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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Coal of Africa | LSE:CZA | London | Ordinary Share | AU000000CZA6 | ORD NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 43.50 | 42.00 | 45.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMCZA
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)
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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 Independent Non-Executive Mr Pryor is currently the
Pryor Chairman 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 Mr Brown is a Chartered
and Chief Executive Accountant, CA (SA) and
Officer completed his articles with
Ernst & Young, graduating
from the University of Cape
Town. Mr Brown joined CoAL
following a tenure of almost
14 years at Impala Platinum
Holdings Limited ("Implats").
He joined the Impala Group
in 1999 and served as chief
financial officer and financial
director of Implats before
being appointed chief executive
officer in 2006. He is currently
an independent non-executive
director of Vodacom Group
Limited. In the past he
has served as a non-executive
director of Simmer & Jack
Limited, as well as Edcon
Holdings Limited and chairman
of ASX listed Zimplats Holdings
Limited.
De Wet Olivier Executive Director Mr De Wet Schutte is a Chartered
Schutte and Chief Financial Accountant, CA (SA) and
Officer completed an MBA at the
University of Virginia in
2002. He has been involved
at the senior level in the
mining and natural resources
industry for the past 16
years, most notably as Managing
Director, Natural Resources
at Macquarie Bank and CFO
at the listed platinum producer,
Atlatsa Resources Corporation.
Prior to these positions
he worked for Harmony Gold
Mining (Pty) Ltd as its
New Business and Exploration
Executive for a period of
three years.
Peter George Independent Non-Executive Mr Cordin has a Bachelor
Cordin Director of Engineering from the
University of Western Australia
and is experienced in the
evaluation, development
and operation of resource
projects within Australia
and overseas. He is a non-executive
director of Vital Metals
Limited and Aurora Minerals
Limited.
Khomotso Brian Independent Non-Executive Mr Mosehla is a Chartered
Mosehla Director Accountant, CA (SA) and
completed his articles with
KPMG. Mr Mosehla worked
for five years at African
Merchant Bank Limited, where
he gained a broad range
of experience, including
management buy-out, leveraged
buy-out and capital restructuring/raising
transactions. In 2003, he
established Mvelaphanda
Corporate Finance, for the
development of Mvelaphanda's
mining and non-mining interests.
Mr Mosehla served as a director
on the boards of several
companies, including Mvelaphanda
Resources Limited, and he
is currently the Chief Executive
Officer of Mosomo Investment
Holdings Proprietary Limited.
Mr Mosehla is currently
s director of Northam Platinum
Ltd as well as Zambezi Platinum
Limited
Rudolph Henry Non-Executive Director Mr Torlage is a Chartered
Torlage Accountant and has over
twenty years experience
with ArcelorMittal South
Africa. He is currently
General Manager, Strategy
and Special Projects and
a Board member of various
unlisted ArcelorMittal Group
companies. He was previously
the Executive Director Finance
at ArcelorMittal South Africa.
Andrew David Independent Non-Executive Mr Mifflin obtained his
Mifflin Director BSc. (Hons) Mining Engineering
from Staffordshire University
and has a Master's Degree
in Business Administration.
Andrew has over 30 years'
experience specifically
in the coal mining arena.
His experience spans across
various organisations such
as British Coal Corporation,
Xstrata and more recently
GVK Resources. He has gained
in depth knowledge in coal
operations, both thermal
and hard coking coal as
well as in project development.
Thabo Felix Independent Non-Executive Mr Mosololi is a Chartered
Mosololi Director Accountant, CA (SA) qualified
in South Africa and brings
considerable expertise as
a director of various companies
as well as from his time
as Finance Director and
Operations Director with
Tsogo Sun. Thabo has 20
years of experience within
the South African corporate
environment. Mr Mosololi
is currently a director
of Pan African Resources
PLC.
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 African Minerals Limited 2011 - 2014
Pryor
David Hugh Brown Vodacom Group Limited 2012 - Present
De Wet Olivier None
Schutte
Peter George Cordin Dragon Mining Limited 2006 - 2014
Vital Metals Limited 2009 - Present
Aurora Minerals Limited 2014 - Present
Khomotso Brian Northam Platinum Limited 2015 - Present
Mosehla Zambezi Platinum Limited 2015 - Present
Rudolph Henry None
Torlage
Andrew David Mifflin None
Thabo Felix Mosololi Evraz Highveld Steel & Vanadium 2013 - 2015
Limited
Pan African Resources PLC 2014 - Present
Directors' shareholdings
The following table sets out each director's relevant interest in shares or options in shares or debentures of the Company as at the date of this report.
Director Ordinary shares Performance 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 Class of shares Exercise Expiry date
shares under price
option
------------------ -------------- ---------------- --------- -------------
ESOP Unlisted 2,670,000 Ordinary ZAR7.60 14 February
Options 2017
ESOP Unlisted 3,932,928 Ordinary ZAR1.75 30 June 2017
Options
Investec options 20,000,000 Ordinary ZAR1.32 21 October
2018
ESOP Unlisted 3,525,000 Ordinary ZAR1.20 1 February
Options 2019
ESOP Unlisted 3,525,000 Ordinary ZAR1.32 1 February
Options 2019
ESOP Unlisted 3,525,000 Ordinary ZAR1.45 1 February
Options 2019
ESOP Unlisted 5,000,000 Ordinary GBP0.055 27 November
Options 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 Class of shares Exercise Expiry date
shares under price
option
------------------- -------------- ---------------- --------- ------------
ESOP Performance 9,714,021 Ordinary Nil 1 December
Grant 2018
ESOP Performance 5,449,944 Ordinary Nil 1 December
Grant 2018
ESOP Performance 18,285,159 Ordinary Nil 1 December
Grant 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 Nomination Safety, Health
Meetings and Remuneration and Environment
Committee Committee
Meetings 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 Year ended Year ended Year ended Year ended
30 June 30 June 30 June 30 June 30 June
2016 2015 2014 2013 2012
$'000 $'000 $'000 $'000 $'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 Year ended Year ended Year ended Year ended
30 June 30 June 30 June 30 June 30 June
2016 2015 2014 2013 2012
----------- ----------- ----------- ----------- -----------
Share price at start A$0.09 A$0.07 A$0.19 A$0.56 A$1.08
of year
Share price at end of A$0.06 A$0.09 A$0.07 A$0.19 A$0.56
year
Basic and diluted loss
per share ($ 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 Post-employment Termination Share- Total Share
benefits benefits benefits based based
payments % of
Total
----------------------------------- ---------------- ------------ ---------- ---------- -------
Salary Bonus Non -monetary Super-annuation Options
and fees benefits / Shares
2016 $ $
$ $ $ $ $ %
---------- ------- -------------- ---------------- ------------ ---------- ---------- -------
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 Post-employment Termination Share- Total Share
benefits benefits benefits based based
payments % of
Total
----------------------------------- ---------------- ------------ ---------- ---------- -------
Salary Bonus Non -monetary Super-annuation Options
and fees benefits / Shares
2015 $ $
$ $ $ $ $ %
---------- ------- -------------- ---------------- ------------ ---------- ---------- -------
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:
Exercise Grant
Grant Expiry price date Vesting
Option series Number date date value 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
--------------------------------------------------------------------
% of
compensation
for the year
% of grant % of grant consisting of
Name Option series Number granted Number vested vested forfeited options
----------- ----------------- --------------- -------------- ----------------- ---------------- ----------------
ESOP unlisted
D Brown options 10,575,000 3,525,000 33 n/a 7
Performance
D Brown Grant 9,714,021 - - n/a 8
Performance
D Schutte Grant 5,449,944 - - n/a 9
Performance
C Bronn 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 Granted Exercised Expired/Other Held at
1 July as remuneration changes 30 June
2015 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 Granted Exercised Expired/Other Held at
