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HWANGE COLLIERY COMPANY LIMITED - Abridged audited financial results For the year ended 31 December 2014

Release Date: 22/04/2015 15:20:00      Code(s): HWA     
(Incorporated in Zimbabwe)
ISIN Number: ZW 0009011934

For the year ended 31 December 2014


Production Volumes UP 23%

2014                 2013
1 802 362 tonnes     1468 566 tonnes

Sales Volumes UP 6%

2014                 2013
1 691 981 tonnes     1 602 187 tonnes

Revenue UP 1%

2014                 2013  
$72.0 Million        $71.5 Million        

Recapitalisation UP 65%

2014                 2013
$31  Million         $10 Million

Loss (excluding non-recurring items) DOWN 25%

2014                 2013
$23.8 Million        $31.6 Million

Chairman's Statement

On behalf of the Board of Directors, I present to the Shareholders, the audited financial
results for Hwange Colliery Company Limited for the year ended 31 December 2014.

Operating environment
The economic environment for the year under review remained very challenging for
business in general, and particularly impacted adversely on the financial performance
of the Company.

The Zimbabwean economy grew by 3.1% and was below the initial projection of 6.1%
that was subsequently revised to 4.4%. The further decrease of the capacity utilization
from 39% in 2013 to 36% in 2014 meant that the productive sectors experienced
low business activity. This coupled with deflation exerted price pressure across the
high margin products against the background of tight liquidity conditions and the
depreciation of the South African rand against the major trading currencies.

The persistent liquidity challenges and the legacy debts slowed down the Company's
effort to bring up to date staff salaries. Staff salaries therefore remained in arrears for
periods ranging from between 6-12 months for the lower grades and more than 12
months for managerial staff. At planned levels of production and sales, the backlog of
salaries will be cleared in the second half of 2015.

The persistent liquidity challenges in the operating environment did not deter the
Company's pursuit of its recapitalisation strategy as a permanent and sustainable
solution to its challenges.

Following the procurement and commissioning of mining equipment worth US$12
million from Sany Heavy Equipment Company of China late in 2013, the Company
finalised a US$18.22 million facility with PTA Bank and a US$13.03 million a line of
credit from Export and Import Bank of India, for the importation of mining equipment.

The Company also secured a US$6 million working capital facility structured through a
prepayment arrangement with one of the major customers. The Company adopted a
judicious working capital management system in order to avail cash for the business.
The funds from internal and external sources were mainly applied to productive areas
with positive effects on performance showing in the last quarter of the year.

The Company is targeting a production of more than 450 000 tonnes per month, as
from June 2015, through own mining and contribution by the contractor. The Company
has also adopted an aggressive marketing strategy to push back competition and grow
its exports where Massive opportunities exist subject to addressing competitiveness
from a logistics perspective. In this regard, the Company has already signed a supplier
contract with Glencore, one of the world's leading commodity companies.

Hwange Colliery Company Limited has fully embraced the country's economic blueprint,
Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZIMASSET), whose
main thrust is the beneficiation of the mineral resources. The Company is one of the key
enablers of the economic policy with its anticipated production ramp up of up to five (5)
million tonnes of coal per annum.

Operational performance
Production for the year was 23% above the volume for the previous year. Sales statistics
below show a similar growth trend evidenced by an increase of 6% between the
volumes for 2013 and 2014.

Product                            2014                2013
                        (METRIC TONNES)     (METRIC TONNES)

HPS coal                        996 200             924 659
HCC/HIC coal                    439 909             393 408
Coal Fines                      242 802             201 610
Total Coal                    1 678 911           1 519 677
Coke (Incl breeze)               13 070              82 510
TOTAL                         1 691 981           1 602 187

The improved overall sales performance was attributed to increased production
throughput. The major mining contractor, Mota Engil's contribution was notable in
the last quarter of the year following full mobilisation hence attainment of monthly
contractual obligations of 200 000 tonnes.

