


-

 


-


-

 





 

Deferred tax (note 25)




 

Recognition of deferred tax assets on assessed losses

1,431


-

 


1,431


-

 

Total income tax credit recognised

1,431


-

 





 

The Group's effective tax rate for the year from continuing operations was (6%) (2015: 0%). The tax rate used for the 2016 and 2015 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:




 





 

Loss from continuing operations before income tax

(23,903)


(4,535)

 

Income tax benefit calculated at 30% (2015: 28%)

7,171


1,270

 

Tax effects of:




 

   Expenses that are not deductible for tax purposes

(1,195)


(753)

 

Differences in tax rates

(442)


-

 

Income that are not taxable

-


91

 

Other temporary differences not recognised

(5,106)


(608)

 

Recognition of deferred tax asset - Losses

1,003


-

 

              Income tax credit

1,431


-

 





 

Income tax recognised on the loss from discontinuing operations




 

Current tax




 

Current tax expense in respect of the current year

-


-

 


-


-

 





 

Deferred tax (note 25)




 

Recognition of deferred tax assets on assessed losses

-


-

 


-


-

 

Total income tax credit recognised

-


-

 





 





 

 

 

 

 

 

 

10.     Income tax and deferred tax (continued)




 


Year ended

30 June 2016


Year ended

30 June 2015

 


$'000


$'000

 

Income tax recognised in profit or loss from discontinued operations




 

Current tax




 

Current tax expense in respect of the current year

-


-

 


-


-

 





 

Deferred tax (note 25)




 

Recognition of deferred tax assets on assessed losses

-


-

 


-


-

 

Total income tax credit recognised

-


-

 





 





 

The Group's effective tax rate for the year from discontinued operations was (0%) (2015: 0%). The tax rate used for the 2016 and 2015 reconciliations below is the corporate tax rate of 30% payable by Australian corporate entities. The income tax expense for the year can be reconciled to the accounting profit as follows:




 





 





 

Loss before income tax from discontinued operations

(973)


(5,005)

 

Income tax benefit calculated at 30% (2015: 28%)

292


1,401

 

Tax effects of:




 

   Expenses that are not deductible for tax purposes

13


(483)

 

   Difference in tax rates

(19)


-

 

   Other temporary differences not recognized

(286)


(918)

 

Income tax credit

-


-


 

11.     Discontinuing operations








11.1   Holfontein (Pty) Ltd ('Holfontein')




The Company is in the process of finalising agreements for the disposal of the Holfontein thermal coal project near Secunda in Mpumalanga.








11.2   Plan to dispose of Langcarel (Pty) Ltd ('Mooiplaats')




The Company has announced a long-term strategy to dispose of its thermal assets in order to focus on the development of the coking coal assets. The Company is actively seeking a buyer for this business and expects to complete a sale during the next financial year. The Group has not recognised any impairment on the Mooiplaats colliery during the current financial year. (2015: $nil - note 21).








11.3   Analysis of loss for the year from discontinuing operations




The combined results of the operations held for sale included in the loss for the year are set out below. The comparative losses and cash flows from operations held for sale have been re-presented to include those operations classified as held for sale in the current year.




 

 

 

 

11.     Discontinuing operations (continued)




 


Year ended

30 June 2016


Year ended

30 June 2015

 


$'000


$'000

 

Loss for the year from operations held for sale




 

Revenue

-


-

 

Other gains

-


427

 


-


427

 

Expenses

(973)


(2,603)

 

Loss before tax

(973)


(2,176)

 

Loss for the year from operations held for sale (attributable to owners of the Company)

(973)


(2,176)

 





 

Cash flows from operations held for sale




 

Net cash outflows from operating activities

(951)


(1,400)

 

Net cash inflows from investing activities

1


1,024

 

Net cash inflows from financing activities

1,400


729

 

Net cash inflows

450


353

 





 

These operations have been classified and accounted for at 30 June 2016 as a disposal group held for sale (see note 21).




 





 

Impairment testing

Non-current assets held for sale

As of 30 June 2016 the net book value of the following project assets were classified as non-current assets held for sale

·      Holfontein Colliery: $ nil

·      Mooiplaats Colliery: $14.1 million

The Company is in the process of finalising agreements for the disposal of the Holfontein Colliery, and has announced a strategy to dispose of the Mooiplaats Colliery within the next 12 months. Consequently, these project assets have been classified as non-current assets held for sale and have been written down to their fair value less costs to sell represented by indicative offers received.