1 July as remuneration changes 30 June
2015 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 Granted Exercised Expired/Other Held at
1 July as remuneration changes 30 June
2015 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 Granted Exercised Expired/Other Held at
1 July as remuneration changes 30 June
2015 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 Granted Exercised Expired/Other Held at
1 July as remuneration changes 30 June
2015 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 Granted Exercised Expired/Other Held at
1 July as remuneration changes 30 June
2015 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 Granted Exercised Expired/Other Held at
1 July as remuneration changes 30 June
2015 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 Granted Exercised Expired/Other Held at
1 July as remuneration changes 30 June
2015 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 Granted Exercised Expired/Other Held at
1 July 2015 as remuneration changes 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 Deloitte Touche Tohmatsu
Coal of Africa Limited ABN 74 490 121 060
Suite 8, 7 The Esplanade
Mount Pleasant WA 6153 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 Number of Board
meetings attended meetings held
in FY2016 while in FY2016 while
a member 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 Number of Committee
meetings attended meetings held
in FY2016 while in FY2016 while
a member 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 Number of Committee
meetings attended meetings held
in FY2016 while in FY2016 while
a member 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 Year ended
30 June 30 June
2016 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 Year ended
30 June 2016 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 Accumulated Share Capital Foreign Attributable Non-controlling Total
capital deficit based profits currency to owners interests equity
payment reserve translation of the
reserve reserve parent
$'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 Year ended
30 June 30 June
2016 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 Expected to
the annual be initially
reporting periods applied in
beginning on the financial
or after year ending
---------------------------------------------------------------- ------------------------ --------------------
1 January 2018 30 June 2019
* AASB 9 'Financial Instruments' and the relevant
amending standards
1 January 2018 30 June 2019
* AASB 15 Revenue from Contracts with Customers
1 January 2019 30 June 2020
* AASB 16 Leases
1 January 2016 30 June 2017
* 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 2017 30 June 2018
* AASB 2016-1 Amendments to Australian
AccountingStandards - Recognition of Deferred Tax
Assets for Unrealised Losses
------------------------------------------------------------------ ---------------------- --------------------
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.
Discontinuing
Continuing operations operations
-------------------------- --------------
Exploration Development Mining Total
For the year ended $'000 $'000 $'000 $'000
30 June 2016
----------------------------- ------------ ------------ -------------- --------
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)
Discontinuing
Continuing operations operations
-------------------------------- ----------------
Exploration Development Mining Total
For the year ended $'000 $'000 $'000 $'000
30 June 2015
---------------------------------------- ----------------- ------------- ---------------- -----------
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 Year ended
30 June 30 June
2016 2015
$'000 $'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 Year ended
30 June 30 June
2016 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 Year ended
30 June 30 June
2016 2015
$'000 $'000
-----------
Other (losses)/gains
Profit on disposal of property, plant 8 -
and equipment
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 Year ended
30 June 30 June
2016 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 1,431 -
assessed losses
----------- -----------
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 Year ended
30 June 30 June
2016 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 Year ended
30 June 30 June
2016 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 Cents per
share 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 Year ended
30 June 30 June
2016 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 Year ended
30 June 30 June
2016 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 67.8(2)
---------------------------------------- ----- ----- ----- ------ ---------
Hard coking coal price (USD, nominal)3 86.5 91.3 97.2 105.6 111.2(4)
---------------------------------------- ----- ----- ----- ------ ---------
Exchange rate (USD / ZAR, nominal) 17.9 18.5 19.3 20.0 20.0(5)
---------------------------------------- ----- ----- ----- ------ ---------
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 Land Leasehold Motor Other Total
property, and improvements vehicle
plant and buildings
equipment
$'000 $'000 $'000 $'000 $'000 $'000
---------------------- ----------- ----------- -------------- ---------- ------- ----------
2016
Cost
At beginning
of year 50 16,701 463 732 1,831 19,777
Additions - - - 56 58 114
Transferred
to development
assets - (6,501) - - - (6,501)
Disposals - - - (59) - (59)
Exchange differences (8) (2,832) (73) (124) (292) (3,329)
---------------------- ----------- ----------- -------------- ---------- ------- ----------
At end of year 42 7,368 390 605 1,597 10,002
---------------------- ----------- ----------- -------------- ---------- ------- ----------
Accumulated depreciation
At beginning
of year 36 857 462 517 1,646 3,518
Depreciation
charge - 171 - 103 77 351
Accumulated
depreciation
on disposals - - - (37) - (37)
Exchange differences (6) (148) (73) (89) (269) (585)
---------------------- ----------- ----------- -------------- ---------- ------- ----------
At end of year 30 880 389 494 1,454 3,247
Net carrying
value at end
of year 2016 12 6,488 1 111 143 6,755
---------------------- ----------- ----------- -------------- ---------- ------- ----------
Mining Land Leasehold Motor Other Total
property, and improvements vehicles
plant and buildings
equipment
$'000 $'000 $'000 $'000 $'000 $'000
---------------------- ----------- ----------- -------------- ---------- ------- ----------
2015
Cost
At beginning
of year 28 17,403 540 828 2,048 20,847
Additions 28 1,824 - 20 75 1,947
Disposals - - - - - -
Exchange differences (6) (2,526) (77) (116) (292) (3,017)
---------------------- ----------- ----------- -------------- ---------- ------- ----------
At end of year 50 16,701 463 732 1,831 19,777
---------------------- ----------- ----------- -------------- ---------- ------- ----------
Accumulated
depreciation
At beginning
of year 11 714 537 447 1,725 3,434
Depreciation
charge - 230 1 130 136 497
Accumulated - - - - - -
depreciation
on disposals
Exchange differences 25 (87) (76) (60) (215) (413)
---------------------- ----------- ----------- -------------- ---------- ------- ----------
At end of year 36 857 462 517 1,646 3,518
---------------------- ----------- ----------- -------------- ---------- ------- ----------
Net carrying
value at end
of year 2015 14 15,844 1 215 185 16,259
---------------------- ----------- ----------- -------------- ---------- ------- ----------
Year ended Year ended
30 June 30 June
2016 2015
$'000 $'000
----------- -----------
15. Intangible assets
Balance at beginning of year 11,682 15,488
Amortisation (848) (975)
Foreign exchange differences (345) (2,831)
----------- -----------
Balance at end of year 10,489 11,682
----------- -----------
In August 2008 the Company entered into
a throughput agreement with TCM, a subsidiary
of Grindrod, the operator of the Matola
Terminal, and CMR Engineers & Project
Managers Proprietary Limited.
This agreement granted the Company one
mtpa of port capacity through the Matola
terminal commencing 1 January 2009, for
an initial term of five years. This capacity
was increased to approximately three mtpa
in March 2011 and the Company has the
right to renew the agreement (subject
to certain conditions) at the end of the
initial term, for further periods of 3
successive periods of 5 years each for
a total of 15 years.
During the prior year the Company reached
an agreement with Grindrod to settle the
current liabilities to date as well as
cover all future take or pay obligation
until 31 December 2016. The settlement
of $10.3 million was paid during the prior
financial year.
