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Hwa - Hwange Colliery Company - The Company`s Audited Results For The

Release Date: 31/03/2008 17:59:48      Code(s): HWA
HWA - Hwange Colliery Company - The Company`s Audited Results For The           
                        Financial Year Ended 30 December 2006                   
HWANGE COLLIERY COMPANY LIMITED                                                 
(Incorporated in Zimbabwe)                                                      
Code: HWA & ZW0009011934                                                        
THE COMPANY`S AUDITED RESULTS FOR THE FINANCIAL YEAR ENDED 3O DECEMBER 2006     
INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2007                            
INFLATION ADJUSTED                                                              
                      2007                    2006                              
                      $                       $                                 
Revenue                22 149 079 823 045      20 536 443 540 468               
Cost of sales          (15 076 507 621 551)     (10 518 687 257 664)            
Gross profit           7 072 572 201 494       10 017 756 282 804               
Investment revenue     4 060 340 591 915       4 178 808 266 729                
Other gains and        5 252 051 553 818       6 203 800 009 489                
losses                                                                          
Marketing costs        (485 095 710 847)       (206 583 374 629)                
Administrative costs   (14 775 503 912 603)    (6 148 377 487 545)              
(Loss)/gain on net     (2 410 299 667 352)     13 559 709 470 910               
monetary position                                                               
(Loss)/profit from     (1 285 934 943 575)     27 605 113 167 758               
operations                                                                      
Finance cost           (2 650 590 100 322)     (1 307 266 643 223)              
Impairment             202 612 896 489         (202 612 896 489)                
reversal/(loss)                                                                 
(Loss)/profit before   (3 733 912 147 408)     26 095 233 628 046               
taxation                                                                        
Taxation               (1 435 076 042 592)     (606 588 406 195)                
(Loss)/profit after    (5 168 988 190 000)     25 488 645 221 851               
taxation                                                                        
Attributable           (28 370)                143 360                          
(loss)/earnings per                                                             
share                                                                           
- basic                                                                         
- diluted             (28 370)                143 360                           
Headline               (29 721)                143 429                          
(loss)/earnings per                                                             
share                                                                           
- basic                                                                         
- diluted             (29 721)                143 429                           
HISTORICAL COST                                                                 
                      2007                    2006                              
                      $                       $                                 
Revenue                1 645 362 456 374       13 258 615 530                   
Cost of sales          (1 203 287 719 120)     (6 280 319 545)                  
Gross profit           442 074 737 254         6 978 295 985                    
Investment revenue     1 182 532 008 158       1 921 294 085                    
Other gains and        17 141 071 266 459      11 087 502 907                   
losses                                                                          
Marketing costs        (43 719 213 159)        ( 179 067 423)                   
Administrative costs   (1 428 793 166 493)     (5 375 134 818)                  
(Loss)/gain on net     -                       -                                
monetary position                                                               
(Loss)/profit from     17 293 165 632 219      14 432 890 736                   
operations                                                                      
Finance cost           (361 667 888 759)       ( 852 087 770)                   
Impairment             -                       -                                
reversal/(loss)                                                                 
(Loss)/profit before   16 931 497 743 460      13 580 802 966                   
taxation                                                                        
Taxation               (3 513 881 658 707)     (3 475 201 955)                  
(Loss)/profit after    13 417 616 084 753      10 105 601 011                   
taxation                                                                        
Attributable           73 642                  57                               
(loss)/earnings per                                                             
share                                                                           
- basic                                                                         
- diluted             73 642                  57                                
Headline               73 636                  56                               
(loss)/earnings per                                                             
share                                                                           
- basic                                                                         
- diluted             73 636                  56                                
BALANCE SHEET AT 31 DECEMBER 2007                                               
INFLATION ADJUSTED                                                              
2007                    2006                              
                      $                       $                                 
ASSETS                                                                          
Non Current Assets                                                              
Property, plant and    377 989 579 982 962     25 328 428 852 988               
equipment                                                                       
Investment property    14 349 000 000 000      7 692 226 800 000                
Investments in         10 350 024              10 350 024                       
associates                                                                      
Investments in         -                       100 795                          
subsidiaries                                                                    
                      392 338 590 332 986     33 020 666 103 807                
Current Assets                                                                  
Pre-stripped           14 521 998 918 742      12 038 323 668 246               
overburden                                                                      
Inventory              1 724 996 562 964       19 033 533 200 676               
Recoverable foreign    -                       3 023 888 890 105                
loans                                                                           
Receivables and        344 399 699 304         3 322 197 255 714                
prepayments                                                                     
Short term loans       -                       15 148 382                       
receivable                                                                      
Other financial        3 688 272 000 000       -                                
assets                                                                          
Bank and cash          198 466 473 382         276 482 119 672                  
balances                                                                        
                      20 478 133 654 392      37 694 440 282 795                
Total assets           412 816 723 987 378     70 715 106 386 602               
EQUITY AND                                                                      
LIABILITIES                                                                     
Capital and reserves                                                            
Share capital          33 775 150 872 449      33 775 150 745 822               
Capital reserves       279 018 934 955 243     17 116 615 828 688               
Retained               (3 654 429 286 367)     1 514 558 903 633                
(loss)/profit                                                                   
                      309 139 656 541 325     52 406 325 478 143                
