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CZA - Coal of Africa Limited - Consolidated financial report for the period
ended 31 December 2010
Coal of Africa Limited
(previously, "GVM Metals Limited")
(Incorporated and registered in Australia)
(Registration number ABN 98 008 905 388)
JSE Share code: CZA
ASX Share code: CZA
ISIN AU000000CZA6
("CoAL" or the "Company")
CONSOLIDATED FINANCIAL REPORT FOR THE PERIOD ENDED 31 DECEMBER 2010
The Directors present their report on the consolidated entity comprising CoAL
and the entities it controlled for the six months ended 31 December 2010
together with the auditor`s review report thereon:
Directors
The Directors of the Company in office during the six months and to the date
of this report are:
Name Status
Richard Linnell (Chairman) Non-executive Director
Peter Cordin Non-Executive Director
Steve Bywater Non-Executive Director
Khomotso Mosehla Non-Executive Director
David Murray Non-Executive Director
Rudolph Torlage Non-Executive Director
Mikki Xayiya Non-Executive Director
John Wallington (Chief Executive Officer) Executive
Simon Farrell (Deputy Chairman) Executive
Professor Alfred Nevhutanda Executive
Blair Sergeant (Finance Director) Executive
REVIEW OF OPERATIONS
Principal activity and nature of operations
The principal activity of the Consolidated Entity is the exploration,
development and mining of its coal interests in South Africa.
During the 2010 financial year, the Company commenced production of export
quality thermal coal from its Mooiplaats thermal coal project ("Mooiplaats
Colliery") in Mpumalanga, South Africa. The acquisition of the NuCoal group of
companies, also in Mpumalanga, added to the Company`s production profile. CoAL
exports the coal through the Matola Terminal in Maputo, Mozambique ("Matola
Terminal").
CoAL also owns the Vele coking coal project ("Vele Colliery") and the Makhado
coking coal project ("Makhado Project"), situated in Limpopo, South Africa.
These are coking coal projects that the Company expects will supply both
domestic and export markets. The construction of Vele Colliery was almost
complete by the end of December 2010 and will be commissioned once the
necessary regulatory approvals have been obtained. The Company has undertaken
extensive exploration activities on the Makhado Project and has agreed to
acquire coal prospects in the vicinity, which will substantially increase the
project`s coal resource.
These interim financial statements report the results of the consolidated
entity for the six months ended 31 December 2010 and its financial position at
that date. The financial statements have been prepared for the Australian
Stock Exchange ("ASX"), the Alternative Investment Market ("AIM") of the
London Stock Exchange and the JSE Limited ("JSE").
The period under review has been characterised by:
- The achievement of 1,000 fatality free production shifts at the Mooiplaats
Colliery;
- Total coal sales of $93m for the period compared to Nil during the
corresponding period last year;
- Vele Compliance Notice resulting in the closure of the colliery on 5 August
2010. The Company is well advanced in meeting regulatory and mitigation
requirements;
- Increasing production profile at Mooiplaats;
- Up 59% to 375,000 run of mine ("ROM") tones for the period;
- Approval from the Department of Mineral Resources ("DMR") for the exchange
of New Order Prospecting Rights ("NOPR") between CoAL and Rio Tinto controlled
entities ("Rio Farm Swap") allowing for the submission of the Makhado Project
New Order Mining Right ("NOMR") Application;
- Makhado Project Definitive Feasibility Study ("DFS") near completion;
- Makhado bulk sample on schedule testing by Arcelor Mittal - extraction of
over 350,000 bank cubic metres ("bcm") of material during the six months; and
- Agreement reached with Rio Tinto to acquire the Chapudi Coal Project and
several other coal exploration properties (collectively "the Rio Coal Assets")
for US$75 million, increasing resources by an estimated 1.040 million tonnes.
Woestalleen Colliery - Witbank Coal field (100%)
The Zonnebloem Colliery continued its impressive safety record during the
period, and has not recorded a single lost time injury since start-up in 2008.
Woestalleen produced 948,057 tonnes of export coal and 201,450 tonnes of
domestic coal between July and December 2010. This was generated from
1,692,233 tonnes of ROM coal from the Zonnebloem, Klipbank and Hartogshoop
collieries. The ROM production was lower than the previous six-month period as
a result of seasonal rainfall and the near completion of the Klipbank and
Hartogshoop collieries` life of mine. The production lost as a result of the
closure of Hartogshoop and Klipbank will be made up by an increase in
production from the Zonnebloem Colliery.
Mooiplaats Colliery - Ermelo Coalfield (100%)
The Mooiplaats Colliery achieved the significant milestone of 1,000 fatality
free production shifts during September 2010 that had increased to over 1,200
shifts by the end of December 2010.
Production from the initial three sections increased during the six-month
period with the fourth added in October 2010. The colliery increased
production by 59% compared to the previous six months generating 375,752
tonnes of ROM coal compared to 236,798 tonnes in the corresponding period. ROM
purchases to supplement the plant feed totaled 317,103 tonnes compared to
262,248 tonnes in the prior comparative period. During the half-year, 716,810
tonnes (H1 2010: 448,192) of ROM coal was processed yielding 383,153 tonnes of
export quality coal (H1 2010: 150,457) and 123,628 tonnes of middlings coal
(H1 1010: 39,652).
The deployment of a fifth section at the Mooiplaats Colliery is planned for
mid-2011. A review of the Colliery is currently under way with the objective
of maximising value. This will involve restructuring where appropriate and
revision of mine planning based on the improved geological information as a
consequence of targeted exploration work.