The terms of the Throughput Agreement
can be renegotiated if required to facilitate
any production by its Vele Colliery and
Makhado Project.
16. Other receivables
Carrying amount of:
Nimag loan 811 1,503
Other loans 202 243
----------- -----------
1,013 1,746
----------- -----------
Balance at beginning of year 1,746 2,245
Loans repaid (444) -
Other - (312)
Foreign exchange differences (289) (187)
----------- -----------
Balance at end of year 1,013 1,746
----------- -----------
Nimag loan
CoAL provided a loan as part of the NiMag
disposal to settle the balance of the
purchase consideration. The loan bears
interest at the South African prime overdraft
rate less 0.5%, payable quarterly in arrears.
Year ended Year ended
30 June 30 June
2016 2015
$'000 $'000
----------- -----------
17. Other financial assets
Carrying value of financial assets at
fair value through profit or loss
Listed securities
* Equity securities 188 468
Unlisted securities
* Equity securities in investment funds* 5,545 3,145
----------- -----------
5,733 3,613
----------- -----------
Fair value movements in other financial
assets are recognised in other (losses)/gains
in the consolidated statement of profit
or loss. Refer note 7.
*Listed investments are carried at the
market value as at the reporting date
and unlisted investments are valued with
reference to the investment company's
fund statement.
Deposits 1,488 266
----------- -----------
7,221 3,879
----------- -----------
Other financial assets have been analysed
between current and non-current as follows:
Current 188 468
Non-current 7,033 3,411
----------- -----------
7,221 3,879
----------- -----------
18. Inventories
Consumable stores 5 218
Finished goods - 18
5 236
----------- -----------
The cost of inventories recognised as
an expense during the year in respect
of continuing operations was $0.05 million
(2015: $0.5 million).
Year ended Year ended
30 June 30 June
2016 2015
$'000 $'000
------------ ---------------
19. Trade and other receivables
Trade receivables 48 95
Other receivables 963 1,111
Allowance for doubtful debts (345) (414)
------------ ---------------
666 792
------------ ---------------
The carrying amount of trade and other
receivables approximate their fair value
due to their short-term maturity.
The maximum exposure to credit risk at
the reporting date is the carrying value
of each class of receivables as disclosed
in note 19. The Group does not hold any
collateral as security.
Movements on the allowance for doubtful
debts are as follows:
Balance at beginning of year 414 484
Allowance for bad debts - 6
Foreign exchange differences (69) (76)
------------ ---------------
Balance at end of year 345 414
------------ ---------------
Trade receivables are exposed to the credit
risk of end-user customers within the
coal mining industry.
The Group has an established credit policy
under which customers are analysed for
creditworthiness before the Group's payment
and delivery terms and conditions are
offered. Customer balances are monitored
on an ongoing basis to ensure that they
remain within the negotiated terms and
conditions offered.
Credit quality of trade receivables
Not past due 48 95
Past due 0 to 30 days - -
Past due 31 to 60 days - -
Past due 61 to 90 days - -
------------ ---------------
48 95
------------ ---------------
Currency analysis of trade receivables
SA Rand 48 95
48 95
------------ ---------------
20. Cash and cash equivalents
Bank balances 19,502 17,759
Bank balances included in a disposal group
held for sale (refer note 21) 21 123
------------ ---------------
19,523 17,882
------------ ---------------
Restricted cash 249 1,023
Restricted cash included in a disposal
group held for sale (refer note 21) 219 264
------------ ---------------
468 1,287
------------ ---------------
The restricted cash balance of $0.2 million(2015
- $1.0 million) is held on behalf of subsidiary
companies in respect of the rehabilitation guarantees
issued to the DMR in respect of environmental rehabilitation
costs of $6.3 million (2015: $10.1 million). This
cash is not available for use other than for those
specific purposes.
20. Cash and cash equivalents (continued)
Credit risk
Cash at bank earns interest at a floating
rate based on daily bank deposit rates.
Cash is deposited at highly reputable
financial institutions of a high quality
credit standing within Australia, the
United Kingdom and the Republic of South
Africa.
The fair value of cash and cash equivalents
equates to the values as disclosed in
this note.
Year ended Year ended
30 June 30 June
2016 2015
$'000 $'000
------------ ---------------
21. Assets classified as held for sale
Carrying amounts of
Holfontein Investments Proprietary Limited - -
('Holfontein')
Langcarel Proprietary Limited ('Mooiplaats') 11,835 14,764
11,835 14,764
------------ ---------------
Assets classified as held for sale
Holfontein - -
Mooiplaats 14,567 18,118
14,567 18,118
------------ ---------------
Liabilities associated with assets held
for sale
Holfontein - -
Mooiplaats 2,732 3,354
2,732 3,354
------------ ---------------
Holfontein
Net assets of Holfontein Investments Proprietary - -
Limited
Impairment on assets held for sale - -
------------ ---------------
- -
------------ ---------------
During the year, the Company received
R2.5 million ($0.2 million) of the balance
outstanding of R17.2 million ($1.2 million)
from the prior year for the sale of the
undeveloped Opgoedenhoop mining right.
The Company has agreed on new settlement
terms for the balance of R15.9 million
($1 million) outstanding at 30 June 2016,
which includes, R1 million ($0.1 million)
to be settled in September 2016 and the
balance remaining to be settled in full
in December 2016. The outstanding balance
will accrue interest at the South African
prime rate. Any default in the payment
terms will result in interest at the South
African prime rate plus 4%.
21. Assets classified as held for sale
(continued)
Year ended Year ended
30 June 30 June
2016 2015
$'000 $'000
------------ ---------------
Assets classified as held for sale
Property, plant and equipment 14,069 16,770
Other financial assets 202 710
Restricted cash 219 264
Inventories - 13
Trade and other receivables 56 238
Cash and cash equivalents 21 123
14,567 18,118
------------ ---------------
Liabilities classified as held for sale
Provisions 2,332 2,855
Trade payables and accrued expenses 400 499
2,732 3,354
------------ ---------------
Net assets of Mooiplaats 11,835 14,764
------------ ---------------
22. Deferred consideration
Deferred consideration 16,016 18,687
------------ ---------------
16,016 18,687
------------ ---------------
Opening balance 18,687 29,800
Loan advanced - 65
Repaid during the year (4,066) (10,000)
Interest accrued 1,443 33
Gain on valuation at amortised cost - (1,303)
Foreign Exchange (48) 92
------------ ---------------
Balance at end of year 16,016 18,687
------------ ---------------
Current 16,016 3,265
Non-Current - 15,422
-------
16,016 18,687
------- -------
The Deferred Consideration relates to
the second tranche (part of the total
acquisition price of $75 million for Chapudi
and Kwezi) of $30 million payable to Rio
Tinto. During the year the Company renegotiated
the payment term of this loan. The Company
was required to pay a minimum payment
of $100,000 a month as well as additional
committed money on the sale of non-core
assets. In May 2016, the monthly payment
was revised to $650,000 per month, with
an additional $1 million payable on 15
May 2016 and $2 million payable on 15
September 2016. This arrangement includes
interest at 4% as per the original agreement.
