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FMC - Forbes & Manhattan Coal Corp. - Condensed interim consolidated
financial statements for the three and nine months ended November 30, 2011 -
unaudited
Forbes & Manhattan Coal Corp.
(Registration number: 002116278)
(External company registration number: 2011/011661/10)
Share code on the Toronto Stock Exchange: FMC
Share code on the JSE Limited: FMC
ISIN: CA3451171050
("Forbes Coal")
FORBES AND MANHATTAN COAL CORP.
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE
MONTHS ENDED NOVEMBER 30, 2011 - UNAUDITED
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited - prepared by management)
(Presented in Canadian Dollars)
Notes November 30, February 28,
2011 2011
(Note 27)
ASSETS
Current
Cash $ $
16,832,573 15,252,651
Restricted cash
1,912,290 1,736,000
Accounts and other
receivables 11,441,728 12,410,375
Inventories 14
3,237,454 10,526,681
Prepaid expenses
175,860 60,301
33,599,905 39,986,008
Property, plant and 12
equipment 78,048,139 79,316,581
Intangibles 11
5,180,441 5,911,567
Goodwill
16,672,014 18,672,014
Other assets 13
6,830,267 5,398,825
Long-term prepaid
expenses 460,893 -
Deferred income taxes
130,094 120,061
$ $
140,921,753 149,405,056
LIABILITIES
Current
Accounts payable and 15 $ $
accrued liabilities 10,517,667 7,031,196
Acquisition obligation 10
19,741,548 -
Other financial 16
liabilities 474,163 2,660,467
Asset retirement 17
obligation 354,340 389,177
Loans payable 18
52,340 261,934
31,140,058 10,342,774
Acquisition obligation 10
- 20,300,925
Asset retirement 17
obligation 2,602,132 2,665,329
Other financial 16
liabilities 8,333,077 11,727,930
Deferred income taxes
14,356,466 18,654,227
56,431,733 63,691,185
SHAREHOLDERS` EQUITY
Issued capital 19
98,792,926 93,672,871
Share-based payment 21
reserves 10,758,251 8,413,283
Deficit
(15,727,524) (17,434,614)
Currency translation
reserve (9,972,645) (535,198)
Equity attributable to the
owners of the Company 83,851,008 84,116,342
Non-controlling interest 6,7
639,012 1,597,529
84,490,020 85,713,871
$ $
140,921,753 149,405,056
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME/(LOSS)
(Unaudited - prepared by management)
(Presented in Canadian Dollars)
Notes FOR THE THREE MONTHS
ENDED
November December
30, 2011 31, 2010
(Notes 1
and 27)
REVENUE 31,152,094 9,030,977
COST OF SALES
Operating expenses 20,459,454 ,598,811
Amortization and depletion 3,907,206 78,617
24,366,660 7,777,428
Gross profit 6,785,434 1,253,549
EXPENSES
Consulting and professional 817,472 745,940
fees
General and administration 1,776,995 407,004
Stock based compensation 21 64,739 5,795,596
Mineral properties
investigation costs 189,606 -
2,848,812 6,948,540
Net income (loss) before
other items 3,936,622 (5,694,991)
OTHER ITEMS
Other income (loss) 325,195 56,805
Business combination
transaction costs (2,605) (195,155)
Accretion 10 (474,497) (976,329)
Change in estimates on contingent
acquisition liability (119,729) 2,724,711
Interest (expense) income 9 (306,506) 3,998
Foreign exchange gain (loss) 1,203,117 (1,073,650)
Unrealized gain on marked-to- 53,571
market securities
Loss on share-based payments 7,27 (1,488,132)
NET INCOME (LOSS) before 3,127,036 (5,154,611)
income tax
Income tax expense 395,627 (10,970)
NET INCOME (LOSS) for the
period 3,522,663 (5,165,581)
Other comprehensive income
items
Unrealized (loss) gain on foreign
currency translation (9,254,968) 4,989,070
COMPREHENSIVE (LOSS) for the
period (5,732,305) (176,511)
Net income (loss) per share
- basic and diluted 0.10 (0.20)
Headline earnings per share
- basic and diluted 0.10 (0.20)
Weighted average number:
of common shares outstanding-
basic 34,865,717 25,590,793
of common shares outstanding-
diluted 34,865,717 25,590,793
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME/(LOSS)Continued
Notes FOR THE NINE MONTHS ENDED
November December 31,
30, 2011 2010
(Notes 1 and
27)
REVENUE 86,002,829 15,658,216
COST OF SALES
Operating expenses 57,052,413 10,988,685
Amortization and depletion 12,355,399 1,969,312
69,407,812 12,957,997
Gross profit 16,595,017 2,700,219
EXPENSES
Consulting and professional
