19 Sep 2011 07:00
COAL OF AFRICA LIMITED
ANNUAL FINANCIAL STATEMENTS
For the year ended 30 June 2011
(Expressed in United States dollars unless otherwise stated)
Page | |
Directors' Report | 2 |
Auditor's Independence Declaration | 17 |
Corporate Governance Statement | 18 |
Directors' Declaration | 25 |
Consolidated Statement of Comprehensive Income | 26 |
Consolidated Statement of Financial Position | 27 |
Consolidated Statement of Changes in Equity | 28 |
Consolidated Statement of Cash Flows | 29 |
Notes to the Financial Statements | 30 |
Independent Auditor's Report | 93 |
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 2011. In order to comply with the provisions of the Corporations Act 2001, the directors report as follows:
Information about the directors and senior management
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 :
Richard John Linnell | Independent Non-Executive Chairman | Mr Linnell has been active in the resources and metals fields for over forty years and has significant global experience in the development and marketing of resources and commodities. He was the originator of the Bakubang Initiative, a forum designed to revive the South African mining industry and which led to the establishment of the New Africa Mining Fund, of which he is Chairman of Trustees. He holds a number of other Directorships.
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Simon James Farrell | Independent Non-Executive Deputy Chairman | Mr Farrell has a Bachelor of Commerce from the University of Western Australia and an MBA from the Wharton School of the University of Pennsylvania. He is a Fellow of the Australian Society of CPA's and the Institute of Company Directors. He has held a number of senior management and Board positions, principally in the resources sector over the last twenty years. He is currently a Director of London Stock Exchange listed Kenmare Resources plc and Bellzone Mining plc.
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John Nicholas Wallington | Chief Executive Officer Executive Director | Mr Wallington holds a BSc in Mining Engineering from the University of the Witwatersrand in Johannesburg, South Africa and has participated in executive programmes with both the London Business School and the Harvard Business School. He joined the Coal Division of Anglo American in 1981 and was CEO of the South African Region before being appointed as CEO of Anglo Coal globally. Mr Wallington held the position of CEO for the Anglo Coal Division between 2005 and 2008 and has 30 years experience in the coal exploration and mining industry.
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Wayne Gregory Koonin | Financial Director (appointed 1 April 2011) | Over the past 12 years, Mr Koonin has gained extensive international experience working in senior financial roles for Canadian, South African, British and Swiss based exploration, development and operating mining companies, covering a variety of commodities, including coal. As a result, he has had exposure to various international accounting standards, taxation and regulatory environments, as well as responsibility for entities listed on the JSE Limited ("JSE"), Australian Securities Exchange ("ASX"), AIM market of the London Stock Exchange ("AIM") and National Association of Securities Dealers Automated Quotations ("NASDAQ").
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Professor Ntshengedzeni Alfred Nevhutanda | Executive Director | Professor Alfred Nevhutanda has two PhD's (in Education Environment and Arts Culture), a diploma in Management Studies and an MBA, has been involved in a number of diversified businesses and served as a leader in various academic fields, as well as held various political appointments. He has acted as an advisor to the King of the Vhavenda, Ministers and Members of the Executive Council of the ruling party.
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Peter George Cordin | Independent Non-Executive Director | Mr Cordin has a Bachelor of Engineering from the University of Western Australia and is well experienced in the evaluation, development and operation of resource projects within Australia and overseas. He is the Managing Director of ASX listed Dragon Mining Limited and non-executive director of Vital Metals Limited.
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Stephen Bywater | Independent Non-Executive Director | Mr Bywater has a distinguished career in the resources industry, developing and operating a total of 14 large-scale open pit and underground mining operations and their associated services, logistics and infrastructure. When working for Rio Tinto Coal Australia, he was Chief Operating Officer, and in this position oversaw seven mining operations, producing 60 million tonnes of saleable coal a year. Mr Bywater has a B.Sc. in Engineering Geology and Geotechnics from Portsmouth University and a M.Sc. in Rock Mechanics and Excavation Engineering from Newcastle-upon-Tyne University. He is also Chief Executive of GCM Resources plc.
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Dave John Keir Murray | Independent Non-Executive Director (appointed 8 September 2010)
| Mr Murray has held a number of senior positions in the global coal industry, including Managing Director of Ingwe Coal Corporation (formerly Trans-Natal Coal Corporation Limited), Chief Executive of BHP Billiton Mitsubishi Alliance and President of Energy Coal Sector Group at BHP Billiton Limited, a position he held until December 2009. Mr Murray holds a Bachelor of Science Degree (Civil Engineering) from the University of KwaZulu-Natal and a Post Graduate Diploma in Mining Engineering from the University of Pretoria. He has also completed the Advanced Executive Program from the University of South Africa.
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Khomotso Brian Mosehla | Non-Executive Director (appointed 18 November 2010)
| After serving articles at KPMG, Mr Mosehla worked for five years at African Merchant Bank Limited, where he gained a broad range of experience, including MBO, LBO 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 (Pty) Ltd. | ||
Mikki Sivuyile Macmillan Xayiya | Non-Executive Director (appointed 18 November 2010)
| Mr Xayiya has served in various capacities in the African National Congress since 1977. In 1995, he was appointed as a Policy Advisor - Office of the Premier, Gauteng Provincial Government. He left public office and joined Mawenzi Asset Managers as Managing Director. In 1998 he co-founded Mvelaphanda Holdings. Mr Xayiya was appointed as Executive Chairman of Mvelaphanda Holdings with effect from 9 June 2009.
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Rudolph Henry Torlage | Non-Executive Director (appointed 18 November 2010)
| Mr Torlage is a Chartered Accountant and has over twenty years experience with ArcelorMittal South Africa. He is currently Executive Director Finance and a Board member of various unlisted ArcelorMittal Group companies.
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Blair Edward Sergeant | Finance Director (resigned 1 April 2011) | Mr Sergeant graduated with a Bachelor of Business and a Post Graduate Diploma in Corporate Administration, both from Curtin University, Western Australia. He is a member of the Chartered Institute of Company Secretaries and an Associate of the Australian Society of Certified Practising Accountants. Mr Sergeant's experience includes senior management and executive positions with numerous listed public companies across a broad spectrum of industries internationally.
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Directorships of other listed companies
Directorships of other listed companies held by the directors in the 3 years immediately before the end of the financial year are as follows:
Director | Company | Period of directorship |
Richard Linnell | Namakwa Diamond Company NL GRD Minproc Ltd Chrome Corporation Limited GMA Resources plc Falkland Gold and Minerals plc SacOil Holdings Limited (previously SA Mineral Corporation Limited) Maghreb Minerals plc IPSA Group plc Brinkley Mining plc Mag Industries Corp Incorporated Rockwell Diamonds Incorporated | 2003 - 2008 2004 - 2009 2005 - 2009 2003 - 2009 2004 - 2008 2002 - Present 2008 - Present 2010 - Present 2007 - 2009 2002 - Present 2009 - 2011 2010 - Present
|
Simon Farrell | Kenmare Resources plc Bellzone Mining plc | 2002 - Present 2010 - Present
|
John Wallington | Firestone Energy Limited Keaton Energy Limited | 2009 - 2010 2008 - 2010
|
Wayne Gregory Koonin | Ivanhoe Nickel & Platinum Limited Platmin Limited
| 2006 - 2008 2009 - 2011
|
Professor Alfred Nevhutanda | none | none |
Director | Company | Period of directorship |
Peter Cordin | Dragon Mining Limited Vital Metals Limited | 2006 - Present 2009 - Present
|
Stephen Bywater | GCM Resources plc Caledon Resources plc
| 2006 - Present 2006 - 2011 |
Dave Murray | none
| none
|
Khomotso Mosehla | none | none
|
Mikki Xayiya | Avusa Limited Mvelaphanda Group Limited Mvelaphanda Resources Limited Northam Platinum Limited Ophir Energy plc
| 2008 - Present 2005 - Present 2001 - Present 2009 - Present 2006 - Present |
Rudolph Torlage | ArcelorMittal South Africa Ltd | 2010 - Present
|
Blair Edward Sergeant | Vmoto Limited Millepede International Limited Ram Resources Limited | 2004 - 2009 2002 - 2008 2008 - 2010
|
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 | Listed options | Unlisted options |
S Farrell (1) | 2,871,791 | - | 12,000,000 |
R Linnell (2) | 787,550 | - | 4,000,000 |
P Cordin (3) | 412,759 | - | 1,000,000 |
S Bywater | - | - | - |
A Nevhutanda (4) | 55,000 | - | - |
J Wallington | - | - | - |
D Murray (5) | - | - | 2,500,000 |
K Mosehla | - | - | - |
M Xayiya | - | - | - |
R Torlage | - | - | - |
W Koonin(6) | 55,000 | - | - |
B Sergeant(7) | - | - | 4,000,000 |
H Verster | - | - | - |
4,182,100 | - | 23,500,000 |
1. 1,406,377 shares are held by Cherek Pty Ltd of which Mr Farrell is a director and shareholder. The 12,000,000 options and the balance of the shares are held by Mr Farrell directly.
2. 751,550 shares held by Ord Group Pty Ltd as trustee for Terra Africa Investments Limited of which Mr Linnell is a beneficiary. 2,000,000 options are held by Terra Africa Investments Limited, of which Mr Linnell is a director and shareholder, and the remaining 2,000,000 options and the balance of shares are held by Mr Linnell directly.
3. All shares and options are held by Cordin (Pty) Ltd, of which Mr Cordin is a director.
4. All shares are held by Professor Nevhutanda directly.
5. Mr Murray was issued a total of 2,500,000 options (each option having an exercise price equal to the volume weighted average price of the Company's Shares 10 trading days prior to the issue date and an expiry date 5 years from the issue date, 1,000,000 of which will vest 12 months after the date of issue, 750,000 of which will vest 24 months after the date of issue and the remaining 750,000 vesting 36 months from the date of issue).
6. All shares are held by Mr Koonin directly.
7. As at 1 April 2011, on resignation 2,000,000 options are held by various trustees for the Rio Grande Do Norte Superannuation Fund of which Mr Sergeant is a member and trustee. The remaining 2,000,000 options are held by Mr Sergeant directly.
Remuneration of directors and senior management
Information about the remuneration of directors and senior management is set out in the remuneration report of this directors' report, on pages 11 to 16.
Share options granted to directors and senior management
During and since the end of the financial year, an aggregate 2,788,000 share options were granted to the following directors and senior management of the company as part of their remuneration:
Directors and senior management | Number of options | Issuing entity | Number of ordinary shares under option |
S Farrell | - | Coal of Africa Limited | - |
R Linnell | - | Coal of Africa Limited | - |
P Cordin | - | Coal of Africa Limited | - |
S Bywater | - | Coal of Africa Limited | - |
A Nevhutanda | - | Coal of Africa Limited | - |
J Wallington | - | Coal of Africa Limited | - |
D Murray | 2,500,000 | Coal of Africa Limited | 2,500,000 |
K Mosehla | - | Coal of Africa Limited | - |
M Xayiya | - | Coal of Africa Limited | - |
R Torlage | - | Coal of Africa Limited | - |
W Koonin | - | Coal of Africa Limited | - |
B Sergeant | - | Coal of Africa Limited | - |
K Verster | - | Coal of Africa Limited | - |
R van der Merwe | 211,000 | Coal of Africa Limited | 211,000 |
W Hattingh | 77,000 | Coal of Africa Limited | 77,000 |
Company secretary
Ms Shannon Coates held the position of Company Secretary for the financial year and is a qualified lawyer with over 18 years of experience in corporate law and compliance.
Principal activities
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 AIM Market of the London Stock Exchange ("AIM") and the Johannesburg Securities Exchange ('JSE').The principal activities of the Company and its subsidiaries ('the Group' or 'the Consolidated Entity') are the acquisition, exploration, development and operation of thermal and metallurgical coal projects in South Africa.
Changes in state of affairs
During the year the Company:
• Recorded production of 4.409 million run of mine ("ROM") tonnes (FY2010: 2.515 million tonnes) of thermal coal mined at Woestalleen and Mooiplaats collieries, up 75% year on year.
• Processed 4.997 million ROM tons (2010: 2.317 million tonnes) of thermal coal, including 0.472 million ROM tons (FY2010: 0.262 million tonnes) of purchased coal.
• Overall yield of 66.4% (FY2010: 56.4%) producing 3.316 million saleable tonnes (FY2010: 1.308 million tonnes).
• Transition from contract miner to owner-operator at Mooiplaats thermal colliery ("Mooiplaats Colliery").
• Phase 3 expansion of the Matola terminal in Maputo, Mozambique ("Matola Terminal"), completed in March 2011, increasing CoAL's effective throughput allocation from 1.0 million tons per annum ("mtpa") to 3.0 mtpa.
• Increase of 100 additional wagons (total of 850 wagons) by Transnet Freight Rail ("TFR") on the Maputo corridor to meet increased port allocation resulting in turnaround times reducing from 8 days to 4 days.
• Environmental authorisation received for the Vele coking coal colliery ("Vele Colliery"), paving the way for production to resume. The Integrated Water Use Licence ("IWUL") for the project granted in April 2011 but temporarily suspended following an appeal by non-governmental organisations ("NGO"). Non-water related activities re-commenced at the Vele Colliery.
• Definitive Feasibility Study ("DFS") for the Makhado coking coal project ("Makhado Project") in final stages with the infrastructure design substantially complete. Product trials at ArcelorMittal South Africa Limited ("AMSA") nearing completion leading to further discussions to convert the signed letter of intent into a commercial off-take agreement for the coking coal product.
Other than the above, there was no significant change in the state of affairs of the Consolidated Entity during the financial year.
Subsequent events
Post year end , the following significant operational events took place:
• On 5 July 2011, the Department of Environmental Affairs ('DEA') granted authorisation in terms of section 24G of the South African National Environmental Management Act, 107 of 1998 ("NEMA") in respect of the Vele Colliery;
• On 29 July 2011, the Vele Colliery's Integrated Water Use License ('IWUL') was suspended in terms of section 148(2)(b) of the South African National Water Act, No 36 of 1998 due to an appeal to the Water Tribunal submitted by an NGO coalition on 28 July 2011;
• On 15 August 2011, the irrevocable undertakings from the vendor shareholders were obtained in terms of the Sale and Purchase Agreement for the acquisition of the shares in the Chapudi Coal Project and Related Exploration Properties in South Africa's Soutpansberg coal basin in the Limpopo province and the time for satisfaction of remaining conditions precedent was extended until 30 April 2012 to obtain the requisite regulatory approvals;
• On 19 August 2011, CoAL submitted a s11 application in respect of the Chapudi and Soutpansberg properties.
• On 1 September 2011, CoAL concluded a landmark agreement with the Department of Environmental Affairs ("DEA"), South African National Parks Board ("SANParks") and CoAL, paving the way for collaborative and responsible mine development in Limpopo Province.
There have been no other events between 30 June 2011 and the date of this report which necessitate adjustment to the statements of comprehensive income or statements of financial position at that date.
Financial review
During the year, the Company changed its presentation currency from the Australian Dollar to the United States Dollar as the Board considers that the latter more appropriately reflects the results of operations and the financial position of CoAL and its subsidiaries on the basis that the underlying commodities from its operating coal mines are principally sold in that currency. Accordingly, the FY2010 prior year comparatives have been retrospectively adjusted to reflect this change.
With the acquisition of NuCoal with effect from 1 January 2010, Woestalleen's FY2010 results are based on six months production compared to a full year in FY2011. Production at Mooiplaats started in late 2008 and was in a ramp-up phase with three underground sections in operation by 30 June 2010. The ramp up continued in FY2011 increasing from three to four underground sections by 30 June 2011. As a result, the production and financial results from both thermal coal mines in FY2010 and FY2011 are not directly comparable.
On 23 March 2011, an operating subsidiary of the Company entered into a US$50 million revolving loan facility with Deutsche Bank AG (Amsterdam) and simultaneously repaid the JP Morgan Cazenove US$20 million loan which was then in place. As at 30 June 2011, the Company had drawn down US$32.5 million against the US$50 million facility. Total unrestricted cash and cash equivalents and available Deutsche Bank facility at year-end was US$40.261 million (FY2010: US$72.054 million), including US$17.500 million (FY2010: nil) which is undrawn against the Deutsche Bank facility. The facility is repayable by 23 September 2012.
The following is a summary of the key financial results for FY2011:
• US$261.4 million (FY2010: US$98.4 million) in revenue generated, up 166% year on year, with US$229.2 million (FY2010: US$78.1 million) from thermal coal sales and US$32.2 million (FY2010: US$20.3 million) generated by the NiMag business from alloy sales, development and other revenue;
• US$37.9 million (FY2010: US$27.1 million) in gross profit, up 40% year on year;
• operating costs, non-capitalised overheads and other items amounts to US$49.3 million (FY2010: US$49.6 million), marginally lower year on year with the inclusion of Woestalleen for a full 12 months in the current financial year (FY2010: 6 months) and generally higher overhead costs not capitalised as the Company continued to increase the portfolio of exploration and development stage projects during FY2011;
• adjusted loss before tax (excluding non-cash items and foreign exchange gains and losses) of US$11.4 million (FY2010: US$22.5 million), down 49% year on year;
• foreign exchange losses of US$29.9 million (FY2010: US$3.0 million net gain) of which US$29.3 million (US$2.7m loss) was unrealised and non-cash related.
• significant non-cash charges of US$176.9 million (FY2010: US$159.2 million) include:
- impairment losses of US$97.4 million (FY2010: US$54.0 million);
- depreciation and amortisation of US$79.5 million (FY2010: US$26.7 million);
• BBBEE share-based payment expenses (option) US$nil (FY2010: US$78.5 million);
• loss before tax for the year, including non-cash items, of US$218.1 million was US$39.4 million higher than in FY2010 of US$178.7 million principally as a result of the higher impairment charges in the current year;
• income tax charge for the year of US$0.9 million (FY2010: US$10.9 million credit) differs from the prior year and was due to the net effect of various reversals of deferred tax relating to the impairment charges in the current and prior year;
• net loss after tax for the year, including non-cash items, of US$219.0 million (FY2010: US$167.8 million);
• total unrestricted cash balances and undrawn Deutsche Bank facilities of US$40.3 million at year-end.
Impairment losses of US$97.4 million (FY2010: US$54.0 million) relate to the re-assessment of the carrying value of Mooiplaats and Woestalleen totalling US$92.3 million (FY2010: US$46.6 million) and assets held for sale totalling US$5.1 million (FY2010: US$7.4 million).
Depreciation and amortisation relate to the mining assets, plant and equipment increased from US$26.7 million in FY2010 to US$79.5 million in FY2011. The increase in the depreciation charge year on year was due to a reduction in the remaining life and resource at Woestalleen coupled with a twelve month charge in FY2011 compared to a six month charge in FY2010, since Woestalleen was only acquired effective 1 January 2010. The re-assessment of the remaining life of mine at Mooiplaats, also resulted in an increase in this charge year on year.
The foreign exchange losses of US$29.9 million, of which US$29.3 million is non-cash and unrealised, is principally as a result of the translation of inter-company loan balances, the majority of which are denominated in Australian Dollars or South African Rands, into US Dollars at financial year-end. The Australian/US Dollar closing exchange rate at financial year-end was 23.7% higher than the previous year and the average rate was 12.1% higher year on year. Similarly, the South African Rand/US Dollar closing and average exchange rates strengthened year on year by 10.4% and 7.7% respectively.
The share-based payment expense of US$78.5 million in FY2010 relates to the fair value adjustment for the option issued to Firefly to acquire 50 million ordinary shares at 60 pence per share (exercisable between 1 November 2010 and 1 November 2014). There is no corresponding charge in FY2011.
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 Atmospheric Pollution Prevention Act (No. 45 of 1965), 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 the Board has undertaken a thorough review of all its activities to seek to bring them into compliance.
Dividends
No dividend has been paid or proposed for the financial year ended 30 June 2011 (2010 - none).
