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Buffalo Coal Corp - Condensed Interim Consolidated Financial Statements For The Three Months Ended 31 March 2017

Release Date: 12/05/2017 15:29:00      Code(s): BUC     
BUFFALO COAL CORP.
Registration number: 001891261
External company registration number: 2011/011661/10
Share code on the TSX Venture Exchange: BUF (Primary listing)
Share code on the JSE Limited: BUC (Secondary listing)
ISIN: CA1194421014
"Buffalo Coal" or "the Company"

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

For the three months ended March 31, 2017 and March 31, 2016
(Presented in South African Rands)

BUFFALO COAL CORP.
Condensed Interim Consolidated Statements of Financial Position
(Presented in South African Rands)

                                                                      March 31,      December 31,        March 31,
                                                                           2017              2016             2017
                                                                                                          (Note 1)
                                                       Notes                  R                 R               C$
Assets
Non-current assets
Property, plant and equipment                                       304 206 531       311 730 638       30 232 216
Investment in financial assets                                       43 487 982        41 633 486        4 321 860
Other receivables                                                     4 015 902         4 032 570          399 104
Long-term restricted cash                                            11 200 000        11 200 000        1 113 062
Total non-current assets                                            362 910 415       368 596 694       36 066 242
Current assets
Trade and other receivables                                         102 555 525        84 773 344       10 192 026
Inventories                                                          41 340 876        35 222 250        4 108 479
Non-interest bearing receivables                                      1 930 084         1 902 205          191 813
Cash and cash equivalents                                            10 506 617        13 753 934        1 044 153
Total current assets                                                156 333 102       135 651 733       15 536 471
Total assets                                                        519 243 517       504 248 427       51 602 713
Equity and liabilities
Capital and reserves
Share capital                                              5      1 078 056 787     1 075 881 497      107 137 888
Currency translation reserve                                      (219 945 085)     (219 945 085)     (21 858 266)
Reserves                                                             13 092 597        13 308 821        1 301 150
Accumulated retained loss                                       (1 090 768 032)   (1 095 286 547)    (108 401 139)
Equity (deficiency) attributable to owners of the company         (219 563 733)     (226 041 314)     (21 820 367)
Non-controlling interest                                              4 339 142         4 339 142          431 226
Total equity (deficiency)                                         (215 224 591)     (221 702 172)     (21 389 142)
Non-current liabilities
RCF loan facilities                                                 331 437 365       336 288 222       32 938 431
Conversion option liability                                          20 690 838        31 905 346        2 056 267
Asset retirement obligation                                          28 290 459        26 694 012        2 811 522
Total non-current liabilities                                       380 418 662       394 887 580       37 806 220
Current liabilities
Trade and other payables                                            175 932 245       158 262 414       17 484 246
Current portion of borrowings                              4        162 176 492       161 016 413       16 117 191
Warrant liability                                                       333 538           344 627           33 147
Current tax liability                                                 9 953 725         8 775 360          989 207
Current portion of asset retirement obligation                        5 653 446         2 664 205          561 843
Current liabilities                                                 354 049 446       331 063 019       35 185 634
Total liabilities                                                   734 468 108       725 950 599       72 991 854
Total equity (deficiency) and liabilities                           519 243 517       504 248 427       51 602 713

Commitments and contingencies                          1, 6

Approved on behalf of the Board:

Signed, "Craig Wiggill"                                                Signed, "Robert Francis"

The accompanying notes are an integral part of the condensed interim consolidated financial statements.