Non current                                                                     
liabilities                                                                     
Loans payable          -                       34 274 495 666                   
Foreign lease          -                       454 786 875 236                  
liability                                                                       
Deferred taxation      101 029 735 445 587     8 767 372 790 066                
                      101 029 735 445 587     9 256 434 160 968                 
Current liabilities                                                             
Loans payable          200 000 000 000         107 483 418 101                  
Foreign lease          145 298 451 760         547 257 945 903                  
liability                                                                       
Foreign loans payable  694 158 674 794         3 031 993 235 914                
Payables               1 603 932 096 497       5 286 180 053 844                
Overdrafts             3 940 474 956           78 374 462 941                   
Current tax liability  2 302 459               1 057 630 788                    
                      2 647 332 000 466       9 052 346 747 491                 
Total equity and          412 816 723 987 378     70 715 106 386 602            
liabilities                                                                     
HISTORICAL COST                                                                 
                  2007                    2006                                  
$                       $                                     
ASSETS                                                                          
Non Current                                                                     
Assets                                                                          
Property, plant    370 470 406 405 048     2 409 350 295                        
and equipment                                                                   
Investment         14 349 000 000 000      11 600 000 000                       
property                                                                        
Investments in     15 608                  15 608                               
associates                                                                      
Investments in     -                       152                                  
subsidiaries                                                                    
384 819 406 420 656     14 009 366 055                        
Current Assets                                                                  
Pre-stripped       388 283 684 703         1 986 000 645                        
overburden                                                                      
Inventory          583 792 306 364         2 382 220 896                        
Recoverable        -                       4 560 072 400                        
foreign loans                                                                   
Receivables and    344 399 699 304         5 009 926 146                        
prepayments                                                                     
Short term loans   -                       22 844                               
receivable                                                                      
Other financial    3 688 272 000 000       -                                    
assets                                                                          
Bank and cash      198 466 473 382         416 939 421                          
balances                                                                        
                  5 203 214 163 753       14 355 182 352                        
Total assets       390 022 620 584 409     28 364 548 407                       
EQUITY AND                                                                      
LIABILITIES                                                                     
Share capital      182 200                 177 795                              
Capital reserves   275 044 163 659 692     5 694 147                            
Retained           13 428 039 082 918      10 422 998 165                       
(loss)/profit                                                                   
                  288 472 202 924 810     10 428 870 107                        
Non current                                                                     
liabilities                                                                     
Loans payable      -                       51 686 483                           
Foreign lease      -                       685 825 820                          
liability                                                                       
Deferred taxation  98 903 085 659 133      3 547 083 547                        
                                                                                
                  98 903 085 659 133      4 284 595 850                         
Current                                                                         
liabilities                                                                     
Loans payable      200 000 000 000         162 086 699                          
Foreign lease      145 298 451 760         825 273 661                          
liability                                                                       
Foreign loans      694 158 674 794         4 572 293 882                        
payable                                                                         
Payables           1 603 932 096 497       7 971 643 351                        
Overdrafts         3 940 474 956           118 189 933                          
Current tax        2 302 459               1 594 924                            
liability                                                                       
                  2 647 332 000 466       13 651 082 450                        
Total equity and   390 022 620 584 409     28 364 548 407                       
liabilities                                                                     
CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2007                         
INFLATION ADJUSTED                                                              
2007                  2006                                   
                   $                     $                                      
CASH FLOWS FROM                                                                 
OPERATING                                                                       
ACTIVITIES                                                                      
(Loss)/Profit from  (1 285 934 943 575)   27 605 113 167 758                    
operations                                                                      
Adjustment for non-                                                             
cash items                                                                      
- Depreciation     1 827 918 048 652     1 250 669 695 300                      
- Impairment       202 612 896 489                                              
reversal                                                                        
- Fair value       (3 674 896 568 895)   -                                      
adjustment on other                                                             
financial assets                                                                
- Investment in    100 795               -                                      
subsidiaries -                                                                  
write -off                                                                      
Operating cash flow (9 587 073 666 534)   21 751 801 883 632                    
before changes in                                                               
working capital                                                                 
Decrease/(increase) 17 308 536 637 712    (15 794 568 956 943)                  
in inventory                                                                    
(Increase)/decrease (2 483 675 250 496)   (3 488 950 929 833)                   
in pre-strip                                                                    
overburden                                                                      
Decrease/(increase) 3 023 888 890 105     6 130 593 571 777                     
in recoverable                                                                  
foreign loans                                                                   
Decrease/(increase) 2 977 797 556 410     970 548 985 244                       
in receivables                                                                  
Decrease in short   15 148 382            -                                     
term loan                                                                       
receivables                                                                     