Full and final settlement of the outstanding
balance plus all accrued interest remains
15 June 2017.
Year ended Year ended
30 June 30 June
2016 2015
$'000 $'000
----------- -------------
23. Borrowings
Yishun Brightrise Investment PTE Limited
loan
Loan advanced 10,000 -
During the period, a loan for $10 million
was provided to the Company by its shareholder
Yishun. The loan bears no interest and
is only repayable in limited circumstances,
including conditions relating to Baobab
Mining and Exploration Proprietary Limited.
Investec bank facility
Loan advanced - 6,372
Loan repaid - (5,909)
- 463
Foreign exchange differences - (463)
----------- -------------
- -
----------- -------------
The Company, through its wholly owned
subsidiary GVM Metals Administration (South
Africa) (Pty) Ltd had secured an 18-month,
ZAR210 million (approximately US$20.0
million) working capital facility from
Investec. The facility was repaid in full
during the prior financial year.
In addition, CoAL had issued 20 million
options to Investec which are exercisable
at ZAR1.32 before October 2018.
24. Provisions
Employee provisions 207 221
Biodiversity offset provision 1,856 2,773
Rehabilitation provisions 2,338 3,033
----------- -------------
4,401 6,027
----------- -------------
Employee provisions
The provision for employees represents
unused annual leave entitlements.
Biodiversity offset provision
The Biodiversity offset agreement("BOA")
was signed by the Department of Environmental
Affairs ("DEA"), South African National
Parks Board and the Company to the value
of R55 million ($4.7 million) over a 25
year period. The BOA commits the Company
to pay R55million ($4.4 million) to the
South African National Parks Board over
a period of 25 years. The following payment
arrangement has been agreed:
Phase 1 - R2million paid in 2015
Phase 2 - R15million from year 2016 to
2021 (R2.5million annually)
Phase 3 - R13million from year 2022 to
2028 (R1.8million annually)
Phase 4 - R13million from 2029 to 2033
(R2.6million annually)
Phase 5 - R12million from 2034 to 2038
(R2.4million annually)
For the purpose of the present value calculation
these payments have been assume as equal
annual payment and discounted at the South
Africa inflation rate of 6%.
24. Provisions (continued)
Year ended Year ended
30 June 30 June
2016 2015
$'000 $'000
----------- -----------
Rehabilitation provision
Balance at beginning of year 3,033 4,643
Unwinding of discount - 86
Change in assumptions on rehabilitation
provisions (186) (1,051)
Foreign exchange differences (509) (645)
----------- -----------
Balance at end of year 2,338 3,033
----------- -----------
The rehabilitation provision represents
the current cost of environmental liabilities
as at the respective year end. An annual
estimate of the quantum of closure costs
is necessary in order to fulfil the requirements
of the DMR, as well as meeting specific
closure objectives outlined in the mine's
Environmental Management Programme ('EMP').
Although the ultimate amount of the obligation
is uncertain, the fair value of the obligation
is based on information that is currently
available. This estimate includes costs
for the removal of all current mine infrastructure
and the rehabilitation of all disturbed
areas to a condition as described in the
EMP.
The period assumed in the calculation
of the present value of the obligation
is the aggregate of the construction period
of the mine and the total estimated LOM.
The current estimate available is inflated
by the South African inflation rate of
6% annually and the discount rate applied
to establish the current obligation is
a South Africa government bond rate at
30 June 2016 of 8.75% (2015: 8.32%) annually.
Due to the delay on the Vele Colliery
start-up the estimated LOM has been extended
causing a decrease in the present value
of the environmental obligation.
The Makhado Project is still in Exploration
phase and no formal decision to mine is
currently in place.
Provisions have been analysed between
current and non-current as follows:
Current 398 294
Non-current 4,003 5,733
----------- -----------
4,401 6,027
----------- -----------
Year ended Year ended
30 June 30 June
2016 2015
$'000 $'000
----------- -----------
25. Deferred tax
Deferred tax asset 4,773 2,320
----------- -----------
4,773 2,320
----------- -----------
The gross movement on the deferred tax
account is as follows:
Balance at beginning of year 2,320 2,694
Recognised on tax losses 1,437 -
Provisions (5) -
Capital allowances 1,488 -
Exchange differences (467) (374)
----------- -----------
Balance at end of year 4,773 2,320
----------- -----------
The movement in deferred income tax assets and liabilities
during the year, without taking into consideration the offsetting
of balances within the same tax jurisdiction, is as follows:
Deferred tax assets
Capital allowances (1) on development
assets 3,378 2,320
Tax losses 1,400 -
----------- -----------
Balance at end of year 4,778 2,320
----------- -----------
Deferred tax liabilities
Provisions (5) -
----------- -----------
Balance at end of year (5) -
----------- -----------
Net deferred tax assets (4,773) -
----------- -----------
Deferred income tax assets are recognised
for tax loss carry-forwards to the extent
that the realisation of the related tax
benefit through future taxable profits
is probable. The Group did not recognise
deferred income tax assets of $99 million
(2015: $97 million) in respect of losses
amounting to $207 million (2015: $158
million) and unredeemed capital expenditure
of $134 million (2015: $176 million) that
can be carried forward against future
taxable income.
1 - The deferred tax asset recognised
on capital allowances relates to a portion
of the capital expenditure on the construction
of the Vele plant. The deferred tax asset
recognised on assessed losses relates
to taxable losses for the Vele plant.
The recognition of the asset is supported
by the LOM model as future profits will
be available to utilise the deferred tax
asset.
26. Trade and other payables
Trade payables 956 1,237
Accrued expenses 1,333 1,134
Other 34 348
------ ------
2,323 2,719
------ ------
The average credit period is 30 days.
Interest at the South African prime overdraft
rate is charged on overdue creditors.
27. Issued capital
Fully paid ordinary shares
1,927,001,328 (2015: 1,743,568,613) fully
paid ordinary shares 1,006,435 992,374
Movements in fully paid ordinary shares Number $'000
-------------- -----------
At 30 June 2014 1,048,368,613 935,891
Issue of shares, net of issuance costs 695,200,000 56,483
-------------- -----------
At 30 June 2015 1,743,568,613 992,374
Issue of shares, net of issuance costs 183,432,715 14,061
-------------- -----------
At 30 Jun 2016 1,927,001,328 1,006,435
-------------- -----------
Holders of ordinary shares are entitled
to receive dividends as declared from
time to time and are entitled to one vote
per share at shareholders meetings.
In the event of winding up of the Company
ordinary shareholders rank after all other
shareholders and creditors and are fully
entitled to any proceeds of liquidation.
Changes to the then Corporations Law abolished
the authorised capital and par value concept
in relation to share capital from 1 July
1998. Therefore, the Company does not
have a limited amount of authorised capital
and issued shares do not have a par value.
Share options granted
Share options granted under the Company's
employee share option plan carry no rights
to dividends and no voting rights. Further
details of the employee share option plan
are provided in note 30.
Year ended Year ended
30 June 30 June
2016 2015
$'000 $'000
-------------- -----------
28. Accumulated deficit
Accumulated deficit at the beginning of
the financial year (718,081) (790,964)
Net loss attributed to Owners of the Company (23,445) (6,711)
Transferred from share based payment reserve 5,123 79,594
-------------- -----------
Accumulated deficit at the end of the
financial year (736,403) (718,081)
-------------- -----------
29. Reserves
Capital profits reserve 91 91
Share based payment reserve 2,248 7,205
Foreign currency translation reserve (36,495) (7,609)
----------- ---------------
(34,156) (313)
----------- ---------------
Movements for the year can be reconciled
as follows:
Share-based payments reserve
Opening balance 7,205 82,464
Share options issued during the year 275 4,335
Transfer from share based payment reserve (5,123) (79,594)
Share options cancelled (83) -
----------- ---------------
Closing balance 2,274 7,205
----------- ---------------
29. Reserves (continued)
Year ended Year ended
30 June 30 June
2016 2015
$'000 $'000
----------- -----------
Foreign currency translation reserve
Opening balance (7,609) 52,263
Exchange differences on translating foreign
operations (28,921) (59,872)
----------- -----------
Closing balance (36,530) (7,609)
----------- -----------
Nature and purpose of reserves:
Capital reserve
The capital profits reserve contains capital
profits derived during previous financial
years.