Despite upgrade and expansion related delays at the Matola Terminal and train
derailment in December 2010, the Company railed 364,967 tonnes (H1 1010:
169,404) of Mooiplaats and Woestalleen coal to the port, a 115% increase over
the previous six months. Export sales totaled 352,268 tonnes (H1 2010:
263,681) and domestic sales were 141,697 tonnes (H1 2010: 51,909).
At the end of October 2010, a Pre-Compliance Notice ("the Notice") was issued
to the Mooiplaats Colliery. Company representatives met with the Mpumalanga
Department of Economic Development, Environment and Tourism shortly thereafter
and subsequently the Notice was withdrawn. The Company continues to work with
the relevant state departments to ensure full compliance.
Vele Colliery - Tuli Coalfield (100%)
Vele Colliery recorded one lost time injury during the construction and
development phases of the project.
Project development included the construction of the open cast pit, processing
plant and related mining infrastructure. As a consequence of significant
opposition to the Colliery, due primarily to a purported proximity to the
Mapungubwe Heritage Site and ambitions for the creation of a Trans-Frontier
park in August 2010, the Department of Environmental Affairs ("DEA") issued a
Compliance Notice for specific activities under taken during the construction
of the Vele Colliery requiring the cessation of all activities on site. The
Company has subsequently submitted rectification papers in terms of section
24G of the South African National Environmental Management Amendment Act, 1998
(Act No. 107 of 1998) ("NEMA") requesting permission to continue with the
activities relevant to the Compliance Notice. CoAL has fully adhered to the
instructions contained within the Compliance Notice and is complying with all
relevant legislation. The Company expects clarity soon on the appropriate
approvals enabling it to recommence activities. With reference to the
Integrated Water Use License ("IWUL"), the Company has cooperated fully with
the Department and complied with the legal requirements. The Company is
expectant therefore that a decision in this regard should be imminent.
During November 2010, representatives of the United Nations Educational,
Scientific and Cultural Organisation ("UNESCO") and senior government
officials from the DMR and DEA visited the site to assess the co-existence of
the Vele Colliery with the Mapungupwe World Heritage site. The Company is
confident that it has addressed the concerns and designed sufficient
mitigation into the mining layout and processes to ensure co-existence with
eco-tourism and agriculture.
Makhado Project - Soutpansberg coal field (100%)
The extraction of the bulk sample at the Makhado Project commenced during the
reporting period and by the end of December 2010, over 350,000 bcm`s of
material had been removed allowing for the extraction of the 19,100 tonne
sample bulk sample to be sent to Exxaro Resources Limited`s ("Exxaro")
Tshikondeni mine for processing. The coking coal produced will be sent to
ArcelorMittal`s works for testing. The results of these tests are required for
the completion of the DFS and to facilitate the finalisation of terms and
conditions for the proposed off-take agreement between CoAL and ArcelorMittal.
By the end of the December 2010, CoAL had largely completed the DFS for the
Makhado Project and is currently undergoing a review process, expected to be
completed by end March 2011. This will be followed by the detailed design
phase of the Project when approved by the CoAL Board, anticipated to be early
in the third quarter of the calendar year.
Significant progress was made during the period towards completing the NOMR
application for the Makhado Project which included baseline social and
environmental studies conducted by independent experts. Consultation with
interested and affected parties continued with the communities and land
claimants affected by the Project. The NOMR was lodged subsequent to the end
of the period. Extensive economic, social and environmental impact studies
will be prepared as part of the process in formulating a detailed
Environmental Management Programme ("EMP").
During the period, CoAL received confirmation from the DMR that the
application for Ministerial consent in terms of the Mineral and Petroleum
Resources Development Act (no. 28 of 2002) ("MPRDA") to effect the Rio Farm
Swap had been approved. The rationalisation of the farms allowed CoAL to lodge
the NOMR application for this Project. The Rio Farm Swap rationalizes the NOPR
into well defined, economic coal projects and creates a further three
significant coal projects around the Makhado Project.
During November 2010, the Company announced that it had entered into an
agreement to acquire certain coal assets from Rio Tinto group companies. These
assets are situated in the Soutpansberg Basin comprising both thermal and
coking coal resources and are for the most part, contiguous to CoAL`s existing
holdings in the area. One of these projects, the Chapudi Coal Project,
provides an estimated additional 1.040 million tonne JORC resource and is
contiguous with the Company`s Makhado Project. CoAL will retain properties
that were to be exchanged in accordance with the Rio Farm Swap.
CoAL intends to use the acquisition of the Rio Coal Assets to continue and
further build upon its extensive Broad Based Black Economic Empowerment
("BBBEE") initiatives. Specifically, CoAL intends to develop the Chapudi Coal
Project and a potential Independent Power Producer project in collaboration
with its proposed BBBEE partners, including the local communities and other
broad based groupings.
The acquisition consideration payable by CoAL for the Rio Coal Assets is US$75
million and CoAL provided the Vendors with a US$2 million cash deposit. The
remainder of the consideration comprises US$45 million payable on completion
of the sale, including approval in accordance with Section 11 of the MPRDA.
The remaining US$30 million deferred cash consideration is not payable until
either the granting of a NOMR covering one or more of the projects, or 2
years, whichever is the earlier.
Educational Trust
The Company established an educational trust in 2008 that provides bursaries
to students from the areas surrounding CoAL`s projects in the Limpopo and
Mpumalanga provinces. Students sponsored by the trust have been provided with
the opportunity to study mining and associated fields at academic and
technical tertiary institutions in South Africa.