fees 3,846,055 1,267,382
General and administration 4,335,338 1,107,085
Stock based compensation 21 1,996,489 13,418,096
Mineral properties
investigation costs 189,606 -
10,367,488 15,792,563
Net income (loss) before
other items 6,227,529 (13,092,344)
OTHER ITEMS
Other income (loss) 356,432 207,914
Business combination
transaction costs (24,223) (1,222,390)
Accretion 10
(1,539,940) (1,615,365)
Change in estimates on contingent (119,729) 2,724,711
acquisition liability
Interest (expense) income 9 (827,354) (201,992)
Foreign exchange gain (loss) 1,130,957 (2,482,321)
Unrealized gain on marked-to- 53,571 -
market securities
Loss on share-based payments 7,27 (1,488,132) (2,357,221)
NET INCOME (LOSS) before 3,769,111
income tax (18,039,008)
Income tax expense (2,672,059) (815,382)
NET INCOME (LOSS) for the
period 1,097,052 (18,854,390)
Other comprehensive income
items
Unrealized (loss) gain on foreign
currency translation (9,437,447) 5,899,944
COMPREHENSIVE (LOSS) for the
period (8,340,395) (12,954,446)
Net income (loss) per share
- basic and diluted 0.03 (1.58)
Headline earnings per share
- basic and diluted 0.03 (1.58)
Weighted average number:
of common shares outstanding-
basic 34,856,990 11,949,521
of common shares outstanding-
diluted 34,895,610 11,949,521
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - prepared by management)
(Presented in Canadian Dollars)
FOR THE THREE MONTHS ENDED
November 30, December
2011 31, 2010
(Notes 1
and 27)
CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES
Net income (loss) for the period
3,522,663 (5,165,581)
Adjustments:
Amortization and depletion
3,907,206 149,401
Fair value adjustment on financial
assets (162,761) 160,934
Deferred income taxes
(1,977,140) (279,849)
Accretion
480,412 1,042,818
Change in estimates
119,729 (2,724,711)
Foreign exchange
(1,463,573) 1,157,461
Unrealized gain on marked-to-
market securities (53,571) -
Stock based compensation
64,739 5,795,596
Loss on share-based payments
1,488,133 -
5,925,837 136,069
Net change in non-cash working
capital 735,819 (2,514,326)
6,661,656 (2,378,258)
INVESTING ACTIVITIES
Business combination
- -
Cash acquired on business
combination - -
Cash acquired on Nyah
transaction - -
Long-term prepaid expenses
(500,216) -
Additions to property, plant and
equipment (13,486,032) (1,827,459)
Additional contribution to
endowment policy (371,342) (19,317)
Investment in held for trading
instruments - 2,241,818
Investment in securities
- -
Restricted cash
(12,270) (1,872,400)
(14,369,860) (1,477,359)
FINANCING ACTIVITIES
Change in accounts payable
attributable to share issue costs - 1,440,000
Shares issued for cash
- (1,440,000)
Commitment to issue special
warrants - -
Shares issue costs
- -
Loans payable
583,729 (1,054,516)
583,729 (1,054,516)
Effect of exchange rate change on
cash and cash equivalents (261,793) 84,476
CHANGE IN CASH
(7,124,475) (4,910,132)
CASH, beginning of the period
24,218,841 9,215,718
CASH, end of the period $ $
16,832,573 4,390,062
SUPPLEMENTAL INFORMATION
Shares issued on business $ $
combination - -
Shares issued on Nyah $ $
transaction into escrow - -
Performance shares issued into $ $
escrow - -
Broker warrants granted on $ $
private placements - -
Interest and dividend income $ $
(306,506) 3,998
Income taxes received (paid) $ $
(545,687) (972,828)
Deferred charge payment made by $ $
Aberdeen - -
Settlement of amount due to $ $
Aberdeen - -
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS Continued
(Unaudited - prepared by management)
(Presented in Canadian Dollars)
FOR THE NINE MONTHS ENDED
November 30, December 31,
2011 2010
(Notes 1 and
27)
CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES
Net income (loss) for the period
1,097,052 (18,854,390)
Adjustments:
Amortization and depletion
12,355,399 1,969,312
Fair value adjustment on financial
assets (142,605) (152,759)
Deferred income taxes
(2,007,343) (35,994)
Accretion
1,600,216 1,681,854
Change in estimates
119,729 (2,724,711)
Foreign exchange
(1,491,123) 2,566,436
Unrealized gain on marked-to-
market securities (53,571) -
Stock based compensation
1,996,489 13,418,096