BUFFALO COAL CORP.
Condensed Interim Consolidated Statements of Profit or Loss and Other Comprehensive Income
(Presented in South African Rands)

                                            
                                                                                    3 months ended
                                                                           March 31,       March 31,      March 31,
                                                                                2017            2016           2017
                                                                                                           (Note 1)
                                                                Notes              R               R             C$

Revenue                                                                  171 423 795     142 488 373     17 036 193
Cost of sales                                                          (158 046 485)   (139 006 633)   (15 706 749)
Gross profit                                                              13 377 310       3 481 740      1 329 444
Other income/(expense) - net                                        3     20 258 401      23 343 186      2 013 291
General and administration expenses                                     (15 448 727)    (16 186 654)    (1 535 303)
Profit before the undernoted                                              18 186 984      10 638 272      1 807 432
Finance income                                                               417 112         431 156         41 452
Finance expense                                                         (13 271 655)    (22 295 216)    (1 318 945)
Profit/(loss) before income tax                                            5 332 441    (11 225 788)        529 939
Income tax                                                               (1 107 530)       (867 773)      (110 066)
Profit/(Loss) for the period                                               4 224 911    (12 093 561)        419 873
Other comprehensive loss                                                           -               -              -
Total comprehensive profit/(loss) for the period                           4 224 911    (12 093 561)        419 873

Profit/(loss) attributable to:
- Owners of the parent                                                     4 224 911    (12 093 561)        419 873
- Non-controlling interest                                                         -               -              -
                                                                           4 224 911    (12 093 561)        419 873

Net profit/(loss) per share - basic and diluted                                 0.01          (0.04)           0.00
Headline profit/(loss) per share - basic and diluted                            0.01          (0.04)           0.00
Weighted average number of common shares outstanding:
- Basic                                                                  396 565 418     293 413 234     396 565 418
- Diluted                                                                396 565 418     293 413 234     396 565 418

The accompanying notes are an integral part of the condensed interim consolidated financial statements.

BUFFALO COAL CORP.
Condensed Interim Consolidated Statements of Changes in Equity
(Presented in South African Rands)

                                                                                              Attributable to owners of the Group
                                                                                                          Reserves
                                                                                                                                                                                                               
                                                                                                                                                                     Currency                          Non-
                                                  No. of shares             Share       Option           Equity-settled         BEE option     Accumulated        translation           Total   controlling     
                                                         issued           capital      reserve             non-employee           reserve     retained loss           reserve        interest                  Total equity
                                                                                                       benefits reserve                                                                                                                                             
                                                                                R            R                        R                 R                 R                 R               R             R               R
Balance at December 31, 2015                        280 729 049     1 038 096 502    7 653 184                        -         9 073 711   (1 055 512 401)     (219 945 085)   (220 634 089)     4 339 142   (216 294 947)
Shares issued in relation to RCF convertible loan    14 990 400         5 185 044            -                        -                 -                 -                 -       5 185 044             -       5 185 044
Stock options expired/cancelled                               -                 -  (1 620 636)                        -                 -         1 620 636                 -               -             -               -
Stock-based compensation                                      -                 -      149 916               17 901 060                 -                 -                 -      18 050 976             -      18 050 976
Net loss for the period                                       -                 -            -                        -                 -      (12 093 561)                 -    (12 093 561)             -    (12 093 561)
Balance at March 31, 2016                           295 719 449     1 043 281 546    6 182 464               17 901 060         9 073 711   (1 065 985 326)     (219 945 085)   (209 491 630)     4 339 142   (205 152 488)
Shares issued in relation to RCF Convertible Loan    83 919 240        23 979 151            -                        -                 -                 -                 -      23 979 151             -      23 979 151
Shares issued to STA                                 15 164 333         8 620 800                                                                                                   8 620 800                     8 620 800
Stock options expired/cancelled                               -                 -  (4 149 242)                        -                 -         4 149 242                 -               -             -               -
Stock-based compensation                                      -                 -       26 598             (15 725 770)                 -                 -                 -    (15 699 171)             -    (15 699 171)
Net loss for the period                                       -                 -            -                        -                 -      (33 450 463)                 -    (33 450 463)             -    (33 450 463)
Balance at December 31, 2016                        394 803 022     1 075 881 497    2 059 820                2 175 290         9 073 711   (1 095 286 547)     (219 945 085)   (226 041 314)     4 339 142   (221 702 172)
Shares issued to STA                                  4 286 908         2 175 290            -                        -                 -                 -                 -       2 175 290             -       2 175 290
Stock options expired/cancelled                               -                 -    (293 604)                        -                 -           293 604                 -               -             -               -
Stock-based compensation                                      -                 -       26 889                   50 491                 -                 -                 -          77 380             -          77 380
Net profit for the period                                     -                 -            -                         -                -         4 224 911                 -       4 224 911             -       4 224 911
Balance at March 31, 2017                           399 089 930     1 078 056 787    1 793 105                 2 225 781        9 073 711   (1 090 768 032)     (219 945 085)   (219 563 733)     4 339 142   (215 224 591)
   
The accompanying notes are an integral part of the condensed interim consolidated financial statements.