Shares under option or issued on exercise of options
Details of unissued shares under option as at the date of this report are:
Number of shares under option | Class of shares | Exercise price | Expiry date | |
Class A Unlisted Options | 7,950,000 | Ordinary | A$0.50 | 30 September 2011 |
Class B Unlisted Options | 250,000 | Ordinary | A$2.05 | 1 May 2012 |
Class H Unlisted Options | 600,000 | Ordinary | A$1.25 | 1 May 2012 |
Class I Unlisted Options | 1,650,000 | Ordinary | A$3.25 | 31 July 2012 |
Class D Unlisted Options | 7,000,000 | Ordinary | A$1.25 | 30 September 2012 |
Class G Unlisted Options | 1,000,000 | Ordinary | A$1.90 | 30 September 2012 |
Class J Unlisted Options | 5,000,000 | Ordinary | A$2.74 | 30 November 2014 |
Class K Unlisted Options | 912,500 | Ordinary | A$1.90 | 30 June 2014 |
Class C Unlisted Options | 2,500,000 | Ordinary | A$1.20 | 9 November 2015 |
1 Option(1) | 50,000,000 | Ordinary | GBP0.60 | 1 November 2014 |
ESOP Unlisted Options | 1,540,561 | Ordinary | A$1.40 | 30 September 2015 |
1. Option to subscribe for 50 million ordinary shares for 60 pence each between 1 November 2010 and 1 November 2014, as approved by shareholders on 22 April 2010, and granted to Firefly Investments (Pty) Ltd, a Broad Based Black Economic Empowerment ("BBBEE") entity.
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 shares or interests issued during or since the end of the financial year as a result of exercise of an option are:
Number of shares under option | Class of shares | Exercise price | Expiry date | |
Exercise of Class A options | 1,124,998 | Ordinary | A$0.50 | 30 September 2011 |
Indemnification of officers and auditors
During the financial year, the company paid a premium of $35,292 (2010 - $21,050) in respect of a contract insuring the directors of the company as named above, 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, 5 board meetings, 1 nomination and remuneration committee meeting, 2 audit committee meetings and 1 safety and health committee meeting were held.
Board of Directors | Audit Committee | Nomination and Remuneration Committee | Safety and Health | |||||
Director | Held | Attended | Held | Attended | Held | Attended | Held | Attended |
R Linnell | 5 | 5 | - | - | - | - | - | - |
S Farrell | 5 | 5 | 2 | 1* | - | - | - | - |
P Cordin | 5 | 5 | 2 | 1 | 1 | 1 | 1 | 1 |
S Bywater | 5 | 5 | 2 | 2 | 1 | 1 | 1 | 1 |
A Nevhutanda | 5 | 4 | - | - | - | - | - | - |
J Wallington | 5 | 5 | 2 | 2* | - | - | - | - |
D Murray | 5 | 4 | - | - | - | - | - | - |
K Mosehla | 5 | 4 | 2 | 1 | - | - | - | - |
M Xayiya | 5 | 3 | - | - | - | - | - | - |
R Torlage | 5 | 3 | 2 | 1 | - | - | - | - |
W Koonin | 5 | 1 | - | - | - | - | - | - |
K Verster | 5 | - | - | - | 1 | 1 | 1 | - |
B Sergeant | 5 | 4 | 2* | 1 | - | - | - | - |
* By invitation
Non-audit services
Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in note 7 to the financial statements.
The directors are satisfied that the provision of non-audit services, during the year, by the auditor (or by another person or firm on the auditor's behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 7 to the financial statements do not compromise the external auditor's independence, based on advice received from the Audit Committee, for the following reasons:
·; all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor, and
·; none of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES 110 'Code of Ethics for Professional Accountants' issued by the Accounting Professional & Ethical Standards Board, including reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risks and rewards.
Auditor's independence declaration
The auditor's independence declaration is included on page 17 of these 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 2011. 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
·; 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, as approved by shareholders at the November 2010 General Meeting, is not to exceed A$1,000,000 per annum.
The Board has nominated a Remuneration Committee which is made up as follows: Mr Steve Bywater (Chairman), Mr Dave Murray and Mr Mikki Xayiya. The Company does not have any scheme relating to retirement benefits for Non-Executive Directors.
Director and senior management details
The following persons acted as directors of the company during or since the end of the financial year:
·; R Linnell - Independent Non-Executive Chairman
·; S Farrell - Independent Non-Executive Deputy Chairman
·; P Cordin - Independent Non-Executive Director
·; S Bywater - Independent Non-Executive Director
·; Professor A Nevhutanda - Executive Director
·; J Wallington - Chief Executive Officer
·; D Murray - Independent Non-Executive Director, appointed 8 September 2010
·; K Mosehla - Non-Executive Director, appointed 18 November 2011
·; M Xayiya - Non-Executive Director, appointed 18 November 2011
·; R Torlage - Non-Executive Director, appointed 18 November 2011
·; W Koonin - Financial Director, appointed 1 April 2011
·; B Sergeant - Finance Director, resigned 1 April 2011
·; H Verster - Non-Executive Director, resigned 12 August 2010
The term 'key management' is used in this remuneration report to refer to the following persons. 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:
·; R van der Merwe - Chief Operating Officer
·; W Hattingh - General Manager: Commercial
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 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 company with those of the shareholders.
The 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 Board may, however, exercise its discretion in relation to approving incentives, bonuses and options, and can recommend changes to the 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 Remuneration Committee determines payments to the Non-Executive Directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to Non-Executive Directors is A$1,000,000.
To assist directors with independent judgement, it is the Board's policy that if a director considers it necessary to obtain independent professional advice to properly discharge the responsibility of their office as a director then, provided the director first obtains approval from the Chairman for incurring such expense, the Company will pay the reasonable expenses associated with obtaining such advice.
Options granted under the arrangement do not carry dividend or voting rights. Options are valued using the Black-Scholes methodology.
Performance - based remuneration
The key performance indicators (KPIs) are set annually, with a certain level of consultation with key management personnel to ensure buy-in. The measures are specifically tailored to the area each individual is involved in and has a level of control over. The KPIs target areas the Board believes hold greater potential for group expansion and profit, covering financial and non-financial as well as short and long-term goals.
Performance in relation to the KPIs is assessed annually, with bonuses being awarded depending on the number and deemed difficulty of the KPIs achieved.
Relationship between remuneration policy and company performance
The remuneration policy has been tailored to increase goal congruence between shareholders, Directors and key management. Two methods have been applied to achieve this aim, the first being a performance-based bonus based on key performance indicators, and the second being the issue of options to the majority of Directors and key management to encourage the alignment of personal and shareholder interests.
The tables below set out summary information about the Group's earnings and movements in shareholder wealth for the five years to June 2011.
Year ended 30 June 2011 US$'000 | Year ended 30 June 2010 US$'000 | Year ended 30 June 2009 US$'000 | Year ended 30 June 2008 A$'000 | Year ended 30 June 2007 A$'000 | |
Revenue | 261,425 | 98,376 | 17,120 | 53,774 | 62,595 |
Net loss before tax | 218,106 | 178,656 | 9,613 | 10,324 | 10,889 |
Net loss after tax | 219,003 | 167,758 | 9,849 | 11,244 | 3,547 |
Year ended 30 June 2011 | Year ended 30 June 2010 | Year ended 30 June 2009 | Year ended 30 June 2008 | Year ended 30 June 2007 | |
Share price at start of year | A$1.68 | A$1.57 | A$4.14 | A$1.07 | A$0.34 |
Share price at start of year | A$1.08 | A$1.68 | A$1.60 | A$4.18 | A$1.06 |
Basic and diluted loss per share (cents) | 0.41 | 0.37 | 0.02 | 4.08 | 4.72 |
Remuneration of directors and key management personnel
Details of the nature and amount of each major element of the remuneration of each director and senior management personnel for the year are:
Short term employee benefits | Post-employment benefits | Other long term benefits | Share- based payments | Total | Share based % of Total | |||
2011 | Salary and fees
$ | Bonus(2)
$ | Non -monetary benefits $ | Super-annuation
$ |
$ | Options / Shares
$ |
$ |
% |
Non-Executive Directors | ||||||||
R Linnell | 89,025 | - | - | - | - | - | 89,025 | - |
P Cordin | 56,383 | - | - | 5,074 | - | - | 61,457 | - |
S Bywater | 56,383 | - | - | - | - | - | 56,383 | - |
H Verster | 5,850 | - | - | - | - | - | 5,850 | - |
D Murray | 82,702 | - | - | 7,443 | - | 472,951 | 563,096 | 84 |
K Mosehla | - | - | - | - | - | - | - | - |
M Xayiya | - | - | - | - | - | - | - | - |
R Torlage | - | - | - | - | - | - | - | - |
Executive Directors | ||||||||
S Farrell(1) | 544,046 | 173,105 | - | - | - | 482,152 | 1,191,303 | 40 |
J Wallington | 636,160 | - | - | - | - | - | 636,160 | - |
B Sergeant | 400,900 | 129,582 | - | - | - | 241,076 | 771,558 | 31 |
W Koonin | 95,424 | - | - | - | - | - | 95,424 | - |
A Nevhutanda | 160,532 | 35,960 | - | - | - | - | 196,491 | - |
2,127,405 | 338,647 | - | 12,517 | - | 1,196,179 | 3,666,747 | 33 | |
Key management | ||||||||
R van der Merwe | 451,417 | 118,128 | - | - | - | 411,468 | 981,013 | 42 |
W Hattingh | 301,426 | 43,060 | - | - | - | 150,156 | 494,642 | 30 |
752,843 | 161,188 | - | - | - | 561,624 | 1,475,655 | 38 | |
2,880,248 | 499,835 | - | 12,517 | - | 1,757,803 | 5,142,402 | 34 |
Short term employee benefits | Post-employment benefits | Other long term benefits | Share- based payments | Total | Share based % of Total | |||
2010 | Salary and fees
$ | Bonus(2)
$ | Non -monetary benefits $ | Super-annuation
$ |
$ | Options / Shares
$ |
$ |
% |
Non-Executive Directors | ||||||||
R Linnell | 78,554 | - | - | - | - | - | 78,554 | - |
P Cordin | 46,315 | - | - | 3,970 | - | - | 50,285 | - |
S Bywater | 50,285 | - | - | - | - | - | 50,285 | - |
H Verster | 37,351 | - | - | - | - | - | 37,351 | - |
Executive Directors | ||||||||
S Farrell | 705,752 | - | - | - | - | 429,994 | 1,135,719 | 38 |
J Wallington | 27,449 | - | - | - | - | - | 27,449 | - |
B Sergeant | 485,205 | - | - | - | - | 472,993 | 958,198 | 49 |
A Nevhutanda | 171,038 | - | - | - | - | - | 171,038 | - |
1,601,949 | - | - | 3,970 | - | 902,988 | 2,508,906 | 36 | |
Key management | ||||||||
R van der Merwe | 385,409 | - | - | - | - | 364,017 | 749,426 | 49 |
W Hattingh | 124,141 | - | - | - | - | 170,439 | 294,580 | 58 |
509,550 | - | - | - | - | 534,456 | 1,044,066 | 51 | |
2,111,499 | - | - | 3,970 | - | 1,437,444 | 3,552,912 | 40 |
1. Mr Farrell assumed the role of a Non-Executive Deputy Chairman with effect from 1 April 2011.
2. Discretionary bonuses awarded to the executive directors and key management were approved by the board.
All amounts have been converted to United States dollars for disclosure purposes.
No director or key management appointed during the period received a payment as part of his consideration for agreeing to hold the position.
Key terms of employment contracts
The Company has entered into formal contractual employment agreements with the Non-Executive Deputy Chairman, the Chief Executive Officer and the Financial Director only and not with any other member of the Board. The employment conditions of the Non-Executive Deputy Chairman, the Chief Executive Officer and Financial Director are:
1. Mr Farrell's agreement commenced on 1 July 2009 and is for a 3.5 year fixed term, at an annual remuneration of A$550,000. The agreement may be terminated on 1 month written notice and in the event of termination by the Company, the remaining term of the agreement must be paid out.
2. Mr Wallington's agreement commenced on 31 May 2010 and is for a 3 year fixed term, at an annual remuneration of GBP400,000. Subject to shareholder approval and the satisfaction of certain capital performance conditions, Mr Wallington is also entitled to receive up to 250,000 shares following 12 months service, up to 500,000 shares following 24 months service and up to 500,000 shares following 36 months service. The agreement may be terminated on 3 month's written notice.
3. Mr Koonin's agreement commenced on 1 April 2011 and is for a 5 year fixed term, at an annual remuneration of GBP240,000. Subject to shareholder approval and the satisfaction of certain capital performance conditions, Mr Koonin is also entitled to receive up to 175,000 shares following 12 months service, up to 350,000 shares following 24 months service, up to 350,000 shares following 36 months service, up to 350,000 shares following 48 months service and up to 350,000 shares following 60 months service . The agreement may be terminated on 3 month's written notice.
The employment conditions of the following specified executives have been formalised in employment contracts:
1. Mr Van der Merwe is employed by CoAL in the capacity of Chief Operations Officer, at an annual remuneration of R3.2 million. The permanent employment contract commenced on 1 August 2008 and may be terminated by written notice of one month.
2. Mr Hattingh is employed by CoAL in the capacity of General Manager: Commercial, at an annual remuneration of R2.1 million. The permanent employment contract commenced on 1 January 2010 and can be terminated by written notice of one month.
This directors' report is signed in accordance with a resolution of directors made pursuant to s.298(2) of the Corporations Act 2001.
On behalf of the Directors
John Wallington
Chief Executive Officer
18 September 2011
Chair, Board Audit Committee
Coal of Africa Limited
Level 1, 173 Mounts Bay Road
Perth WA 6000
14 September 2011
Dear Sir
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 2011, I declare that to the best of my knowledge and belief, there have been no contraventions of:
·; the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
·; any applicable code of professional conduct in relation to the audit.
Yours faithfully
DELOITTE TOUCHE TOHMATSU
Ross Jerrard
Partner
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. CoAL's objective is to achieve best practice in corporate governance and the Company's Board, senior executives and employees are committed to achieving this objective.
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.
ASX Best Practice Recommendations
The ASX Listing Rules require listed companies to include in their Annual Report a statement disclosing the extent to which they have complied with the ASX best practice recommendations in the reporting period. The recommendations are not prescriptive and if a company considers that a recommendation is inappropriate having regard to its particular circumstances, the company has the flexibility not to adopt it. 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.
The Board has adopted a Corporate Governance policy that (except where expressly noted below) complies with the Principles in the Second Edition of the "Corporate Governance Principles and Recommendations", established by the ASX Corporate Governance Council and published by the ASX in August 2007. This Corporate Governance policy has been in effect for the entire reporting period. On 9 December 2010, the Company amended its Securities Trading Policy to comply with new Listing Rule 12.9 and provided this to ASX for release to the market.
Board of Directors
Role and Responsibilities of the Board
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 financial director 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 Committee, if applicable) 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 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 Committee (where there is a separate Audit 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) make regular assessment of whether each non-executive Director is independent in accordance with the Company's Policy on Assessing the Independence of Directors.
In accordance with ASX Principle 1, 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 Board has delegated responsibilities and authorities to management to enable management 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.
Board composition
Since 18 November 2010, the Board has been comprised of three executive Directors, five independent non-executive Directors and three non-executive Directors.
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.
ASX Principle 2 recommends the Board establish a Nomination Committee to focus on the selection and appointment practices of the Company. It is further recommended that the Nomination Committee have a formal Charter.
The Company has a Nomination & Remuneration Committee which is comprised of 2 independent non-executive Directors and 1 non-executive Director and which undertakes the nomination functions for the Company. The Nomination & Remuneration Committee has adopted a formal Nomination Committee Charter, available on the Company's website, which includes information on the Company's approach to selection and appointment of Directors.
The composition of the Board is reviewed at least annually to ensure the balance of skills and experience is appropriate. The current Directors have a broad range of qualifications, experience and expertise in mining exploration, development and operation in the corporate and finance industries. The Board is of the view that the current composition comprises the mix of skill sets and experience it is looking to achieve in membership of the Board. The skills, experience and expertise of Directors are set out in the Directors' Report.
The names of the Directors in office at the date of this Report, the year they were first appointed, their status as non-executive, executive or independent Directors and whether they are retiring by rotation and seeking re-election by shareholders at the 2011 Annual General Meeting, are set out in the Directors' Report.
Independence of non-executive directors
The Board considers an independent Director to be a non-executive Director who meets the criteria for independence set out in Principle 2 of the ASX Corporate Governance Principles and Recommendations. In determining a Director's independence, the Board considers the relationships that may affect independence, as set out in Box 2.1 of the Principles.
Materiality for these purposes is based on quantitative and qualitative thresholds, set out in the Board Charter available from the Company's website. In summary, the Board has agreed on the following guidelines for assessing the materiality of matters:
Materiality - Quantitative
Balance sheet items
Balance sheet items are material if they have a value of more than 10% of pro-forma net asset.
Profit and loss items
Profit and loss items are material if they will have an impact on the current year operating result of 10% or more.
Materiality - Qualitative
Items are also material if:
a) they impact on the reputation of the Company;
b) they involve a breach of legislation;
c) they are outside the ordinary course of business;
d) they could affect the Company's rights to its assets;
e) if accumulated they would trigger the quantitative tests;
f) they involve a contingent liability that would have a probable effect of 10% or more on balance sheet or profit and loss items; or
g) they will have an effect on operations which is likely to result in an increase or decrease in net income or dividend distribution of more than 10%.
Material Contracts
Contracts will be considered material if:
a) they are outside the ordinary course of business;
b) they contain exceptionally onerous provisions in the opinion of the Board;
c) they impact on income or distribution in excess of the quantitative tests;
d) there is a likelihood that either party will default, and the default may trigger any of the quantitative or qualitative tests;
e) they are essential to the activities of the Company and cannot be replaced, or cannot be replaced without an increase in cost of such a quantum, triggering any of the quantitative tests;
f) they contain or trigger change of control provisions;
g) they are between or for the benefit of related parties; or
h) they otherwise trigger the quantitative tests.
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 not independent. Messrs Richard Linnell, Simon Farrell, Peter Cordin, Steve Bywater and David Murray are considered independent. Executive Directors Messrs John Wallington, Wayne Koonin, Alfred Nevhutanda, and Non-Executive Directors Khomotso Mosehla, Mikki Xayiya and Rudolph Torlage are not considered independent.
The Company notes for the purposes of Principle 2, that while Mr Farrell was engaged in an executive capacity until 1 June 2010 when Mr Wallington was appointed as Chief Executive Officer, he is no longer involved in the day to day running of the Company, has no material or business relationship with the Company and no conflicts of interest which could interfere with the exercise of independent judgement and he is therefore considered independent.
Independent professional advice
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.
Meetings
The Board held 5 scheduled meetings during the reporting year and no unscheduled meetings were held during that year. Senior management attended and made presentations at the Board Meetings as considered appropriate and were available for questioning by Directors.
The attendance of Directors at Board meetings during the year ended 30 June 2011 is detailed in the Directors' Report.
Evaluation of Board and Senior Executive performance
A process has been established to review and evaluate the performance of the Board, individual Directors and senior executives. The Board is required to meet annually with the specific purpose of reviewing the role of the Board, assessing the performance of the Board and individual Directors over the previous 12 months and examining ways in which the Board can better perform its duties. The Company's annual Board review to consider the 2011 financial year is scheduled to take place by 31 December 2011.
The Chief Executive Officer is responsible for assessing the performance of the key executives within the Company. This is performed through a formal process involving a formal meeting with each senior executive.
Remuneration
ASX Principle 8 recommends the Board establish a Remuneration Committee to focus on appropriate remuneration policies. It is further recommended that the Remuneration Committee have a formal Charter.
The Company has a Nomination and Remuneration Committee which is comprised of 2 independent non-executive Directors and 1 non-executive Director and which undertakes the remuneration functions for the Company. The Nomination & Remuneration Committee has adopted a formal Remuneration Committee Charter, available on the Company's website, which includes information on the Company's approach to remuneration of Directors (executive and non-executive) and senior executives.
In accordance with Principle 8, 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 Non-executive Directors' fees are currently capped at A$1,000,000 per annum.
On 14 October 2010, following shareholder approval, the Company issued 2,500,000 Options to Non-Executive Director Mr David Murray. The Company acknowledges that the guidelines to ASX Principle 8 recommend that Non-Executive Directors do not receive options. However under the Company's current circumstances, the Directors considered the issue to be a cost effective and efficient means for the Company to provide a reward and incentive, as opposed to alternative forms of incentive, such as the payment of additional cash consideration that would be necessary for someone with the experience of Mr Murray.
The Company does not have any scheme relating to retirement benefits for non-executive Directors.
See the Remuneration Report for details of remuneration paid to Directors and senior key executives during the year.
Risk Management
In accordance with ASX Principle 7, 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 Managing Director, 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.
Further, in accordance with Principle 7, the Chief Executive Officer and Financial Director have confirmed in writing to the Board that:
a) the Company's 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;
c) the Company's risk management and internal compliance and control system is operating efficiently and effectively in all material respects.