Export sales of coke and coke breeze significantly decreased because of the controlled
cooling of the coke oven battery in June 2014 after the antiquated plant developed
some drop in temperatures. This product line normally accounts for up to 30% of the
Company's revenue. To mitigate this, the Company entered into toll coking arrangements
with South Mining Company and Hwange Coal Gasification Company.

HPS coal supplies to Zimbabwe Power Company (ZPC)'s Hwange Power Station
increased by 8% and should continue to increase. This coal grade accounted for 58% of
coal sales volumes with its contribution to revenue at 38% compared to HCC/HIC coal
sales volume of 26% and a revenue contribution of 38%. The re-pricing of HPS coal is
long overdue and it must be based on calorifc value of the coal and be benchmarked
to regional comparative standards. The current prices of $29 per tonne of HPS coal is
unsustainable and Hwange Colliery Company will be pushing for a price increase of up
to $35 per tonne. This is essential to ensure that coal supplies to all power stations
remain stable. Hwange Colliery Company is of the view that this should not translate
into a power tariff increase as the price of our HPS coal is relatively underpriced.

Sales of coal fines of 242 735 tonnes were 20% above the 201 610 tonnes sold the
previous year. This was attributed to the increased demand for coal fines from cement

The Company signed an offtake agreement with Co-Ash Resources (Private) Limited for
the beneficiation of coal fines and use as primary energy for the generation of electricity.

Financial Performance
The Company recorded a turnover for the year of US$72.0 million which is US$0.5
million above the US$71.5 million turnover achieved in the previous year. Though
production and sales volumes showed an incremental trend, the product prices for
both local and export markets continued to decrease hence eroding the anticipated
sales value. The production volumes were also below the expected levels because the
Company's plant and equipment requires major overhauls and replacements.

The impact of the legacy debts on current cash flows continued to inflict pain on the
operations of the Company and torpedoed the turnaround initiatives. During the year
under review, a total of US$25 million was paid towards liquidation of legacy debts
whose balance has come down to US$136 million. This is in addition to $35 million
which was applied to legacy debts in 2013. A review of the legacy debts established
delinquent conduct on the part of the parties involved and in due course, the Company
will take appropriate action.

The Company's gross loss was US$10.3 million against a comparable gross loss of
US$10.4 million for the same period last year.

The Company incurred a loss for the year ended 31 December 2014 of US$37.2 million
compared to a loss of US$31.6 million posted in 2013. Included in the loss for the year
are non-recurring items amounting to US$13.4 million comprising of assets impairment
of US$3.4 million, accrued retrenchment costs of US$5 million and Palehouse (Private)
Limited contract costs of US$4.9 million.

The Company's loss position excluding non-recurring items was US$23.7 million which
is less than the US$31.6 million posted in the previous year.

Property, plant and equipment decreased from US$139.1 million to US$129.1 million
because of impairment of the coke oven battery and depreciation. The amount is
expected to increase when the new equipment is commissioned.

There was a 43% reduction in borrowings following the repayment of the BancABC loan
which left the loan balance at US$10.6 million as at 31 December 2014. Trade payables
increased because of the continued reliance on creditors to finance the business.
Some of the creditors ended up litigating against the Company and settlement
agreements were successfully negotiated and implemented.

Though the legal risk continues to be glaring, the Company has put in place mutually agreed
payment plans such that the Company's ability to continue as a going concern remains intact.

Quality, safety, health and environment
The Company continues to be certified with the ISO 9001:2008 Quality Management System by the
Standards Association of Zimbabwe (SAZ).

The safety programmes continue to guarantee an accident free working environment. The
Company's ?no fatal accident? record now stretches over a period of seven (7) years.

The provision for rehabilitation of the mined out areas at the opencast mines was increased from
US$3.9 million to US$4.9 million. Actual rehabilitation work was done on containing the underground
fire at the old No 3 Underground mine.

The Company was compliant with most of the Environmental Management Agency (EMA) regulations
with no reported incidents of environmental pollution. There were no incidents of surface and
underground water pollution.

The Company's health delivery systems and public health programmes were successfully
divisionalised and are now operating on a self-sustenance financial model. The Colliery Hospital met
stakeholder expectations as the referral medical facility for Matebeleland North province.