(Decrease)/increase (3 682 247 957 347)   1 693 559 837 552                     
in payables                                                                     
Cash flow utilised  7 557 241 358 232     11 262 984 391 429                    
in operations                                                                   
Finance cost        (2 650 590 100 322)   (1 307 266 643 223)                   
Income tax paid     (1 055 328 329)       (88 253 970 453)                      
CASH FLOWS FROM                                                                 
INVESTING                                                                       
ACTIVITIES                                                                      
Increase in other    (13 375 431 105)     115 402 970 760                       
financial assets                                                                
Purchase of          (1 761 742 526 473)   (3 820 590 431 002)                  
Property, plant and                                                             
equipment                                                                       
Net cash flows from (1 775 117 957 578)   (3 705 187 460 242)                   
investing                                                                       
activities                                                                      
CASH FLOWS FROM                                                                 
FINANCING                                                                       
ACTIVITIES                                                                      
Shares issued       126 627               -                                     
Increase/(decrease) 2 279 087 331         -                                     
in share premium                                                                
(Decrease)/increase (3 136 338 844 266)   (6 142 206 335 598)                   
in loans                                                                        
Net cash flows from (3 134 059 630 308)   (6 142 206 335 598)                   
financing                                                                       
activities                                                                      
(Decrease)/increase (3 581 658 305)       20 069 981 913                        
in cash and cash                                                                
equivalents                                                                     
Represented by:                                                                 
Cash and cash       198 107 656 731       178 037 674 818                       
equivalents at                                                                  
beginning of the                                                                
year                                                                            
Cash and cash       194 525 998 426       198 107 656 731                       
equivalents at end                                                              
of the year                                                                     
(Decrease)/increase (3 581 658 305)       20 069 981 913                        
in cash and cash                                                                
equivalents                                                                     
HISTORICAL COST                                                                 
                   2007                  2006                                   
                   $                     $                                      
CASH FLOWS FROM                                                                 
OPERATING                                                                       
ACTIVITIES                                                                      
(Loss)/Profit from  17 293 165 632 219    14 432 890 736                        
operations                                                                      
Adjustment for non-                                                             
cash items                                                                      
- Depreciation     287 360 972           100 447 189                            
- Impairment                                                                    
reversal                                                                        
- Fair value       (14 337 400 000 000)  (11 599 982 120)                       
adjustment on                                                                   
investment property                                                             
- Fair value       (3 687 918 540 600)   -                                      
adjustment on other                                                             
financial assets                                                                
- Investment in    152                   -                                      
subsidiaries -                                                                  
write -off                                                                      
Operating cash flow (731 865 547 257)     2 933 355 805                         
before changes in                                                               
working capital                                                                 
Decrease/(increase) (581 410 085 468)     (2 225 370 972)                       
in inventory                                                                    
(Increase)/decrease (386 297 684 058)     (1 813 624 867)                       
in pre-strip                                                                    
overburden                                                                      
Decrease/(increase) 4 560 072 400         (3 560 509 100)                       
in recoverable                                                                  
foreign loans                                                                   
Decrease/(increase) (339 389 773 158)     (4 541 229 239)                       
in receivables                                                                  
Decrease in short   22 844                -                                     
term loan                                                                       
receivables                                                                     
(Decrease)/increase 1 595 960 453 146     7 580 635 873                         
in payables                                                                     
Cash flow utilised  (438 442 541 551)     (1 626 742 500)                       
in operations                                                                   
Finance cost        (361 667 888 759)     (852 087 770)                         
Income tax paid     684 691               (9 421 844)                           
Cash flows utilised (800 109 745 619)     (2 488 252 114)                       
from operating                                                                  
activities                                                                      
CASH FLOWS FROM                                                                 
INVESTING                                                                       
ACTIVITIES                                                                      
Increase in other   (353 459 400)         -                                     
financial assets                                                                
Purchase of         (38 548 816 196)      (2 402 998 421)                       
Property, plant and                                                             
equipment                                                                       
Net cash flows from (839 012 021 215)     (4 891 250 535)                       
investing                                                                       
activities                                                                      
CASH FLOWS FROM                                                                 
FINANCING                                                                       
ACTIVITIES                                                                      
Shares issued       4 405                 -                                     
Increase/(decrease) 79 282 895            -                                     
in share premium                                                                
(Decrease)/increase 1 033 159 960 009     5 170 560 374                         
in loans                                                                        
Net cash flows from 1 033 239 270 153     5 170 560 374                         
financing                                                                       
activities                                                                      
(Decrease)/increase 194 227 248 938       279 309 839                           
in cash and cash                                                                
equivalents                                                                     