BUFFALO COAL CORP.
Condensed Interim Consolidated Statements of Cash Flow
(Presented in South African Rands)


                                                                                               
                                                                                      
                                                                                       3 months  ended
                                                                         March 31,         March 31,        March 31,
                                                                              2017              2016            2017
                                                                                                            (Note 1)
                                                                                 R                 R              C$
Cash flows from operating activities
Cash generated from/(utilized in) operations                             9 018 308      (12 588 599)         896 244
Interest received                                                          417 112           431 156          41 452
Interest paid                                                          (5 129 875)       (5 584 776)       (509 809)
Net cash generated from/(utilized in) operating activities               4 305 545      (17 742 219)         427 887
Cash flows from investing activities
Investment in financial assets                                         (1 360 193)       (1 279 579)       (135 177)
Purchase of property, plant and equipment                              (6 164 791)       (4 998 745)       (612 660)
Proceeds from the disposal of property, plant and equipment                      -             6 052             -
Movement in non-interest bearing receivables                              (27 878)         (122 836)         (2 770)
Net cash (utilized in) investing activities                            (7 552 862)       (6 395 108)       (750 607)
Cash flows from financing activities
Drawdowns from working capital facility                                          -        25 000 000               -
Net cash generated from financing activities                                     -        25 000 000               -
Net (decrease)/increase in cash and cash equivalents                   (3 247 317)           862 673       (322 720)
Cash and cash equivalents at the beginning of the period                13 753 934        20 365 446       1 366 873
Cash and cash equivalents at the end of the period                      10 506 617        21 228 119       1 044 153

The accompanying notes are an integral part of the condensed interim consolidated financial statements.

Notes to the Condensed Interim Consolidated Financial Statements
For the periods ended March 31, 2017 and March 31, 2016
(Presented in South African Rands)

1 BASIS OF PREPARATION

The unaudited condensed interim consolidated financial statements (the "Interim Results") of Buffalo Coal Corp. ("BC Corp" or the
"Company") and its subsidiaries (the "Group") for the periods ended March 31, 2017 and March 31, 2016 have been prepared in accordance 
with the recognition and measurement criteria of International Financial Reporting Standards ("IFRS"), as issued by the International 
Accounting Standards Board ("IASB") and have been prepared in accordance with accounting policies based on the IFRS standards and 
International Financial Reporting Interpretations Committee ("IFRIC") interpretations and are in compliance with IAS 34, Interim Financial Reporting.

The Interim Results have not been audited by the Group's external auditors. The Interim Results do not include all the information
and disclosures required in the consolidated annual financial statements and should be read in conjunction with the Group's
consolidated annual financial statements for the year ended December 31, 2016, which have been prepared in accordance with IFRS.
The Group has adopted the required new or revised accounting standards in the current period, as further set out in note 2 below,
none of which had a material impact on the Group's results.

The preparation of the Interim Results requires management to make judgments, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets and liabilities, income and expenses. In preparing these
Interim Results, the significant judgments made by management in applying the Group's accounting policies and the key sources of
estimation and uncertainty were the same as those applied to the consolidated
annual financial statements for the year ended December 31, 2016.

References to "R", "Rands" mean South African Rands, "C$" mean Canadian Dollars and to "US$" mean United States Dollars.
References to Q1 2017 mean the period ended March 31, 2017.