In 2010, the educational trust sponsored 39 students and the Company is proud
to announce that at the end of the period, a bursary student graduated from
Pretoria University with a Bachelor of Science in Metallurgical Engineering. A
further two students completed their academic studies and have undertaken
their in-service training prior to graduating later in 2011. The remaining
students are supported and mentored by the trustees as well as CoAL staff.
FINANCIAL RESULTS
Revenue from the sale of coal for the six months totalled $93,386,039. No
sales of coal were reported for the corresponding period last year. Revenue
from the sale of coal arising from the acquisition of NuCoal only accrued to
the Group with effect from January 2010.
The loss for the six months under review amounted to $57,371,902, or 11.25
cents per share compared to a loss of $41,421,106 or 12.30 cents per share for
the prior corresponding period. This result is characterised by the high level
of non-cash charges to the statement of comprehensive income.
CoAL`s decision to restate the results for the year ended 30 June 2010,
following a review of the accounting treatment for the option issued in terms
of its Broad Based Black Economic Empowerment transaction, has had no effect
on the current period`s operating result. Shareholders are referred to Note 6
of the half-year report.
Depreciation and amortisation of $30,287,571 was the biggest contributor to
the loss. Further impairments of $11,907,600 were recorded to the carrying
value of assets held for sale, following the decision to dispose of Holfontein
and NiMag. The Company also recorded an unrealised exchange loss of $9,774,201
that arose from the translation of inter-group loan balances. Share option
expenses contributed a further $1,442,242 in non-cash expenditure.
As at 31 December 2010, the Company had cash of $23,304,834 and working
capital of $ 11,930,635 compared to cash of $101,062,757 and working capital
of $73,275,992 in June 2010. The Company has embarked on a number of
initiatives to improve control of its working capital and to ensure the flow
of operational capital is more efficient. These include a review of the
existing operating structures and costs.
CoAL continues to work on a number of new debt facilities and remains
confident of securing one or more currently under negotiation, which if
finalised, will ensure that the Company has the ability to repay the US$20
million facility to JP Morgan.
Marketing
The seaborne traded export thermal coal prices have steadily increased during
the six months and peaked at approximately US$130 per tonne for Free On Board
sales from the Richards Bay Coal Terminal. These coal prices were underpinned
by substantial demand for South African coal in Asia, specifically India and
China, while the European market remained relatively subdued. The US dollar
weakness has resulted in strong Australian and South African currencies that
in turn increased the cost base for the coal produced in these territories.
The international thermal coal market remains volatile and intra-day movements
of several dollars on the paper and physical markets are not uncommon.
Sustained demand from India and China as well as supply side constraints from
countries exporting coal and a colder than expected European winter has
further supported thermal coal prices in late 2010. The domestic thermal coal
market has remained relatively stable to firm due to the demand for export
thermal coal.
Australian supply disruptions as a result of severe flooding and an extreme
wet season has impacted global hard coking coal prices which have steadily
increased, peaking above US$330 per tonne from a low of just above US$200 per
tonne.
Authorised and issued share capital
At 31 December 2010, Coal of Africa Limited had 530,514,663 fully paid
ordinary shares in issue. The holders of ordinary shares are entitled to one
vote per share and are entitled to receive dividends when declared.
Dividends
No dividends were declared or paid during the six months.
Highlights and events after the reporting period
- The NOMR application for the Makhado Project was lodged with the DMR during
January 2011 and accepted in February 2011 thus enabling the Company to
commence with the extensive economic, social and environmental impact studies
required for the completion of the EMP;
- During January 2011, the DMR executed the NOPR for the Rio Farm Swap,
completing the final administrative step required for completion of the
transaction;
- The Company completed the extraction of the Makhado Project bulk sample,
which will now be processed at Exxaro`s Tshikondeni Colliery to produce some
5,000 tonnes of coking coal;
- Commissioning of the Phase 3 expansion at the Matola Terminal providing CoAL
with 3 million tonnes per annum allocation at the port.
Outlook
Expected developments during the next reporting period include:
- Clarity and resolution of the situation at Vele.
- Completion of the Makhado bulk sample tests at ArcelorMittal followed by the
DFS.
- Commissioning of Phase 3 of the Matola Terminals upgrade during March 2011,
thereby increasing CoAL`s export allocation from one to three million tonnes
per annum.
- Increasing the production profile at the Mooiplaats Colliery to assist in
meeting the port allocation referred to above.
- Progress the Rio Coal Asset acquisition, including finalizing terms with
potential partners
Additional disclosures
The additional information can be found in the notes to the half-year
financial statements. These disclosures have been included to give a true and
fair view of the Company`s financial performance and position as required by
the Corporations Act 2001.
Corporate Activity
The Company previously announced that it intends transferring its primary
listing from the ASX and would seek approval for admission to listing on the
Official List of the UK Listing Authority and to trading on the London Stock
Exchange`s Main Market ("LSE"). As a result of the delay in the commencement
of the Vele Colliery, the CoAL Board considered it prudent that the transfer
to the LSE be delayed.
Auditors
The change in the Company`s auditors to Deloitte was approved by shareholders
on 17 November 2010.
Auditor`s Independence Declaration
A copy of the auditor`s independence declaration as required under Section
307C of the Corporations Act 2001 is included.
The half-year report, which has been approved on the going concern basis, was
approved by the board on 16 March 2011 and was signed on its behalf by:
John Wallington
Chief Executive Officer
Dated at Johannesburg, South Africa, this 16th day of March 2011.