Represented by:                                                                 
Cash and cash       298 749 488           19 439 649                            
equivalents at                                                                  
beginning of the                                                                
year                                                                            
Cash and cash       194 525 998 426        298 749 488                          
equivalents at end                                                              
of the year                                                                     
(Decrease)/increase 194 227 248 938       279 309 839                           
in cash and cash                                                                
equivalents                                                                     
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2007              
INFLATION ADJUSTED                                                              
           Share           Capital          Retained        Total               
           Capital         Reserves         (loss)/profits  $                   
           $               $                $                                   
Balance at  33 775 150 745  17 116 615 828   (23 974 086     26 917 680 256     
1 January   825             688              318 218)        295                
2006                                                                            
Profit for  -               -                25 488 645 221  25 488 645 221     
the year                                     851             851                
Balance at  33 775 150 745  17 116 615 828   1 514 558 903   52 406 325 478     
31 December 825             688              633             146                
2006                                                                            
Balance at  33 775 150 745  17 116 615 828   1 514 558 903   52 406 325 478     
1 January   825             688              633             146                
2007                                                                            
Loss for    -               -                (5 168 988 190  (5 168 988 190     
the year                                     000)            000)               
Revaluation                 352 727 326      -               352 727 326        
           -               652 153                          652 153             
Issue of                                                                        
share                                                                           
capital                                                                         
under                                                                           
share       126 627         2 279 087 331    -               2 279 213 958      
option                                                                          
scheme                                                                          
Transfer to -               (90 827 286      -               (90 827 286        
deferred                    612 930)                         612 930)           
tax                                                                             
Balance at  33 775 150 872  279 018 934      (3 654 429 286  309 139 656        
31 December 452             955 243          367)            541 328            
2007                                                                            
HISTORICAL COST                                                                 
           Share      Capital      Retained     Total                           
           Capital    Reserves     Earnings     $                               
           $          $            $                                            
Balance at  177 795    5 694 147    317 397 154  323 269 096                    
1 January                                                                       
2006                                                                            
Profit for  -          -            10 105 601   10 105 601                     
the year                            011          011                            
Balance at  177 795    5 694 147    10 422 998   10 428 870                     
31 December                         165          107                            
2006                                                                            
Balance at  177 795    5 694 147    10 422 998   10 428 870                     
1 January                           165          107                            
2007                                                                            
Profit for  -          -            13 417 616   13 417 616                     
the year                            084 753      084 753                        
Revaluation -          370 429 735  -            370 429 735                    
                      599 529                   599 529                         
Issue of                                                                        
share                                                                           
capital                                                                         
under                                                                           
share       4 405      79 282 895   -            79 287 300                     
option                                                                          
scheme                                                                          
Transfer to -          (95 385 656  -            (95 385 656                    
deferred               916 879)                  916 879)                       
tax                                                                             
Balance at  182 200    275 044 163  13 428 039   383 857 859                    
31 December            659 692      082 918      841 689                        
2007                                                                            
CHAIRMAN`S STATEMENT                                                            
It is my pleasure to present the Company results for the financial year ended   
31 December 2007.                                                               
There were challenges in the operating environment as a result of the           
prevailing hyperinflation and unfavourable product prices for the greater part  
of the year. Foreign currency shortages negatively affected the Company`s       
recapitalisation and plant and equipment maintenance programmes.                
The interest rates on the open market were high during the period under review  
thus rendering local borrowings unfavourable.                                   
The demand for coal and coke products remained high during the year, coupled    
with the increases in prices of commodities on the international markets.       
OPERATIONS                                                                      
The Company`s mining operations were concentrated mainly on the JKL Opencast    
and 3 Main Underground Mines. The Chaba Opencast Mine was maintained as a       
strategic pit.                                                                  
A Load Haul and Dump (LHD) truck was imported during the year for use at the    
underground mine. The company carried out refurbishment of the caterpillar      
equipment and the coal-handling systems with limited assistance of both foreign 
and local companies. However, intermittent breakdowns of the aged equipment     
constrained the Company`s operations.                                           
The Company experienced skills losses, mainly to neighbouring countries.        
Hwange Colliery Company entered into a medium-term contract mining arrangement  
with Clidder Minerals (Private) Limited to boost production capacity, while the 
long-term recapitalisation efforts are pursued.                                 
TRADING PERFORMANCE                                                             
Total coal and coke sales for the year amounted to 2 071 526 tonnes and         
compared favourably with the 2 070 358 tonnes achieved the previous year.       
The Hwange Coking Coal (HCC) and Hwange Industrial Coal (HIC) sales amounted to 
541 357 tonnes and were slightly below the tonnage of 566 976 tonnes achieved   
the previous year.                                                              
HPS coal delivered to Zimbabwe Power Company (ZPC)`s Hwange Power Station       
amounted to 1 315 799 tonnes compared to 1 330 553 tonnes delivered in 2006.    
Coke oven gas supply to Hwange Power Station was                                
7 152 650 Nm3 compared to 17 662 576 Nm3 supplied the previous year. The gas    
pipeline was on major breakdown for the greater part of the year.               
Coke sales of 213 370 tonnes were well above the 173 831 tonnes achieved the    
previous year. Coke sales accounted for 42% of annual turnover.                 