Share-based payment reserve
Share based payments represent the value
of unexercised share options to directors
and employees.
Foreign currency translation reserve
The foreign currency translation reserve
records the foreign currency differences
arising from the translation of foreign
operations.
30. Share-based payments
Employee share option plan
The Group maintains certain Employee Share Option Plans ('ESOP's') for executives and senior employees of the Group as per the rules approved by shareholders on 30 November 2009. In accordance with the terms of the schemes, eligible executives and senior employees may be granted options to purchase ordinary shares.
Share options granted to Directors and Officers
The Group also grants share options to directors, officers, lenders and equity funders of the Group outside the ESOP. In accordance with the Group's policies, directors and officers may be granted options to purchase ordinary shares.
Share Option Terms, Vesting Requirements and Options Outstanding at 30 June 2016
Each option converts into one ordinary share of the Company on exercise. No amounts are paid or payable by the recipient on receipt of the option. The options hold no voting or dividend rights, and are not transferable. Upon exercise of the options the ordinary shares received rank equally with existing ordinary shares.
The following share-based payment arrangements existed during the financial period ended 30 June 2016:
-- 2,670,000 options were issued on 16 September 2011 to eligible employees of CoAL as part of the ESOP. The options issued are exercisable prior to 14 February 2017 and have an exercise price of A$1.40 or ZAR7.60. The options vest in equal tranches on 1 July 2012, 1 July 2013 and 1 July 2014. Upon conversion the shares will rank equally with existing shares, are not transferable and hold no voting or dividend rights. At reporting date, none of the options had been taken up or had lapsed.
-- 3,932,928 options were granted on 22 November 2013 to eligible employees of CoAL as part of the ESOP. The options are exercisable prior to 30 June 2017 and have an exercise price of ZAR1.75. Two thirds of the options vested immediately and the remaining third on 1 July 2014. Upon conversion the shares will rank equally with existing shares, are not transferable and hold no voting or dividend rights. At reporting date, none of the options had been taken up or had lapsed.
30. Share-based payments (continued)
-- The Company finalised an 18-month, ZAR210 million working capital facility from Investec Bank Limited during October 2013 and announced that it would issue 20,000,000 Options to Investec. The 20,000,000 shareholder approved options were issued on 30 January 2015 and have an exercise price of ZAR1.32 and expire on 21 October 2018. Upon conversion the shares will rank equally with existing shares, are not transferable and hold no voting or dividend rights. At reporting date, none of the options had been taken up or had lapsed.
-- 10,575,000 options were awarded to Mr Brown on his appointment as Chief Executive Officer and Executive Director of the Company. The options were approved by shareholders on 28 November 2014 and issued on 1 February 2015 under the ESOP vesting in three equal tranches of 3,525,000 options on 1 February 2015, 1 February 2016 and 1 February 2017 respectively. The Options will expire on 1 February 2019 and are otherwise subject to the terms of the ESOP. Upon conversion the shares will rank equally with existing shares, are not transferable and hold no voting or dividend rights. At reporting date, none of the options had been taken up or had lapsed.
-- On 27 November 2015, 1,000,000 options were awarded and vested to each of the five independent non-executive directors at a price of GBP0.055 per option. The options expire on 27 November 2018. Upon conversion the shares will rank equally with existing shares, are not transferable and hold no voting or dividend rights. At reporting date, none of the options had been taken up or had lapsed.
There has been no alteration of the terms and conditions of the above share based payment arrangements since the grant date. The following share-based payment arrangements were in existence at the end of the current year:
Weighted
Fair average
value remaining
Grant Expiry Exercise at grant contractual
Option series Number date date price date life
---------------------- ----------- ------------- ------------- ----------------- ----------- ---------------
ESOP unlisted options 2,670,000 16/09/2011 14/02/2017 A$1.40/ZAR7.60 ZAR3.46 0.6 years
ESOP unlisted options 3,932,928 22/11/2013 30/06/2017 ZAR1.75 ZAR0.52 1.0 years
Investec options 20,000,000 30/01/2015 21/10/2018 ZAR1.32 ZAR0.75 2.3 years
ESOP unlisted options 3,525,000 28/11/2014 01/02/2019 ZAR1.20 ZAR0.15 2.6 years
ESOP unlisted options 3,525,000 28/11/2014 01/02/2019 ZAR1.32 ZAR0.14 2.6 years
ESOP unlisted options 3,525,000 28/11/2014 01/02/2019 ZAR1.40 ZAR0.12 2.6 years
Non-executive 27/11/2015 27/11/2018 GBP0.055 ZAR0.77 2.4 years
director
options 5,000,000
42,177,928
-----------
Fair value of share options granted during the year
The weighted average fair value of share options granted during the financial year is A$0.024 (2015: A$0.07). Options were priced using a binomial option pricing model and the Black-Scholes option pricing model was used to validate the price calculated. Where relevant, the expected life used in the model has been adjusted based on management's best estimate of the effects of non-transferability, exercise restrictions (including the probability of meeting market conditions attached to the option), and behavioural considerations.
Expected volatility is calculated by Hoadley's volatility calculator for one, two and three year periods and a future estimated volatility level of 100% was used in the pricing model.
30. Share-based payments (continued)
Inputs into the binomial option pricing model for the current financial year were as follows (validated using the Black-Scholes valuation model):
NED grants(1)
----------------------------------- --------------
Closing share price on issue date AUD0.051
Exercise price GBP0.055
Expected volatility 100%
Option life remaining 3.01 years
Dividend yield 0%
Risk free interest rate 2.09%
1. Options granted to non-executive directors.
The total share based payment expense recognised in the current financial year is $0.1 million.
Inputs into the binomial option pricing model for the prior financial year were as follows (validated using the Black-Scholes valuation model):
ESOP grants(1) ESOP grants(1) ESOP grants(1) Investec grant(2) TMM grant(3)
----------------------------- --------------- --------------- --------------- ------------------ -------------
Closing share price on issue ZAR0.53 ZAR0.53 ZAR0.53 ZAR1.35 ZAR1.04
date
Exercise price ZAR1.20 ZAR1.32 ZAR1.45 ZAR1.32 ZAR0.30
Expected volatility 55.0% 55.0% 55.0% 55.0% 80.0%
Option life remaining 4.2 years 4.2 years 4.2 years 5.0 years 1.0 years
Dividend yield 0% 0% 0% 0% 0%
Risk free interest rate 6.92% 6.92% 6.92% 6.64% 6.7%
1. Options granted to Mr D Brown under the ESOP in terms of his appointment as Chief Executive Officer.
2. Options granted to Investec in terms of the working capital facility.
3. Options granted to TMM in terms of the three stage equity raise process.
Movement in share options
Year ended Year ended
30 June 30 June
2016 2015
Number Number
------------- ------------
Options outstanding at beginning of year 85,993,989 21,168,990
Options expired (47,441,061) (3,000,001)
Options cancelled (1,375,000) (2,750,000)
Options granted 5,000,000 70,575,000
Options outstanding at end of year 42,177,928 85,993,989
------------- ------------
Weighted average exercise price (A$) 0.08 0.17
Options exercisable 38,652,928 78,943,989
Share options exercised during the year
No share options were exercised during the period.