Going Concern

The Interim Results have been prepared on the basis of accounting principles applicable to a going concern, which assume that the
Group will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the
normal course of operations. Market conditions deteriorated significantly over the prior financial years necessitating, during the
financial year ended December 31, 2015, the implementation of various restructurings at Buffalo Coal Dundee (Pty) Ltd ("BC
Dundee") including two retrenchment processes and the conclusion of agreements with STA Coal Mining Company Proprietary
Limited ("STA"). The arrangements with STA include the provision of contract mining services by STA at Magdalena ("STA Contract
Mining Agreement"), the sale of certain underground mining equipment to STA and an equity settlement arrangement ("STA Equity
Settlement Agreement") in terms of which a portion of the contract mining fees will be settled through the issuance of common
shares of the Company ("Common Shares"), in order to alleviate cash flow pressures. In addition, the Company secured additional
funding from Resource Capital Fund V L.P. ("RCF") and Investec Bank Limited ("Investec") in December 2015, of which the last
tranche was drawn in March 2016. During 2016, the Group entered into contracts with a significant export customer for the sale of
built-up anthracite stockpiles at market-related pricing, which has and will inject cash into the Group. Subsequent to quarter end,
Investec agreed to release R22.0 million undrawn Working Capital Facility funds, which was subject to agreement being reached on
the revised terms and conditions to the term loan and revolving credit agreement (refer to note 7 Subsequent Events). Although the
Group has implemented various restructuring initiatives, the Group continues to experience operational challenges. The Group
remains dependent upon sustaining profitable levels of operation, as well as the continued support of Investec, RCF and other
stakeholders and believes that subject to its ability to meet current forecasts, it should be able to generate positive cash flows in the
foreseeable future.

As at March 31, 2017, the Company had a shareholder's deficiency of R215.2 million (December 31, 2016:
R221.7 million), a working capital deficiency of R191.7 million (December 31, 2016: R192.7 million) and for the three month period
ended March 31, 2017, had a net profit of R4.2 million (March 31, 2016: loss of R12.1 million). The Group was in breach of certain
covenants with respect to its borrowings from Investec at March 31, 2017. On November 22, 2016, Investec provided a forbearance
letter stating that it does not intend to exercise its rights to request early payment of the outstanding debt; however, no waiver has
been provided and Investec has reserved its right to review this decision periodically, with no obligation to keep the Company
advised in this regard. There is no assurance that the Company will be able to meet its covenants in the future, or that Investec will
provide future waivers, if required. These matters constitute material uncertainties which cast significant doubt as to whether the
Group can continue as a going concern.

If the going concern assumption was not appropriate for the Interim Results of the Group then adjustments would be necessary to
the carrying values of assets and liabilities, the reported revenues and expenses and the statement of financial position
classifications. Such adjustments could be material.

Convenience rate translation

The Company's functional and presentation currency is Rands. The Canadian Dollar amounts provided in the Interim Results
represent supplementary information solely for the convenience of the reader. The financial position as of March 31, 2017 
and the financial results for the three months period ended March 31, 2017 were translated into Canadian Dollars using a 
convenience translation at the rate of C$1:R10.0623, which is the exchange rate published on Oanda.com as of March 31,
2017. Such presentation is not in accordance with IFRS and should not be construed as a representation that the Rand amounts
shown could be readily converted, realized or settled in Canadian Dollars at this or at any other rate.

2 NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

The following standards, amendments and interpretations are issued and effective for the first time for the period ended March
31, 2017:

IAS 7 - Disclosure Initiative
The amendments require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities
arising from financing activities. The amendment did not have a significant impact on the Group.

IAS 12 - Recognition of Deferred Tax Assets for unrealized losses
The amendments were issued to clarify the requirements for recognising deferred tax assets on unrealised losses. The amendments
clarify the accounting for deferred tax where an asset is measured at fair value and that fair value is below the asset's tax base. They
also clarify certain other aspects of accounting for deferred tax assets.

The amendments clarify the existing guidance under IAS 12. They do not change the underlying principles for the recognition of
deferred tax assets. The amendment did not have a significant impact on the Group.