Export sales amounted to 147 284 tonnes as compared to 115 301 tonnes for the   
previous year, representing a 28% increase. The bulk of the coke and coal       
exports were dispatched to the Zambian and Democratic Republic of Congo         
markets.                                                                        
FINANCIAL RESULTS                                                               
The Company complied with the International Accounting Standard (IAS) 29        
(Financial Reporting in Hyper Inflationary Economies). The financial statements 
and corresponding figures for the previous period have been restated to take    
account of changes in the purchasing power of the Zimbabwean dollar.            
(i)  Historical Cost Accounting Results                                         
The Company made a turnover of $1.645 trillion and this was above the previous  
year`s turnover of $13 billion.                                                 
The attributable profits were $13.4 trillion, as compared to the previous       
year`s $10.1 billion.                                                           
There was a fair value adjustment of $14.3 trillion, arising from the           
revaluation of investment properties in Harare and Bulawayo. There was another  
fair value adjustment on the shares held in First Mutual Life, amounting to     
$3.6 trillion.                                                                  
The property, plant and equipment increased from $2.4 billion in 2006 to $370   
trillion, as a result of the revaluation exercise undertaken by CB Richard      
Ellis Valuers.                                                                  
Receivables and prepayments increased from $5 billion in 2006 to $344.4         
billion. The Zimbabwe Iron and Steel Company and Zimbabwe Power Company debts   
of $175 billion and $148 billion comprised 51% and 43% of receivables,          
respectively.                                                                   
The current liabilities increased from $13.7 billion to $2.6 trillion, mainly   
due to the revaluation of the loans from Commonwealth Development Bank (CDC)    
and West LB and finance facilities from China North Industries Corporation and  
Atlas Copco. Payables accumulated to $1.6 trillion by year end compared to $8   
billion payable as at end of last year. A loan facility of $200 billion was     
accessed through the Reserve Bank of Zimbabwe for working capital.              
The Company continued to seek funding for the recapitalisation programme, which 
is meant to boost production capacity.                                          
There were cash flow problems during the year due to low product prices,        
excessively high costs of inputs as well as late payments by major customers.   
(ii) Inflation-Adjusted Accounting Results.                                     
The Company`s inflation-adjusted revenue increased from $20.5 trillion in 2006  
to $22 trillion in 2007. The Company made an operating loss of $1.3 trillion as 
compared to an operating profit of $27.6 trillion for the same period the       
previous year.                                                                  
The Company recorded a net loss after tax of $5.2 trillion, compared to a net   
profit of $25.5 trillion, realised for the same period the previous year.       
DIVIDEND                                                                        
The Board has resolved not to consider payment of a dividend, in view of the    
challenges in the operating environment and the ongoing recapitalisation        
programme being pursued by the Company.                                         
QUALITY, SAFETY, HEALTH AND ENVIRONMENT                                         
The Company successfully went through two (2) ISO 9001:2000 Quality Management  
System surveillance audits during the year.                                     
The zero tolerance safety ensured an accident- free working environment. The    
Company had no fatality during the year. The quality of ground water and        
surface water in public streams remained good throughout the year. Incidents of 
pollution by Company activities were not experienced for the period under       
review.                                                                         
The HIV and AIDS education campaigns targeted at the workforce and the          
community were done to raise the level of awareness and good moral and safe     
behaviour.                                                                      
OUTLOOK                                                                         
Acquisition of mining equipment and refurbishment of major machinery will be    
undertaken during 2008 and this will boost production.                          
The procurement of the coal fines recovery plant is in progress. This plant     
will significantly improve coking coal availability to the market.              
Contract mining will continue as a short-term strategy to ensure coal           
availability while concluding recapitalisation programmes.                      
The demand for both coal and coke is expected to remain firm in both the        
domestic and export markets. The northern market is expected to remain buoyant  
and with opportunity for growth. The Company is pushing for an export drive in  
order to improve foreign currency inflows and debt service capacity.            
The Company is implementing a new information technology system that will aid   
management in efficient and effective decision making.                          
The Board and management of Hwange Colliery Company is positive that the        
current recapitalisation initiatives will yield improved and sustainable coal   
and coke availability to the domestic and international markets. The            
fundamental guiding principle in all Company activities is the optimisation of  
shareholders` value.                                                            
DIRECTORATE                                                                     
Mr T. Kwashirai resigned from the Board on 29 June 2007. On behalf of the       
Company, I would like to thank                                                  
Mr Kwashirai for his valuable contributions to Hwange Colliery Company Limited. 
Mr A. M. Ngapo was appointed non- executive director of the Company with effect 
from 01 July 2007and Mr F. Moyo was appointed Managing Director on 11 July      
2007. I welcome the new directors on board.                                     
APPRECIATION                                                                    
I would like to express sincere appreciation to my fellow Directors who,        
throughout the year, worked tirelessly to ensure the Company tackles its        
challenges and set Hwange Colliery Company on the growth path.                  
The Board, management and staff demonstrated commitment, despite a number of    
challenges in the operating environment.                                        
T. Savanhu                                                                      
CHAIRMAN                                                                        
19 March 2008                                                                   
BASIC EARNINGS PER SHARE (HISTORICAL COST)                                      
The calculations of basic earnings per share is based on profit after taxation  
of $13.4 trillion ($10.1 trillion in 2006) and on 182 199 850 (177 795 000 in   
2006) weighted average ordinary shares in issue during the year.                