Corporate social responsibility
Despite the challenges facing the Company, the corporate social responsibility programmes
continued to be given priority in line with good corporate governance practice.

For the year under review, the Company undertook a number of projects. The Company performed
medical outreach to outlying areas in the district and conducted routine clinics at no charge to the
patients. The district and provincial awards for best performing primary and secondary schools were
financed by the Company.

The Company's municipal responsibilities of housing, social amenities and schooling continued but
this time under the auspices of the new divisionalised structure of the stand alone Estates and

The two hundred (200) bed hospital and its five (5) satellite industrial clinics were refurbished to
enhance health service delivery not only for Company employees, but the community in the Hwange
District and its traditional leaders.

Strategic thrust
Hwange Colliery Company Limited's grand strategy is to grow the business by first fully recapitalizing
its operations. In the three (3) years to 31 December 2014 an amount of US$33 million was injected
into the business for capital projects. A further US$31.2 million has been secured and equipment
currently under delivery and commissioning bringing the total capital injected in the past 3 years
to US$66.2 million.

The Company takes cognizance of the importance of its human capital on its brand, and in the short
term all efforts will be directed at addressing the plight of the employees in bringing all salaries
to date. For this to be sustainable, Hwange Colliery Company will relaunch a staff rationalization
exercise which will see the head count reducing by at least a third. Rationalisation will be subject
to funding and will be implemented in the least disruptive manner, cordial and on a win win basis.

The Company is at advanced stages of a fully underwritten rights offer for an amount of US$88
million and a conditional private placement of US$51 million. The main objective is to restructure
the Company's balance sheet, complete the recapitalization programme and retire the Government
and other legacy debts. The shareholder consultations have been completed and subject to further
approvals, stakeholders will be informed by way of the usual and relevant notices.

The business model has been reviewed and a divisionalisation strategy implemented. The Estates
and Medical Divisions are now separate strategic business units fully discharging of their monthly
financial obligations including staff salaries. The financial statements of the Company have also
been divisionalised. As from 2015, the financial reporting will reflect this new model.

The Board and Management will continue with endeavors to achieve a sustainable and permanent
solution to the challenges of the Company envisaging the improvement in the performance of the
economy driven by ZIMASSET and its enabling policies.

Mota Engil, the Company's major mining contractor, commenced operations at the beginning of
August 2014 and contribution to coal production at contractual capacities will have a significant and
positive impact on Hwange Colliery Company's performance for 2015.

As previously reported, the Company finalised a US$18.2 million facility with PTA Bank for the
importation of mining equipment from Europe. Delivery of the mining equipment is currently
underway and the commissioning is expected to be done by 31 May 2015. The acquisition of
additional mining equipment worth US$13.03 million through a Government guaranteed line of
credit from Export and Import Bank of India is in progress and delivery and commissioning is
expected to be effected by 30 June 2015.

The interventions and recapitalisation initiatives mentioned above will result in improved production
performance expected to be at least 450 000 tonnes per month.

In line with the beneficiation thrust of the national economic blueprint, the Company has signed
a memorandum of understanding with an international consultancy firm for the rebuild and
refurbishment of the existing coke oven battery and the resuscitation of the gas pipeline plant. This
will be done through vendor financing.

The target market for the Company's coal and coke products remain the local and regional markets
but now with deliberate inclination to supply Asian markets.

With the current pressure on commodity prices, the Company will intensify its cost containment
strategies to attain margins that would yield profitability at the end of the year 2015.

The Company's current initiatives will no doubt overturn the loss position and return to profitability
in the medium-to-short term given the strong operational base attributed to capitalisation and
contractor capacity.

With the economy forecasted to grow by 3.2% in 2015 driven by increased agricultural and mining
activities, there is opportunity for increased demand for coal and coke. A strong branding based
marketing strategy will see the Company gradually regaining its market share.

The demand for coal on domestic and export markets is expected to begin to firm up in the second
half of the year 2015. The sales mix to be adopted will be in favour of the high contribution coal and
coke grades while maintaining the contractual volume for thermal coal. This will ensure significant
improvements in the gross margins which is currently in the negative.