A PDF version of the half-year report is available on the Company`s website
www.coalofafrica.com.
Resource Estimation:
The information in this report that relates to the Chapudi Coal Project`s
estimated 1,040Mt JORC Resource is based on information compiled by Steen
Kristensen, who is a member of the Australian Institute of Mining and
Metallurgy and who qualifies as a Competent Person as defined in the 2004
Edition of the `Australasian Code for Reporting of Exploration Results,
Minerals Resources and Ore Reserves` ("JORC Code"). Steen is a full-time
employee of Rio Tinto Energy and has experience that is relevant to the style
of mineralisation and type of deposits under consideration. Steen Kristensen
consents to the inclusion in the report of the matters based on his
information in the form and context in which it appears.
The information in this report that relates to exploration results, mineral
resources or ore reserves in respect of the Makhado coking coal project is
based on information compiled by Mark Craig Stewardson, who is registered as a
Professional Natural Scientist (PrSci Nat, Reg. No. 400119/93) with the South
African Council for Natural Scientific Professions ("SACNASP"), which is a
Recognised Overseas Professional Organisation ("ROPO") in terms of the JORC
Code. Mark Craig Stewardson is employed by Mineral Corporation Consultancy
and has sufficient experience that is relevant to the style of mineralisation
and type of deposit under consideration and to the activity that he is
undertaking to qualify as a Competent Person as defined in the JORC Code.
Mark Craig Stewardson consents to the inclusion in this announcement of the
matters based on his information in the form and context in which it appears.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE HALF-YEAR
ENDED 31 DECEMBER 2010
Consolidated Consolidated
Six months Six months
ended 31 ended 31
December 2010 December 2009
A$ A$
Sale of goods 93,386,039 -
Cost of sales (excluding distribution (74,797,040) (1,421,219)
costs)
Gross profit 18,588,999 (1,421,219)
Interest and other income 1,445,775 2,000,571
Distribution costs (14,528,097) (4,124)
Take or Pay obligations (103,595) (3,392,587)
Total distribution costs (14,631,692) (3,396,711)
Consulting, accounting & professional (2,700,045) (1,856,334)
expenses
Employee benefits expenses (7,182,528) (3,055,371)
Depreciation and amortisation expenses (30,287,571) (6,801,171)
Foreign exchange losses (9,774,201) (6,110,165)
Diminution in investments (138,644) (6,223,000)
Diminution in value of assets held for (11,907,600) (8,692,665)
sale
Environmental provision (1,694,201) -
Finance costs (668,263) (144,106)
Other expenses (14,529,063) (3,822,072)
Total administration and other expenses (78,882,116) (36,704,884)
Loss before tax (73,479,034) (39,522,243)
Income tax benefit 13,214,808 3,474,376
Loss from continuing operations (60,264,226) (36,047,867)
Discontinued operation
Profit from discontinued operations 568,975 864,410
Loss after income tax (59,695,251) (35,183,457)
Other Comprehensive Income
Exchange differences on translating 2,323,349 (6,237,649)
foreign operations
Total comprehensive income for the (57,371,902) (41,421,106)
period
Basic loss per share (11.25) cents (12.30) cents
The Consolidated Entity`s potential ordinary shares were not considered
dilutive as the Entity is in a loss position
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2010
Consolidated Consolidated
Note 31 December 30 June 2010
2010 A$
A$
CURRENT ASSETS
Cash and cash equivalents 23,304,834 101,062,757
Trade and other receivables 18,109,172 31,812,006
Inventories 25,837,439 28,874,316
Assets held for sale 15,381,454 17,428,303
Other assets 365,635 396,602
Total Current Assets 82,998,534 179,753,984
NON CURRENT ASSETS
Mining Assets 240,168,179 266,316,598
Exploration Expenditure 33,485,961 29,374,946
Property, plant and equipment 174,737,732 182,928,437
Development Expenditure 73,153,973 45,557,064
Logistics assets 34,082,673 37,897,472
Deferred tax assets 25,017,402 12,208,693
Other financial assets 21,366,716 21,373,986
Other intangible assets - 3,540,213
Total Non Current Assets 602,012,636 599,197,409
TOTAL ASSETS 685,011,170 778,771,393
CURRENT LIABILITIES
Trade and other payables 50,308,724 80,726,868
Borrowings 19,679,200 24,352,867
Provisions 366,774 1,023,228
Current tax liability 713,201 375,029
Total Current Liabilities 71,067,899 106,477,992
NON CURRENT LIABILITIES
Borrowings 1,783,386 1,758,055
Provisions 16,027,772 10,790,064
Deferred tax liabilities 25,643,512 33,327,021
TOTAL NON CURRENT LIABILITIES 43,454,670 45,875,140
TOTAL LIABILITIES 114,522,569 152,353,132
NET ASSETS 570,488,601 626,418,261
EQUITY
Contributed equity 3 778,046,671 778,046,671
Reserves 97,781,170 94,015,579
Retained earnings (310,592,787) (250,897,536)
TOTAL PARENT EQUITY INTEREST 565,235,054 621,164,714
Non Controlling Interests 5,253,547 5,253,547
TOTAL EQUITY 570,488,601 626,418,261
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE HALF YEAR ENDED
31 DECEMBER 2010
A$ A$ A$ A$
Contributed Capital Foreign Share
equity profit currency options
reserve translation reserve
reserve
Balance at 30.6.2010 778,046,671 136,445 (4,875,339) 9,754,473
previously reported
Effect of prior period - - - 89,000,000
error for Firefly options
(note 7)
As Re-stated 778,046,671 136,445 (4,875,339) 98,754,473