ANNUAL REPORT AND ACCOUNTS AND NOTICE OF GENERAL MEETING                        
The annual reports and accounts for the year ended 31 December 2007 will be     
distributed to members on or before 31 Mach 2008 and the Annual General Meeting 
will be held on Friday, 27 June 2008.                                           
By Order of the Board                                                           
T.K. Ncube                                                                      
SECRETARY                                                                       
19 March 2008                                                                   
STATEMENT OF ACCOUNTING POLICIES FOR THE YEAR ENDED 31 DECEMBER 2007            
1.   ACCOUNTING POLICIES                                                        
The principal accounting policies applied in the preparation of                 
these financial statements are set out below.                                   
These policies have been consistently applied to all the years                  
presented, unless otherwise stated.                                             
1.1-ACCOUNTING POLICIES                                                         
The financial statements are presented in Zimbabwe dollars and                  
are prepared in accordance with and comply with International                   
Financial Reporting Standards.  They are based on the historical cost and are   
restated to take account of the effects of inflation in accordance with the     
International Accounting Standard (IAS) 29:                                     
Financial reporting in Hyperinflationary Economies.                             
The existence of certain hyperinflationary conditions as identified by IAS 29   
was formally identified by Public Accountants and Auditors board in November    
1999.  The application of IAS 29 was made effective for the financial periods   
beginning on or after 1 January 2000.                                           
International Accounting Standard (IAS) 29, "Financial Reporting in             
Hyperinflationary Economies" requires that the financial statements prepared in 
the currency of the hyperinflationary economy be stated in terms of the         
measuring unit current at the balance sheet date, and that corresponding        
figures for the previous period be restated in the same                         
terms.  One characteristic that necessitates the application of IAS 29 is a     
cumulative three-year inflation rate approaching or exceeding 100%.             
The inflation adjusted results were calculated by means of conversion factors   
derived from the Zimbabwe consumer price index (cpi) given below:               
Dates              Indices             Conversion Factors                       
31 December 2007   441 490 130.8        1.0000                                  
31 December 2006   665 774.1           663.1230                                 
31 December 2005    48 205.6           9158.4822                                
The main procedures applied for the above mentioned restatement are as follows: 
Financial statements prepared in the currency of a                              
hyperinflationary economy are stated in terms of the measuring unit current at  
the balance sheet date, and corresponding figures for the previous period are   
restated in the same terms. Monetary assets and liabilities that are carried at 
the balance sheet date are not restated because they are already expressed in   
terms of the monetary unit current at the balance sheet date. Non-monetary      
assets and liabilities that are                                                 
not carried at amounts current at the balance sheet date and components of      
shareholders` equity are restated by applying the relevant monthly conversion   
factors. Additions to equipment in the year of acquisition are restated using   
the relevant monthly conversion factors. Comparative financial                  
statements are restated using general inflation indices in terms of the         
measuring unit current at the latest balance sheet date. All items in the       
income statement are restated by applying the relevant monthly, or year-end     
conversion factors.                                                             
1.2 INVESTMENT IN ASSOCIATES                                                    
Associates are all entities over which the Company has significant influence    
but not control, generally accompanying a shareholding of between 20% and 50%   
of the voting rights. Investments in associates are accounted for using the     
equity method of accounting and are initially recorded at cost. The Company`s   
investment in associates includes goodwill identified on acquisition, net of    
any accumulated impairment loss.                                                
The Company`s share of its associates post acquisition profits or loses is      
recognised in the income statement, and its share of post acquisition movements 
in reserves is recognised in reserves and the cumulative post acquisition       
movements are adjusted against the carrying amount of the investment. When      
the Company`s share of loses in  an associate equals or exceeds its interest in 
the associate, including any other unsecured receivables, the Company does not  
recognise further loses, unless it has incurred obligations or made payments    
on behalf of the associate.                                                     
Unrealised gains on transaction between the Company and its associates are      
eliminated to the extent of the Company`s interest in the associates.           
Unrealised losses are also eliminated unless the transaction provides evidence  
of an impairment of the asset transferred. Accounting policies of the           
associates have been changed where necessary to ensure consistence with the     
policies adopted                                                                
by the Company.Dilution gains and loses arising in investments in associates    
are recognised in the income statement.                                         
1.3 REVENUE RECOGNITION                                                         
Revenue is measured at the fair value of the consideration received or          
receivable.                                                                     
Revenue is reduced for customer returns and Value Added Tax and discounts.      
1.3.1 Sale of goods                                                             
Revenue from the sale of goods is recognised when all the following conditions  
are satisfied:                                                                  
-the Company has transferred to the buyer the significant risks and rewards of  
ownership of the goods;                                                         
-the Company 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 entity; and                                                    
-the costs incurred or to be incurred in respect of the transaction can be      
measured reliably.                                                              
1.3.2 Dividend income                                                           
Dividend revenue from investments is recognised when the shareholder`s right to 
receive payment has been established.                                           
1.3.3 Interest income                                                           
Interest revenue 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.                     