The Company's new business model will be key in increasing production and rationalisation of direct
and overhead costs.

The Company is at advanced stages of being allocated new coal concessions which are located
west of the mine. The new reserves will boost the Company's life of mine and ability to attract new
investment. This will also augment Hwange Colliery Company's capacity to supply coal to Hwange
Power Station stage 3 and other thermal power stations. Coke requirements for iron and steel
furnaces and ferro alloy smelters would be adequatley covered.

Hwange Colliery Company has adopted the dematerialization of its shares on the Zimbabwe Stock
Exchange through the Central Securities Depository system, in line with the new listing requirements
and the global trends.

The Board resolved not to consider payment of a dividend in view of the current Company's
performance, the current recapitalization initiatives and the need to turnaround the business in a
sustainable manner.

Mr Stenjwa Thomas Makore was appointed Managing Director of the Company with effect from 01
June 2014. Mr Jemister Chininga, who acted as Managing Director since 01 August 2013, reverted
back to his position as Non Executive Director.

There have been no other changes to the Board of Directors since the last Annual General Meeting.

I express my sincere gratitude to my fellow Board Members, all our stakeholders, the management
team and staff for their commitment and dedication to the Company.

26 March 2015

Auditor's Statement
These summary financial statements should be read in conjunction with the complete set of the
audited financial statements of Hwange Colliery Company Limited for the year ended 31 December
2014, which have been audited by Messrs Grant Thornton Chartered Accountants (Zimbabwe). The
audit opinion on the financial statements is unqualified with an emphasis of matter on going concern.
As disclosed in note 14, these summary financial statements do not include the financial results of
Hwange Coal Gasification Company (Private) Limited (HCGC). These results are not likely to have
a material effect on these financial statements. The auditor's report on the financial statements is
available for inspection at the Company's registered office.

Statement of profit or loss and other comprehensive income 
for the year ended 31 December 2014         
                                                    Notes             2014            2013
                                                                       USD             USD
Revenue                                                         72 031 451      71 540 667
Cost of sales                                                 (82 320 263)    (81 957 758)
Gross loss                                                    (10 288 812)    (10 417 091)
Other income                                                       694 761         936 849
Other gains and losses                                         (5 425 101)       (504 314)
Marketing costs                                                (1 486 861)     (2 738 360)
Administrative costs                                          (26 527 782)    (27 652 799)
Redundancy costs                                               (5 053 909)               -
Impairment loss                                                (3 452 516)               -
Operating loss before interest and tax                        (51 540 220)    (40 375 715)
Finance costs                                                  (3 701 723)     (3 432 092)
Share of profit from equity accounted investments                (450 964)       (915 000)
Loss before tax                                               (55 692 907)    (44 722 807)
Income tax credit                                      10       18 499 846      13 108 780
Loss for the year                                             (37 193 061)    (31 614 027)

Other comprehensive income:      
Share of other comprehensive income of equity
accounted investments, net of tax                                        -               -
Other comprehensive income, net of tax                                   -               -
Total comprehensive loss for the year                         (37 193 061)    (31 614 027)
Attributable earnings per share  - basic               11           (0.20)          (0.17)
                                 - diluted             11           (0.20)          (0.17)
Headline earnings per share      - basic               11           (0.19)          (0.17)
                                 - diluted             11           (0.19)          (0.17)

Statement of financial position      
as at 31 December 2014
                                                    Notes             2014            2013
                                                                       USD             USD
Non Current Assets
Property, plant and equipment                          12      129 078 977     139 129 468
Investment property                                    13        3 700 000       3 700 000
Investments accounted for using the equity method      14       17 267 492      17 718 455
Intangible assets                                                1 590 041       1 802 904
Deferred tax asset                                               9 367 557               -
                                                               161 004 067     162 350 827
Current Assets
Stripping activity asset                               15        7 290 468       6 774 204
Inventory                                              16       41 446 180      42 869 241
Trade and other receivables                            17       37 784 545      34 618 515
Financial assets at fair value through profit or loss  18                -           4 645
Cash and cash equivalents                              19          956 810         830 420
                                                                87 478 003      85 097 025
Total assets                                                   248 482 070     247 447 852