Share options outstanding at the end of the year
The share options outstanding at the end of the year had a weighted average exercise price of A$0.08 (2015: A$0.17) and a weighted average contractual life of 1.32 years (2015: 1.86 years).
30. Share-based payments (continued)
Performance rights Plan
On 27 November 2015, 33,449,124 Performance Rights were issued to senior management. The Performance Right factors in a hurdle rate based on the compound annual growth rate of total shareholder return across the period from the grant date, 30 November 2015, ending on 1 December 2018. The Performance Rights were valued using a hybrid employee share option pricing model to simulate the total shareholder return of CoAL at the expiry date using a Monte-Carlo model.
Inputs into the model for the current financial year were as follows:
Performance rights
------------------------- -------------------
Spot 5 day VWAP AUD0.047
Exercise price Nil
Expiry date 1 December 2018
Performance period 3.01
Risk free interest rate 2.09%
The total share based payment expense recognised in relation to the performance rights in the current financial year is $0.1 million.
Year ended Year ended
30 June 30 June
2016 2015
$'000 $'000
----------- -------------
31. Non-controlling interest
Non-controlling interests comprise the
following:
Freewheel Trade and Invest 37 Proprietary
Limited 575 575
575 575
----------- -----------
32. Financial instruments
32.1 Capital management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Group's overall strategy remains unchanged.
The capital structure of the Group consists of net debt (borrowings as detailed in note 23) and equity of the Group (comprising issued capital, reserves, retained earnings and non-controlling interests as detailed in notes 27 to 29).
The Group is not subject to any externally imposed capital requirements.
The Group's risk management committee reviews the capital structure of the Group on a semi-annual basis. As part of this review, the committee considers the cost of capital and the risks associated with each class of capital. The Group is above its target gearing ratio of 0% determined as the proportion of net debt to equity. During 2016 the gearing ratio was higher than the target range due to the loan agreement entered into with Yishun which is a short term arrangement in terms of the subscription agreement entered into with Yishun for the subscription of shares in CoAL.
Debt (1) 10,000 -
Net debt 10,000 -
-------- --------
Equity (2) 235,867 273,980
-------- --------
Net debt to equity ratio 0.04 -
-------- --------
1. Debt is defined as long-term and short-term borrowings as described in note 23.
2. Equity includes all capital and reserves of the Group that are managed as capital.
32.
Financial instruments (continued)
Year ended Year ended
30 June 30 June
2016 2015
$'000 $'000
----------- -----------
32.2 Categories of financial instruments
The accounting policies for financial
instruments have been applied to the
line items below:
Financial assets
Other receivables 1,013 1,746
Trade and other receivables 666 792
Cash and cash equivalents 19,502 17,759
Restricted cash 249 1,023
Other Financial Assets 7,221 3,879
Total financial assets 28,651 25,199
--------- --------
Financial liabilities
Deferred consideration 16,016 18,687
Borrowings 10,000 -
Trade and other payables 2,323 2,719
Total financial liabilities 28,339 21,406
--------- --------
Fair value of financial assets and
liabilities
The fair value of a financial asset or a financial liability
is the amount at which the asset could be exchanged or liability
settled in a current transaction between willing parties
in an arm's length transaction. The fair values of the Group's
financial assets and liabilities approximate their carrying
values, as a result of their short maturity or because they
carry floating rates of interest.
All financial assets and liabilities recorded in the consolidated
financial statements approximate their respective fair values.
The following table provides an analysis of financial instruments
that are measured subsequent to initial recognition at fair
value, grouped into Level 1 to 3, based on the degree to
which the fair value is observable.
Level 1 fair value measurements are those derived from quoted
prices in active markets for identical assets or liabilities.
Level 1 financial assets comprise deposits and listed securities (note 17). Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 financial assets comprise investments with investment firms. These investments serve as collateral for rehabilitation guarantees. The fair value has been determined by the investment firms' fund statement (note 17). Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data. There were no assets reclassified into / out of FVTPL during the year nor were any assets transferred between levels. As at 30 June Level 1 Level Level 3 Total 2016 2 ------------------ ----------- ------ -------- ------ Financial assets at FVTPL 188 5,545 - 5,733 As at 30 June Level 1 Level Level 3 Total 2015 2 ------------------ ----------- ------ -------- ------ Financial assets at FVTPL 468 3,145 - 3,613 32. Financial instruments (continued)
32.3 Financial risk management objectives
The Group's Corporate Treasury function provides services to the business, co-ordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyse exposures by degree and magnitude of risks. These risks include market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk.
The Corporate Treasury function reports quarterly to the Group's risk management committee, an independent body that monitors risks and policies implemented to mitigate risk exposures.
32.4 Market risk
Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Australian dollar and the US dollar. Foreign exchange risk arises from future commitments, assets and liabilities that are denominated in a currency that is not the functional currency. Most of the Company's purchases are denominated in SA rand. However, certain items during the exploration, development and plant construction phase as well as long lead-capital items are denominated in US dollars, Euros or Australian dollars. These have to be acquired by the South African operating company due to the South African Reserve Bank's Foreign Exchange Control Rulings. This exposes the South African subsidiary companies to changes in the foreign exchange rates.
The Group's cash deposits are largely denominated in US dollar and SA rand. A foreign exchange risk arises from the funds deposited in US dollar which will have to be exchanged into the functional currency for working capital purposes.
The Group generally does not enter into forward sales, derivatives or other hedging arrangements to manage this risk.
At financial period end, the financial instruments exposed to foreign currency risk movements are as follows:
Held in Held in Held in Held in Total
Balances at 30 ZAR GBP AUD USD $'000
June 2016 $'000 $'000 $'000 $'000
-------------------------- -------- -------- -------- -------- -------
Financial assets
Other receivables 1,013 - - - 1,013
Trade and other
receivables 616 - 50 - 666
Cash(1) and cash
equivalents 3,642 4,692 22 11,395 19,751
-------- -------- -------- -------- -------
Total financial
assets 5,271 4,692 72 11,395 21,430
-------- -------- -------- -------- -------
(1) . Cash includes
restricted cash
Financial liabilities
Deferred consideration - - - 16,016 16,016
Borrowings - - - 10,000 10,000
Trade and other
payables 1,199 1,124 - 2,323
Total financial
liabilities 1,199 - 1,124 26,016 28,339
-------- -------- -------- -------- -------
32. Financial instruments (continued)
Held in Held in Held in Held in Total
ZAR GBP AUD USD $'000
Balances at 30 $'000 $'000 $'000 $'000
June 2015
-------------------------- -------- -------- -------- ---------- -------
Financial assets
Other receivables 1,746 - - - 1,746
Trade and other
receivables 701 - 91 - 792
Cash(1) and cash
equivalents 13,698 597 44 4,443 18,782
-------- -------- -------- ---------- -------
Total financial
assets 16,145 597 135 4,443 21,320
-------- -------- -------- ---------- -------
(1) . Cash includes
restricted cash
Financial liabilities
Deferred consideration - - - 18,687 18,687
Borrowings - - - - -
Trade and other
payables 1,462 1,257 - 2,719
Total financial
liabilities 1,462 - 1,257 18,687 21,406
-------- -------- -------- ---------- -------
Balances classified as held for sale are not included in the above tables, or discussed in the subsequent narrative.