3 OTHER INCOME/(EXPENSE) - NET

                                                                                    3 months            3 months            3 months
                                                                                       ended               ended               ended
                                                                                   March 31,           March 31,           March 31,
                                                                                        2017                2016                2017
                                                                                                                            (Note 1)
                                                                                           R                   R                  C$
Foreign exchange gain - net                                                        8 252 280          12 536 664             820 116
Fair value adjustment on financial assets                                            466 156           1 113 122              46 327
Fair value adjustment on conversion option and warrant liability                  10 652 884           8 842 627           1 058 690
Other income                                                                         887 081             850 773              88 159
                                                                                  20 258 401          23 343 186           2 013 291

4 INVESTEC BORROWINGS

On December 2, 2015, BC Corp closed a second amended and restated term loan and revolving credit facility with Investec ("Second
Amended Investec Agreement"), whereby Investec agreed to extend BC Dundee's working capital facility from R30.0 million to R80.0
million, comprising two tranches of R25.0 million each. The conditions to the first and second tranche were fulfilled and drawn in
December 2015 and March 2016 respectively. On December 18, 2015, BC Dundee entered into a third amendment to the Investec
loan agreement ("Third Amendment"), in terms of which the repayment schedule for the term loan facility was replaced with a new
schedule with principal repayments commencing on March 31, 2016.

Due to continued cash constraints, Investec was approached during the first quarter of 2016 for a deferral of the term loan facility
repayment due on March 31, 2016. On March 31, 2016, BC Dundee entered into a fourth amendment to the Investec term loan and
revolving credit agreement ("Fourth Amendment") in terms of which the repayment schedule for the term loan facility was replaced
with a new schedule with principal repayments commencing on June 30, 2016.

In addition, surplus cash at each quarter-end in excess of R30.0 million will be used to reduce the R80.0 million working capital
facility back to R30.0 million and a clause was included restricting outflows of funds from BC Dundee to BC Corp between April 1,
2016 and June 30, 2016, unless prior written consent was obtained from Investec. To date, no cash has been swept to reduce the
working capital facility.

Investec was again approached for a deferral of the term loan facility repayment due on June 30, 2016.On June 30, 2016, BC Dundee 
entered into a fifth amendment to the term loan and revolving credit agreement ("Fifth Amendment") in terms of which the repayment 
schedule for the term loan facility was replaced with a new schedule with principal repayments commencing on September 30, 2016. 
Investec extended the restriction on the outflows of funds from BC Dundee to BC Corp to September 30, 2016, unless prior written 
consent was obtained from Investec.

On each of September 30, 2016 and December 31, 2016 the company made the term loan facility repayments of R7.5 million.

BC Dundee was required to meet specified debt covenants at March 31, 2017 and was in breach of certain of these covenants at this
date. Such breach constitutes an event of default under the debt agreement whereby Investec is entitled to request early payment
of the outstanding debt. On November 22, 2016, Investec provided a forbearance letter stating that it does not intend to exercise its
rights to request early payment of the outstanding debt; however, it has reserved its right to review this decision periodically, with
no obligation to keep the Company advised in this regard.

Due to Investec being entitled to request early payment of the outstanding debt, as a result of the breach in covenants referred to
preceding, management has determined that the total Investec debt of R162.5 million be classified as current borrowings.

Due to continued cash constraints, the scheduled R7.5 million repayment of the term loan facility was not made on March 31, 2017,
constituting an event of default.

Subsequent to quarter end, BC Dundee entered into the sixth amendment to the term loan and revolving credit agreement and the
undrawn working capital facility balance of R22.0 million was made available. Refer to note 7, Subsequent Events.


5 ISSUANCE OF COMMON SHARES TO STA

On February 22, 2017, the Company issued Common Shares to STA pursuant to the STA Equity Settlement Agreement entered into
during the financial year ended December 31, 2015. An additional 4 286 908 Common Shares were issued at C$0.05 (R0.51).

6 COMMITMENTS AND CONTINGENCIES

Director Agreement

An agreement with a director requires that payment of approximately R3.0 million be made upon the occurrence of a change of
control, other than a change of control attributable to RCF. As no triggering event has taken place, no provision has been recognised
as of March 31, 2017.