Capital and Reserves
Share capital                                          20       45 962 789      45 962 789
Share premium                                                      577 956         577 956
Non-distributable reserve                                        4 358 468       4 358 468
Revaluation reserve                                             39 948 518      39 948 518
Accumulated losses                                            (52 952 366)    (15 759 305)
                                                                37 985 365      75 088 426
Non-current liabilities
Lease liability                                        21          800 000         900 000
Deferred income tax                                                      -       9 132 289
                                                                   800 000      10 032 289
Current liabilities
Borrowings                                             22       11 051 683      19 410 020
Trade and other payables                               23      187 482 799     132 889 579
Provisions                                             24       10 848 723       8 950 441
Current income tax liability                                       403 500       1 077 097
                                                               209 786 705     162 327 137

Total equity and liabilities                                   248 482 070     247 447 852

Statement of changes in equity     
for the year ended 31 December 2014
                             Share     Share  distributable   Revaluation      Retained  
                           capital   premium        reserve       reserve      earnings         Total
                               USD       USD            USD           USD           USD           USD
Balance at
1 January 2013          45 928 393   529 802      4 358 468    39 948 518    15 854 722   106 619 903

loss for the year                -         -              -             -  (31 614 027)  (31 614 027)

Exercise of share
options                     34 396    48 154              -             -             -        82 550

Balance at 1
January 2014            45 962 789   577 956      4 358 468    39 948 518  (15 759 305)    75 088 426

loss for the year                -         -              -             -  (37 193 061)  (37 193 061)

Balance at 31
December 2014           45 962 789   577 956      4 358 468    39 948 518  (52 952 366)    37 985 365

Statement of cash flows      
for the year ended 31 December 2014
                                                                 2014            2013
                                                Notes             USD             USD
Loss before tax                                          (55 629 907)    (44 722 807)
Adjustment for non-cash items                              20 276 403      15 937 744

Operating cash flow before
changes in working capital                               (35 416 504)    (28 785 063)
Changes in working capital                                 53 558 672      66 676 940
Cash generated from operations                             18 142 168      31 891 877
    Interest paid                                         (3 249 810)     (3 432 092)
    Tax paid                                                (673 597)               -
Net cash flows generated from operating activities         14 218 761      28 459 785
Acquisition of property, plant and equipment                (346 840)    (22 993 932)
Proceeds from the disposal of assets                                -         260 080
Net cash flows utilised in investing activities             (346 840)    (22 733 852)
Repayment of borrowings                                  (10 631 690)    (11 201 576)
Proceeds from loans raised                                  1 511 204         873 000

Net cash flows utilised in financing activities           (9 120 486)    (10 328 576)

Net increase/(decrease) in cash and cash equivalents        4 751 435     (4 602 643)
Cash and cash equivalents at beginning of the year        (3 989 511)         613 132
Cash and cash equivalents at end of year           19         761 924     (3 989 511)

Notes to the audited financial statements
for the year ended 31 December 2014

1.  General information
    Hwange Colliery Company Limited is a Company that extracts, processes and distributes
    coal and coal products. The Company operates a coal mine situated in Hwange and
    sells its products mainly within Zimbabwe and in Sub Saharan Africa.  
    The Company is a limited liability Company incorporated and domiciled in Zimbabwe. It
    is listed primarily on the Zimbabwe Stock Exchange (ZSE), and has secondary listing on
    the Johannesburg Stock Exchange (JSE) and London Stock Exchange (LSE).  
    The Company's financial statements were authorised for issue by the board of directors
    on the Thursday 19th of March 2015.     
    Presentation currency      
    These financial statements are presented in United States Dollars being the functional
    and reporting currency of the primary economic environment in which the Company