1.4 PROPERTY, PLANT AND EQUIPMENT                                               
Freehold land and buildings comprise mainly staff houses and offices. Freehold  
land and buildings are shown at fair value, based on periodic, but at least     
annually, valuations by external independent valuers, less subsequent           
depreciation for buildings. All other property, plant and equipment is stated   
at historical                                                                   
cost/valuation less depreciation and impairment losses. Historical cost         
includes expenditure that is directly attributable to the acquisition of the    
items.                                                                          
Subsequent costs are included in the asset`s carrying amount or recognised as a 
separate asset, as appropriate, only when it is probable that future economic   
benefits associated with the item will flow to the group and the cost of the    
item                                                                            
can be measured reliably. The carrying amount of the replaced part is           
derecognised.                                                                   
All other repairs and maintenance are charged to the income statement during    
the financial period in which they are incurred.                                
Increases in the carrying amount arising on revaluation of land and buildings   
are credited to capital reserves in shareholders` equity. Decreases that offset 
previous                                                                        
increases of the same asset are charged against capital reserves directly in    
equity;                                                                         
all other decreases are charged to the income statement. Each year the          
difference between depreciation based on the revalued carrying amount of the    
asset charged to the income statement and depreciation based on the asset`s     
original cost is                                                                
transferred from `capital reserves` to `retained earnings`.                     
Depreciation Land, capital work in progress and pre-stripped overburden are not 
depreciated.                                                                    
All other property, plant and equipment are depreciated on a straight line      
basis or amortised at rates estimated to write-off the cost or valuation of     
such assets over their expected useful lives.                                   
The expected useful lives are as follows                                        
Buildings                                 6 to 40 years                         
Permanent works                           7 to 40 years                         
Plant, machinery and movable equipment    5 to 30 years                         
Motor vehicles                            5 years                               
Plant, machinery and permanent works used for opencast mining written off on    
the basis of tonnages mined.                                                    
Opencast pre-stripped overburden costs written off on the basis of tonnages     
Mined.                                                                          
Coal mining and other rights amortised over the estimated life of coal          
reserves.                                                                       
Gains and losses on disposal of property, plant and equipment are determined by 
reference to their carrying amount and are taken into account in determining    
operating profit. On disposal of revalued assets, amounts in capital reserves   
relating to that asset are transferred to retained earnings.                    
Interest costs on borrowings to finance the construction of property, plant and 
equipment are capitalised during the period of time that is required to         
complete and prepare the property for its intended use, as part of the cost of  
the asset.                                                                      
1.5 IMPAIRMENT OF NON-FINANCIAL ASSETS                                          
Assets that have an indefinite useful life, for example goodwill, are not       
subject to amortisation and are tested annually for impairment. Assets that are 
subject to amortisation are reviewed for impairment whenever events or          
changes in circumstances indicate that the carrying amount may not be           
recoverable.                                                                    
An impairment loss is recognised for the amount by which the asset`s carrying   
amount exceeds its recoverable amount. The recoverable amount is the higher of  
an asset`s fair value less costs to sell and value in use. For the purposes of  
assessing impairment, assets are grouped at the lowest levels for which there   
are separately identifiable cash flows (cash-generating units). Non-financial   
assets other than goodwill that                                                 
suffered an impairment are reviewed for possible reversal of the impairment at  
each reporting date.                                                            
1.6 INVESTMENT PROPERTIES                                                       
Investment property, which is property held to earn rentals and/or for capital  
appreciation, is measured initially at its cost, including transaction costs.   
Subsequent to initial recognition, investment property is measured at fair      
value determined by external independent valuers. Gains and losses arising from 
changes in the fair value of investment property are included in profit or loss 
in the period in which they arise.                                              
On disposal of an investment property, the difference between the net disposal  
proceeds and the carrying amount is charged or credited to the income           
statement; any amounts on capital reserves relating to that investment property 
are transferred to retained earnings.                                           
1.7 FINANCIAL INSTRUMENTS                                                       
Financial instruments are initially recognised using trade date accounting      
method.                                                                         
Financial instruments are initially measured at cost, which includes            
transaction costs. Subsequent to initial recognition these  instruments are     
measured as set out below:                                                      
1.7.1 Investments                                                               
Marketable securities are carried at market value, which is calculated by       
reference to quoted selling prices at the date of business on the balance sheet 
date. Other investments are shown at fair value. Fair value adjustments are     
recognised in the income statement. Changes in fair value of investments        
designated as available for sale are recognised directly in equity.             