STA Contract Mining Agreement

In terms of the STA Contract Mining Agreement, STA is mining four sections at Magdalena at a fixed contract mining fee per tonne,
effective October 31, 2015. The STA Contract Mining Agreement has a three year term, and the option for a further two year
extension if agreed to by all parties. In terms of the STA Equity Settlement Agreement, a portion of the contract mining fees will be
settled in Common Shares, in order to alleviate cash flow pressures.

The STA Contract Mining agreement can be terminated on 60 days notice for which period the Company will be liable for payment
for the tonne mined at the fixed rate per tonne.

Capital Commitments

Capital expenditures contracted for at the statement of financial position date but not recognized in the Interim Results are as
follows:

                                                                                 March 31,       December 31,           March 31,
                                                                                      2017               2016                2017
                                                                                         R                  R                  C$
Property, plant and equipment                                                    6 160 463          2 919 134             612 230

In terms of Regulation 8.10 of the Mine Health and Safety Act, 29 of 1996 Regulations, the Company is required to take reasonably
practicable measures to ensure that pedestrians are prevented from being injured as a result of collisions between trackless mobile
machines and pedestrians, by way of the installation of proximity devices on specified machines. The Company is currently investigating 
its options in this regard. The Company has proposed the phase in of such devices over a five year period.

Environmental and Regulatory Contingency

The Company's mining and exploration activities are subject to various laws and regulations governing the environment and mine
operations. These laws and regulations are continually changing and generally becoming more restrictive. The Company believes its
operations are materially in compliance with all applicable laws and regulations. The Company has made, and expects to make in
the future, expenditures to continue to comply with such laws and regulations.

Effective November 20, 2015, regulations governing financial provisions for asset retirement obligations was transitioned from the
Mineral and Petroleum Resources Development Act ("MPRDA") to the National Environmental Management Act ("NEMA"). There is
currently substantial uncertainty regarding the revised requirements for financial provisions pursuant to NEMA. Management is
currently seeking clarification of the revised requirements in order to determine the expected impact of the change, which may
result in a significant increase to the asset retirement obligation. One of the key changes in the requirements is that closure cost
assessment now has to be based on a "Sudden Closure" assessment and third party rates whereas pursuant to the MPRDA, it was
based on the end of mine life and prescribed rates. Uncertainty exists around the transitional arrangements although the
implementation date of the new Act is expected to be February 20, 2019.

Outstanding Legal Proceedings

On April 20, 2015, the trustees of the Avemore Trust brought an application in the High Court of South Africa against, among others,
the South African Minister of Mineral Resources ("the Minister"), BC Dundee and Zinoju in respect of Mining Right 174 ("MR174"). In
terms of the application, the trustees of the Avemore Trust challenged the decision by the Minister, subsequent to an internal
appeal process concluded during September 2014, to grant a converted mining right to BC Dundee and to grant consent for the
cession of the converted mining right to Zinoju. There have been various settlement offers between the parties, but should
settlement not be reached, BC Dundee and Zinoju intend to oppose the application. The Company's external legal team, including
senior counsel have advised of a defendable case in terms of Avemore Trust's approach to the matter. The legal process on this
matter is currently ongoing.

On August 27, 2015, notice was received from the Minister that Mining Right 301 ("MR301") had been withdrawn together with the
approval by the Regional Manager of the Environmental Management Plan in respect of MR301 (the "Ministerial Decision"). The
reasons given by the Minister for the Ministerial Decision are procedural issues in respect of the award process, in relation to an
objection received from Avemore Trust in October 2013 against the awarding of the right. On September 15, 2015, an urgent court
order was granted, pending final determination, for the Ministerial Decision to be of no force and effect, to interdict the Minister
from awarding MR301 to any other party and for the Company to continue to mine in terms of MR301. A review application was
instituted by the Company in October 2015 to obtain final relief in the form of an order setting aside the Ministerial Decision. On
March 23, 2016, Avemore Trust filed a counter application for the Ministerial Decision to be remitted for consideration by the
Minister. The Company's external legal team, including senior counsel have indicated a strong likelihood of the review application
being successful. The legal process on this matter is currently ongoing.