2.  Basis of preparation of the abridged financial statements
    The summary financial statements for the year ended 31 December 2014 have been
    prepared in accordance with IAS 34, Interim Financial Reporting and in terms of
    Zimbabwe Stock Exchange (ZSE) listing rules and the Companies Act (Charter 24:03).
    They do not include all of the information required for full annual financial statements
    for the year ended 31 December 2014, which have been prepared in accordance with
    International Financial Reporting Standards.
3.  Statement of compliance
    In the current year, the Company has adopted amendments to the following International
    Accounting Standards:
    Adoption of 'Presentation of Items of Other Comprehensive   
    Income' (Amendments to IAS 1)
    (i)   Offsetting financial assets and financial liabilities (amendments to IAS 32)
    (ii)  Recoverable amount disclosures for non-financial assets (amendments to
          IAS 36).  

4.  Summary of accounting policies
    The financial statements have been prepared using the measurement bases specified by
    IFRS for each type of asset, liability, income and expense. The accounting policies are
    consistent with those adopted in the company's last annual financial statements.

5.  Revenue recognition      
    Revenue comprises revenue from the sale of goods and the rendering of services. Revenue
    is measured by reference to the fair value of consideration received orreceivable by the
    Company for goods supplied and services provided, excluding sales taxes, rebates, and
    trade discounts. 

6.  Earnings per share      
    The Company presents basic and diluted earnings per share (EPS) data for its ordinary  
    shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary
    shareholders of the Company by the weighted average number of ordinary shares
    outstanding during the period. Diluted EPS is determined by adjusting the profit or
    loss attributable to ordinary shareholders and the weighted average number of ordinary
    shares outstanding for the effects of all dilutive potential ordinary shares, which comprise
    share options granted to employees.

7.  Property, plant and equipment                   
    Freehold land and buildings and plant and machinery are shown at fair value, based on
    periodic, but at least annual, valuations by external independent valuers, less subsequent
    accumulated depreciation for buildings. All other property, plant and equipment is
    stated at historical cost less depreciation and impairment losses. Historical cost includes
    expenditure that is directly attributable to the acquisition of the items. 

8.  Depreciation       
    Land, capital work in progress and prestripped 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. 

9.  Intangible assets                   
    Intangible assets include acquired mining rights and acquired and internally developed
    software used in production or administration that qualify for recognition as an intangible
    assets. They are accounted for using the cost model whereby capitalised costs are
    amortised on a straight-line basis over their estimated useful lives, as these assets are
    considered finite. Residual values and useful lives are reviewed at each reporting date.
    In addition, they are subject to impairment testing.     

10. Taxation
                                                                     2014             2013
                                                                      USD              USD
    Income tax:
    Current tax                                                         -                -   
    Deferred tax                                             (18 499 846)     (13 108 780)
    Income tax credit                                        (18 499 846)     (13 108 780)
11. Earnings per share  

    11.1 Basic                                                                     
    Loss attributable to Shareholders                        (37 193 061)     (31 614 027) 
    Weighted average number of ordinary
    shares in issue                                           183 851 154      183 851 154

    Basic earnings per share                                       (0.20)           (0.17) 

    Basic earnings per share is calculated by dividing the loss attributable to Shareholders
    by the weighted average number of ordinary shares in issue during the year, excluding
    the average number of ordinary shares purchased by the Company and held as treasury
    11.2 Diluted       
    For diluted earnings per share the weighted average number of ordinary shares in issue
    is adjusted to assume conversion of all dilutive potential ordinary shares. The Company
    has one category of dilutive potential ordinary shares being share options granted to
    The earnings used in the calculation of all diluted earnings per share measures are the
    same as those for the equivalent basic earnings per share measures, as outlined above.