Financial Reporting
ASX Principle 4 recommends the Board establish an Audit Committee to focus on issues relevant to the integrity of the Company's financial reporting. It is further recommended the Audit Committee have a formal Charter.
The Company has established an Audit Committee which is comprised of 3 non-executive Directors, 1 of which is independent.
The role of the Audit Committee is to:
a) monitor and review the integrity of the financial reporting of the Company, reviewing significant financial reporting judgments;
b) 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;
c) monitor, review and oversee the external audit function including matters concerning appointment and remuneration, independence and non-audit services;
d) monitor and review compliance with the Company's Code of Conduct; and
e) perform such other functions as assigned by law, the Company's Constitution, or the Board.
The Audit Committee has adopted a formal Audit Committee Charter, available from the Company's website, which promotes an environment consistent with best practice financial reporting.
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. ASX Principle 3 recommends companies establish a policy concerning diversity and disclose the policy or a summary of that policy. It further recommends that companies should disclose in each annual report measurable objectives for achieving gender diversity set by the Board in accordance with the diversity policy and progress towards achieving them. Due to the current nature and scale of CoAL's activities, the Board has not established a diversity policy or measurable objectives for achieving gender diversity to report against in this Annual Report for the current financial year.
A fundamental theme is that all business affairs are conducted legally, ethically and with strict observance of the highest standards of integrity and propriety.
ASX Principle 3 recommends companies establish a policy concerning diversity and disclose the policy or a summary of that policy. It further recommends companies should disclose in each annual report measurable objectives for achieving gender diversity set by the Board in accordance with the diversity policy and progress towards achieving them. Due to the current nature and scale of CoAL's activities, the Board has not established a diversity policy or measurable objectives for achieving gender diversity to report against in this Annual Report for the 2011 financial year.
Securities Trading
As required by Listing Rule 12.12, the Board has adopted a Securities Trading Policy which regulates dealings by Directors, officers and employees in securities issued by the Company.
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 Chairman.
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.
Continuous Disclosure
In accordance with ASX Principle 5, the Board has an established Continuous Disclosure Policy which is available from the Company's website.
The Company promotes timely and balanced disclosure of all material matters concerning the Company and recognises that all investors should have equal and timely access to material information. 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.
Shareholder Communication
In accordance with ASX Principle 6, 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 are requested to attend the Company's annual general meetings.
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 2.1 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
John Wallington
Chief Executive Officer
18 September 2011
| Year ended 30 June 2011 | Year ended 30 June 2010 | ||
Note | $'000 | $'000 | ||
Revenue | 5 | 261,425 | 98,376 | |
Cost of sales - direct | (223,483) | (71,242) | ||
Gross profit | 37,942 | 27,134 | ||
Employee benefits expense | 6 | (21,362) | (10,354) | |
Other share-based payments (as restated, see note 27.2) | 6 | - | (78,515) | |
Impairment losses | 6 | (97,400) | (53,961) | |
Depreciation and amortisation | 6 | (79,521) | (26,684) | |
Other gains and losses | 6 | (498) | (1,344) | |
Operating lease expenses | (1,874) | (1,008) | ||
Foreign exchange (losses)/gains | (29,923) | 2,953 | ||
Take or pay obligation | - | (3,199) | ||
Other expenses | (26,134) | (35,085) | ||
Operating loss | (218,770) | (180,063) | ||
Finance income | 8 | 2,486 | 2,496 | |
Finance costs | 8 | (1,822) | (1,089) | |
Loss before tax | (218,106) | (178,656) | ||
Income tax (charge) / credit | 9 | (897) | 10,898 | |
Net loss for the year | (219,003) | (167,758) | ||
Other comprehensive income | ||||
Exchange differences on translating foreign operations | 119,470 | 12,889 | ||
Total comprehensive loss for the year | (99,533) | (154,869) | ||
Loss attributable to: | ||||
Owners of the Company | (219,003) | (167,758) | ||
Non-controlling interests | - | - | ||
(219,003) | (167,758) | |||
Total comprehensive loss attributable to: | ||||
Owners of the Company | (99,533) | (154,869) | ||
Non-controlling interests | - | - | ||
(99,533) | (154,869) | |||
Loss per share | ||||
Basic and diluted (cents per share) | 10 | 0.41 | 0.37 | |
The accompanying notes are an integral part of these financial statements |
| Year ended 30 June 2011 | Year ended 30 June 2010 | ||
Note | $'000 | $'000 | ||
ASSETS | ||||
Non-current assets | ||||
Development, exploration and evaluation expenditure | 11 | 195,848 | 310,825 | |
Property, plant and equipment | 12 | 218,258 | 132,987 | |
Intangible assets | 13 | 20,800 | 18,066 | |
Other receivables | 14 | 12,800 | 14,400 | |
Other financial assets | 15 | 13,594 | 18,651 | |
Goodwill | 16 | - | 3,031 | |
Restricted cash | 19 | 13,323 | 14,511 | |
Deferred tax assets | 23 | 4,171 | 10,460 | |
Total non-current assets | 478,794 | 522,931 | ||
Current assets | ||||
Inventories | 17 | 23,122 | 24,025 | |
Trade and other receivables | 18 | 44,734 | 27,240 | |
Cash and cash equivalents | 19 | 22,761 | 72,054 | |
Total current assets | 90,617 | 123,319 | ||
Assets classified as held for sale | 20 | 22,268 | 14,638 | |
Total assets | 591,679 | 660,888 | ||
LIABILITIES | ||||
Non-current liabilities | ||||
Borrowings | 21 | 1,720 | 1,506 | |
Provisions | 22 | 18,714 | 9,239 | |
Deferred tax liabilities | 23 | 19,435 | 28,551 | |
Total non-current liabilities | 39,869 | 39,296 | ||
Current liabilities | ||||
Trade and other payables | 24 | 73,590 | 68,858 | |
Borrowings | 21 | 38,631 | 20,863 | |
Provisions | 22 | 2,481 | 876 | |
Current tax liabilities | 3,474 | 321 | ||
Total current liabilities | 118,176 | 90,918 | ||
Liabilities classified as held for sale | 20 | 2,843 | - | |
Total liabilities | 160,888 | 130,214 | ||
NET ASSETS | 430,791 | 530,674 | ||
EQUITY | ||||
Issued capital | 25 | 686,577 | 685,740 | |
Accumulated deficit | 26 | (429,589) | (210,586) | |
Reserves (as restated) | 27 | 173,228 | 51,242 | |
Equity attributable to owners of the Company | 430,216 | 526,396 | ||
Non-controlling interests | 29 | 575 | 4,278 | |
TOTAL EQUITY | 430,791 | 530,674 | ||
The accompanying notes are an integral part of these financial statements |
| Issued capital | Accumulated deficit | Share based payment reserve | Capital profits reserve | Foreign currency translation reserve | Attributable to owners of the parent | Non-controlling interests | Total equity |
$'000 | $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | |
Balance at 1 July 2010 | 685,740 | (210,586) | 86,451 | 91 | (35,300) | 526,396 | 4,278 | 530,674 |
Total comprehensive loss for the year | - | (219,003) | - | - | 119,470 | (99,533) | - | (99,533) |
Loss for the year | - | (219,003) | - | - | - | (219,003) | - | (219,003) |
Other comprehensive loss, net of tax | - | - | - | - | 119,470 | 119,470 | - | 119,470 |
685,740 | (429,589) | 86,451 | 91 | 84,170 | 426,863 | 4,278 | 431,141 | |
Shares issued on exercise of options | 349 | - | - | - | - | 349 | - | 349 |
Share options issued during the year | - | - | 3,004 | - | - | 3,004 | - | 3,004 |
Deconsolidation of Coal of Madagascar | - | - | - | - | - | - | (3,703) | (3,703) |
Transfer from / (to) share based payments reserve | 488 | - | (488) | - | - | - | - | - |
Balance at 30 June 2011 | 686,577 | (429,589) | 88,967 | 91 | 84,170 | 430,216 | 575 | 430,791 |
Balance at 1 July 2009 | 500,896 | (42,828) | 7,162 | 91 | (48,189) | 417,132 | 6,047 | 423,179 |
Total comprehensive loss for the year | - | (167,758) | - | - | 12,889 | (154,869) | - | (154,869) |
Loss for the year | - | (167,758) | - | - | - | (167,758) | - | (167,758) |
Other comprehensive loss, net of tax | - | - | - | - | 12,889 | 12,889 | - | 12,889 |
500,896 | (210,586) | 7,162 | 91 | (35,300) | 262,263 | 6,047 | 268,310 | |
Shares issued for capital raising | 177,482 | - | - | - | 177,482 | - | 177,482 | |
Shares issued in lieu of professional fees | 752 | - | - | - | - | 752 | - | 752 |
Shares issued on acquisition of 26% of Vele | 15,915 | - | - | - | - | 15,915 | - | 15,915 |
Shares issued on exercise of options | 755 | - | - | - | - | 755 | - | 755 |
Acquisition and disposal of non-controlling interest | - | - | - | - | - | - | (1,769) | (1,769) |
Transfer from option reserve | 986 | - | (986) | - | - | - | - | - |
Share options issued during the year | - | - | 1,760 | - | - | 1,760 | - | 1,760 |
BEE share based payments (as restated, see note 6) | - | - | 78,515 | - | - | 78,515 | - | 78,515 |
Share issue costs | (11,046) | - | - | - | - | (11,046) | - | (11,046) |
Balance at 30 June 2010 | 685,740 | (210,586) | 86,451 | 91 | (35,300) | 526,396 | 4,278 | 530,674 |
The accompanying notes are an integral part of these financial statements |
| Year ended 30 June 2011 | Year ended 30 June 2010 | ||
Note | $'000 | $'000 | ||
Cash flows from operating activities | ||||
Receipts from customers | 302,885 | 81,243 | ||
Payments to suppliers and employees | (305,412) | (88,872) | ||
Cash generated from operations | 31 | (2,527) | (7,629) | |
Interest received | 2,486 | 2,496 | ||
Dividends received | - | 92 | ||
Interest paid | (1,822) | (1,089) | ||
Income taxes paid | (374) | (3,039) | ||
Net cash used in operating activities | (2,237) | (9,169) | ||
Cash flows from investing activities | ||||
Purchase of property, plant and equipment | (34,975) | (7,728) | ||
Proceeds from the sale of property, plant and equipment | 1,679 | 530 | ||
Increase in development assets | (21,320) | (96,804) | ||
Increase in exploration assets | (19,350) | (2,528) | ||
Acquisitions through business combinations | - | (64,057) | ||
Cash acquired on business acquisition | - | 3,499 | ||
Increase in other financial assets | 5,058 | 7,080 | ||
Decrease in other receivables | 1,600 | 1,600 | ||
Increase in restricted cash | (1,188) | (14,446) | ||
Cash classified as held for sale | (1,528) | - | ||
Net cash used in investing activities | (70,024) | (172,854) | ||
Cash flows from financing activities | ||||
Increase in working capital facility | - | 20,000 | ||
Repayment of working capital facility | (20,000) | - | ||
Increase in export trade finance facility | 32,500 | - | ||
Finance lease repayments | (4,545) | - | ||
Increase / (decrease) in loans payable | 2,644 | (8,171) | ||
Proceeds from the issue of shares | 309 | 167,827 | ||
Net cash (used in) / generated by financing activities | 10,908 | 179,656 | ||
Net decrease in cash and cash equivalents | (61,353) | (2,367) | ||
Net foreign exchange differences | 12,060 | 4,442 | ||
Cash and cash equivalents at beginning of the year | 72,054 | 69,979 | ||
Cash and cash equivalents at the end of the year | 31 | 22,761 | 72,054 | |
The accompanying notes are an integral part of these 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'). The addresses of its registered office and principal places of business are disclosed in the Annual Report.
The principal activities of the Company and its subsidiaries ('the Group' or 'the Consolidated Entity') are the acquisition, exploration and development of thermal and metallurgical coal projects in South Africa.
The Group's principal assets and projects include:
·; two coking coal projects, the Vele Colliery and the Makhado Complex, in the development stage;
·; two exploration and development stage coking and thermal coal complexes, the Chapudi Complex and the Soutpansberg Complex, each comprising three large scale coal projects;
·; two operational thermal coal collieries, the Mooiplaats Colliery and the Woestalleen Colliery; and
·; in excess of three million tonnes per annum port and rail capacity, with the option to secure additional capacity at the Matola Terminal in Maputo, Mozambique.
The Group also has an interest in an analytical coal laboratory.
Going Concern
The Consolidated Entity has incurred a net loss after tax for the year ended 30 June 2011 of $219,003,000 (30 June 2010: loss of $167,758,000) and experienced net cash operating outflows from operating activities of $2,237,000 (2010 net outflow: $9,169,000). As at 30 June 2011 the Consolidated Entity had a net current liability position of $27,559,000, excluding assets classified as held for sale (30 June 2010: net current asset of $32,401,000).
The financial report has been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the normal course of business. This basis has been adopted based on the Consolidated Entity's cash flow projections for a period of not less than 12 months from the date of this report, which includes additional capital raising or financing as discussed below.
During the year to 30 June 2011 and the period to the date of this report, the Directors have taken steps to ensure the Consolidated Entity continues as a going concern. These steps have included:
(i) on 23 March 2011 the Consolidated Entity announced that they successfully reached agreement with Deutsche Bank AG on a $50 million export finance facility. $17.5 million of this facility remains undrawn at reporting date.
(ii) Coal continues to work on a number of new debt facilities and remains confident of securing one or more currently under advanced negotiation, and a debt facility of at least $50 million is required by no later than 1 November 2011.
(iii) Coal have reached agreement to dispose of Holfontein Investments (Pty) Ltd and NiMag (Pty) Ltd. These disposals are expected to occur within the next twelve months
(iv) The Directors have reviewed the quantum and timing of all discretionary expenditures including exploration and development costs, and wherever necessary, these costs will be minimised or deferred to suit the Consolidated Entity's cash flow from operations. This includes the active management of working capital commitments. Based on this review the Directors are satisfied non-discretionary expenditures and existing liabilities can be met from current cash resources, forecast cash flows from operations, existing facilities, planned facility as per (ii) above and proceeds from the sale of assets currently classified as held for sale.
(v) The Directors are also considering various strategies to raise funds through additional debt or equity. The form and content of this strategy, although advanced, has not yet been finalised.
The additional funds raised, as mentioned in (v) above, will allow the Consolidated Entity to fund non-discretionary expenditures.
Going concern (continued)
The ability of the Consolidated Entity to continue as a going concern and to pay its debts as and when they fall due is dependent on the on-going and active management of the expenditure incurred by the Consolidated Entity to protect the current cash levels.
The Directors have reviewed the Consolidated Entity's overall position and outlook in respect of the matters identified above and are of the opinion that the use of the going concern basis is appropriate in the circumstances.
No adjustments have been made to the consolidated financial report relating to the recoverability and classification of recorded asset amounts and the amount and classification of liabilities that might be necessary should the Group not continue as a going concern.
2. Basis of presentation
2.1. Statement of compliance
These financial statements are general purpose financial statements that 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.
Accounting Standards include Australian Accounting Standards. Compliance with Australian Accounting Standards ensures that the financial statements and notes of the company and the Group comply with International Financial Reporting Standards ('IFRS').
The financial statements were authorised for issue by the Directors on 18 September 2011.
2.2. Basis of Preparation
The consolidated financial statements have been prepared on the basis of historical cost, except for certain non-current 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.
The company has resolved to amend its presentation currency to the United States dollar as it considers this to be a more appropriate measure to reflect the results of operations and the financial position of the Group. The functional currencies remained the same. The comparative figures for the year ended 30 June 2010 have been restated accordingly.
3. Accounting policies
3.1. 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 where the Company has the power to govern the financial and operating policies so as to obtain benefits from its activities. Control will generally exist when the parent owns, directly or indirectly through its subsidiaries, more than half of the voting power of an entity. In assessing the power to govern, the existence and effect of actual and potential voting rights are also considered. A list of controlled entities is contained in Note 35 to the financial statements.
3. Accounting policies (continued)
3.1. Basis of Consolidation (continued)
Income and expense of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate. 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.
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, the profit or loss on disposal 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 retained earnings 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 AASB 139 'Financial Instruments: Recognition and Measurement' or, when applicable, the cost on initial recognition of an investment in an associate or jointly controlled entity.
3.2. 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.
3. Accounting policies (continued)
3.2. Business Combinations (continued)
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at the acquisition date, except that:
·; deferred tax assets or liabilities and liabilities are recognised and measured in accordance with AASB 112 'Income Taxes';
·; assets 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 acquire 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 'Noncurrent 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 are present 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. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of 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.
3. Accounting policies (continued)
3.3. Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of the acquisition of the business (see 3.2 above) less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to each of the Group's cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination.
A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss in the consolidated statement of comprehensive income. An impairment loss recognised for goodwill is not reversed in subsequent periods.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
3.4. 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 ('USD' or '$'), which is the presentation currency for the consolidated financial statements.
In preparing the financial statements of each individual group entity, transactions in currencies other than the entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Nonmonetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
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 exchange rates prevailing at the end of the reporting period. 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).
3. Accounting policies (continued)
3.4. Functional and presentation currency (continued)
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 acquired arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences arising are recognised in equity.
3.5. 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 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 held for sale when the criteria described above are met, regardless of whether the Group will retain a non-controlling interest in its former subsidiary after the sale.
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.
3.6. Exploration and evaluation expenditure
Exploration and evaluation costs related to an area of interest are written off as incurred except when they are carried forward as an asset in the balance sheet where the rights of tenure of an area are current and it is considered probable that the costs will be recouped through successful development and exploitation of the area of interest, or alternatively by its sale.
Capitalised costs include costs directly related to exploration and evaluation activities in the relevant area of interest. General and administrative costs are allocated to an exploration or evaluation asset only to the extent that those costs can be related directly to operational activities in the relevant area of interest.
Capitalised exploration and evaluation expenditure is written off where the above conditions are no longer satisfied. Identifiable exploration assets acquired are recognised as assets at their fair value. Exploration and evaluation expenditure incurred subsequent to the acquisition of an exploration asset in a business combination are accounted for in accordance with the policy outlined above.
All capitalised exploration and evaluation expenditure is assessed for impairment if facts and circumstances indicate that an impairment may exist. Exploration and evaluation assets are also tested for impairment once commercial reserves are found, before the assets are transferred to development properties.
3. Accounting policies (continued)
3.7. Development expenditure
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.
Once a development decision has been taken, the carrying amount of the exploration and evaluation expenditure in respect of the area of interest is aggregated with the development expenditure and classified under non-current assets as ''development, exploration and evaluation properties''.
A development property 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.
No depreciation is recognised in respect of development properties until they are reclassified as "mining properties''.
Development properties are tested for impairment in accordance with the policy in note 3.12.
3.8. Property, plant and equipment - mining property
When further development expenditure is incurred in respect of a mining property after the commencement of production, such expenditure is carried forward as part of the mining property and recognised as part of property, plant and equipment "mining property, plant and equipment" when it is probable that additional future economic benefits associated with the expenditure will flow to the Consolidated Entity. Otherwise such expenditure is classified as a cost of sales.
Depreciation 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, plant and equipment is tested for impairment in accordance with the policy in note 3.12.
3.9. 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 statement of comprehensive income 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.
3. Accounting policies (continued)
3.10. Property, plant and equipment (excluding mining property, plant and equipment)
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.
Depreciation is recognised so as to write off the cost of assets 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 or, where shorter, the term of the relevant lease.
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 depreciation rates applicable to each category of property, plant and equipment are as follows:
·; Buildings 20%
·; Plant and equipment 20%
·; Computer equipment 33%
·; Furniture, fittings and office equipment 13% - 50%
·; Leasehold improvements 25%
·; Motor vehicles 20% - 33%
·; Leased assets Lease period
3.11. Intangible assets, excluding goodwill
An intangible asset is recognised at cost if it is probable that future economic benefits will flow to the company and the cost can be reliably measured.
Intangible assets include the right to use an asset belonging to a third party, the costs of acquiring the option or right is capitalised to the extent that it will be used in the future. Once the Company commences utilising the logistics assets to the extent agreed with the rights holder or owner, the capitalised logistics costs are amortised over the expected period of use. The Directors will assess the capitalised costs for impairment over their expected future useful life and impair the cost where the future use of the option or right has decreased.