Loss on share-based payments
1,488,133 2,357,221
14,962,376 225,065
Net change in non-cash working
capital 6,780,842 (3,198,847)
21,743,218 (2,973,782)
INVESTING ACTIVITIES
Business combination
- (29,993,586)
Cash acquired on business
combination - 3,832,045
Cash acquired on Nyah transaction
- 968,356
Long-term prepaid expenses
(500,216) -
Additions to property, plant and
equipment (17,454,185) (2,455,953)
Additional contribution to
endowment policy (1,017,958) (19,317)
Investment in held for trading
instruments - 2,213,526
Investment in securities
(250,000) -
Restricted cash
(356,090) (1,872,400)
(19,578,449) (27,327,329)
FINANCING ACTIVITIES
Change in accounts payable
attributable to share issue costs 351,673 (77,000)
Shares issued for cash
5,460,000 36,900,409
Commitment to issue special
warrants - (2,000,001)
Shares issue costs
(691,618) -
Loans payable
(5,358,766) (627,718)
(238,711) 34,195,690
Effect of exchange rate change on
cash and cash equivalents (346,136) 214,060
CHANGE IN CASH
1,926,058 3,894,579
CASH, beginning of the period
15,252,651 281,423
CASH, end of the period $ $
16,832,573 4,390,062
SUPPLEMENTAL INFORMATION
Shares issued on business $ $
combination - 11,029,102
Shares issued on Nyah transaction $ $
into escrow - 1,716,357
Performance shares issued into $ $
escrow - 7,196,100
Broker warrants granted on private $ $
placements - 993,053
Interest and dividend income $ $
(827,354) (201,992)
Income taxes received (paid) $ $
(3,334,037) 815,382
Deferred charge payment made by $ $
Aberdeen - 3,091,500
Settlement of amount due to $ $
Aberdeen - 1,091,500
Deferred charges allocated to $ $
purchase price - 735,706
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited - prepared by management)
(Presented in Canadian Dollars)
Number of Issued Share-based payment reserves
shares capital
issued
Warrant Option BEE
reserve reserve option
reserve
Balance as at January 1, $ $ $ $
2010 2,600,000 800,160 - - -
Shares issued on private
placements 100,000 500,000 - - -
Stock-based compensation
- - - 104,000 -
Net loss for the three
months ended
March
31, 2010 - - - - -
Balance as at March 31, $ $ $ $
2010 2,700,000 1,300,1 - 104,000 -
60
Shares issued on private
placements 14,972,368 38,017, - - -
958
Shares issued on
business combination 3,938,965 11,029, - - -
102
Shares issued on Nyah
transaction 1,279,384 4,073,5 - - -
78
Performance shares
issued into escrow 2,700,000 7,196,1 - - -
00
Stock-based compensation
- - - 6,221,9 -
96
Options issued on Nyah
transaction - - - 119,684 -
Broker warrants granted
on private placement (993,05 993,053 - -
3)
Other comprehensive
income for
the nine months
ended December 31, 2010 - - - - -
Net loss for the nine
months ended
December - - - - -
31, 2010
Balance at December 31, $ $ $ $
2010 25,590,717 60,623, 993,053 6,445,6 -
845 80
Shares issued on public
offering 8,000,000 33,779, - - -
826
Stock-based compensation
- - - - -
Shares issued on
exercise of options 75,000 426,000 - (182,25 -
0)
Broker warrants granted
on public offering - (1,156, 1,156,8 - -
800) 00
Other comprehensive loss for the
period ended
February - - - - -
28, 2011
Net loss for the period
ended
February - - - - -
28, 2011
Balance as at February $ $ $ $
28, 2011 33,665,717 93,672, 2,149,8 6,263,4 -
871 53 30
Shares issued on public
offering 1,200,000 5,120,0 - - -
55
Stock-based compensation
- - - 1,996,4 -
89
Stock
options - - - (897,05 -
expired 0)
Settlement of BEE option
- - - - 1,245,5
29
Other comprehensive loss
for
the nine months
ended November 30, 2011 - - - - -
Net loss for the nine
months ended
November - - - - -
30, 2011
Balance as at November 98,792,
30, 2011 34,865,717 926 2,149,8 7,362,8 1,245,5
53 69 29
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - Continued
(Unaudited - prepared by management)
(Presented in Canadian Dollars)
Deficit Curremcy Shareholders`
translation equity
reserve
Balance as at January 1, $ $ $
2010 (36,888) - 763,272
-
Shares issued on private
placements - - 500,000
Stock-based compensation
- - 104,000
Net loss for the three
months ended
March
31, 2010 (379,169) - (379,169)