Balance at 1.7.2010 778,046,671 136,445 (4,875,339) 98,754,473
Options exercised during - - -
the period
Capital raising - - -
Share based payments - - - 1,442,242
Share issue costs - - - -
Profit/ (Loss) - - - -
attributable to members
of parent entity
Minority interests in - - - -
investments
Foreign currency - - -
translation adjustments
of foreign controlled
operations 2,323,349
Balance at 31.12.2010 778,046,671 136,445 (2,551,990) 100,196,715
A$ A$ A$
Retained Total Non
profits/ controlling
(losses) interest
Balance at 30.6.2010 (161,897,536) 621,164,714 5,253,547
previously reported
Effect of prior period error (89,000,000) - -
for Firefly options (note 7)
As Re-stated (250,897,536) 621,164,714 5,253,547
Balance at 1.7.2010 (250,897,536) 621,164,714 5,253,547
Options exercised during the - - -
period
Capital raising - - -
Share based payments - 1,442,242 -
Share issue costs - - -
Profit/ (Loss) attributable to (59,695,251) (59,695,251) -
members of parent entity
Minority interests in - - -
investments
Foreign currency translation - 2,323,349 -
adjustments of foreign
controlled operations
Balance at 31.12.2010 (310,592,787) 565,235,054 5,253,547
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE HALF YEAR ENDED
31 DECEMBER 2009
A$ A$ A$ A$
Contributed Capital Foreign Share
equity profit currency options
reserve translation reserve
reserve
Balance at 1.7.2009 569,267,119 136,445 (1,823,690) 8,876,771
Options exercised during 1,255,747 - - (509,235)
the period
Capital raising 102,601,864 - - -
Share based payments 4,139,200 - - -
Share issue costs (3,386,764) - - -
Profit/ (Loss) - - - -
attributable to members of
parent entity
Minority interests in - - - -
investments
Foreign currency - - (6,237,649) -
translation adjustments of
foreign controlled
operations
Balance at 31.12.2009 673,877,166 136,445 (8,061,339) 8,367,536
A$ A$ A$
Retained Minority Total
profits/ Equity
(losses) Interests
Balance at 1.7.2009 (60,456,243) 523,640,036 7,679,634
Options exercised during the - 746,512
period
Capital raising - 102,601,864
Share based payments - 4,139,200
Share issue costs - (3,386,764)
Profit/ (Loss) attributable to (35,183,457) (35,183,457)
members of parent entity
Minority interests in investments - (23,587) (23,587)
Foreign currency translation - (6,237,649)
adjustments of foreign controlled
operations
Balance at 31.12.2009 (95,639,700) 586,296,155 7,656,047
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE HALF YEAR ENDED 31
DECEMBER 2010
Consolidated Consolidated
31 December 31 December
2010 2009
A$ A$
Cash Flows used in Operating Activities
Cash receipts in the course of operations 127,107,072 11,234,131
Interest received 1,134,982 1,828,547
Cash payments in the course of operations (154,987,532) (11,419,938)
Interest paid (668,263) (185,001)
Tax paid (8,003,269) (19,492)
Net cash (used in)/ generated by (35,417,010) 1,438,247
operating activities
Cash Flows used in Investing Activities
Deposits paid on investments - (11,802,283)
Receipts from investments - 1,446,416
Payments for development assets (25,319,911) -
Exploration expenditure (4,225,363) (4,644,188)
Proceeds on disposal of assets 2,772,173 -
Payments for investments (3,965,885) (10,271,719)
Payments for property, plant and (11,533,742) (68,059,625)
equipment
Net cash used in investing activities (42,272,728) (93,331,399)
Cash Flows from Financing Activities
Other loans repaid (982,141) -
Proceeds from issues of shares and - 99,961,612
options
Net cash (used in)/ provided by financing (982,141) 99,961,612
activities
NET DECREASE/ (INCREASE) IN CASH HELD (78,671,878) 8,068,460
Cash at the beginning of the half-year 101,062,757 87,032,875
Exchange rate adjustment 913,956 (1,059,277)
Cash at the end of the half-year 23,304,834 94,042,058
The accompanying notes form part of these financial statements.
NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR REPORT FOR THE HALF-YEAR ENDED
31 DECEMBER 2010
1. Corporate information
The financial report of CoAL for the half-year ended 31 December 2010 was
authorised for issue in accordance with a resolution of the directors on 16
March 2011. CoAL is a company incorporated in Australia and limited by shares,
which are publicly traded on the ASX, AIM and the JSE.
The nature of the operations and principal activities of the group are
described in the Directors` Report.
2. Summary of significant accounting policies
Statement of compliance
The half-year financial report is a general purpose financial report prepared
in accordance with the requirements of the Corporations Act 2001 and AASB 134:
Interim Financial Reporting. Compliance with AASB 1334 ensures compliance with
International Financial Reporting Standard 134 Interim Financial Reporting.
The half year report does not include notes of the type normally included in
an annual financial report and should be read in conjunction with the most
recent annual financial report.
Going Concern
The financial statements have been prepared on the basis that the Group is a
going concern, which contemplates the continuity of normal business activity,
realisation of assets and the settlement of liabilities in the normal course
of business. The Company will fund its future strategic and working capital
requirements through capital raisings or debt, as it has successfully
transacted in the past.