Cents per share


Cents per share

 

12.     Loss per share attributable to owners of the Company




 





 

12.1   Basic loss per share




 

From continuing operations

1.19


0.32

 

From discontinuing operations

0.05


0.15

 


1.24


0.47

 





 


$'000


$'000

 

Loss for the year attributable to owners of the Company

(23,445)


(6,711)

 

Less: Loss for the year from operations held for sale

973


2,176

 

Loss used in the calculation of basic loss per share from continuing operations

(22,472)


(4,535)

 





 


'000 shares


'000 shares

 

Weighted number of ordinary shares




 

Weighted average number of ordinary shares for the purposes of basic loss per share

1,896,412


1,414,768

 

 

 




 





 

12.     Loss per share attributable to owners of the Company (continued)





12.2   Diluted loss per share




Diluted loss per share is calculated by dividing loss attributable to owners of the Company by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of diluted ordinary share that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.




As at 30 June 2016, 75,627,052 options (2015 - 85,993,989 options) were excluded from the computation of the loss per share as their impact is anti-dilutive. Furthermore at 30 June 2016, the TMM options had expired and is not included in the calculation.

 





Year ended

30 June 2016


Year ended

30 June 2015


$'000


$'000





12.3   Headline loss per share (in line with JSE requirements)




The calculation of headline loss per share at 30 June 2016 was based on the headline loss attributable to ordinary equity holders of the Company of $22.0 million (2015: $6.7 million) and a weighted average number of ordinary shares outstanding during the period ended 30 June 2016 of 1,896,412,421 (2015:  1,414,768,613).

The adjustments made to arrive at the headline loss are as follows:




Loss for the period attributable to ordinary shareholders

(23,445)


(6,711)

Adjust for:




Impairment losses

360


-

Profit on sale of property, plant and equipment

(8)


-

Headline earnings

(23,093)


(6,711)





Headline loss per share (cents per share)

(1.22)


(0.47)









13.     Development, exploration and evaluation expenditure








Development, exploration and evaluation expenditure comprises:








Exploration and evaluation assets

104,893


118,498

Development expenditure

103,030


114,315

Balance at end of year

207,923


232,813





A reconciliation of development, exploration and evaluation expenditure is presented below:








Exploration and evaluation assets




Balance at beginning of year

118,498


139,991

Additions

1,187


145

Movement in Rehabilitation asset

(18)


-

Foreign exchange differences

(14,774)


(21,638)

Balance at end of year

104,893


118,498

 

 

 

13.     Development, exploration and evaluation expenditure (continued)




 





 


Year ended

30 June 2016


Year ended

30 June 2015

 


$'000


$'000

 

Development assets




 

Balance at beginning of year

114,315


131,720

 

Additions

-


2,454

 

Transfer from property, plant and equipment

6,501


-

 

Movement in Rehabilitation asset

(167)


-

 

Deferred tax asset

(1,488)


-

 

Foreign exchange differences

(16,131)


(19,859)

 

Balance at end of year

103,030


114,315

 





 

Impairment testing

Exploration and Evaluation Assets

As of 30 June 2016, the net book value of the following project assets were classified as Exploration and Evaluation assets:

·      Greater Soutpansberg Project: $54.4 million

·      Makhado Project: $50.5 million

In terms of AASB 6 - Exploration for and Evaluation of Mineral Resource management have performed an assessment of whether facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount. In performing its assessment, management have considered its exploration rights to the exploration areas, its planned & budgeted exploration activities and the likelihood of the recoverability of the net book value from the successful development of the areas of interest. Management have concluded that no indicators of impairment for its Exploration and Evaluation assets exist as at 30 June 2016.

Development Assets

As of 30 June 2016 the net book value of the following project assets were included in Development assets:

·      Vele Colliery: $103 million

In terms of AASB 136 - Impairment of Assets management has identified the coal commodity price as an indicator that the Vele assets may be impaired and have performed a formal impairment assessment.

Management have adopted the fair value less costs of disposal approach to estimate the recoverable amount of the project, before comparing this amount with the carrying value of the associated assets and liabilities in order to assess whether an impairment of the carrying value is required under AASB 136. Management formed the view that impairment is not likely.