Subsequent expenditure on intangible assets is capitalised only if it increases the future benefits embodied in the specific asset to which it relates.
Intangible assets with finite useful lives are amortised on the straight-line basis over their estimated useful lives. The amortisation methods and estimated remaining useful lives are reviewed at least annually.
The carrying amounts are reviewed at each financial year-end to determine whether there is any indication of impairment.
3. Accounting policies (continued)
3.12. Impairment of tangible and intangible assets other than goodwill
The carrying amounts of the Group's tangible and intangible assets are reviewed at each reporting date to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss.
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 pre-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.
3.13. Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are initially recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the 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 3.23 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.
3. Accounting policies (continued)
3.14. Inventories
Inventories are stated at the lower of cost and net realisable value. Costs of inventories include expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition.
Costs of inventories are determined on the average cost basis.
Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.
3.15. Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the accounts 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 income. When an accounts 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 comprehensive income.
3.16. Cash and cash equivalents
Cash and cash equivalents comprise cash balances and short term deposits. Bank overdrafts that are repayable on demand form an integral part of the Group's cash management system and are included as a component of cash and cash equivalents for the purposes of the cash flow statement.
3.17. Financial instruments
Recognition
Financial assets and financial liabilities are recognised when a Group entity becomes a party to a contract which entitles it to receive contractually agreed cash flows on 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 and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) and payments through the expected life of the instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
3. Accounting policies (continued)
3.17. Financial instruments (continued)
Financial assets
Financial assets are classified into the following specified categories: financial assets 'at fair value through profit or loss' (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.
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.
The Group designates financial assets at FVTPL when either:
• the assets or liabilities are managed, evaluated and reported internally 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 ;
• the designation eliminates or significantly reduces an accounting mismatch which would otherwise arise; or
• the assets or liabilities contain an embedded derivative that significantly modifies the cash flows that would otherwise be required under the contract and has to be separately disclosed and fair-valued through profit or loss.
Financial assets at FVTPL are stated at fair value, with any gains or losses arising on re-measurement 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.
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 classifies 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.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. 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 recognition of interest would be immaterial.
3. Accounting policies (continued)
3.17. 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 classifies 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 of 180 days, 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.
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.
3. Accounting policies (continued)
3.17. Financial instruments (continued)
The Group may enter into transactions whereby it transfers assets recognised on its 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 comprise short-term and long-term interest-bearing borrowings and trade and other payables (excluding income received in advance).
The Group classifies financial liabilities as other financial liabilities. 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 income statement as borrowing costs based on the effective interest rate method.
Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers.
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.
3. Accounting policies (continued)
3.18. 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.
3.19. 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).
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 estimated future obligations include the costs of removing facilities, abandoning sites and restoring the 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, unless the present obligation arises from the production of inventory in the period, in which case the amount is included in the cost of sales for the period. 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.
3. Accounting policies (continued)
3.20. 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 28.
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.
No amounts have been recognised in the financial statements in respect of other equity-settled share-based payments.
Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the liability. At the end of each reporting period until the liability is settled, and at the date of settlement, the fair value of the liability is remeasured, with any changes in fair value recognised in profit or loss for the year.
Cash-settled
For cash-settled share-based payments, a liability is recognised for the goods or services acquired, measured initially at the fair value of the liability. At the end of each reporting period until the liability is settled, and at the date of settlement, the fair value of the liability is remeasured, with any changes in fair value recognised in profit or loss for the year.
3.21. Taxation
The income tax expense for the period represents the sum of the tax currently payable and deferred tax.
Current taxation
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated statement of comprehensive income 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. 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 the temporary difference arises from goodwill or 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 the related tax benefit will be realised.
3. Accounting policies (continued)
3.21. Taxation (continued)
Deferred tax assets and liabilities are measured at the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Deferred tax liabilities are recognised for temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
Current and deferred tax for the year
Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case the current and deferred tax are also recognised in other comprehensive income or directly in equity, respectively.
Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.
Applicable 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.
3.22. 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.
3. Accounting policies (continued)
3.22. Revenue Recognition (continued)
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.
Dividend and interest income
Dividend income from investments is recognised when the shareholder's right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably).
Interest income from a financial asset 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 applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition.
3.23. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
3.24. Employee benefits
A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and sick leave when it is probable that settlement will be required and they are capable of being measured reliably.
3.25. Segment information
Operating 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 operating segments of the group based on the reports reviewed by the executive committee that are used to make strategic decisions. The Group has three reportable segments: Exploration, Development and Mining (see note 32).
3.26. Comparative amounts
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial period. The following comparative financial information has been reclassified to aid comparability with the current year, and more appropriately reflect the nature of the items concerned. None of the adjustments affect profit before after tax or total assets.
3. Accounting policies (continued)
3.26. Comparative amounts (continued)
2010 Amendments within non-current assets:
a. Property plant and equipment moved to development assets - $23 million
b. Logistics assets now disclosed as intangibles - $18 million
c. Intangibles correctly termed goodwill - $3 million
d. Logistics assets moved to other receivables - $14 million
2010 Reclassification between non-current and current assets
a. Restricted cash disclosed as cash $14.4 million
b. Assets held for sale disclosed as non-current $14.9 million
3.27. Adoption of new and revised Accounting Standards and Interpretations
At the date of the authorisation of the financial report, a number of Standards and Interpretations were in issue but not yet effective. Management are currently assessing the impact of the Initial application of the following Standards. Initial indication is that they will not affect the amounts recognised in the financial report, but will change the disclosures presently made in relation to the Group and the Company's financial report:
Standard | Effective for the annual reporting periods beginning on or after | Expected to be initially applied in the financial year ending |
·; AASB 9 Financial Instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 | 1 January 2013 | 30 June 2014 |
·; AASB 9 Financial Instruments (December 2010), AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 | 1 January 2013 | 30 June 2014 |
·; AASB 2009-14 Amendments to Australian Interpretation - Prepayments of Minimum Funding Requirement | 1 January 2011 | 30 June 2012 |
·; AASB 1054 Australian Additional Disclosures | 1 July 2011 | 30 June 2012 |
·; AASB 2011-1 Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence Project | 1 July 2011 | 30 June 2012 |
·; AASB 2011-2 Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence Project - Reduced Disclosure Requirements | 1 July 2013 | 30 June 2014 |
·; AASB 2010-4 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project | 1 January 2011 | 30 June 2012 |
·; AASB 124 Related Party Disclosures (revised December 2009), AASB 2009-12 Amendments to Australian Accounting Standards | 1 January 2011 | 30 June 2012 |
·; AASB 2010-4 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project | 1 January 2011 | 30 June 2012 |
·; AASB 2010-5 Amendments to Australian Accounting Standards | 1 January 2011 | 30 June 2012 |
·; AASB 2010-6 Amendments to Australian Accounting Standards - Disclosures on Transfers of Financial Assets | 1 July 2011 | 30 June 2012 |
·; AASB 2010-8 Amendments to Australian Accounting Standards - Deferred Tax: Recovery of Underlying Assets | 1 January 2012 | 30 June 2013 |
·; AASB 2010-9 Amendments to Australian Accounting Standards - Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters | 1 January 2011 | 30 June 2012 |
·; IFRS 10 Consolidated Financial Statements | 1 January 2013 | 30 June 2014 |
·; IFRS 11 Joint Arrangements | 1 January 2013 | 30 June 2014 |
·; IFRS 12 Disclosure of Interests in Other Entities | 1 January 2013 | 30 June 2014 |
·; IFRS 13 Fair Value Measurement | 1 January 2013 | 30 June 2014 |
·; IAS 27 Separate Financial Statements (2011) | 1 January 2013 | 30 June 2014 |
·; IAS 28 Investments in Associates and Joint Ventures (2011) | 1 January 2013 | 30 June 2014 |
·; IAS 19 Employee Benefits (2011) | 1 January 2013 | 30 June 2014 |
·; Presentation of Items of Other Comprehensive Income (Amendments to IAS 1) | 1 January 2012 | 30 June 2013 |
Standards and Interpretations adopted with no effect on financial statements
The following new and revised Standards and Interpretations have also been adopted in these financial statements. Their adoption has not had any significant impact on the amounts reported in these financial statements but may affect the accounting for future transactions or arrangements.
Standards/Interpretations | Effective for the annual reporting periods beginning on or after | Expected to be initially applied in the financial year ending | |||
·; AASB 2009-5 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project | 1 January 2010 | 30 June 2011 | |||
·; AASB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvements Project | 1 July 2010 | 30 June 2011 | |||
·; AASB 2010-4 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project | 1 January 2010 | 30 June 2011 | |||
The following new and revised Standards and Interpretations have been adopted in these financial statements, but have had no effect on the amounts reported. | |||||
Standard | Effective for the annual reporting periods beginning on or after | Expected to be initially applied in the financial year ending | |||
·; AASB 2009-8 Amendments to Australian Accounting Standards - Group Cash-Settled Share-based Payment Transactions | 1 January 2010 | 30 June 2011 | |||
·; AASB 2009-10 Amendments to Australian Accounting Standards - Classification of Rights Issues | 1 February 2010 | 30 June 2011 | |||
·; Interpretation 19 Extinguishing Financial Liabilities with Equity | 1 July 2010 | 30 June 2011 | |||
| |||||
4. 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 and coal reserves.
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 Statement of Comprehensive Income 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 11.
4. 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 statement of comprehensive income. Refer to note 11.
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 appropriate rate at which to discount the liability;
·; 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 future expected costs of rehabilitation, restoration and dismantling.
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 22.
Recoverability of non-current assets
As set out in Note 3.12, 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 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 12.
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 33.
Year ended 30 June 2011 | Year ended 30 June 2010 | |||
$'000 | $'000 | |||
5. Revenue | ||||
Sale of product | 229,225 | 97,827 | ||
Other revenue | 32,200 | 549 | ||
261,425 | 98,376 | |||
6. Operating expenses | ||||
Loss for the year has been arrived at after charging or crediting: | ||||
Employee benefits expenses | ||||
Share-based payments | 3,004 | 1,760 | ||
Other employee benefits | 18,628 | 8,594 | ||
Total employee benefits expense | 21,632 | 10,354 | ||
Other share-based payments | ||||
BBBEE options issued to Firefly (note 27.2) | - | 78,515 | ||
- | 78,515 | |||
Impairment losses | ||||
Impairment loss on assets held for sale | 5,105 | 7,399 | ||
Impairment loss on development assets (see note 11) | - | 46,562 | ||
Impairment loss on mining assets (see note 12) | 92,295 | - | ||
Total impairment loss | 97,400 | 53,961 | ||
Depreciation and amortisation | ||||
Depreciation | ||||
Depreciation of property, plant and equipment | 29,651 | 11,479 | ||
Total depreciation | 29,651 | 11,479 | ||
Amortisation | ||||
Amortisation of mining properties (note 12) | 48,427 | 13,257 | ||
Amortisation of intangible asset (note 13) | 1,443 | 1,948 | ||
Total amortisation | 49,870 | 15,205 | ||
Total depreciation and amortisation | 79,521 | 26,684 | ||
Other gains and losses | ||||
Gain on disposal of property, plant and equipment | (297) | (2) | ||
Revaluation of investments | 795 | 1,346 | ||
Total other gains and losses | 498 | 1,344 | ||
Year ended 30 June 2011 | Year ended 30 June 2010 | |||
$ | $ | |||
7. Auditors' remuneration | ||||
Amounts received by the auditors of the Company as at 30 June 2011 | ||||
Deloitte - Australia | ||||
Audit and review of financial reports | 170,000 | - | ||
Other services | - | - | ||
170,000 | - | |||
Moore Stephens | ||||
Audit and review of financial reports | - | 16,935 | ||
Other services | - | 1,384 | ||
- | 18,319 | |||
Deloitte - Johannesburg | ||||
Audit and review of financial reports | 542,257 | - | ||
Other services | 37,661 | 3,564 | ||
579,918 | 3,564 | |||
Moore Stephens MWM | ||||
Audit and review of financial reports | - | 336,895 | ||
Other services | - | 16,088 | ||
- | 352,984 | |||
Ernst & Young - Johannesburg | ||||
Audit and review of financial reports | - | - | ||
Other services | - | 73,118 | ||
- | 73,118 | |||
8. Finance income and cost | $'000 | $'000 | ||
Finance income | ||||
Interest income on short term bank deposits | 2,486 | 2,496 | ||
Finance costs | ||||
Bank borrowings | (591) | - | ||
Finance lease liabilities | (1,162) | (963) | ||
Unwinding of discount | (69) | (126) | ||
(1,822) | (1,089) | |||
Net finance income | 664 | 1,407 | ||
Year ended 30 June 2011 | Year ended 30 June 2010 | |||
$'000 | $'000 | |||
9. Income tax expense and deferred tax | ||||
Income tax recognised in profit and loss | ||||
Current tax | ||||
Current tax expense in respect of the current year | 3,527 | 3,069 | ||
Adjustments recognised in relation to prior years | - | 9 | ||
3,527 | 3,078 | |||
Deferred tax (note 23) | ||||
Origination and reversal of temporary differences | (2,630) | (13,976) | ||
(2,630) | (13,976) | |||
Total income tax expense recognised | 897 | (10,898) | ||
The Group's effective tax rate for the year was 0% (2010: 6%). The tax rate used for the 2011 and 2010 reconciliations below is the corporate tax rate of 28% payable by South African corporate entities on taxable profits under South African tax law. The income tax expense for the year can be reconciled to the accounting profit as follows: | ||||
Loss before income tax expense | (218,106) | (178,656) | ||
Income tax benefit calculated at 28% (2010: 28%) | (61,070) | (50,024) | ||
Tax effects of: | ||||
Expenses that are not deductible for tax purposes | 42,980 | 46,535 | ||
Tax losses utilised | (1,883) | 1,591 | ||
Benefit of losses not previously recognised | - | (11) | ||
Share based payments | 873 | - | ||
Other temporary differences not utilised | 18,875 | (6,990) | ||
Tax payable on dividends | - | 9 | ||
Foreign income tax allowances and rate differentials | 1,122 | (2,008) | ||
Income tax expense | 897 | (10,898) | ||
10. Loss per share attributable to owners of the parent | ||||
Basic loss per share | ||||
The calculation of basic loss per share at 30 June 2011 was based on the loss attributable to ordinary equity holders of the Company of $219.003 million (2010: $167.758 million) and a weighted average number of ordinary shares outstanding during the year ended 30 June 2011 of 530,681,000 (2010: 456,817,000), calculated as follows: | ||||
Loss for the year attributable to ordinary shareholders | ||||
Loss attributable to owners of the Company ($'000) | 219,003 | 167,758 | ||
'000 shares | '000 shares | |||
Weighted number of ordinary shares | ||||
Weighted number of ordinary shares at 30 June | 530,681 | 456,817 | ||
Diluted loss per share | ||||
Due to the loss incurred, there is no dilutive effect from share options. |
Year ended 30 June 2011 | Year ended 30 June 2010 | ||
$'000 | $'000 | ||
11. Development, exploration and evaluation expenditure | |||
Development, exploration and evaluation expenditure comprises: | |||
Exploration and evaluation assets | 74,881 | 45,971 | |
Development expenditure | 120,967 | 264,854 | |
Balance at end of year | 195,848 | 310,825 | |
A reconciliation of development, exploration and evaluation expenditure is presented below: | |||
Exploration and evaluation assets | |||
Balance at beginning of year | 45,971 | 41,186 | |
Additions | 19,350 | 2,528 | |
Foreign exchange differences | 9,560 | 2,257 | |
Balance at end of year | 74,881 | 45,971 | |
Development assets | |||
Balance at beginning of year | 264,854 | 204,417 | |
Additions | 21,320 | 96,804 | |
Transferred to Property, plant and equipment (note 12) | (178,776) | - | |
Impairment | - | (46,562) | |
Foreign exchange differences | 13,569 | 10,195 | |
Balance at end of year | 120,967 | 264,854 | |
12. Property, plant and equipment | |||||||||
Mining property, plant and equipment | Land and buildings | Leasehold improvements | Motor vehicles | Other | Total | ||||
$'000 | $'000 | $'000 | $'000 | $'000 | $'000 | ||||
2011 | |||||||||
Cost | |||||||||
At beginning of year | 134,140 | 21,465 | 1,239 | 848 | 1,536 | 159,228 | |||
Additions | 33,932 | - | 20 | 273 | 750 | 34,975 | |||
Additions through business combinations | - | - | - | - | - | - | |||
Transfers (note 11) | 223,993 | - | - | - | - | 223,993 | |||
Assets held for sale | (1,669) | (1,257) | - | - | (655) | (3,581) | |||
Disposals | (2,697) | - | - | - | - | (2,697) | |||
Foreign exchange | 84,336 | 2,473 | 150 | 106 | 210 | 87,275 | |||
At end of year | 472,035 | 22,681 | 1,409 | 1,227 | 1,841 | 499,193 | |||
Accumulated depreciation | |||||||||
At beginning of year | 24,913 | 156 | 260 | 98 | 814 | 26,241 | |||
Amortisation | 48,427 | - | - | - | - | 48,427 | |||
Depreciation charge | 28,112 | 436 | 311 | 376 | 416 | 29,651 | |||
Accumulated depreciation on disposals | (298) | - | - | - | - | (298) | |||
Assets held for sale | (1,187) | (132) | - | - | (386) | (1,705) | |||
Exchange differences | 39,558 | 28 | 42 | 21 | 113 | 39,762 | |||
At end of year | 139,525 | 488 | 613 | 495 | 957 | 142,078 | |||
Accumulated Impairment | |||||||||
At beginning of year | - | - | - | - | - | - | |||
Transfers (note 11) | 45,216 | - | - | - | - | 45,216 | |||
Impairment | 92,295 | - | - | - | - | 92,295 | |||
Exchange differences | 1,346 | - | - | - | - | 1,346 | |||
At end of year | 138,857 | - | - | - | - | 138,857 | |||
Net carrying value at end of year |
193,653 |
22,193 |
796 |
732 |
884 |
218,258 | |||
2010 | |||||||||
Cost | |||||||||
At beginning of year | 2,095 | 14,345 | 677 | 515 | 720 | 18,352 | |||
Additions | 535 | 5,988 | 547 | - | 658 | 7,728 | |||
Additions through business combinations | 134,736 | 778 | - | 594 | 150 | 136,258 | |||
Disposals | - | - | - | (273) | - | (273) | |||
Exchange differences | (3,226) | 354 | 15 | 12 | 8 | (2,837) | |||
At end of year | 134,140 | 21,465 | 1,239 | 848 | 1,536 | 159,2280 | |||
Accumulated depreciation | |||||||||
At beginning of year | 1,086 | 107 | 57 | 218 | 376 | 1,844 | |||
Depreciation charge | 10,744 | 46 | 201 | 52 | 436 | 11,479 | |||
Amortisation | 13,257 | - | - | - | - | 13,257 | |||
Accumulated depreciation on disposals | - | - | - | (180) | - | (180) | |||
Exchange differences | (174) | 3 | 2 | 8 | 2 | (159) | |||
At end of year | 24,913 | 156 | 260 | 98 | 814 | 26,241 | |||
Net carrying value at end of year |
109,227 |
21,309 |
979 |
750 |
722 |
132,987 | |||
Year ended 30 June 2011 | Year ended 30 June 2010 |
| |||||||
$'000 | $'000 |
| |||||||
| |||||||||
| |||||||||
12. Property, plant and equipment (continued) |
| ||||||||
| |||||||||
Included in mining property, plant and equipment is the carrying amount of the Mooiplaats and Woestalleen collieries. The carrying amount includes the acquisition of the mineral tenements in addition to site infrastructure, plant and equipment established. |
| ||||||||
| |||||||||
At the start of the current period, the Mooiplaats colliery was reclassified from a development asset to a mining property. |
| ||||||||
| |||||||||
The carrying amounts of the respective collieries included in property, plant and equipment at year end are: |
| ||||||||
| |||||||||
Mooiplaats | 119,840 | - |
| ||||||
Woestalleen | 72,685 | 109,194 |
| ||||||
192,525 | 109,194 |
| |||||||
| |||||||||
Impairment disclosures |
| ||||||||
| |||||||||
The above mining assets have been assessed for impairment by comparing the carrying value against the value-in-use calculations of each coal project (which represents individual cash generating units). The carrying values have been assessed against independent valuations commissioned by the Company. Both the Mooiplaats and Woestalleen assets were assessed independently during the current year. Only Mooiplaats was assessed independently in 2010.