CoAL continues to work on a number of new debt facilities and remains
confident of securing one or more currently under advanced negotiation, which
if finalised, will ensure that the Company has the ability to repay the US$20
million facility to JP Morgan which is due and payable on 24 March 2011
without affecting other planned cash flows.
Should the new debt facilities not be secured as planned the Directors are
comfortable that the payment of the US$20 million facility will be settled
using existing cash reserves. The quantum and timing of all discretionary
expenditures will be minimized or deferred to suit the Company`s cash flow
requirements from operations
Basis of preparation
The half-year condensed consolidated financial statements have been prepared
on the basis of historical cost, except for the revaluation of certain non-
current assets and financial instruments. Cost is based on the fair values of
the consideration given in exchange for assets. All amounts are given in
Australian dollars, unless otherwise noted.
The Directors are of the opinion that the basis upon which the financial
statements are prepared is appropriate in the circumstances.
The accounting policies and methods of computation adopted in the preparation
of the half-year financial report are consistent with those adopted and
disclosed in the company`s 2010 annual financial report for the financial year
ended 30 June 2010, except for the impact of the Standard and Interpretations
described below. These accounting policies are consistent with the Australian
Accounting Standards and with International Financial Reporting Standards
("IFRS").
The Group has adopted all of the new and revised Standards and Interpretations
issued by the Australian Accounting Standards Board ("the AASB") that are
relevant to their operations and effective for the current reporting period.
New and revised Standards and amendments thereof and Interpretations effective
for the current reporting period that are relevant to the Group include:
Amendments to AASB 5, 8, 101, 107, 117, 118, 136 and 139 as a consequence of
AASB 2009-5 Further Amendments to Australian Accounting Standards arising from
the Annual Improvements Project
AASB 2009-5 Introduces amendments into Accounting Standards that are
equivalent to those made by the IASB under its program of annual improvements
to its standards. A number of the amendments are largely technical, clarifying
particular terms, or eliminating unintended consequences. Other changes are
more substantial, such as the current/non-current classification of
convertible instruments, the classification of expenditures on unrecognised
assets in the statement of cash flows and the classification of leases of land
and buildings.
The adoption of these amendments has not resulted in any changes to the
Group`s accounting policies and have no affect on the amounts reported for the
current or prior periods.
Dividends
No dividend has been paid or is proposed in respect of the half-year ended 31
December 2010 (2009: None).
Consolidated
31 December
2010
A$
3. CONTRIBUTED EQUITY
530,514,663 fully paid ordinary shares 778,046,671
Movements in contributed equity
Opening balance at beginning of the period 778,046,671
Total equity at the end of the half-year 778,046,671
Option Fully paid ordinary shares carry one vote per share and carry the right
to dividends.
Options
The following options to subscribe for ordinary fully paid shares are
outstanding at balance date:
Number Number Exercise Expiry Date
Issued Quoted Price
9,074,998 - A$0.50 30 September 2011
250,000 - A$2.05 1 May 2012
7,000,000 - A$1.25 30 September 2012
1,000,000 - A$1.90 30 September 2012
600,000 - A$1.25 1 May 2012
1,650,000 - A$3.25 31 July 2012
5,000,000 - A$2.74 30 November 2014
912,500 - A$1.90 30 June 2014
2,500,000 - A$1.20 9 November 2015
1 (note1) - GBp0.60 1 November 2014
No options were exercised during the six months under review.
Note 1: Option to subscribe for 50 million ordinary shares for 60 pence each
between 1 November 2010 and 1 November 2014 as approved by shareholders on 22
April 2010.
4.SEGMENT INFORMATION
AASB 8 requires operating segments to be identified on the basis of internal
reports about components of the Group that are regularly reviewed by the chief
operating decision maker in order to allocate resources to the segment and to
assess its performance.
Operating segments
The Group comprises the following main operating segments:
Coal exploration and mining - Mining of coal at the Mooiplaats and Woestalleen
collieries and exploration activities across other coal related interests
Investing - Equity investments in South Africa, Australia and United Kingdom
Segment performance for the six months ended 31 December
2010
Revenue Segment profit/ (loss)
Half-year ended Half-year ended
31 December 31 31 December 31 December
2010 December 2010 2009
2009
A$ A$ A$ A$
Continuing
operations
Coal mining and 93,386,039 28,237 18,588,999 (1,421,219)
exploration
Investing 1,134,982 1,826,898 - -
Other 309,293 145,436 - -
94,830,314 2,000,571 18,588,999 (1,421,219)
Interest and other 1,445,775 2,000,571
income
Distribution costs (14,631,692) (3,396,711)
Consulting, (2,700,045) (1,856,334)
accounting &
professional fees
Foreign exchange (9,774,201) (6,110,165)
losses
Employee expenses
(7,182,528) (3,055,371)
Depreciation and
amortisation (30,287,571) (6,801,171)
expenses
Diminution in (138,644) (6,223,000)
investments
Environmental (1,694,201) -
provisions
Impairment of assets
held for sale (11,907,600) (8,692,665)
Finance costs (668,263) (144,106)
Other expenses from
ordinary activities (14,529,063) (31,822,072)
Net loss before tax (73,479,034)
from continuing (40,097,471)
operations
Discontinued
operations
Alloy manufacturing 14,899,659 11,247,799 568,975 864,410
Loss before tax (72,910,059) (39,522,243)
Income tax expenses 13,214,808 3,474,376
(continuing and
discontinuing
operations)
Consolidated segment 109,729,973 13,248,370 (59,695,251) (35,183,457)
revenue and loss for
the period
The revenue reported above represents revenue generated from external
customers. There were no inter-segment sales during the period.