South African Revenue Service ("SARS") Correspondence

During the year ended December 31, 2016, BC Dundee received a letter of demand from SARS with regards to an investigation
conducted by them on diesel refunds claimed by BC Dundee under the South African Customs and Excise Act, 91 of 1964. As per the
notification, the SARS Commissioner has disallowed diesel refunds in the amount of R13.8 million (including interest) for the period
December 2012 to February 2016. The Company applied to SARS to suspend payment, however this request was denied. SARS has
requested payment in three equal instalments of R4.9 million between March 2017 and May 2017. The Company requested SARS to
enter into more favorable instalment terms and is awaiting feedback from SARS. The Company has disputed the disallowance of
diesel refunds and believes it has a defendable case, however the outstanding amount owing has been included in trade and other
payables. During March 2017 and April 2017 the Company made the first and second instalment repayment of R4.9 million.

During the year ended December 31, 2016, Zinoju received correspondence from SARS after conducting an audit of the 2012 to 2014
tax returns, disallowing an expense claimed in the 2012 tax return. The total exposure is approximately R3.0 million plus penalties of
R1.5 million and interest of R1.8 million, all of which have been provided for as at March 31, 2017. The Company raised an objection
to SARS disputing the penalties and interest levied, however the objection was disallowed. The Company has lodged an appeal to the
SARS Commissioner to defend its case and is awaiting feedback from SARS.

7 SUBSEQUENT EVENTS

Investec facility revised terms

The Magdalena mine current LOM has a main development panel, which is Panel 417. It is critical this panel be developed to allow
sufficient pit-room for the mining sections. Drilling results in panel 417 revealed a dyke of 22 meters thick, with a 13.5 meter down-
throw. In terms of the life of mine planning for Magdalena, the mine must develop through this dyke in order to access the LOM
block towards South-West of the reserves, which would establish additional pit-room. Funding was required for this development,
and Investec was approached to make the undrawn R22.0 million Working Capital Facility available for this purpose.

Investec has agreed to release the funds, subject to agreement being reached on the following revised terms and conditions:

     -    The Panel 417 project implementation shall be reviewed and its completion verified by a Project Oversight Committee
          appointed by Investec.
     -    Investec agrees to not exercise its rights arising from events of default until July 15, 2017.
     -    Investec will review the terms and conditions of the facility after July 15, 2017, with a view to agreeing terms and
          conditions of an extension of the final maturity date for a period of no less than 2 years, subject to the project having been
          successfully completed to the Project Oversight Committee's satisfaction.
     -    Investec will release the R22.0 million as working capital for the purpose of ensuring the project is completed timeously.
     -    A Life of Mine Royalty ("LOMR") shall be payable to Investec on all bituminous coal sales with effect from July 1, 2017,
          calculated at a rate of 3.54% on all bituminous coal sold.
     -    If all amounts owing under the facility are paid on or before June 30, 2018, the Company shall pay Investec a fee equal to
          the greater of the aggregate amount of the LOMR which was payable until the date of repayment, and R22.0 million,
          minus the aggregate amount of the LOMR which was paid to Investec up to that date. The LOMR shall be terminated if the

facilities are fully repaid before June 30, 2018.

On April 13, 2017, BC Dundee entered into a sixth amendment to the term loan and revolving credit agreement and the undrawn
working capital facility balance was made available for drawdown. As of the date of these Financial Statements, the Company has
drawn the full R80.0 million working capital facility.

Northcott Capital Limited Mandate

The Company engaged Northcott Capital Limited ("Northcott") to provide advisory services regarding potential funding for the
Company. Northcott is entitled to a success fee based on a percentage of any funding raised. The agreement may be terminated on
30 days written notice.

Other Matters

Except for the matters discussed above, no other matters which management believes are material to the financial affairs of the
Company have occurred between the statement of financial position date and the date of approval of the Interim Results.

May 11,2017
Sponsor: Questco Proprietary Limited



Date: 12/05/2017 03:29:00 Supplied by www.sharenet.co.za                     
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