1.7.2 Loans and receivables                                                     
Trade receivables are carried at anticipated realisable value. An estimate is   
made for doubtful receivables based on a review of all outstanding amounts at   
the year end. Bad debts are written off during the year in which they are       
identified.                                                                     
1.7.3 Cash and cash equivalents. For the purposes of the cash flow statement,   
cash and cash equivalents comprise cash on hand, deposits held on call with     
banks, and investments in money market instruments, net of bank overdrafts. In  
the balance sheet, bank overdrafts are included in borrowings and current       
liabilities.                                                                    
1.8 FOREIGN CURRENCY TRANSACTIONS AND TRANSLATIONS                              
Foreign currency transactions are translated into the functional currency using 
the exchange rates prevailing at the dates of the transactions. Foreign         
exchange gains and losses resulting from the settlement of such transactions    
and from the translation at year-end exchange rates of monetary assets and      
liabilities denominated in foreign currencies are recognised in the income      
statement.                                                                      
1.9 OPENCAST PRE-STRIPPED OVERBURDEN                                            
Pre-stripped overburden represents the cost of overburden removed to expose     
coal and is capitalised during the course of development. The portion relating  
to reserves expected to be mined in the next twelve months is transferred to    
current assets and is charged to production as the coal is mined.               
1.10 INVENTORIES                                                                
Inventories are stated at the lower of cost and net realisable value. The cost  
of consumable stores is determined using the weighted average cost method. The  
cost of finished goods is determined on an average cost of production basis.    
Net realisable value is the estimated selling price in the ordinary course of   
business, less applicable variable selling expenses.                            
1.11 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. 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 income statement within `selling and    
marketing costs`. When a trade receivable is uncollectible, it is written off   
against the allowance account for trade receivables. Subsequent recoveries of   
amounts previously written off are credited against `selling and marketing      
costs` in the income statement.                                                 
1.12 TAXATION                                                                   
Income tax expense represents the sum of the tax currently payable and deferred 
tax.                                                                            
Current tax                                                                     
The tax currently payable is based on taxable profit for the year. Taxable      
profit differs from profit as reported in the consolidated income statement     
because it excludes items of income or expense that are taxable or deductible   
in other years and it further excludes 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 by the balance sheet date.      
Deferred tax                                                                    
Deferred income tax is provided, using the liability method, for all temporary  
differences arising between the tax bases of assets and liabilities and their   
carrying values for financial reporting purposes. Currently enacted tax rates   
are used to determine deferred income tax.                                      
The principal temporary differences arise from depreciation on property, plant  
and equipment, revaluations of certain non-current assets and tax losses        
carried forward. Deferred tax assets relating to the carry forward of unused    
tax losses are recognised to the extent that it is probable that future taxable 
profit will be available against which the unused tax losses can be utilised.   
1.13 LEASES                                                                     
Leases of property, plant and equipment where the Company assumes substantially 
all the benefits and risks of ownership are classified as finance leases.       
Finance leases are capitalised at the estimated present value of the underlying 
lease payments. Each lease payment is allocated between the liability and       
finance charges so as to achieve a constant rate on the finance balance         
outstanding. The corresponding rental obligations, net of finance charges, are  
included in other long-term payables. The interest element of the finance       
charge is charged to the income statement over the lease period. The property,  
plant and equipment acquired under finance leasing contracts is depreciated     
over the useful life of the asset.                                              
Leases of assets under which all the risks and rewards of ownership are         
effectively retained by the lessor are classified as operating leases. Payments 
made under operating leases are charged to the income statement on a straight-  
line basis over the period of the lease.                                        
When an operating lease is terminated before the lease period has expired, any  
payment required to be made to the lessor by way of penalty is recognised as an 
expense in the period in which termination takes place.                         
1.14 EMPLOYEE BENEFITS                                                          
Pension and retirement schemes                                                  
The Company is a member of the Mining Industry Pension Fund which is            
independently administered as a defined contribution scheme. All full time      
permanent employees are members and the scheme provides for contributions by    
both employer and employee. The Company`s contributions to the defined          
contribution pension plans are charged to the income statement in the year to   
which they relate. The Company and all employees must contribute to the         
National Social Security Authority statutory pension and benefits scheme, which 
is a defined contribution scheme.                                               
Equity compensation benefits                                                    
The stock option programme allows employees to acquire shares of the Company.   
The option exercise price equals the market price of the underlying shares at   
the date of the grant and consequently no compensation cost or obligation is    
recognised. When the options are exercised equity is increased by the amount of 
the proceeds received.                                                          
1.15 TRADE PAYABLE                                                              
Trade payables are recognised initially at fair value and subsequently measured 
at amortised cost using the effective interest method.                          
1.16 PROVISIONS                                                                 
Provisions are recognised when the Company has a present legal or constructive  
obligation as a result of past events, it is probable that an outflow of        
resources embodying economic benefits will be required to settle the            
obligations, and a reliable estimate of the amount of the obligations can be    
made.                                                                           
Employee entitlements to annual leave and long service leave are recognised     
when they accrue to employees. A provision is made for the estimated liability  
for annual leave and long service leave as a result of services rendered by     
employees up to balance sheet date.                                             
Sponsor                                                                         
Sasfin Capital                                                                  
A division of Sasfin Bank Limited                                               
Johannesburg                                                                    
31 March 2008                                                                   
Date: 31/03/2008 17:59:46 Supplied by www.sharenet.co.za                     
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