Segment profit represents the profit earned by each segment without allocation
of administration costs and directors` salaries, finance costs, income tax
expense, depreciation or amortisation expenses.
SEGMENT INFORMATION CONTINUED
Segment
Half-year ended
31 December 30 June 2010
2010
A$ A$
Coal mining and exploration 629,883,774 111,048,913
Investing 33,829,755 596,202,841
Other 21,297,641 71,519,639
685,011,170 778,771,393
5. ASSETS HELD FOR SALE
Holfontein Investments (Pty) Limited
31 December 30 June 2010
2010
A$ A$
Carrying value of investment at beginning 17,428,303 25,540,957
of the year
Diminution in value of asset held for (8,317,942) (8,386,435)
sale
Capitalised expenditure - at cost - 136,705
Exchange differences (63,927) 137,076
Carrying value at end of year 9,046,434 17,428,303
The Company`s investment in the Holfontein Project continues to be available
for sale. CoAL has entered into a formal sale process to dispose of the
investment.
NIMAG (Pty) Limited
31 December 30 June 2010
2010
Carrying value of investment at beginning 10,575,137 -
of the year
Diminution in value of asset held for (3,589,658) -
sale
Exchange differences (352,956) -
Share of subsidiaries` net (loss) / 589,131 -
profit
Carrying value at end of year 7,221,654 -
CoAL considers NiMag a non-core asset and has commenced with a formal disposal
process.
6.PRIOR YEAR ADJUSTMENT
The Annual Report for the year ended 30 June 2010 disclosed the basis of an
agreement entered into with respect to BBBEE. CoAL reported that the option
granted on 22 April 2010 to give effect to the transaction had not been issued
at the reporting date and that, based on the advice received - the transaction
did not meet the requirements of AASB 2 - Share Based Payment - did not record
the transaction in accordance with AASB 2.
The Board has reviewed the advice given and consulted further on this matter
and has, regrettably, concluded that the provisions of AASB 2 do apply to the
transaction. It is therefore necessary to restate the financial statements.
This has resulted in a non-cash charge of $89,000,000 to the Statement of
Comprehensive Income and a corresponding credit to Equity in the Statement of
Financial Position. The effect of this adjustment has been to increase the
loss per share for the year ended 30 June by 19.48 cents per share to 41.69
cents per share. The accounting treatment has no effect on the result for the
current reporting period nor has it any effect on shareholder value as at 30
June 2010.
The effect of the misstatement is reflected below:
June 2010 June 2010
Re-stated Disclosed
balances previously
A$ A$
STATEMENT OF COMPREHENSIVE INCOME
Net loss attributable to members of the (190,441,293) (101,441,293)
parent entity
Other comprehensive income
Foreign currency translation differences (3,051,649) (3,051,649)
Total comprehensive loss for the period (193,492,942) (104,492,942)
CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
EQUITY
Contributed equity 778,046,671 778,046,671
Reserves 94,015,579 5,015,579
Retained earnings (250,897,536) (161,897,536)
Total parent equity interest 621,164,714 621,164,714
7.(LOSS)/ EARNINGS PER SHARE
December 2010 December 2009
A$ A$
Basic loss per share (cents per share) (11.25) (12.30)
Weighted average number of ordinary shares 530,514,663 456,817,409
used as the denominator
Headline Earnings Reconciliation
Profit / (Loss) after income tax for the (59,695,251) (35,183,457)
period attributable to ordinary
shareholders
Diminution in value of assets and 12,046,244 15,773,641
investments
Profit / (Loss) after income tax for the (47,649,007) (19,409,816)
period attributable to ordinary
shareholders
Headline loss per share (cents per share) (8.98) (6.79)
As at 31 December 2010, there were 25,487,498 (June 2010: 25,487,498) options
outstanding over unissued capital exercisable at amounts ranging between $0.50
and $3.25 (June 2010: $0.50 and $3.25). The Consolidated Entity`s potential
ordinary shares were not considered dilutive as the Entity is in a loss
position.
8. COMTINGENT LIABILITIES
In accordance with normal industry practice, the Company has agreed to provide
financial support to its controlled entities.
Contingent liabilities relate to legal proceedings instituted by Envicoal
(Pty) Ltd in South Africa. The claimant, Envicoal (Pty) Limited, has claimed
the sum of ZAR188,808,550 ($28,038,070), alternatively ZAR157,098,650
($23,329,150), further alternatively ZAR139,670,450 ($20,741,062) from CoAL`s
wholly owned subsidiary, NuCoal (Pty) Ltd in terms of a written Coal Supply
Agreement concluded by the parties in August 2007. NuCoal has defended the
matter and it has been referred to arbitration. The Directors are of the
opinion that the action currently holds insufficient certainty of the outcome
of the proceedings for provision to be made in the financial statements.
CoAL is currently involved in a dispute with Ferret Mining (Pty) Ltd ("Ferret
Mining") who has claimed restitution of 26% of the issued share capital of
Mooiplaats Mining Limited, on the basis of a fraud which has allegedly been
perpetrated between two individuals who are not related to Mooiplaats Mining
Limited or the Group. The Company anticipates that the claim will in all
likelihood be heard later in 2011, although this depends upon how actively
Ferret Mining, as the applicant, pursues the matter going forward. If Ferret
Mining is successful in its claim, the Company has received legal advice that
Ferret Mining will in any event be obliged to compensate the Company for the
fact that the shares, which are the subject of the restitution claim, are now
significantly more valuable than they were when previously owned by Ferret
Mining. The Company will apply for a conditional counter-relief to that effect
and will do so when its response papers are filed.