Value-in-use is calculated based on the present value of cash flow projections over the expected life of each coal project. The discount rates applied in the value-in-use range from 10% to 14% depending on the stage of development of the project.
Based on the value-in-use projections, the Mooiplaats Colliery was impaired as a result of: (i) a change in the life-of-mine calculation, following a revision of the annual tonnages mined; and (ii) a change in the cut off heights used from 1.4 metres to 1.6 metres, effectively reducing the tonnage to be mined. (iii) significantly higher rail and port costs |
| ||||||||
| |||||||||
Based on the value-in-use projections, the Woestalleen assets were impaired following a recalculation of the remaining resources available.
|
| ||||||||
The key inputs into the Mooiplaats valuation were:
Total coal reserves (tonnes) |
41,810,000 |
32,009,296 |
| ||||||
Minimum seam height (metres) | 1.6 | 1.4 |
| ||||||
Life of mine (years) | 13 | 13 |
| ||||||
Annualised ROM production during the life of mine (million tonnes) | 1.18 - 1.70 | 2.28 - 3.36 |
| ||||||
| |||||||||
The key inputs into the Woestalleen valuation were:
|
| ||||||||
Total coal reserves (tonnes) | 6,921,374 |
| |||||||
Life of mine (years) | 2 |
| |||||||
| |||||||||
| |||||||||
Year ended 30 June 2011 | Year ended 30 June 2010 |
| |||||||
$'000 | $'000 |
| |||||||
| |||||||||
13. Intangible assets |
| ||||||||
| |||||||||
Balance at beginning of year | 18,066 | 18,749 |
| ||||||
Amortisation | (1,443) | (1,948) |
| ||||||
Foreign exchange differences | 4,117 | 1,265 |
| ||||||
Balance at end of year | 20,800 | 18,066 |
| ||||||
| |||||||||
In August 2008 the Company entered into a throughput agreement with Terminal De Carvao Da Matola Limitada ('TCM'), a subsidiary of Grindrod Trading & Shipping Limited ('Grindrod')), the operator of the Matola Terminal) and CMR Engineers & Project Managers (Pty) Ltd. This agreement granted the Company one million tonnes per annum ('mtpa') of port capacity through the Matola terminal commencing 1 January 2009, for an initial term of five years. The Company has the right to renew the agreement (subject to certain conditions) at the end of the initial term, for a further 15 years. |
| ||||||||
| |||||||||
14. Other receivables |
| ||||||||
| |||||||||
Carrying amount of: |
| ||||||||
Terminal development loan | 12,800 | 14,400 |
| ||||||
| |||||||||
Balance at beginning of year | 14,400 | 16,000 |
| ||||||
Loan repayment | (1,600) | (1,600) |
| ||||||
Balance at end of year | 12,800 | 14,400 |
| ||||||
| |||||||||
The Company entered into an agreement with Grindrod on 12 January 2009 whereby the Company exercised its option under the Grindrod option agreement and advanced loan of USD16,000,000, with a stated rate of interest of zero percent, to Grindrod (the 'Loan') The loan will be used to expand the annual throughput capacity at the Maputo Terminal and will ensure that CoAL receives access to an additional 2 mtpa of throughput capacity from the end of 2010 and will continue as per the throughput agreement. The Loan is to be repaid to the Company in 10 equal instalments, commencing from the 2010 financial year. |
| ||||||||
| |||||||||
15. Other financial assets |
| ||||||||
| |||||||||
Carrying value of financial assets at fair value through profit or loss |
| ||||||||
Listed securities |
| ||||||||
- Equity securities | 10,794 | 6,612 |
| ||||||
Unlisted securities |
| ||||||||
- Equity securities in private corporations* | 2,047 | 11,669 |
| ||||||
12,841 | 18,311 |
| |||||||
| |||||||||
Financial assets at fair value through profit or loss are presented within 'operating activities' as part of changes in working capital in the statement of cash flows.
*Determined primarily by reference to the value of recent private placements. |
| ||||||||
| |||||||||
Deposits | 753 | 340 |
| ||||||
| |||||||||
13,594 | 18,651 |
| |||||||
Year ended 30 June 2011 | Year ended 30 June 2010 |
| |||||||
$'000 | $'000 |
| |||||||
| |||||||||
16. Goodwill |
| ||||||||
| |||||||||
Balance at beginning of year | 3,031 | 2,981 |
| ||||||
Foreign exchange differences | 1,378 | 50 |
| ||||||
Reclassified as held for sale | (4,409) | - |
| ||||||
Balance at end of year | - | 3,031 |
| ||||||
| |||||||||
Goodwill is allocated to cash-generating units which are based on the Group's reporting segments.
|
| ||||||||
| |||||||||
| |||||||||
17. Inventories |
| ||||||||
| |||||||||
Raw materials | 325 | 681 |
| ||||||
Consumable stores | 1,461 | 25 |
| ||||||
Work in progress | 8,200 | 10,819 |
| ||||||
Finished goods | 12,173 | 11,571 |
| ||||||
Goods in transit | 963 | - |
| ||||||
Residue stock (Nickel) | - | 929 |
| ||||||
23,122 | 24,025 |
| |||||||
| |||||||||
18. Trade and other receivables |
| ||||||||
| |||||||||
Trade receivables | 27,500 | 9,304 |
| ||||||
Other receivables | 19,622 | 21,034 |
| ||||||
Allowance for doubtful debts | (2,565) | (3,098) |
| ||||||
44,734 | 27,240 |
| |||||||
| |||||||||
The carrying amount of trade and other receivables approximate their fair value.
Due to the nature of the Group's activities, a substantial amount of the Group's revenues arise from a limited number of large customers. Whilst this concentration provides an increased credit risk, management does not believe that this is significant.
|
| ||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
Year ended 30 June 2011 | Year ended 30 June 2010 |
| |||||||
$'000 | $'000 |
| |||||||
| |||||||||
18. Trade and other receivables (continued) |
| ||||||||
| |||||||||
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables as disclosed in note 30. The Group does not hold any collateral as security.
Movements on the allowance for doubtful debts are as follows: |
| ||||||||
| |||||||||
Balance at beginning of year | 3,098 | 1,008 |
| ||||||
Provision for bad debts | - | 2,395 |
| ||||||
Receivable written off as uncollectable | (769) | (315) |
| ||||||
Transferred to assets classified as held for sale | (206) | - |
| ||||||
Foreign exchange differences | 442 | 10 |
| ||||||
Balance at end of year | 2,565 | 3,098 |
| ||||||
| |||||||||
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 | 24,537 | 9,304 |
| ||||||
Past due 0 to 30 days | - | - |
| ||||||
Past due 31 to 60 days | 1,720 | - |
| ||||||
Past due 61 to 90 days | 1,243 | - |
| ||||||
27,500 | 9,304 |
| |||||||
| |||||||||
Currency analysis of trade receivables |
| ||||||||
| |||||||||
SA Rand | 12,515 | 9,304 |
| ||||||
US dollar | 14,985 | - |
| ||||||
27,500 | 9,304 |
| |||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
Year ended 30 June 2011 | Year ended 30 June 2010 |
| |||||||
$'000 | $'000 |
| |||||||
| |||||||||
| |||||||||
19. Cash and cash equivalents |
| ||||||||
| |||||||||
Bank balances | 22,761 | 72,054 |
| ||||||
| |||||||||
Restricted cash | 13,323 | 14,511 |
| ||||||
| |||||||||
The restricted cash balance of $13,323,000 (2010 - $14,511,000) was held on behalf of subsidiary companies in respect of the rehabilitation guarantees issued to the Department of Mineral Resources in respect of environmental rehabilitation costs of $18.5 million (2010: $18.5 million). This cash was not available for use other than for those specific purposes. |
| ||||||||
| |||||||||
Credit risk |
| ||||||||
Cash at bank earns interest at a floating rate based on daily bank deposit rates. Cash is deposited at highly reputable financial institutions of a high quality credit standing within Australia and the Republic of South Africa.
The fair value of cash and cash equivalents equates to the values as disclosed in this note. |
| ||||||||
| |||||||||
20. Assets classified as held for sale |
| ||||||||
| |||||||||
Carrying amounts of |
| ||||||||
Holfontein | 11,721 | 14,638 |
| ||||||
NiMag | 7,704 | - |
| ||||||
19,425 | 14,638 |
| |||||||
| |||||||||
| |||||||||
Assets classified as held for sale |
| ||||||||
Holfontein Investments (Pty) Ltd | 11,724 | 14,638 |
| ||||||
NiMag (Pty) Ltd | 10,544 | - |
| ||||||
22,268 | 14,638 |
| |||||||
| |||||||||
Liabilities classified as held for sale |
| ||||||||
Holfontein Investments (Pty) Ltd | 3 | - |
| ||||||
NiMag (Pty) Ltd | 2,840 | - |
| ||||||
2,843 | - |
| |||||||
| |||||||||
19,425 | 14,638 |
| |||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
Year ended 30 June 2011 | Year ended 30 June 2010 |
| |||||||
$'000 | $'000 |
| |||||||
| |||||||||
| |||||||||
20. Assets classified as held for sale (continued) |
| ||||||||
| |||||||||
Holfontein Investments (Pty) Ltd |
| ||||||||
| |||||||||
Assets classified as held for sale |
| ||||||||
Exploration and evaluation assets | 11,724 | 14,638 |
| ||||||
11,724 | 14,638 |
| |||||||
Liabilities classified as held for sale |
| ||||||||
Trade payables and accrued expenses | 3 | - |
| ||||||
3 | - |
| |||||||
| |||||||||
Net assets of Holfontein Investments (Pty) Ltd | 11,721 | 14,638 |
| ||||||
| |||||||||
During May 2008 the company entered into an agreement to dispose of its stake in Holfontein Investments (Pty) Ltd ("Holfontein"). When certain conditions precedent were not met, the agreement was mutually cancelled during December 2008. The Company subsequently entered into a new formal disposal process.
During the financial year ended 30 June 2010, the company received an independent valuation indicating the net realisable value of the resources in Holfontein. Management assessed the carrying value and determined that no further diminution in value is necessary in 2011. |
| ||||||||
| |||||||||
NiMag (Pty) Ltd |
| ||||||||
| |||||||||
Assets classified as held for sale |
| ||||||||
Property, plant and equipment | 2,622 | - |
| ||||||
Goodwill | 4,409 |
| |||||||
Other financial assets | 5 | - |
| ||||||
Deferred tax asset | 45 | - |
| ||||||
Inventories | 3,279 | - |
| ||||||
Trade and other receivables | 3,761 | - |
| ||||||
Cash and cash equivalents | 1,528 | - |
| ||||||
15,649 | - |
| |||||||
Liabilities classified as held for sale |
| ||||||||
Interest bearing liabilities | 285 | - |
| ||||||
Provisions | 381 | - |
| ||||||
Trade payables and accrued expenses | 2,277 | - |
| ||||||
Current tax liabilities | (103) | - |
| ||||||
2,840 | - |
| |||||||
| |||||||||
Net assets of Nimag (Pty) Ltd | 12,809 | - |
| ||||||
Impairment on asset held for sale | (5,105) | - |
| ||||||
7,704 | - |
| |||||||
| |||||||||
NiMag is engaged principally in the manufacture and distribution of nickel magnesium alloys and ferro silicon magnesium alloys, and currently manufactures specialised master alloys of nickel and magnesium for the specialised foundry industry including aerospace, aeronautical, motor, steel mill roll and associated industries. Fair value is based on the indicative offers received for Nimag.
|
| ||||||||
NiMag is considered a non-core asset and the Group intends to dispose of this group in the next 12 months. |
| ||||||||
| |||||||||
Year ended 30 June 2011 | Year ended 30 June 2010 |
| |||||||
$'000 | $'000 |
| |||||||
| |||||||||
21. Borrowings |
| ||||||||
| |||||||||
Non-current |
| ||||||||
Unsecured - at amortised cost |
| ||||||||
Unsecured loans | - | - |
| ||||||
Other | - | 485 |
| ||||||
- | 485 |
| |||||||
| |||||||||
Secured - at amortised cost |
| ||||||||
Secured loans | - | - |
| ||||||
Finance leases | 1,720 | 1,021 |
| ||||||
1,720 | 1,021 |
| |||||||
| |||||||||
Total non-current borrowings | 1,720 | 1,506 |
| ||||||
| |||||||||
Current |
| ||||||||
Unsecured - at amortised cost |
| ||||||||
Unsecured loans | - | 20,000 |
| ||||||
Other | 2,644 | - |
| ||||||
2,644 | 20,000 |
| |||||||
| |||||||||
Secured - at amortised cost |
| ||||||||
Secured loans | 32,623 | - |
| ||||||
Finance leases | 3,364 | 863 |
| ||||||
35,987 | 863 |
| |||||||
| |||||||||
Total current borrowings | 38,631 | 20,863 |
| ||||||
| |||||||||
Total borrowings | 40,351 | 22,369 |
| ||||||
| |||||||||
The carrying value of the Group's interest bearing liabilities, which consist of floating rate interest bearing liabilities, approximate fair value. |
| ||||||||
| |||||||||
Finance leases |
| ||||||||
The Group entered into finance lease arrangements for certain motor vehicles and equipment. The average term of finance leases entered into is 5 years, and the average effective borrowing rate is 10.26%.
Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default. |
| ||||||||
| |||||||||
Gross finance lease liabilities - minimum lease payments |
| ||||||||
No later than 1 year | 3,671 | 1,004 |
| ||||||
Later than 1 year and no later than 5 years | 1,786 | 1,074 |
| ||||||
Later than 5 years | - | - |
| ||||||
5,457 | 2,078 |
| |||||||
Future finance charges on finance leases | (373) | (194) |
| ||||||
5,084 | 1,884 |
| |||||||
The present value of finance lease liabilities is as follows: |
| ||||||||
No later than 1 year | 3,364 | 863 |
| ||||||
Later than 1 year and no later than 5 years | 1,720 | 1,021 |
| ||||||
Later than 5 years | - | - |
| ||||||
5,084 | 1,884 |
| |||||||
| |||||||||
| |||||||||
| |||||||||
Year ended 30 June 2011 | Year ended 30 June 2010 |
| |||||||
$'000 | $'000 |
| |||||||
| |||||||||
21. Borrowings (continued) |
| ||||||||
| |||||||||
Export trade finance facility |
| ||||||||
| |||||||||
Balance at beginning of year | - | - |
| ||||||
Loan advanced | 32,500 | - |
| ||||||
Interest accrued | 123 | - |
| ||||||
32,623 | - |
| |||||||
| |||||||||
The Company, through its wholly owned South African subsidiary Langcarel (Pty) Limited ('Borrower'), secured a revolving thermal coal export finance facility ('Facility') for up to US$50 million with Deutsche Bank AG, Amsterdam ('Lender'), on 23 March 2011.
Part of the facility was drawn down to repay the Company's US$20 million unsecured, working capital facility agreement with JP Morgan Chase. Further drawdowns of US$12.5 million were used to fund capital expenditure and for general working capital purposes at Mooiplaats. US$17.5 million remains undrawn at year end.
CoAL and its subsidiaries NuCoal Mining (Pty) Limited and Woestalleen Colliery (Proprietary) Limited guarantee the Borrower's obligations under the Facility agreement. |
| ||||||||
The facility is a rolling 30 month facility, the availability of which will reduce by one-twelfth during the last twelve months. Interest is accrued at the London Interbank Offer Rate ('LIBOR') plus 3% per annum.
Throughout the lifetime of the Facility, certain offtake contract proceeds will be paid into collection accounts held with the Lender in the name of Borrower, and pledged to the Lender, and shall always be equal to or greater than 130% of the amount outstanding under the Facility.
The Facility will be secured by: ·; A first ranking assignment by the relevant Borrower of its rights under the Offtake Contracts in favour of the Lender. The Offtakers have acknowledged such assignment following a notice given by the relevant Borrower; ·; Pledge over the Collection Accounts with the Lender; ·; Pledge over Customer Foreign Currency Accounts with Deutsche Bank, Johannesburg. |
| ||||||||
| |||||||||
| |||||||||
Unsecured working capital facility |
| ||||||||
| |||||||||
Balance at beginning of year | 20,000 | - |
| ||||||
Loan advanced | - | 20,000 |
| ||||||
Loan repaid | (20,000) | - |
| ||||||
- | 20,000 |
| |||||||
| |||||||||
On 24 March 2010 the Company signed a US$20 million unsecured, revolving loan facility with JP Morgan Chase. This facility was for a period of 12 months and interest accrued at a rate of LIBOR plus 3%. On 31 March 2011 the facility was repaid in full. |
| ||||||||
| |||||||||
| |||||||||
| |||||||||
Year ended 30 June 2011 | Year ended 30 June 2010 |
| |||||||
$'000 | $'000 |
| |||||||
| |||||||||
22. Provisions |
| ||||||||
| |||||||||
Employee provisions | 2,481 | 876 |
| ||||||
Rehabilitation provisions | 18,714 | 9,239 |
| ||||||
21,195 | 10,115 |
| |||||||
| |||||||||
Employee provisions |
| ||||||||
Balance at beginning of year | 876 | 211 |
| ||||||
Charged to income statement | 1,618 | 210 |
| ||||||
Acquisition through business combinations | - | 588 |
| ||||||
Used during the year | (155) | (138) |
| ||||||
Foreign exchange differences | 142 | 5 |
| ||||||
Balance at end of year | 2,481 | 876 |
| ||||||
| |||||||||
The provision for employees represents unused annual leave entitlements. |
| ||||||||
| |||||||||
Rehabilitation provision |
| ||||||||
Balance at beginning of year | 9,239 | 1,917 |
| ||||||
Unwinding of discount | 69 | 126 |
| ||||||
Acquisition through business combinations | - | 6,665 |
| ||||||
Additional provisions recognised | 7,610 | 2,449 |
| ||||||
Foreign exchange differences | 1,796 | (1,918) |
| ||||||
Balance at end of year | 18,714 | 9,239 |
| ||||||
| |||||||||
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. The estimated undiscounted liability at 30 June 2011 is US$18.5 million. 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. |
| ||||||||
| |||||||||
Provisions have been analysed between current and non-current as follows: |
| ||||||||
| |||||||||
Current | 2,481 | 876 |
| ||||||
Non-current | 18,714 | 9,239 |
| ||||||
21,195 | 10,115 |
| |||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
Year ended 30 June 2011 | Year ended 30 June 2010 |
| |||||||
$'000 | $'000 |
| |||||||
| |||||||||
23. Deferred tax |
| ||||||||
| |||||||||
Deferred tax asset |
| ||||||||
- Deferred tax asset to be recovered after more than 12 months | 4,171 | 10,460 |
| ||||||
- Deferred tax asset to be recovered within 12 months | - | - |
| ||||||
4,171 | 10,460 |
| |||||||
Deferred tax liability |
| ||||||||
- Deferred tax liability to be recovered after more than 12 months | (13,469) | (28,551) |
| ||||||
- Deferred tax liability to be recovered within 12 months | (5,966) | - |
| ||||||
(19,435) | (28,551) |
| |||||||
| |||||||||
Net deferred tax liability | (15,264) | (18,091) |
| ||||||
| |||||||||
The gross movement on the deferred tax account is as follows: |
| ||||||||
| |||||||||
Balance at beginning of year | (18,091) | 43 |
| ||||||
Exchange differences | 242 | 3,550 |
| ||||||
Business acquisition (note 34) | - | (35,660) |
| ||||||
Transferred to held for sale | (45) | - |
| ||||||
Statement of comprehensive income charge | 2,630 | 13,976 |
| ||||||
Tax credit relating to components of other comprehensive income | - | - |
| ||||||
Tax charged / (credited) directly to income | - | - |
| ||||||
Balance at end of year | (15,264) | (18,091) |
| ||||||
| |||||||||
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 |
| ||||||||
Balance at beginning of year | 4,395 | - |
| ||||||
Statement of comprehensive income charge | (729) | 4,436 |
| ||||||
Charged / (credited) directly to equity | - | - |
| ||||||
Foreign exchange differences | 450 | (41) |
| ||||||
Balance at end of year | 4,171 | 4,395 |
| ||||||
| |||||||||
Employee benefits |
| ||||||||
Balance at beginning of year | 18 | 41 |
| ||||||
Statement of comprehensive income charge / (credit) | (13) | (22) |
| ||||||
Charged / (credited) directly to equity | - | - |
| ||||||
Transferred to held for sale | (9) | - |
| ||||||
Foreign exchange differences | 2 | (1) |
| ||||||
Balance at end of year | (2) | 18 |
| ||||||
| |||||||||
Provisions |
| ||||||||
Balance at beginning of year | 720 | 2 |
| ||||||
Statement of comprehensive income charge / (credit) | (771) | 725 |
| ||||||
Charged / (credited) directly to equity | - | - |
| ||||||
Transferred to held for sale | (25) | - |
| ||||||
Foreign exchange differences | 76 | (7) |
| ||||||
Balance at end of year | - | 720 |
| ||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
Year ended 30 June 2011 | Year ended 30 June 2010 |
| |||||||
$'000 | $'000 |
| |||||||
| |||||||||
23. Deferred tax (continued) |
| ||||||||
| |||||||||
Tax losses |
| ||||||||
Balance at beginning of year | 5,217 | - |
| ||||||
Statement of comprehensive income charge / (credit) | (5,763) | 5,266 |
| ||||||
Charged / (credited) directly to equity | - | - |
| ||||||
Transferred to held for sale | - | - |
| ||||||
Foreign exchange differences | 546 | (49) |
| ||||||
Balance at end of year | - | 5,217 |
| ||||||
| |||||||||
Other |
| ||||||||
Balance at beginning of year | (329) | - |
| ||||||
Statement of comprehensive income charge /(credit) | - | 109 |
| ||||||
Charged / (credited) directly to equity | - | (337) |
| ||||||
Transferred to held for sale | 11 |
| |||||||
Foreign exchange differences | 318 | (101) |
| ||||||
Balance at end of year | - | (329) |
| ||||||
| |||||||||
Deferred tax liabilities |
| ||||||||
| |||||||||
Provisions |
| ||||||||
Balance at beginning of year | (848) | - |
| ||||||
Statement of comprehensive income charge / (credit) | (168) | (848) |
| ||||||
Other comprehensive income charge / (credit) | - | - |
| ||||||
Charged / (credited) directly to equity | - | - |
| ||||||
Foreign exchange differences | 24 | - |
| ||||||
Balance at end of year | (992) | (848) |
| ||||||
| |||||||||
Other |
| ||||||||
Balance at beginning of year | (27,703) | - |
| ||||||
Statement of comprehensive income charge / (credit) | - | - |
| ||||||
Other comprehensive income charge / (credit) | - | - |
| ||||||
Acquisition of business combination | - | (32,038) |
| ||||||
Charged / (credited) directly to equity | - | - |
| ||||||
Amortisation | 13,997 | 2,595 |
| ||||||
Impairment | 1,532 | - |
| ||||||
Foreign exchange differences | (4,737) | 1,740 |
| ||||||
Balance at end of year | 16,911 | (27,703) |
| ||||||
| |||||||||
Total |
| ||||||||
Balance at beginning of year | 28,551 | - |
| ||||||
Statement of comprehensive income charge / (credit) | (12,248) | (29,530) |
| ||||||
Other comprehensive income charge / (credit) | - | 826 |
| ||||||
Foreign exchange differences | 3,132 | 153 |
| ||||||
Balance at end of year | 19,435 | 28,551 |
| ||||||
| |||||||||
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 $12.6 million (2010: $ none) in respect of losses amounting to $15.8 million (2010: $ none) and unredeemed capital expenditure of $151.9 million (2010: $ none) that can be carried forward against future taxable income.