The following table details the Group's sensitivity to a 10% increase and decrease in the US dollar against the relevant foreign currencies. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management's assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the year-end for a 10% change in foreign currency rates. The sensitivity analysis includes external loans as well as loans to foreign operations within the Group where the denomination of the loan is in a currency other than the functional currency of the lender or the borrower. A positive number below indicates an increase in profit or equity where the US dollar strengthens 10% against the relevant currency. For a 10% weakening of the US dollar against the relevant currency, there would be a comparable impact on the profit or equity, and the balances below would be negative.
Year ended Year ended
30 June 30 June
2016 2015
Impact on profit / (loss) $'000 $'000
--------------------------------------------- ----------- -------------
Judgements on reasonable possible movements
USD/ZAR increase by 10% (2,345) (2,355)
USD/ZAR decrease by 10% 2,345 2,355
--------------------------------------------- ---------- ---------------
32. Financial instruments (continued)
32.5 Interest rate risk management
The Group's interest rate risk arises mainly from short-term borrowings, cash and bank balances and restricted cash. The Group has variable interest rate borrowings. Variable rate borrowings expose the Group to cash flow interest rate risk.
The Group has not entered into any agreements, such as hedging, to manage this risk.
The following table summarises the sensitivity of the financial instruments held at the reporting date, following a movement in variable interest rates, with all other variables held constant. The sensitivities are based on reasonably possible changes over a financial period, using the observed range of actual historical rates.
Year ended Year ended
30 June 30 June
2016 2015
Impact on profit / (loss) $'000 $'000
--------------------------------------------- ----------- -----------
Judgements on reasonable possible movements
Increase of 0.2% in LIBOR 38 40
Decrease of 0.2% in LIBOR (38) (40)
Increase of 1.0% in JIBAR 188 202
Decrease of 1.0% in JIBAR (188) (202)
--------------------------------------------- ----------- ------------
The impact is calculated on the net financial instruments exposed to variable interest rates as at reporting date and does not take into account any repayments of short-term borrowings.
32.6 Credit risk
Credit risk is the risk that a contracting entity will not complete its obligation under a financial instrument that will result in a financial loss to the Group. The carrying amount of financial assets represents the maximum credit exposure. Receivable balances are monitored on an ongoing basis with the result that the Group's exposure to bad debts is not significant.
At year end there is no significant concentration of credit risk represented in the cash and cash equivalents, restricted cash and trade accounts receivables balance. The Group manages its credit risk by predominantly dealing with counterparties with a positive credit rating.
The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.
32.7 Liquidity risk
The liquidity position of the Group is managed to ensure sufficient liquid funds are available to meet financial commitments in a timely and cost effective manner. The Group's Executive continually reviews the liquidity position including cash flow forecasts to determine the forecast liquidity position and maintain appropriate liquidity levels.
The concentration of cash balances on hand in geographical areas was as follows:
United Kingdom Australia South Total
Balances at 30 June 2016 $'000 $'000 Africa $'000
$'000
---------------------------- --------------- ---------- -------- -------
Cash and cash equivalents
and restricted cash 16,096 22 3,633 19,751
--------------- ---------- -------- -------
16,096 22 3,633 19,751
--------------- ---------- -------- -------
United Kingdom Australia South Total
Balances at 30 June 2015 $'000 $'000 Africa $'000
$'000
----------------------------- --------------- ---------- -------- -------
Cash and cash equivalents
and restricted cash 5,020 45 13,717 18,782
--------------- ---------- -------- -------
5,020 45 13,717 18,782
--------------- ---------- -------- -------
32. Financial instruments (continued)
The contractual maturities of the Group's financial liabilities at the reporting date were as follows:
Less than Between Greater Total
6 months 6 - 12 months than 12
Balances at 30 June $'000 $'000 months $'000
2016 $'000
------------------------ ---------- --------------- --------- -------
Deferred consideration 5,250 10,766 - 16,016
Borrowings(1) - 10,000 - 10,000
Trade and other
payables 2,323 - - 2,323
7,573 20,766 - 28,339
---------- --------------- --------- -------
1. Not interest bearing
Less than Between Greater Total
6 months 6 - 12 months than 12
Balances at 30 June $'000 $'000 months $'000
2016 $'000
--------------------------- ---------- --------------- ----------- ---------
Other receivables - - 1,013 1,013
Trade and other
receivables 666 - - 666
Cash and cash equivalents 19,502 - - 19,502
Restricted cash 249 - - 249
Other financial
assets 188 - 7,033 7,221
20,605 - 8,046 28,651
---------- --------------- ----------- ---------
Less than Between Greater than Total
6 months 6 - 12 12 months
Balances at 30 June $'000 months $'000 $'000
2015 $'000
------------------------ ---------- -------- ------------- -------
Deferred consideration 2,600 665 15,422 18,687
Borrowings(1) - - - -
Trade and other
payables 2,719 - - 2,719
5,319 665 15,422 21,406
---------- -------- ------------- -------
2. Interest bearing at rates between 4 % and 10 %
Less than 6 Between Greater than Total
months 6 - 12 12 months
Balances at 30 June $'000 months $'000 $'000
2015 $'000
-------------------------- --------------- ---------- --------------- --------
Other Receivables 1,746 - - 1,746
Trade and Other
Receivables 792 - - 792
Cash and Cash Equivalent 17,759 - - 17,759
Restricted Cash 1,023 - - 1,023
Other financial
assets 468 - 3,411 3,879
21,788 - 3,411 25,199
--------------- ---------- --------------- --------
33. Notes to the statement
of cash flows
Year ended Year ended
30 June 30 June
2016 2015
Note $'000 $'000
----- ----------- -----------
Reconciliation of cash
For the purposes of the consolidated
statement of cash flows, cash and
cash equivalents include cash on
hand and in banks, net of outstanding
bank overdrafts. Cash and cash
equivalents at the end of the reporting
period as shown in the consolidated
statement of cash flows can be
reconciled to the related items
in the consolidated statement of
financial position as follows:
Cash and bank balances 20 19,523 17,882
Reconciliation of loss before tax
to net cash used in operations
Loss before tax (continuing and
discontinuing operations) (24,876) (6,711)
Add back:
Depreciation 351 497
Amortisation 848 975
Impairment losses 360 -
Share-based payment 193 3,064
Re-valuation of investments 76 281
Write off of inventory 198 847
Sundry income (non-cash) - (487)
Gain on revaluation of Deferred
Consideration - (1,303)
Movement in provisions (181) 368
Finance costs (net) 849 1,504
(Profit) on sale of assets (8) -
Foreign exchange (gains) / losses
on operating activities 9,568 (14,504)
Changes in working capital
Decrease in inventories 8 4
Decrease in trade and other receivables 265 1,282
(Decrease) / increase in trade
and other payables (788) (935)
----------- -----------
Cash used in operations (13,137) (15,121)
----------- -----------
34. Contingencies and commitments
Contingent liabilities
The Group is currently involved in litigation as outlined below ($ amounts presented within have been computed using the exchange rate as of 30 June 2016 unless otherwise stated):
Ferret Mining & Environmental Services Proprietary Limited
During the prior financial year, Ferret's 26% shareholding in Mooiplaats Mining Limited was re-instated. Although they are not entitled to any assets or claims in the Mooiplaats group, they are entitled to receive ZAR15million (US$1.0 million) upon the successful disposal of the Mooiplaats Colliery.