A further matter relates to Motjoli Resources (Proprietary) Limited
("Motjoli") and Motjoli Resources Advisory Services CC ("Motjoli Advisory")
(together the "Plaintiffs") who have instituted an action in the South Gauteng
High Court, citing, amongst others, CoAL and Mooiplaats Mining Limited as
defendants. The Plaintiffs are claiming a contractual entitlement to be issued
with a further 4,750,000 shares in connection with the acquisition of the
Mooiplaats Colliery. In addition, Motjoli is claiming payment from the
defendants of ZAR95,475,000 ($14,178,038). Mooiplaats Mining Limited and the
Company have defended this claim and filed an appeal. The Plaintiffs have
taken no further steps since the filing of the appeal.
There are no other contingent liabilities as at 31 December 2010.
9. EVENTS SUBSEQUENT REPORTING DATE
Lodging and Acceptance of the Makhado Project NOMR
The NOMR for the Makhado Project was lodged with the DMR during January 2011.
The DMR approved the Makhado Project NOMR application in February 2011
enabling the Company to commence with extensive economic, social and
environmental impact studies allowing for the completion of an extensive EMP.
Execution of the Rio Farm Swap
During January 2011, the DMR executed the NOPR for the Rio Farm Swap,
completing the final administrative step required to complete the transaction.
Makhado Bulk Sample Progress
The Company completed the extraction of the Makhado bulk sample allowing for
the transport of the sample to Exxaro`s Tshikondeni Colliery where the sample
will be beneficiated into approximately 4,400 tonnes of coking coal. The
coking coal will be tested by ArcelorMittal`s Vanderbijlpark operations
facilitating the finalisation of terms relating to the proposed off-take
agreement between CoAL and ArcelorMittal.
There are no other matters or events which have arisen since the end of the
financial period which have significantly affected or may significantly affect
the operations of the consolidated entity, the results of those operations or
the state of affairs of the consolidated entity in subsequent financial years.
Funding
CoAL continues to work on a number of new debt facilities and remains
confident of securing one or more currently under negotiation, which if
finalised, will ensure that the Company has the ability to repay the US$20
million facility to JP Morgan due on 24 March 2011.
DIRECTOR`S DECLARATION
In the opinion of the Directors,
1.The financial statements and notes of the consolidated entity are in
accordance with the Corporations Act 2001, including:
a.complying with Accounting Standard AASB 134: Interim Financial Reporting and
the Corporations Regulations 2001; and
b.giving a true and fair view of the consolidated entity`s financial position
as at 31 December 2009 and of its performance for the half year ended on that
date.
2.There are reasonable grounds to believe that the Company will be able to pay
its debts as and when they become due and payable.
This declaration is made in accordance with a resolution of the Board of
Directors.
Signed
John Wallington
Director
Dated at Johannesburg, South Africa, this 16th day of March 2011.
For the version of the half-year report, including the independent auditors
review report thereon, please refer to the Company`s website,
www.coalofafrica.com.
Sponsor
Macquarie First South Advisers (Pty) Limited
CORPORATE DIRECTORY
Registered office Level 1, 173 Mounts Bay Road
Perth
Western Australia 6000
Telephone: +61 8 9322 6776
Facsimile: +61 8 9322 6778
Email: perth@coalofafrica.com
South African Office 2nd Floor, Gabba Building
Dimension Data Campus
57 Sloane Street
Bryanston
Telephone: +27 11 575 4363
Facsimile: +27 11 576 4363
Board of directors Non-executive
Richard Linnell (Chairman)
Peter Cordin
Steve Bywater
David Murray
Khomotso Mosehla
Mikki Xayiya
Rudolph Torlage
Executive
Simon Farrell (Executive Deputy
Chairman)
John Wallington (Chief Executive
Officer)
Blair Sergeant (Finance Director)
Professor Alfred Nevhutanda
Company secretary Shannon Coates
Australia United Kingdom South Africa
Auditors Deloitte Touche N/A Deloitte & Touche
Tohmatsu Deloitte Place
240 St Georges Building 1
Terrace The Woodlands
Perth WA 6000 20 Woodlands
Australia Drive
Woodmead 2052
South Africa
Bankers NAB Limited N/A ABSA Bank
Level 1, 1238 Hay Palazzo Towers
Street West
West Perth WA Monte Casino
6005 Boulevard
Australia South Africa
Brokers Euroz Securities Morgan Stanley N/A
Limited 25 Cabot Square
Level 14, The London EI4 4QA
Quadrant United Kingdom
1 William Street
Perth WA 6000 Mirabaud
Australia 21 St James`
Street
London SW1Y 4JP
United Kingdom
Lawyers Blakiston&Crabb Watson Farley Bowman Gilfillan
1202 Hay Street Williams 165 West Street
West Perth WA 15 Appold Street Sandton 2196
6005 London EC2A 2HB South Africa
Australia United Kingdom
Nomad/ Corporate N/A Evolution Macquarie First
Sponsor Securities South Advisers
Limited (Pty) Limited
100 Wood Street The Place, South
London EC2V 7AN Wing
United Kingdom 1 Sandton Drive
Sandown 2146
Johannesburg
South Africa
Date: 16/03/2011 12:11:22 Supplied by www.sharenet.co.za
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