|
| ||||||||
| |||||||||
Year ended 30 June 2011 | Year ended 30 June 2010 |
| |||||||
$'000 | $'000 |
| |||||||
| |||||||||
24. Trade and other payables |
| ||||||||
| |||||||||
Trade payables | 32,562 | 31,822 |
| ||||||
Accrued expenses | 20,205 | 22,423 |
| ||||||
Other | 20,823 | 14,613 |
| ||||||
73,590 | 68,858 |
| |||||||
The average credit period is 30 days. No interest is charged on trade payables. |
| ||||||||
| |||||||||
25. Issued capital |
| ||||||||
| |||||||||
Fully paid ordinary shares |
| ||||||||
531,139,651 (2010: 530,514,663) fully paid ordinary shares | 686,577 | 685,740 |
| ||||||
| |||||||||
| |||||||||
Movements in fully paid ordinary shares | Number | $'000 |
| ||||||
| |||||||||
At 1 July 2009 | 411,919,636 | 500,896 |
| ||||||
Exercise of Class E options at GBP0.65 per share | 465,239 | 1,063 |
| ||||||
Issue of shares to acquire 6% of Vele Colliery | 1,990,000 | 4,159 |
| ||||||
Issue of shares | 59,867,731 | 96,712 |
| ||||||
Exercise of Class E options at GBP0.65 per share | 79,488 | 182 |
| ||||||
Exercise of Class E options at GBP0.65 per share | 91,817 | 210 |
| ||||||
Exercise of Class A options at A$0.65 per share | 125,002 | 286 |
| ||||||
Issue of shares in lieu of professional fees | 350,000 | 752 |
| ||||||
Issue of shares to acquire 20% of Vele Colliery | 5,625,750 | 11,756 |
| ||||||
Issue of shares | 50,000,000 | 80,770 |
| ||||||
Share issue costs | - | (11,046) |
| ||||||
At 30 June 2010 | 530,514,663 | 685,740 |
| ||||||
Exercise of Class A options at A$0.50 per share | 624,988 | 837 |
| ||||||
At 30 June 2011 | 531,139,651 | 686,577 |
| ||||||
| |||||||||
| |||||||||
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. |
| ||||||||
| |||||||||
26. Accumulated deficit |
| ||||||||
Accumulated deficit at the beginning of the financial year | 210,586 | (42,828) |
| ||||||
Net loss attributed to members of parent entity | (219,003) | (167,758) |
| ||||||
Accumulated deficit at the end of the financial year | (429,589) | (210,586) |
| ||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
Year ended 30 June 2011 | Year ended 30 June 2010 |
| |||||||
$'000 | $'000 |
| |||||||
| |||||||||
27. Reserves |
| ||||||||
| |||||||||
27.1 Reserves |
| ||||||||
Capital profits reserve | 91 | 91 |
| ||||||
Share based payment reserve | 88,967 | 86,451 |
| ||||||
Foreign currency translation reserve | 84,170 | (35,300) |
| ||||||
173,228 | 51,242 |
| |||||||
| |||||||||
Movement for the year can be reconciled as follows: |
| ||||||||
| |||||||||
Share-based payments reserve |
| ||||||||
Opening balance | 86,451 | 7,162 |
| ||||||
Share options issued during the year | 3,004 | 1,760 |
| ||||||
BEE share based payments | - | 78,515 |
| ||||||
Transfer from option reserve | (488) | (986) |
| ||||||
Closing balance | 88,967 | 86,451 |
| ||||||
| |||||||||
Foreign currency translation reserve |
| ||||||||
Opening balance | (35,300) | (48,189) |
| ||||||
Exchange differences on translating foreign operations | 119,470 | 12,889 |
| ||||||
Closing balance | 84,170 | (35,300) |
| ||||||
| |||||||||
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, as well as the BBBEE option. |
| ||||||||
| |||||||||
Foreign currency translation reserve |
| ||||||||
The foreign currency translation reserve records the foreign currency differences arising from the translation of foreign operations. |
| ||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
27. Reserves (continued) |
| ||||||||
| |||||||||
27.2 Other share-based payments |
| ||||||||
| |||||||||
BBBEE options issued to Firefly |
| ||||||||
| |||||||||
The Annual Report for the year ended 30 June 2010 disclosed the basis of an agreement entered into with respect to BBBEE. CoAL reported that the option granted to give effect to the transaction had not been issued at the reporting date and that, based on the advice received - the transaction did not meet the requirements of AASB 2 - Share Based Payment - did not record the transaction in accordance with AASB 2.
The Board has reviewed the advice given and consulted further on this matter and has, regrettably, concluded that the provisions of AASB 2 do apply to the transaction. It was therefore necessary to restate the financial statements.
This restatement resulted in a non-cash charge to the Statement of Comprehensive Income and a corresponding credit to Equity in the Statement of Financial Position. |
| ||||||||
| |||||||||
The effect of the misstatement is reflected below: |
| ||||||||
June 2010 Restated balances $'000 | June 2010 Disclosed previously $'000 |
| |||||||
| |||||||||
Statement of comprehensive income |
| ||||||||
Net loss attributable to members of the parent entity | (167,758) | (89,253) |
| ||||||
| |||||||||
Other comprehensive income |
| ||||||||
Foreign currency translation gain | 2,953 | 2,953 |
| ||||||
Total comprehensive loss for the period | (154,869) | (76,354) |
| ||||||
| |||||||||
| |||||||||
Consolidated statement of financial position |
| ||||||||
Equity |
| ||||||||
Issued capital | 685,740 | 685,740 |
| ||||||
Accumulated deficit | (210,586) | (132,071) |
| ||||||
Reserves | 51,242 | (27,273) |
| ||||||
Total parent equity interest | 526,396 | 526,396 |
| ||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
| |||||||||
28. Share-based payment
Share options
Employee share option plan
The Group maintains certain Employee Share Option Plans ("ESOP's") for executives and senior employees of the Group. In accordance with the terms of the schemes, 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 and officers of the group outside the ESOP's. 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 2011
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 at 30 June 2011:
·; 8,000,000 share options over ordinary shares in CoAL, granted to CoAL Directors on 28 June 2006. The options allow the Directors to take up ordinary shares at an exercise price of $0.50 each. The options are exercisable on or before 30 September 2011. The options hold no voting or dividend rights and are not transferable. Upon conversion of the options to shares, the shares will rank equally with existing shares. At reporting date, 627,998 options had been taken up and none had lapsed.
·; 1,000,000 share options over ordinary shares in CoAL, granted to employees in South Africa as an incentive for performance on 24 November 2006. The options have an exercise price of $0.50 each and are exercisable on or before 30 September 2011. The options hold no voting or dividend rights and are not transferable. Upon conversion of the options to shares, the shares will rank equally with existing shares. At reporting date, 50,000 of the options had been taken up and none had lapsed.
·; On the 29 May 2007, 250,000 share options exercisable at $0.50 (to Jonathan Colville of Mirabaud Securities Limited) before the 30th of September 2011 were granted to accept ordinary shares in Coal of Africa Limited. The options were part payment of brokerage fees in relation to share placements. The options hold no voting or dividend rights and are not transferable. Upon conversion, of the options to shares, the shares will rank equally with existing shares. At reporting date, none of the options had been taken up or had lapsed.
·; 7,000,000 share options over ordinary shares in CoAL were granted to Simon Farrell (5,000,000 options) (previously CoAL Managing Director, currently Non-Executive Deputy Chairman) and Richard Linnell (Chairman - 2,000,000 options) on 5 June 2007. The options allow the Directors to take up ordinary shares at an exercise price of $1.25 each. The options are exercisable on or before 30 September 2012. The options hold no voting or dividend rights and are not transferable. Upon conversion of the options to shares, the shares will rank equally with existing shares. At reporting date, none of the options had been taken up or had lapsed.
·; 1,000,000 share options over ordinary shares in CoAL were granted on 10 April 2008 to Mr Sergeant on 1 April 2011. The options allow the Mr Sergeant to take up ordinary shares at an exercise price of $1.90 each. The options are exercisable on or before 30 September 2012. The options hold no voting or dividend rights, and are not transferable. Upon conversion of the options to shares, the shares will rank equally with existing shares. At reporting date, none of the options had been taken up or had lapsed.
28. Share-based payments (continued)
Share options (continued)
·; 600,000 share options at an exercise price of $1.25 and 250,000 share options at an exercise price of $2.05 over ordinary shares in CoAL were granted to employees in South Africa as an incentive for performance on 19 May 2008. The options are exercisable on or before 1 May 2012 and hold no voting or dividend rights and are not transferable. Upon conversion of the options to shares, the shares will rank equally with existing shares. At reporting date, none of the options had been taken up or had lapsed.
·; 1,650,000 share options over ordinary shares in CoAL were granted to Riaan van der Merwe (Chief Operations Officer) on 1 December 2008. The options allow the Chief Operations Officer to take up ordinary shares at an exercise price of $3.25 each. The options are exercisable on or before 31 July 2012. The options hold no voting or dividend rights and are not transferable. Upon conversion of the options to shares, the shares will rank equally with existing shares. At reporting date, none of the options had been taken up or had lapsed.
·; 3,000,000 share options over ordinary shares in CoAL were granted to Mr Farrell on 8 December 2009. The options allow the Mr Farrell to take up ordinary shares at an exercise price of $2.74 each. 2,000,000 of the options vest one year after the granting of the NOMR for the Vele Colliery and the remaining 1,000,000 options vest one year after the granting of the Makhado Project NOMR. The 3,000,000 options are exercisable on or before 30 November 2014 and hold no voting or dividend rights and are not transferable. Upon conversion of the options to shares, the shares will rank equally with existing shares. At reporting date, none of the options had been taken up or had lapsed.
·; 2,000,000 share options over ordinary shares in CoAL were granted to the Mr Sergeant on 8 December 2009. The options allow the Mr Sergeant to take up ordinary shares at an exercise price of $2.74 each. 500,000 of the options vest on closing of the NuCoal acquisition transaction, 1,000,000 of the options vest one year after the granting of the NOMR for the Vele Colliery and the remaining 500,000 options vest one year after the granting of the Makhado Project NOMR. The options are exercisable on or before 30 November 2014 and hold no voting or dividend rights and are not transferable. Upon conversion of the options to shares, the shares will rank equally with existing shares. At reporting date, none of the options had been taken up or lapsed and 500,000 options vesting one year after the granting of the Makhado Project NOMR were cancelled.
·; 912,500 options were issued to eligible employees of CoAL as part of the ESOP on 25 February 2010. Shareholders of the Company approved the adoption of the ESOP on 30 November 2009. The ESOP gives eligible employees and officers of the Company the opportunity in the form of options to subscribe for shares in the Company. The options issued under this scheme are exercisable prior to 30 June 2014, have an exercise price of $1.90, are not transferable and hold no voting or dividend rights and vest in equal tranches on 1 July 2009, 1 July 2010 and 1 July 2011. Upon conversion, the shares will rank equally with existing shares. At reporting date, none of the options had been taken up or had lapsed.
·; On 25 February 2010, the Company issued 350,000 fully paid ordinary shares to an external consultant, valued at $843,500, in lieu of professional fees. The $843,500 has been expensed to the statement of comprehensive income. On the same day, an additional 5,625,750 fully paid ordinary shares were issued, valued at $13,558,058, to acquire the remaining 20% interest in Vele, which effectively increased the Company's stake in this project to 100%.
·; On 22 April 2010 CoAL granted an option to Firefly Investments 163 (Pty) Limited ("Firefly") to subscribe for a total of 50 million shares at 60 pence per share, exercisable between 1 November 2010 and 1 November 2014. Any shares issued on exercise of the option will be subject to a 12 month "lock-in period". The BBBEE consortium is led by Firefly which is wholly owned and controlled by historically disadvantaged South Africans.
Firefly also has the right to nominate two persons to the CoAL Board. To facilitate the BBBEE transaction, the Company's second largest shareholder, African Global Capital I, L.P., an entity associated with Mvelaphanda Holdings (Pty) Limited, Palladino Holdings Limited and OZ Management LP, and its affiliate Coal Investments Limited, have entered into an agreement with Firefly in terms of which amongst other provisions, they will cede their voting rights over their ordinary shares in CoAL to Firefly for a period of time.
28. Share-based payments (continued)
Share options (continued)
·; 2,500,000 share options over ordinary shares in CoAL were granted to David Murray, Senior Independent Non-Executive Director of CoAL, on 9 November 2010. The options allow Mr Murray to take up ordinary shares at an exercise price of $1.20 each. The options are exercisable in equal tranches on or before 9 November 2015. The options hold no voting or dividend rights, and are not transferable. 1,000,000 options vest on 8 November 2011, 750,000 on 8 November 2012 and 750,000 on 8 November 2013 and on conversion of the options to shares, the shares will rank equally with existing shares. At reporting date, none of the options had been taken up or had lapsed.
·; 1,540,561 ESOP options were issued on 4 February 2011 to eligible employees of CoAL as part of the ESOP. The options issued are exercisable prior to 30 September 2015, have an exercise price of $1.40, or ZAR9.50. The options vest in equal tranches on 30 June 2011, 30 June 2012 and 30 June 2013. 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.
The following share-based payment arrangements were in existence at the end of the current year:
Option series | Number | Grant date | Expiry date | Exercise price AUD | Fair value at grant date AUD | Weighted average remaining contractual life |
Class A unlisted options | 7,500,000 | 28/06/2006 | 30/09/2011 | A$0.50 | A$0.79 | 0.07 years |
Class A unlisted options | 950,000 | 24/11/2006 | 30/09/2011 | A$0.50 | A$0.79 | 0.07 years |
Class D unlisted options | 7,000,000 | 05/06/2007 | 30/09/2012 | A$1.25 | A$0.45 | 0.30 years |
Class G unlisted options | 1,000,000 | 10/04/2008 | 30/09/2012 | A$1.90 | A$1.54 | 0.04years |
Class H unlisted options | 600,000 | 19/05/2008 | 01/05/2012 | A$1.25 | A$3.09 | 0.02 years |
Class B unlisted options | 250,000 | 19/05/2008 | 01/05/2012 | A$2.05 | A$2.82 | 0.01 years |
Class I unlisted options | 1,650,000 | 01/12/2008 | 31/07/2012 | A$3.25 | A$0.49 | 0.06 years |
Class J unlisted options | 5,000,000 | 08/12/2009 | 30/11/2014 | A$2.74 | A$0.58 | 0.59 years |
Class K unlisted options | 912,500 | 25/02/2010 | 30/06/2014 | A$1.90 | A$0.92 | 0.09 years |
Option (1) | 1 | 22/04/2010 | 01/11/2014 | GBP0.60 | A$1.78 | 0.00 years |
Class C unlisted options | 2,500,000 | 09/11/2010 | 09/11/2015 | A$1.20 | A$0.59 | 0.38 years |
ESOP unlisted options | 1,540,561 | 04/02/2011 | 30/09/2015 | A$1.40 | A$0.91 | 0.23 years |
28,903,062 |
1. Option to subscribe for 50 million ordinary shares for 60 pence each between 1 November 2010 and 1 November 2014, as approved by shareholders on 22 April 2010, and granted to Firefly Investments (Pty) Ltd, a Broad Based Black Economic Empowerment ("BBBEE") entity.
Fair value of share options granted during the year
The weighted average fair value of share options granted during the financial year is A$1.28 (2010: A$0.80). Options were priced using the Black-Scholes option pricing model. 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 based on the historical shares price volatility over the past 5 years. To allow for the effects of early exercise, it was assumed that executives and senior employees would exercise the options after vesting date when the share price is two and a half times the exercise price.
28. Share-based payments (continued)
Share options (continued)
| |||||||||
Inputs into the Black-Scholes model were as follows: | |||||||||
Class C grants | ESOP grants | Firefly grants | |||||||
Closing share price on issue date | A$1.13 | A$1.16 | GBP1.515 | ||||||
Exercise price | A$1.20 | A$1.40 | GBP0.60 | ||||||
Expected volatility | 56.64% | 57.71% | 51% | ||||||
Option life remaining | 4.36 years | 4.25 years | 5.52 years | ||||||
Dividend yield | 0% | 0% | 0% | ||||||
Risk free interest rate | 5.21% | 5.36% | 2.5% | ||||||
Movement in share options | |||||||||
Options outstanding at beginning of year | 25,487,499 | 20,336,544 | |||||||
Options granted | 4,040,561 | 5,912,501 | |||||||
Options exercised | (624,998) | (761,546) | |||||||
Options outstanding at end of year | 28,903,062 | 25,487,499 | |||||||
Weighted average exercise price ($) | 1.46 | 2.09 | |||||||
Options exercisable | 23,571,851 | 19,789,165 | |||||||
Weighted average exercise price ($) | 1.14 | 0.86 | |||||||
Share options exercised during the period | |||||||||
Option series | Number | Exercise date | Weighted average price |
| |||||
Class A unlisted options | 124,998 | 18/03/2011 | 0.10 |
| |||||
Class A unlisted options | 500,000 | 11/04/2011 | 0.40 |
| |||||
624,998 |
| ||||||||
Year ended 30 June 2011 | Year ended 30 June 2010 | ||||||||
$'000 | $'000 | ||||||||
29. Non-controlling interest | |||||||||
Non-controlling interests comprise the following: | |||||||||
Coal of Madagascar | - | 3,703 | |||||||
Freewheel Trade and Invest 37 (Pty) Ltd | 575 | 575 | |||||||
575 | 4,278 | ||||||||
30. Financial risk management
The group's activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the group's financial performance.