Issue of Share Options to De Wet Schutte
In terms of his appointment as Chief Financial officer, Mr Schutte is entitled to receive 6,600,000 options in three equal tranches over a three year period (Year 1: 2,200,000 at ZAR 1, 20, Year 2: 2,200,000 at ZAR 1, 32, Year 3: 2,200,000 at ZAR 1, 45) These are granted in accordance with the Company's employee share option plan and are subject to shareholder approval.
Makhado Water Commitment
CoAL has agreed to acquire water allocation for the Makhado Project from water users situated near the proposed colliery and the Company has undertaken to increase supply assurance without impacting negatively on the water available for agriculture. The parties have in principle agreed to avoid endangering local agriculture by creating new water, primarily by reducing losses, improving distribution and countering leakages and evaporation. The creation of new water will be financed either through CoAL's funds, outside funding or a Public-Private-Partnership with one or more organs of State or other appropriate entities.
The overall objective is the co-existence of mining and agriculture and includes a feasibility study and the completion of projects identified in the study which will facilitate the creation of new water. In terms of the agreement, the Company will be required to pay a total of $7.9 million. The first payments of $1.8 million are due 90 and 180 days after the granting of the IWUL, a further $0.6 million is payable eight months after the IWUL is granted and the balance within five years of the granting.
Commitments
In addition to the commitments of the parent entity as disclosed under note 38, subsidiary companies have financial commitments in terms of the NOMR granted by the South African DMR. The commitments are based on the revenue generated by the colliery during the financial year, and/or quantities of coal sold by the colliery during the financial year.
There are no other significant contingent liabilities as at 30 June 2016.
35. Related party disclosures
The aggregate compensation made to directors and other members of key management personnel of the Company and the Group is set out below:
Year ended Year ended
30 June 30 June
2016 2015
$'000 $'000
------------------------------ ------------- -----------
Short-term employee benefits 1,223 1,289
Post-employment benefits 9 10
Termination benefits - -
Share-based payments 209 131
------------- -----------
1,441 1,430
------------- -----------
The Group has not provided any of its key management personnel with loans.
Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note.
36. Controlled entities
Particulars in relation to controlled entities.
Year Year
ended ended
30 June 30 June
2016 2015
Country
of incorporation % %
Bakstaan Boerdery Proprietary Limited * South Africa 100 100
Baobab Mining & Exploration Proprietary
Limited**
Chapudi Coal Proprietary Limited ***
Coal of Africa Plc****
Coal of Africa & ArcelorMittal Analytical
Laboratories Proprietary Limited
Cove Mining NL
Evoc Mining NL****
Freewheel Trade and Invest 37 Proprietary
Limited
Fumaria Property Holdings Proprietary South Africa 100 100
Limited South Africa 74 74
Golden Valley Services Proprietary Limited Jersey - -
Greenstone Gold Mines NL**** South Africa 50 50
GVM Metals Administration (South Africa) Australia 100 100
Proprietary Limited Australia - -
Harrisia Investments Holdings Proprietary South Africa 74 74
Limited South Africa 100 100
Holfontein Investments Proprietary Limited Australia 100 100
Kwezi Mining Exploration Proprietary Australia - -
Limited South Africa 100 100
*** South Africa 100 100
Langcarel Proprietary Limited ***** South Africa 74 74
Limpopo Coal Company Proprietary Limited South Africa 74 74
MbeuYahsu Proprietary Limited South Africa 74 74
Mooiplaats Mining Limited South Africa 100 100
Regulus Investment Holdings Proprietary South Africa 74 74
Limited South Africa 74 74
Silkwood Trading 14 Proprietary Limited South Africa 100 100
Tshikunda Mining Proprietary Limited South Africa 100 100
Tshipise Energy Investments Proprietary South Africa 60 60
Limited South Africa 50 50
------------------------------------------------ --------------------------- --------- -----------
* Subsidiary company of Fumaria Property Holdings
Proprietary Limited
----------------------------------------------------------------------------- --------- -----------
** 74% on completion of the Makhado Project BBBEE transactions
*** Subsidiary companies of MbeuYashu Proprietary Limited
**** Deregistered
***** Subsidiary company of Mooiplaats Mining Limited
37. Events after the reporting period
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.
38. Parent entity financial information
Parent entity
Year ended Year ended
30 June 30 June
2016 2015
$'000 $'000
Summary financial information
Non-current assets 234,664 270,405
Current assets 16,553 6,806
----------- -----------
Total assets 251,217 277,211
----------- -----------
Current liabilities 14,775 5,389
----------- -----------
Total liabilities 14,775 5,389
----------- -----------
Net assets 236,442 271,822
----------- -----------
Shareholders' Equity
Issued capital 1,006,435 992,374
Accumulated deficit (952,060) (887,836)
Reserves 182,067 167,284
----------- -----------
236,442 271,822
----------- -----------
Loss for the year (64,224) (238,420)
----------- -----------
Total comprehensive loss (64,224) (238,420)
----------- -----------
Commitments
-- Coal has subordinated all loans to subsidiary companies
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
Independent Auditor's Report to the members of Coal of Africa Limited
Report on the Financial Report
We have audited the accompanying financial report of Coal of Africa Limited, which comprises the statement of financial position as at 30 June 2016, the statement of profit or loss and other comprehensive income, the statement of cash flows and the statement of changes in equity for the year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors' declaration of the consolidated entity, comprising the company and the entities it controlled at the year's end or from time to time during the financial year as set out on pages 37 to 94.
Directors' Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the consolidated financial statements comply with International Financial Reporting Standards.
Auditor's Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control, relevant to the company's preparation of the financial report that gives a true and fair view, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Auditor's Independence Declaration
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of Coal of Africa Limited, would be in the same terms if given to the directors as at the time of this auditor's report.
Opinion
In our opinion:
(a) the financial report of Coal of Africa Limited is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity's financial position as at 30 June 2016 and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) the consolidated financial statements also comply with International Financial Reporting Standards as disclosed in Note 1.
Emphasis of matter
Without modifying our opinion, we draw attention to Note 1 in the consolidated financial report, which indicates that the consolidated entity incurred a net loss of $23.4 million and experienced net cash outflows from operating and investing activities of $16.5 million for the year ended 30 June 2016, and as of that date the consolidated entity's current liabilities exceeded its current assets by $9.6 million, excluding assets and liabilities classified as held for sale. These conditions, along with other matters as set forth in Note 1, indicate the existence of a material uncertainty which may cast significant doubt about the ability of the company and consolidated entity to continue as going concerns and therefore, the company and consolidated entity may be unable to realise their assets and discharge their liabilities in the normal course of business.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 12 to 23 of the directors' report for the year ended 30 June 2016. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
Opinion
In our opinion the Remuneration Report of Coal of Africa Limited for the year ended 30 June 2016, complies with section 300A of the Corporations Act 2001.
DELOITTE TOUCHE TOHMATSU
David Newman
Partner
Chartered Accountants
Perth, 30 September 2016
This information is provided by RNS
The company news service from the London Stock Exchange
END
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September 30, 2016 03:01 ET (07:01 GMT)
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