In calculating the fair value less costs of disposal, management have forecast the cash flows associated with the project over its expected life of 17 years until 2033. The cash flows are estimated for the assets of the colliery in its current condition together with capital expenditure required for the colliery to resume operation and discounted to its present value using a post-tax discount rate that reflects the current market assessments of the risks specific to the Vele Colliery. The identification of impairment indicators and the estimation of future cash flows require management to make significant estimates and judgments. Details of the key assumptions used in the fair value less costs of disposal calculation at 30 June 2016 are included below.

 

 

13.     Development, exploration and evaluation expenditure (continued)

Key assumptions

 


2017

2018

2019

2020

LT

Thermal coal price (USD, nominal)[1]

63.6

65.1

66.8

68.4

67.82

Hard coking coal price (USD, nominal)3

86.5

91.3

97.2

105.6

111.24

Exchange rate (USD / ZAR, nominal)

17.9

18.5

19.3

20.0

20.05

Discount rate6

16.1%

Inflation rates    USD

2.5%

                             ZAR

6.0%

Production start date7

February 2018

(1)      Management's assumptions reflect the Richards Bay export thermal coal (API4) price.

(2)      LT thermal coal price equivalent to USD 60 per tonne in 2016 dollars

(3)      Management's assumption of the hard coking coal price is made after considering relevant broker forecasts

(4)     LT hard coking coal price equivalent to USD 111 per tonne in 2016 dollars

(5)     From 2021, the exchange rate is derived with reference to the 2020 assumption, and inflated by the  compounding differential between USD and ZAR inflation rates

(6)     Management prepared a nominal ZAR-denominated, post-tax discount rate, which was calculated with reference to the Capital Asset Pricing Model (CAPM).

(7)     The recoverable amount is based on obtaining project financing in order for production to commence in February 2018. Management has assumed the project will be financed in the time frame required and has determined the recoverable amount on that basis. Any delay to the production start date will impact the recoverable value.

Impairment Assessment


USD million

Value of Vele using the discounted cash flow method based on the current life of mine model

99

Value of resources not currently included in the life of mine model 8

11

Total value attributed to Vele

110

Carrying Value of Vele cash-generating unit

103

 

(8)     Excluded from the value of the Vele Colliery derived from the discounted cash flow model, is any value attributable to resources remaining after the projections made in the current life of mine ("LOM") model. In order to assess the potential value of resources outside of the current LOM model, a resource valuation was undertaken by management in January 2016 in consultation with external independent valuations experts. This valuation applied a weighted average multiple of ZAR 3.8/tonne of resources, or USD 0.25/tonne which resulted in an indicative valuation of $57 million at that time. An alternative valuation of the resources outside of the LOM model has been performed by extending the discounted cash flow model by ten years, which results in a valuation of $11 million. The value of the resources outside of the LOM model could therefore be in the range of $11 million to $57 million.

 

 

 

 

13.     Development, exploration and evaluation expenditure (continued)

Sensitivity Analysis

Changes in key assumptions in the table below would have the following approximate impact on the recoverable amount of the Vele Colliery as calculated using the discounted cash flow method and excluding the effect of the value attributable to resources outside the LOM.

 

Sensitivity

Change in variable

Effect on fair value less costs of disposal using discounted cash flow method (USD million)

Long term coal prices

+10.0%

18


-10.0%

(17)

Long term exchange rate

+10.0%

23


-10.0%

(24)

Discount rate

+1.0%

(7)


-1.0%

7

Operating costs

+10.0%

(16)


-10.0%

17

Delays in production start date

+12 months

(14)

 

 

 

 

 

 

 

 




 

 

14.    Property, plant and equipment




 


Mining property, plant and equipment

Land and buildings

Motor vehicle

Other

Total


$'000

$'000

$'000

$'000

$'000

$'000

2016






Cost






At beginning of year

50

16,701

732

1,831

19,777

Additions

-

-

56

58

114

Transferred to development assets

-

(6,501)

-

-

(6,501)

Disposals

-

-

(59)

-

(59)

Exchange differences

(8)

(2,832)

(73)

(124)

(292)

(3,329)

At end of year

42

7,368

390

605

1,597

10,002







Accumulated depreciation





At beginning of year

36

857

517

1,646

3,518