Risk management is carried out by management under policies approved by the Board. Management identifies, evaluates and hedges financial risks in close co-operation with the group's operating units. The board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.
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 exposed the South African subsidiary companies to changes in the foreign exchange rates.
The Group's cash deposits are largely denominated in Australian dollar and SA rand. A foreign exchange risk arises from the funds deposited in Australian dollar which will have to be exchanged into the functional currency for working capital purposes.
The group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. Currency exposure arising from the net assets of the group's foreign operations is managed primarily through borrowings denominated in the relevant foreign currencies.
The following significant exchange rates were applied during the reporting period:
Average rate | Reporting date spot rate | |||
Year ended 30 June 2011 | Year ended 30 June 2010 | Year ended 30 June 2011 | Year ended 30 June 2010 | |
US Dollar 1 = SA Rand | 6.999 | 7.563 | 6.837 | 7.634 |
SA Rand 1 = US Dollar | 0.143 | 0.132 | 0.146 | 0.131 |
US Dollar 1 = Australian Dollar | 1.011 | 1.134 | 0.944 | 1.167 |
SA Rand 1 = Australian Dollar | 0.145 | 0.150 | 0.138 | 0.153 |
Australian Dollar 1 = US Dollar | 0.989 | 0.882 | 1.060 | 0.857 |
SA Rand 1 = Australian Dollar | 0.145 | 0.150 | 0.138 | 0.153 |
Australian Dollar 1 = SA Rand | 6.909 | 6.662 | 7.245 | 6.536 |
30. Financial risk management (continued)
Market risk (continued)
At financial period end, the financial instruments exposed to foreign currency risk movements are as follows:
Balances at 30 June 2011 | Denominated in ZAR $'000 | Denominated in AUD $'000 | Denominated in USD $'000 | Total
$'000 |
Financial assets | ||||
Other receivables | - | - | 12,800 | 12,800 |
Trade and other receivables | 29,749 | - | 14,985 | 44,734 |
Cash(1) and cash equivalents | 19,970 | 4,426 | 11,688 | 36,084 |
Total financial assets | 49,719 | 4,426 | 39,473 | 93,618 |
1. Cash includes restricted cash | ||||
Financial liabilities | ||||
Borrowings | 7,728 | - | 32,623 | 40,351 |
Trade and other payables | 68,248 | 5,342 | - | 73,590 |
Total financial liabilities | 75,976 | 5,342 | 32,623 | 113,941 |
Balances at 30 June 2010 | Denominated in ZAR $'000 | Denominated in AUD $'000 | Denominated in USD $'000 | Total
$'000 |
Financial assets | ||||
Other receivables | - | - | 14,400 | 14,400 |
Trade and other receivables | 24,177 | 3,063 | - | 27,240 |
Cash and cash equivalents | 24,055 | 59,480 | 3,030 | 86,565 |
Total financial assets | 48,232 | 62,543 | 17,430 | 128,205 |
1. Cash includes restricted cash | ||||
Financial liabilities | ||||
Borrowings | 2,369 | - | 20,000 | 22,369 |
Trade and other payables | 61,074 | 7,780 | 4 | 68,858 |
Total financial liabilities | 63,443 | 7,780 | 20,004 | 91,227 |
Balances classified as held for sale are not included in the above tables.
The following table summarises the sensitivity of financial instruments held at balance date to movements in the exchange rate of the SA rand to the US dollar, with all other variables held constant. The US dollar denominated instruments have been assessed using the sensitivities indicated in the table. These are based on reasonably possible changes, over a financial period, using the observed range of actual historical rates for the preceding two-year period.
30. Financial risk management (continued)
Market risk (continued)
Impact on profit / (loss) | Year ended 30 June 2011 $'000 | Year ended 30 June 2010 $'000 | |
Judgements on reasonable possible movements | |||
USD/ZAR increase by 10% | (2,626) | (1,521) | |
USD/ZAR decrease by 10% | 2,626 | 1,521 |
Price risk
The group is exposed to equity securities price risk because of investments held by the group and classified on the consolidated balance sheet as at fair value through profit or loss.
CoAL is exposed to financial risks arising in coal prices. Coal prices are expected to fluctuate in the next financial year. Further contracts have been entered into with Eskom and other local buyers for the middlings and run of mine sales.
Interest risk
The group's interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the group to cash flow interest rate risk which is partially offset by cash held at variable rates. During both 2011 and 2010, the group's borrowings at variable rate were denominated in the US dollar.
The following table summarises the sensitivity of the financial instruments held at the reporting date, following a movement in variable interest rates, with all other variables held constant. The sensitivities are based on reasonably possible changes over a financial period, using the observed range of actual historical rates.
Impact on profit / (loss) | Year ended 30 June 2011 $'000 | Year ended 30 June 2010 $'000 | |
Judgements on reasonable possible movements | |||
Increase of 0.2% in LIBOR | 65 | 40 | |
Decrease of0.2% in LIBOR | (65) | (40) |
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 long or short-term borrowing.
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. The Group's credit risk is limited to the carrying value of its financial assets.
At balance date there is a significant concentration of credit risk represented in the cash and cash equivalents, restricted cash and trade accounts receivables balance. With respect to accounts receivables, this is due to the fact that sales of large value are made to a limited number of customers. The customers have complied with all contractual sales terms and has not at any stage defaulted on amounts due. The Group manages its credit risk by predominantly dealing with counterparties with a positive credit rating.
30. Financial risk management (continued)
Credit risk (continued)
The maximum exposure to credit risk was as follows:
Financial assets | Year ended 30 June 2011 $'000 | Year ended 30 June 2010 $'000 | |
Other receivables | 12,800 | 14,400 | |
Trade and other receivables | 44,734 | 27,240 | |
Cash and cash equivalents | 36,084 | 85,656 | |
80,818 | 128,205 |
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:
Balances at 30 June 2011 | Australia $'000 | South Africa $'000 | Total $'000 | |
Cash and cash equivalents | 5,446 | 17,315 | 22,761 | |
5,446 | 17,315 | 22,761 |
Balances at 30 June 2010 | Australia $'000 | South Africa $'000 | Total $'000 | |
Cash and cash equivalents | 59,965 | 12,089 | 72,054 | |
59,965 | 12,089 | 72,054 |
The contractual maturity analysis of payables at the reporting date was as follows:
Balances at 30 June 2011 | Less than 6 months $'000 | Between 6 - 12 months $'000 | Greater than 12 months $'000 | Total
$'000 |
Interest bearing liabilities(1) | 4,326 | 1,682 | 1,720 | 7,728 |
Trade and other payables(2) | 73,590 | - | - | 73,590 |
Export Trade finance facility(3) | - | 32,623 | - | 32,623 |
77,916 | 34,305 | 1,720 | 113,941 |
1. Interest bearing at rates between 7.2 % and 11.5 %
2. Not interest bearing
3. LIBOR plus 3%
Included in assets classified held for sale are financial assets totalling $5.3 million which are also subject to liquidity risk.
30. Financial risk management (continued)
Liquidity risk (continued)
Balances at 30 June 2010 | Less than 6 months $'000 | Between 6 - 12 months $'000 | Greater than 12 months $'000 | Total
$'000 |
Interest bearing liabilities | 917 | 431 | 1,021 | 2,369 |
Trade and other payables | 68,858 | - | - | 68,858 |
Revolving credit facility | - | 20,000 | - | 20,000 |
69,775 | 20,431 | 1,021 | 91,227 |
Capital management
The Group's corporate office is responsible for capital management. This involves the use of corporate forecasting models, which facilitates analysis of the Group's financial position including cash flow forecasts to determine the future capital management requirements. Corporate office monitors gearing.
Capital management is undertaken to ensure a secure, cost effective supply of funds to ensure the Group's operating and capital expenditure requirements are met. The mix of debt and equity is regularly reviewed. The Group does not have a target debt/equity ratio, but has a policy of maintaining a flexible financing structure so as to be able to take advantage of new investment opportunities that may arise. Net debt is calculated as total borrowings (including the current and non-current borrowings as reported on the Statement of Financial Position). Total capital is calculated as the total equity (as reported) plus net debt.
| Year ended 30 June 2011 $'000 | Year ended 30 June 2010 $'000 | |||
Interest bearing liabilities | 7,728 | 2,369 | |||
Revolving credit facility | - | 20,000 | |||
Export trade finance facility | 32,623 | - | |||
Net debt | 40,351 | 22,369 | |||
Total equity | 430,791 | 530,674 | |||
Total capital | 471,142 | 553,043 | |||
Gearing ratio | 9.37% | 4.21% | |||
No dividends were paid during the reporting period. The Board maintains a policy of balancing returns to shareholders with the need to fund growth.
| |||||
Financial assets and liabilities by category The accounting policies for financial instruments have been applied to the line items below:
| |||||
Financial assets | |||||
Other receivables | 12,800 | 14,400 | |||
Trade and other receivables | 44,734 | 27,240 | |||
Cash and cash equivalents | 36,084 | 86,565 | |||
Fair value through profit or loss | 13,594 | 18,651 | |||
Total financial assets | 107,212 | 146,856 | |||
Year ended 30 June 2011 $'000 | Year ended 30 June 2010 $'000 | ||||
30. Financial risk management (continued) | |||||
Financial assets and liabilities by category (continued)
| |||||
Financial liabilities | |||||
Finance lease liabilities | 5,084 | 1,884 | |||
Other liabilities | 2,644 | 485 | |||
Trade and other payables | 73,590 | 68,858 | |||
Revolving credit facility | - | 20,000 | |||
Export trade finance facility | 32,623 | - | |||
113,941 | 91,227 | ||||
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 financial statements approximate their respective net 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 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 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.
| |||||
Level 1 | Level 2 | Level 3 | Total | ||
Financial assets at FVTPL | 11,547 | 2,047 | - | 13,594 | |
31. Notes to the statement of cash flows | |||||
Year ended 30 June 2011 $'000 | Year ended 30 June 2010 $'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 | 22,761 | 72,054 | |||
Reconciliation of loss before tax to net cash used in operations | |||||
Loss before tax | (218,106) | (178,656) | |||
Add back: | |||||
Depreciation | 29,651 | 11,479 | |||
Amortisation | 49,870 | 15,205 | |||
Impairment losses | 97,400 | 53,961 | |||
Share-based payment | 3,004 | 80,275 | |||
Movement in provisions | 15,807 | (12,603) | |||
Finance costs (net) | (664) | (1,407) | |||
Dividends received | - | (92) | |||
Foreign exchange (gains) / losses on operating activities | 29,923 | (2,953) | |||
(Gains) / losses on revaluation of investments | 498 | 1,344 | |||
Changes in working capital | |||||
Increase in inventories | 903 | (17,098) | |||
Prepayments received | 13,110 | - | |||
Increase in trade and other receivables | (17,494) | (9,926) | |||
(Decrease) / increase in trade and other payables | (6,429) | 52,842 | |||
Cash generated from operations | (2,527) | (7,629) | |||
32. 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 June 30, 2011, projects within this reportable segment include two exploration and development stage coking and thermal coal complexes, namely the Chapudi Complex (which comprises the Chapudi project, the Chapudi West project and the Wildebeesthoek project), and the Soutpansberg Complex (which comprises the Voorburg project, the Mt Stuart project and the Jutland 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 June 30, 2011 projects included within this reportable segment include two coking coal projects, namely the Vele Colliery and the Makhado Complex (comprising the Makhado project, the Makhado Extension project and the Generaal project), both in the early operational and development stage, respectively. The Mining segment is involved in day to day activities of obtaining a saleable product from the mineral reserve on a commercial scale. As of June 30, 2011 the Group had two operational thermal collieries included in this segment, namely the Mooiplaats Colliery and the Woestalleen Colliery.
The accounting policies of the reportable segments are the same as those described in Note 3, Accounting policies.
The Group evaluates performance on the basis of segment profitability, which represents net operating (loss) / profit earned by each reportable segment before impairment of financial assets, impairment of Mooiplaats, depreciation, amortisation, foreign exchange gains, and impairment of assets held for sale.
They are 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, ie 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 | |||||||||||
| |||||||||||
| |||||||||||
For the year ended 30 June 2011 | Exploration $'000 | Development $'000 | Mining $'000 | Total $'000 |
| ||||||
| |||||||||||
Revenues from external customers(1) | - | - | 229,225 | 229,225 |
| ||||||
Inter-segment revenues | - | - | 45,686 | 45,686 |
| ||||||
Revenue | - | - | 274,911 | 274,911 |
| ||||||
| |||||||||||
Segment loss | 2,485 | 4,626 | 158,817 | 165,928 |
| ||||||
Items included within the Group's measure of segment profitability |
| ||||||||||
- Depreciation and amortisation | - | (51) | (77,159) | (77,210) |
| ||||||
- Impairment | - | - | (92,295) | (92,295) |
| ||||||
- Finance cost (net) | - | - | (1,665) | (1,665) |
| ||||||
| |||||||||||
1. Revenues represent sale of product |
| ||||||||||
|
| ||||||||||
Segment assets | 75,156 | 125,449 | 294,364 | 494,969 |
| ||||||
Items included within the Group's measure of segment assets - Additions to non-current assets |
19,350 |
7,981 |
59,584 |
86,915 |
| ||||||
| |||||||||||
Segment liabilities | 4,289 | 7,009 | 142,172 | 153,740 |
| ||||||
| |||||||||||
| |||||||||||
| |||||||||||
| |||||||||||
| |||||||||||
| |||||||||||
| |||||||||||
32. Segment information (continued) |
| ||||||||||
For the year ended 30 June 2010 | Exploration $'000 | Development $'000 | Mining $'000 | Total $'000 |
| ||||||
| |||||||||||
Revenues from external customers | - | 19,767 | 78,062 | 97,829 |
| ||||||
Inter-segment revenues | - | 1,607 | 4,569 | 6,176 |
| ||||||
Revenue | - | 21,374 | 82,631 | 104,005 |
| ||||||
| |||||||||||
Segment loss | 1,413 | 69,833 | 2,995 | 74,241 |
| ||||||
Items included within the Group's measure of segment profitability |
| ||||||||||
- Depreciation and amortisation | - | 26 | 13,995 | 14,021 |
| ||||||
- Income tax | - | 1,684 | 4,459 | 6,143 |
| ||||||
| |||||||||||
1. Revenues represent sale of product |
| ||||||||||
| |||||||||||
Segment assets | 45,983 | 293,816 | 139,995 | 479,794 |
| ||||||
Items included within the Group's measure of segment assets - Additions to non-current assets | 2,579 | 96,804 | 126,056 | 225,439 |
| ||||||
| |||||||||||
Segment liabilities | 1,423 | 38,105 | 65,304 | 104,832 |
| ||||||
| |||||||||||
Reconciliations of the total segment amounts to respective items included in the consolidated financial statements are as follows:
Year ended 30 June 2011 $'000 | Year ended 30 June 2010 $'000 | ||
Total loss for reportable segments | 165,928 | 74,241 | |
Reconciling items: | |||
Unallocated corporate (income) / costs | (11,523) | 7,022 | |
Depreciation | 29,651 | 11,479 | |
Impairment of assets held for sale | 5,105 | 7,399 | |
BBBEE share-based payment | - | 78,515 | |
Foreign exchange (gain)/ loss | 28,945 | - | |
Loss before taxation | 218,106 | 178,656 | |
Total segment assets | 494,969 | 479,794 | |
Reconciling items: | |||
Unallocated property, plant and equipment | 24,035 | 23,761 | |
Assets classified as held for sale | 22,268 | 14,638 | |
Intangible assets | 20,800 | 18,066 | |
Goodwill | - | 3,031 | |
Other financial assets | 7,948 | 10,227 | |
Other receivables | 12,800 | 14,400 | |
Unallocated current assets | 8,859 | 96,971 | |
Total assets | 591,679 | 660,888 | |
Total segment liabilities | 153,470 | 104,832 | |
Reconciling items: | |||
Liabilities held for sale | 2,843 | - | |
Unallocated liabilities | 4,575 | 25,382 | |
Total liabilities | 160,888 | 130,214 | |
32. Segment information (continued) | |||
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. The Group has equity interests in an exploration and mining companies listed in the United Kingdom, unlisted exploration companies in Guernsey, one listed and one unlisted manufacturing company and unlisted exploration companies as well as a mining company in South Africa and a biotechnology company listed in Australia. | |||
Revenue by location of operations | |||
South Africa | 261,222 | 97,583 | |
Australia | 203 | 793 | |
Total revenue | 261,425 | 98,376 | |
Non-current assets by location of operations | |||
South Africa | 437,516 | 469,093 | |
Australia | 41,278 | 53,838 | |
Total non-current assets | 478,794 | 522,931 | |
Major customers The Consolidated Entity has no major customers in the coal mining, manufacturing or investing segments which account for more than 10% of the external revenue. |
33. Contingencies and commitments
Ferret Mining And Environmental Services (Pty) Ltd ("Ferret") / RH Boer, JA Nel, Coal Of Africa Limited And GVM Metals Limited
This is an application by Ferret declaring that its ownership of 26% shareholding in GVM was unlawfully disposed of by RH Boer, who was the managing director of Ferret at the time, who in turn sold the shareholding to JA Nel of the David Trust. JA Nel then in turn sold the shareholding to GVM Metals Limited. This matter is pending.
Should Coal be unsuccessful with its application, Coal would be entitled to launch a counterclaim against JA Nel for a sum of ZAR30.000 million, which is the purchase price paid for the shares.
Motjoli Resources (Pty) Ltd & Motjoli Resources Advisory Services cc / Coal of Africa, Mooiplaats Mining Ltd and JA Nel
Motjoli Resources (Pty) Ltd and Motjoli Resources Advisory Services CC were appointed as consultants to Mooiplaats in order to obtain the granting of a mining right of Mooiplaats for Langcarel (Pty) Ltd and in order to obtain Section 11 approval for the transaction between Coal of Africa and Mooiplaats. The fees to be paid were ZAR4.000 million plus the issue of 4,750,000 paid up ordinary shares in Coal of Africa to be transferred to Motjoli.
Motjoli contends that it complied with its obligations and was receiving ZAR4.000 million, but did not receive the issue of 4,750,000 fully paid up ordinary shares in the issued ordinary share capital of Coal of Africa. In addition, Motjoli claims that in the event that the shares are not issued, it should be awarded an amount of ZAR95.475 million with interest by the Defendants jointly and severally.
The trial is set down for hearing on 7 November 2011.
33. Contingencies and commitments (continued)
Envicoal (Pty) Ltd / Nucoal Mining (Pty) Ltd
Envicoal launched arbitration proceedings against Nucoal claiming that Nucoal failed to deliver coal as prescribed in terms of the agreement concluded between the parties. As a result, Envicoal claims damages to the value of ZAR188.808 million alternatively ZAR157.099 million alternatively ZAR139.670 million. The arbitration proceedings are still advancing and to date, no arbitration date has been agreed upon.
AMCI International AG ("AMCI") / NuCoal Mining (Pty) Ltd
On 14 July 2009 Nucoal issued a letter of demand against AMCI and Polmaise Colliery (Pty) Ltd ("Polmaise"). Nucoal claimed that in terms of a coal supply agreement AMCI had undertaken that, in the event of the parties failing to agree on a coal production budget, it would off-take 50, 000 tons of coal per month from Nucoal. AMCI failed to take delivery of the full 50,000 tons per month and Nucoal estimated that it had suffered damages to the amount of ZAR42.472 million.
Nucoal also claimed that it had, on the instructions of AMCI, directly supplied coal to Polmaise. Nucoal and AMCI agreed that AMCI would be invoiced. Nucoal duly invoiced AMCI for an amount of ZAR1.591million and ZAR3.667 million, which amount AMCI failed to pay. It appears that the matter was settled during 2009. The provision of the settlement appear to be that: the coal supply agreement would be suspended until AMCI decided to take further deliveries of coal; Nucoal undertook to pay the amount owing by Polmaise if Polmaise failed to pay.
Mhlahlla Consultants (Pty) Ltd/ Woestalleen Colliery (Pty) Ltd
Mhlahla claims that in terms of an oral agreement it concluded with Woestalleen that it transported coal on behalf of Woestalleen for the value of ZAR0.484 million. Woestalleen has in turn raised a counterclaim claiming that it sold and delivered coal to Mhlahla for the sum of ZAR3.77 million of which ZAR1.714 million remains outstanding. It is however likely that only ZAR1.009 million will be recovered.