                                                                     2014             2013
                                                                      USD              USD
    Loss used to determine diluted earnings per share        (37 193 061)     (31 614 027)

    The weighted average number of ordinary shares for
    the purpose of diluted earnings per share, reconciles
    to the weighted average number of ordinary shares
    used in the calculation of basic earnings per share
    as follows:       
    Weighted average number of ordinary
    shares in issues                                          183 851 154      183 713 570
    Adjustments for share options                                       -          137 584
    Weighted average number of ordinary shares for
    diluted earnings per share                                183 851 154      183 851 154

    Diluted earnings per share                                     (0.20)           (0.17) 

    11.3 Headline earnings per share                                           
    Headline earnings per share excludes all items of a capital nature and represents an
    after tax amount. It is calculated by dividing the headline earnings shown below by the
    number of shares in issue during the year:       

    Reconciliation between headline earnings and basic earnings: 

                                                                     2014             2013
                                                                      USD              USD
    IAS 33 - Earnings                                        (37 193 061)     (31 614 027)
    Non-recurring items:
    Proceeds on sale of scrap                                   (352 848)        (329 352)
    Impairment of property, plant and equipment                 3 452 516                -
    Headline earnings                                        (34 093 393)     (31 943 379)
    Weighted average number of ordinary
    shares in issue                                           183 851 154      183 851 154
    Headline earnings per share                                    (0.19)           (0.17)

12. Property, plant and equipment 

    Carrying amount at the beginning of the year              139 129 468      127 346 098
    Additions                                                   5 638 479       22 993 932
    Disposals                                                           -        (122 447)
    Impairment                                                (3 452 516)                -
    Depreciation charge for the year                         (12 236 454)     (11 088 115)
    Carrying amount at the end of the year                    129 078 977      139 129 468

13. Investment property
                                                                    2014              2013
                                                                     USD               USD

    Valuation at 1 January                                     3 700 000         3 700 000
    Fair value gains (included in other gains and losses)              -                 -
    Valuation at 31 December                                   3 700 000         3 700 000
14. Investments accounted for using the equity method
    Investments in associates (note 14.1)                        446 204           897 168
    Investments in joint venture                              16 821 288        16 821 287
                                                              17 267 492        17 718 455
    14.1 Investments in associates       
    Carrying amount as at 1 January                              897 168         1 062 468
    Share of loss                                              (450 964)         (165 300)
    Carrying amount as at 31 December                            446 204           897 168
    The financial results for Hwange Coal Gasification Company (Private) Limited were not
    available for inclusion in these summary financial statements.

                                                                    2014              2013
                                                                     USD               USD
15. Stripping activity asset       
    Balance at beginning of year                               6 774 204         4 522 518
    Current year pre-stripping costs                           1 796 730         2 251 686
    Costs charged to cost of sales                           (1 280 466)                 -
    Balance at end of year                                     7 290 468         6 774 204

16. Inventory    
    Raw materials                                              4 881 326         5 596 027
    Consumables                                                   72 895            72 897
    Finished goods   
    - Coal and coal fines                                     34 282 926        32 127 882
    - Coke                                                     2 209 033         5 072 435
                                                              41 446 180        42 869 241
17. Trade and other receivables
                                                                    2014              2013
                                                                     USD               USD

    Trade receivables - gross                                 23 116 766        19 092 310
    Allowance for credit losses                              (7 743 731)       (6 397 028)
    Trade receivables - net                                   15 373 035        12 695 282
    Other receivables                                         22 411 510        21 923 233
                                                              37 784 545        34 618 515
18. Financial assets at fair value through profit or loss      
                                                                    2014              2013
                                                                     USD               USD
    Listed equity securities - held for trading - Zimbabwe      
    - fair value as at 1 January                                   4 645             2 868
    - fair value adjustment                                      (4 645)             1 777
    Fair value                                                         -             4 645

19. Cash and cash equivalents       
    For the purposes of the statement of cash flows, cash and cash equivalents include cash
    on hand and in banks and investments in money market instruments, net of outstanding
    bank overdrafts. Cash and cash equivalents at the end of the financial year as shown in the
    statement of cash flows can be reconciled to the related items in the statement of financial
    position as follows:
                                                                     2014             2013
                                                                      USD              USD
    Bank and cash balances                                        956 810          830 420
    Bank overdrafts (note 22)                                   (194 886)      (4 819 931)
                                                                  761 924      (3 989 511)
20. Share capital