Gerbid Trading CC / Nucoal MIning (Pty) Ltd and Jerry
This claim is issued out of the Johannesburg Magistrates Court by Gerbid Trading against Nucoal and Jerry wherein it claims that an accident occurred on 18 June 2008, the driver of such forklift, Jerry, being an employee of Nucoal and its claim for a sum of ZAR0.056 million.
Coal of Africa / Troy Holdings and Investments Inc ("Troy"), Kusile Mining (Pty) Ltd ("Kusile") and Nucoal Holdings (Pty) Ltd ("Nucoal")
In terms of a share sale agreement concluded with Troy, Kusile and Nucoal and in order to acquire Nucoal Mining (Pty) Ltd, the sellers agreed to certain withholding warranties and warranty claims in terms of the agreement.
Coal has now launched a notice referring the matter to arbitration using the UNCITRAL Rules on arbitration and will claim a maximum of ZAR130.000 million in respect of the general warranty claims. In addition, Coal withheld a sum of ZAR65.000 million from the purchase consideration in case of any additional withholding warranty claims, against which it has a claim of ZAR55.000 million.
Apex Forex Trading Limited / Coal of Africa Limited
On 31 January 2011, Van Huyssteens Attorneys alleged in writing that Apex was provisionally liquidated in 2000 but purchased a 30% interest in Mooiplaats Mining (Pty) Ltd. This shareholding was according to Van Huyssteens transferred to Coal without payment of any money due to the liquidated estate. This matter is still under investigation.
Vuna Mining Enterprises (Pty) Ltd
NuCoal Mining has committed to mine at least 1,200,000 tons from the Zonnebloem colliery annually.
34. Related party disclosures
The names and positions held by Directors and key management personnel in office at any time during the financial year are:
·; R Linnell - Independent Non-Executive Chairman
·; S Farrell - Independent Non-Executive Deputy Chairman
·; P Cordin - Independent Non-Executive Director
·; S Bywater - Independent Non-Executive Director
·; A Nevhutanda - Executive Director
·; J Wallington - Chief Executive Officer, appointed 15 June 2010
·; D Murray - Non-Executive Director, appointed 8 September 2010
·; K Mosehla - Non-Executive Director, appointed 18 November 2011
·; M Xayiya - Non-Executive Director, appointed 18 November 2011
·; R Torlage - Non-Executive Director, appointed 18 November 2011
·; W Koonin - Financial Director, appointed 1 April 2011
·; B Sergeant - Finance Director, resigned 1 April 2011
·; H Verster - Non-Executive Director, resigned 13 August 2010
·; R van der Merwe - Chief Operating Officer
·; W Hattingh - General Manager: Commercial
Equity instruments
Option holdings
The movement during the reporting period in the number of options over ordinary shares exercisable at $0.50 on or before 30 September 2011 held directly, indirectly or beneficially by each director and key management personnel including their personally-related entities, is as follows:
Held at 1 July 2010 | Granted as remuneration | Exercised | Other changes | Held at 30 June 2011 | |
Non-Executive Directors | |||||
R Linnell | 2,000,000 | - | - | - | 2,000,000 |
P Cordin | 1,000,000 | - | - | - | 1,000,000 |
S Bywater | - | - | - | - | - |
H Verster | - | - | - | - | - |
D Murray | - | - | - | - | - |
K Mosehla | - | - | - | - | - |
M Xayiya | - | - | - | - | - |
R Torlage | - | - | - | - | - |
Executive Directors | |||||
S Farrell | 4,000,000 | - | - | - | 4,000,000 |
J Wallington | - | - | - | - | - |
B Sergeant | 1,000,000 | - | - | - | 1,000,000 |
W Koonin | - | - | - | - | - |
A Nevhutanda | - | - | - | - | - |
Key management | |||||
R van der Merwe | - | - | - | - | - |
W Hattingh | - | - | - | - | - |
34. Related party disclosures (continued)
The movement during the reporting period in the number of options over ordinary shares exercisable at $1.25 on or before 30 September 2012 held directly, indirectly or beneficially by each director and key management personnel including their personally-related entities, is as follows:
Held at 1 July 2010 | Granted as remuneration | Exercised | Other changes | Held at 30 June 2011 | |
Non-Executive Directors | |||||
R Linnell | 2,000,000 | - | - | - | 2,000,000 |
P Cordin | - | - | - | - | - |
S Bywater | - | - | - | - | - |
H Verster | - | - | - | - | - |
D Murray | - | - | - | - | - |
K Mosehla | - | - | - | - | - |
M Xayiya | - | - | - | - | - |
R Torlage | - | - | - | - | - |
Executive Directors | |||||
S Farrell | 5,000,000 | - | - | - | 5,000,000 |
J Wallington | - | - | - | - | - |
B Sergeant | - | - | - | - | - |
W Koonin | - | - | - | - | - |
A Nevhutanda | - | - | - | - | - |
Key management | |||||
R van der Merwe | - | - | - | - | - |
W Hattingh | - | - | - | - | - |
The movement during the reporting period in the number of options over ordinary shares exercisable at $1.90 on or before 30 September 2012 held directly, indirectly or beneficially by each director and key management personnel including their personally-related entities, is as follows:
Held at 1 July 2010 | Granted as remuneration | Exercised | Other changes | Held at 30 June 2011 | |
Non-Executive Directors | |||||
R Linnell | - | - | - | - | - |
P Cordin | - | - | - | - | - |
S Bywater | - | - | - | - | - |
H Verster | - | - | - | - | - |
D Murray | - | - | - | - | - |
K Mosehla | - | - | - | - | - |
M Xayiya | - | - | - | - | - |
R Torlage | - | - | - | - | - |
Executive Directors | |||||
S Farrell | - | - | - | - | - |
J Wallington | - | - | - | - | - |
B Sergeant | 1,000,000 | - | - | - | 1,000,000 |
W Koonin | - | - | - | - | - |
A Nevhutanda | - | - | - | - | - |
Key management | |||||
R van der Merwe | - | - | - | - | - |
W Hattingh | - | - | - | - | - |
34. Related party disclosures (continued)
The movement during the reporting period in the number of options over ordinary shares exercisable at $3.25 on or before 31 July 2012 held directly, indirectly or beneficially by each director and key management personnel including their personally-related entities, is as follows:
Held at 1 July 2010 | Granted as remuneration | Exercised | Other changes | Held at 30 June 2011 | |
Non-Executive Directors | |||||
R Linnell | - | - | - | - | - |
P Cordin | - | - | - | - | - |
S Bywater | - | - | - | - | - |
H Verster | - | - | - | - | - |
D Murray | - | - | - | - | - |
K Mosehla | - | - | - | - | - |
M Xayiya | - | - | - | - | - |
R Torlage | - | - | - | - | - |
Executive Directors | |||||
S Farrell | - | - | - | - | - |
J Wallington | - | - | - | - | - |
B Sergeant | - | - | - | - | - |
W Koonin | - | - | - | - | - |
A Nevhutanda | - | - | - | - | - |
Key management | |||||
R van der Merwe | 1,650,000 | - | - | - | 1,650,000 |
W Hattingh | - | - | - | - | - |
The movement during the reporting period in the number of options over ordinary shares exercisable at $2.74 on or before 30 November 2014 held directly, indirectly or beneficially by each director and key management personnel including their personally-related entities, is as follows:
Held at 1 July 2010 | Granted as remuneration | Exercised | Other changes | Held at 30 June 2011 | |
Non-Executive Directors | |||||
R Linnell | - | - | - | - | - |
P Cordin | - | - | - | - | - |
S Bywater | - | - | - | - | - |
H Verster | - | - | - | - | - |
D Murray | - | - | - | - | - |
K Mosehla | - | - | - | - | - |
M Xayiya | - | - | - | - | - |
R Torlage | - | - | - | - | - |
Executive Directors | |||||
S Farrell | 3,000,000 | - | - | - | 3,000,000 |
J Wallington | - | - | - | - | - |
B Sergeant | 2,000,000 | - | - | - | 2,000,000 |
W Koonin | - | - | - | - | - |
A Nevhutanda | - | - | - | - | - |
Key management | |||||
R van der Merwe | - | - | - | - | - |
W Hattingh | - | - | - | - | - |
2,000,000 of Mr Farrell's options vest one year after granting of a NOMR for the Company's Vele Colliery and the remaining 1,000,000 options vest one year after the DMR has granted CoAL a NOMR for the Makhado Project. 500,000 of Mr Sergeant's options vested on completion of the NuCoal transaction, 1,000,000 vest one year after granting of a NOMR for the Company's Vele Colliery and the remaining 500,000 options vest one year after the DMR has granted the CoAL a NOMR for the Makhado Project. At 30 June 2011, 500,000 of Mr Sergeant's options listed above had vested.
34. Related party disclosures (continued)
The movement during the reporting period in the number of options over ordinary shares exercisable at $0.92 on or before 30 June 2014 held directly, indirectly or beneficially by each director and key management personnel including their personally-related entities, is as follows:
Held at 1 July 2010 | Granted as remuneration | Exercised | Other changes | Held at 30 June 2011 | |
Non-Executive Directors | |||||
R Linnell | - | - | - | - | - |
P Cordin | - | - | - | - | - |
S Bywater | - | - | - | - | - |
H Verster | - | - | - | - | - |
D Murray | - | - | - | - | - |
K Mosehla | - | - | - | - | - |
M Xayiya | - | - | - | - | - |
R Torlage | - | - | - | - | - |
Executive Directors | |||||
S Farrell | - | - | - | - | - |
J Wallington | - | - | - | - | - |
B Sergeant | - | - | - | - | - |
W Koonin | - | - | - | - | - |
A Nevhutanda | - | - | - | - | - |
Key management | |||||
R van der Merwe | 272,500 | - | - | - | 272,500 |
W Hattingh | 211,000 | - | - | - | 211,000 |
The movement during the reporting period in the number of options over ordinary shares exercisable at $1.20 on or before 9 November 2015 held directly, indirectly or beneficially by each director and key management personnel including their personally-related entities, is as follows:
Held at 1 July 2010 | Granted as remuneration | Exercised | Other changes | Held at 30 June 2011 | |
Non-Executive Directors | |||||
R Linnell | - | - | - | - | - |
P Cordin | - | - | - | - | - |
S Bywater | - | - | - | - | - |
H Verster | - | - | - | - | - |
D Murray | - | 2,500,000 | - | - | 2,500,000 |
K Mosehla | - | - | - | - | - |
M Xayiya | - | - | - | - | - |
R Torlage | - | - | - | - | - |
Executive Directors | |||||
S Farrell | - | - | - | - | - |
J Wallington | - | - | - | - | - |
B Sergeant | - | - | - | - | - |
W Koonin | - | - | - | - | - |
A Nevhutanda | - | - | - | - | - |
Key management | |||||
R van der Merwe | - | - | - | - | - |
W Hattingh | - | - | - | - | - |
34. Related party disclosures (continued)
The movement during the reporting period in the number of options over ordinary shares exercisable at $1.40 on or before 30 September 2015 held directly, indirectly or beneficially by each director and key management personnel including their personally-related entities, is as follows:
Held at 1 July 2010 | Granted as remuneration | Exercised | Other changes | Held at 30 June 2011 | |
Non-Executive Directors | |||||
R Linnell | - | - | - | - | - |
P Cordin | - | - | - | - | - |
S Bywater | - | - | - | - | - |
H Verster | - | - | - | - | - |
D Murray | - | - | - | - | - |
K Mosehla | - | - | - | - | - |
M Xayiya | - | - | - | - | - |
R Torlage | - | - | - | - | - |
Executive Directors | |||||
S Farrell | - | - | - | - | - |
J Wallington | - | - | - | - | - |
B Sergeant | - | - | - | - | - |
W Koonin | - | - | - | - | - |
A Nevhutanda | - | - | - | - | - |
Key management | |||||
R van der Merwe | - | 211,000 | - | - | 211,000 |
W Hattingh | - | 77,000 | - | - | 77,000 |
Equity holdings and transactions of Directors and key management personnel
The movement during the reporting period in the number of ordinary shares held, directly, indirectly or beneficially by each key management personnel including their personally-related entities, is as follows:
Held at 1 July 2010 | Purchased | Received on exercise of options / remuneration | Other changes | Held at 30 June 2011 | |
Non-Executive Directors | |||||
R Linnell | 801,550 | - | - | - | 801,550 |
P Cordin | 412,759 | - | - | - | 412,759 |
S Bywater | - | - | - | - | - |
H Verster | - | - | - | - | - |
D Murray | - | - | - | - | - |
K Mosehla | - | - | - | - | - |
M Xayiya | - | - | - | - | - |
R Torlage | - | - | - | - | - |
Executive Directors | |||||
S Farrell | 3,221,791 | - | - | - | 3,221,791 |
J Wallington | - | - | - | - | - |
B Sergeant | - | - | - | - | - |
W Koonin | - | - | - | - | - |
A Nevhutanda | 55,000 | - | - | - | 55,000 |
Key management | |||||
R van der Merwe | - | - | - | - | - |
W Hattingh | - | - | - | - | - |
34. Related party disclosures (continued)
Other Transactions with the Company or its Controlled Entities
A number of Directors or their personally-related entities hold positions in other entities that result in them having control or significant influence over the financial or operating policies of those entities.
A number of those entities transacted with the Company or its subsidiaries during the financial year. The terms and conditions of those transactions were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to unrelated entities on an arm's length basis.
No Directors entered or were party to any contract, whether directly or indirectly during the financial year.
NuCoal acquisition | |||
On 1 January 20101, CoAL acquired 100% of the NuCoal group of companies comprising the Woestalleen, Klipbank and Zonnebloem collieries and other prospecting rights. The total consideration paid was USD74.423 million which includes a retention of USD4.642 million which will be paid if all warranties in terms of the Sale Agreement are satisfied.
| |||
Year ended 30 June 2010 | |||
Consideration at 1 January 2010 | $,000 | ||
Cash | 64,057 | ||
Realised foreign exchange gain | 5,724 | ||
Retention payable | 4,642 | ||
74,423 | |||
Recognised amounts of identifiable assets acquired and liabilities assumed | |||
Property, plant and equipment | 13,860 | ||
Exploration and other financial assets | 15,737 | ||
Receivables | 8,806 | ||
Inventory | 11,343 | ||
Cash and bank balances | 3,499 | ||
Loans and other payables | (39,621) | ||
Deferred taxation | (4,806) | ||
Provisions | (6,389) | ||
Fair value of investment | 2,429 | ||
Mining asset on consolidation | 102,848 | ||
Deferred tax on mining asset | (30,854) | ||
74,423 | |||
35. Controlled entities | ||||
Particulars in relation to controlled entities | ||||
Country of incorporation | Year ended 30 June 2011 % | Year ended 30 June 2010 % | ||
Baobab Exploration (Pty) Ltd Chromet (Pty) Ltd * Coal Mining Madagascar SARL Coal of Africa & ArcelorMittal Analytical Laboratories (Pty) Ltd Coal of Madagascar Ltd **** Cove Mining NL Drilling and Geological Services of Madagascar Ltd *** Evoc Mining NL Freewheel Trade and Invest 37 (Pty) Ltd Fumaria Property Holdings (Pty) Ltd Golden Valley Services (Pty) Ltd Greenstone Gold Mines NL GVM Metals Administrations (South Africa) (Pty) Ltd Harrisia Investments (Pty) Ltd Holfontein Investments (Pty) Ltd Joerg Foundry (Pty) Ltd * Langcarel (Pty) Ltd ** Limpopo Coal Company (Pty) Ltd Magberg Manufacturing (Pty) Ltd * Metalloy Fibres (Pty) Ltd * Mooiplaats Mining Ltd (previously Coal of Africa Ltd) Nimag (Pty) Ltd Nu-Coal (Pty) Ltd ***** NuCoal Investments (Pty) Ltd ***** NuCoal Mining (Pty) Ltd Pan African Drilling Ltd
Regulus Investment Holdings (Pty) Ltd Silkwood Trading 14 (Pty) Ltd Tshikunda Mining (Pty) Ltd Woestalleen Colliery (Pty) Ltd ***** | South Africa South Africa Madagascar South Africa Guernsey Australia Madagascar Australia South Africa South Africa Australia Australia South Africa South Africa South Africa South Africa South Africa South Africa South Africa South Africa South Africa South Africa South Africa South Africa South Africa British Virgin Islands
South Africa South Africa South Africa South Africa | 100 100 50 100 42 100 100 100 74 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
100 100 60 100 | 100 100 50 100 50 100 100 100 74 100 100 100 100 100 100 - 100 100 100 100 100 100 100 100 100 100
100 100 60 100 | |
* Subsidiary companies of Nimag (Pty) Ltd ** Subsidiary companies of Mooiplaats Mining Ltd (previously Coal of Africa Limited *** Subsidiary company of Pan African Drilling Ltd **** Subsidiary company of Coal of Madagascar Ltd ***** Subsidiary companies of NuCoal Mining (Pty) Ltd | ||||
36. Events after the reporting period
Post year end , the following significant operational events took place:
• On 5 July 2011, the Department of Environmental Affairs ('DEA') granted authorisation in terms of section 24G of the South African National Environmental Management Act, 107 of 1998 ("NEMA")in respect of the Vele Colliery;
• On 29 July 2011, the Vele Colliery's Integrated Water Use License ('IWUL') was suspended in terms of section 148(2)(b) of the South African National Water Act, No 36 of 1998 due to an appeal to the Water Tribunal submitted by an NGO coalition on 28 July 2011;
• On 15 August 2011, the irrevocable undertakings from the vendor shareholders were obtained in terms of the Sale and Purchase Agreement for the acquisition of the shares in the Chapudi Coal Project and Related Exploration Properties in South Africa's Soutpansberg coal basin in the Limpopo province and the time for satisfaction of remaining conditions precedent was extended until 30 April 2012 to obtain the requisite regulatory approvals;
• On 19 August 2011, CoAL submitted a s11 application in respect of the Chapudi and Soutpansberg properties.
• On 1 September 2011, CoAL concluded a landmark agreement with the Department of Environmental Affairs ("DEA"), South African National Parks Board ("SANParks") and CoAL, paving the way for collaborative and responsible mine development in Limpopo Province.
There have been no other events between 30 June 2011 and the date of this report which necessitate adjustment to the statements of comprehensive income or statements of financial position at that date. | |||
Parent entity | |||
Year ended 30 June 2011 | Year ended 30 June 2010 | ||
$'000 | $'000 | ||
37. Parent entity financial information | |||
Summary financial information | |||
Non-current assets | 530,676 | 554,456 | |
Current assets | 9,679 | 62,490 | |
Total assets | 540,355 | 616,946 | |
Current liabilities | 7,271 | 32,815 | |
Total liabilities | 7,271 | 32,815 | |
Net assets | 533,084 | 584,131 | |
Shareholders' Equity | |||
Issued capital | 686,577 | 685,740 | |
Accumulated deficit | (346,030) | (165,814) | |
Reserves | 192,537 | 64,205 | |
533,084 | 584,131 | ||
Loss for the year | (180,215) | (139,486) | |
Total comprehensive loss | (180,215) | (139,486) | |
Independent auditors 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 ("the Company") which comprises the consolidated statement of financial position as at 30 June 2011, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated cash flow statement for the year ended on that date, a summary of significant accounting policies and other explanatory notes and the directors' declaration. The Group or consolidated entity comprises both the Company and the entities it controlled at the year's end or from time to time during the financial year.
Directors' Responsibility for the Financial Report
The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101: Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards (IFRS) ensures that the financial report, comprising the financial statements and notes, complies 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. These Auditing 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 judgment, 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 entity's preparation and fair presentation of the financial report 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 entity'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.
Independence
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, provided to the directors of Coal of Africa Limited, would be in the same terms if provided to the directors as at the date of this auditor's report.
Auditor's Opinion
In our opinion:
a. the financial report of Coal of Africa Limited is in accordance with the Corporations Act 2001, including:
·; giving a true and fair view of the consolidated entity's financial position as at 30 June 2011 and of its performance for the year ended on that date; and
·; complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and
b. the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.
Report on the Remuneration Report
We have audited the Remuneration Report as included in the Directors' Report for the year ended 30 June 2011. 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.
Auditor's Opinion
In our opinion, the Remuneration Report of Coal of Africa Limited for the year ended 30 June 2011 complies with Section 300A of the Corporations Act 2001.
DELOITTE TOUCHE TOHMATSU
Ross Jerrard
Partner