    204 000 000 Ordinary shares of USD0.25 each                51 000 000       51 000 000
    Issued and fully paid       
    110 237 432 Ordinary shares of USD0.25 each                27 559 358       27 559 358
    4 404 850 ordinary shares issued under share
    option scheme                                               1 514 039        1 514 039
    67 557 568 "A" Ordinary shares of USD0.25 each             16 889 392       16 889 392
                                                               45 962 789       45 962 789
21. Finance lease liability

    Finance lease liability                                     1 061 570        1 000 000
    Less: Short-term portion                                    (261 570)        (100 000)
    Long-term portion                                             800 000          900 000
22. Borrowings       
    Bank overdrafts (note 19)                                     194 886        4 819 931
    Loans payable within one year                              10 595 227       14 490 089
    Finance lease liability                                       261 570          100 000
    Total borrowings                                           11 051 683       19 410 020

23. Trade and other payables                                 
    Trade payables                                            106 604 119       86 840 255
    Other payables                                             80 878 680       46 049 324
                                                              187 482 799      132 889 579
24. Provisions        
    Provision for rehabilitation 
    - At 1 January                                              3 893 360        2 893 360
    - Charged to the profit or loss       
    - Additional provisions made during the year                1 000 000        1 000 000
    - Amounts used during the year                                      -                -
    - At 31 December                                            4 893 360        3 893 360
    Other provisions:
    Death benefits                                              2 491 991        1 633 282
    Leave pay provisions                                        3 463 372        3 423 799
    Total provisions                                           10 848 723        8 950 441

25. Financial risk management objectives and policies 
    The Company's principal financial liabilities comprise finance lease liabilities, loans payable,
    bank overdrafts and trade payables. The main purpose of these financial liabilities is to raise
    finance for the Company's operations. The Company has various financial assets such as
    trade receivables and cash and short term deposits, which arise directly from its operations.
    Exposure to credit, interest rate and currency risk arises in the normal course of Company's
    business and these are main risks arising from the Company`s financial instruments.

26. Credit risk       
    Management has a credit policy in place and the exposure to credit risk is monitored on
    an ongoing basis. The Company assumes foreign credit risk only on customers approved
    by the Board and follows credit review procedures for local credit customers.    
    Investments are allowed only in liquid securities and only with approved financial institutions.
    At the reporting date there were no significant concentrations of credit risk. The maximum
    exposure to credit risk is represented by the carrying amounts of each financial asset in the
    statement of financial position.
27. Interest rate risk       
    The Company's exposure to the risk of changes in market interest rates relates primarily to
    the Company's long and short term debt obligations and bank overdrafts. The Company's
    policy is to manage its interest cost using a mix of fixed and variable rate debts.   
28. Currency risk       
    The Company is exposed to foreign currency risk on transactions that are denominated in a
    currency other than the United States Dollar. The currency giving rise to this risk is primarily
    the South African Rand.In respect of all monetary assets and liabilities held in currencies
    other than the United States Dollar, the Company ensures that the net exposure is kept to
    an acceptable level, by buying or selling foreign currencies at spot rates where necessary to
    address short-term imbalances.
    The Company's exposure to foreign currency changes is not significant.

29. Liquidity risk       
    Liquidity risk is that the Company might be unable to meet its obligations. The Company
    manages its liquidity needs by monitoring scheduled debt servicing payments for long-term
    financial liabilities as well as forecast cash inflows and outflows due in day-to-day business.

Annual Report and Audited Financial Statements

The annual report and audited financial statements for the year ended 31 December 2014 will
be distributed to Shareholders on or before 29 May 2015 and the Annual General Meeting will be
held on Tuesday 30 June 2015.

By Order of the Board

T K Ncube
26 March 2015

7th Floor, Coal House
17 Nelson Mandela Avenue

Directors: F Mutamangira (Chairman); S T Makore* (Managing); N S Chibanguza; J Chininga; I C Haruperi; J Muskwe (Mrs); V Vera (*Executive)   


Date: 22/04/2015 03:20:00 Supplied by www.sharenet.co.za                     
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