Balance as at March 31, $ $ $
2010 (416,057) - 988,103
Shares issued on private
placements - - 38,017,958
Shares issued on
business combination - - 11,029,102
Shares issued on Nyah
transaction - - 4,073,578
Performance shares
issued into escrow - - 7,196,100
Stock-based compensation
- - 6,221,996
Options issued on Nyah
transaction - - 119,684
Broker warrants granted
on private placement - - -
Other comprehensive
income for
the nine months
ended December 31, 2010 - 5,899,944 5,899,944
Net loss for the nine
months ended
December (18,854,390) - (18,854,390)
31, 2010
Balance at December 31, $ $ 54,692,075
2010 $(19,270,447) 5,899,944
Shares issued on public
offering - - 33,779,826
Stock-based compensation
- - -
Shares issued on
exercise of options - - 243,750
Broker warrants granted
on public offering - - -
February - (6,435,142) (6,435,142)
28, 2011
Net loss for the period
ended
February 1,835,833 - 1,835,833
28, 2011
Balance as at February $ $ 84,116,342
28, 2011 $(17,434,614) (535,198)
Shares issued on public
offering - - 5,120,055
Stock-based compensation
- - 1,996,489
Stock
options 897,050 - -
expired
Settlement of BEE option
(287,012) - 958,517
Other comprehensive loss
for
the nine months
ended November 30, 2011 - (9,437,447) (9,437,447)
Net loss for the nine
months ended
November 1,097,052 - 1,097,052
30, 2011
Balance as at November $ $ 83,851,008
30, 2011 $(15,727,524) (9,972,645)
The accompanying notes are an integral part of the condensed interim
consolidated financial statements
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Presented in Canadian dollars)
1)NATURE OF OPERATIONS
Forbes & Manhattan Coal Corp. (individually, or collectively with its
subsidiaries, as applicable, "Forbes Coal", the "Company" or the
"Corporation") is a coal mining company. Forbes Coal is the continuing
combined entity following a September 2010 transaction between Forbes &
Manhattan (Coal) Inc. and Nyah Resources Corp. ("Nyah") whereby Nyah, a
public company listed on the Toronto Venture Exchange ("TSX-V"), acquired
all of the outstanding shares of the Company in exchange for common shares
of Nyah (the "Transaction"). The Transaction was accounted for as a purchase
of assets with Forbes & Manhattan (Coal) Inc. as the acquirer and Nyah as
the acquiree. As such, these condensed consolidated financial statements are
a continuation of the consolidated financial statements of Forbes &
Manhattan (Coal) Inc. Following the Transaction, the combined company is now
known as Forbes & Manhattan Coal Corp. and is listed on the TSX and
Johannesburg Stock Exchange ("JSE"). The Company`s head office is located at
65 Queen Street West, Suite 815, Toronto, Ontario, Canada. These condensed
interim consolidated financial statements were approved and authorized for
issue by the Board of Directors on January 12, 2012.
Forbes & Manhattan (Coal) Inc. was incorporated on November 12, 2009. In
July 2010, Forbes & Manhattan (Coal) Inc. completed an agreement to acquire
Slater Coal (Pty) Ltd. ("Slater Coal"), a South African company, and its
interest in its coal mines in South Africa ("Slater Coal Properties"), as
more fully described in Note 7. The Slater Coal Properties comprise the
operating Magdalena bituminous mine (the "Magdalena Property") and the
Aviemore anthracite mine (the "Aviemore Property"). Slater Coal is engaged
in open-pit and underground coal mining.
Slater Coal indirectly holds a 70% interest in the Slater Coal Properties
through its 70% interest in Zinoju Coal (Pty) Ltd. ("Zinoju") which holds
all of the mineral rights and prospecting permits with respect to the Slater
Coal Properties. The remaining 30% interest in Zinoju Coal (Pty) Ltd. is
held by the South African Black Economic Empowerment ("BEE") partners. BEE
is a statutory initiative on behalf of the South African government, enacted
to increase African access to the South African economy by increasing
African ownership in new South African enterprises.
The Company changed its year end from December 31 to February 28, effective
for the year ending February 28, 2011. The year end change was made to
align the year end of the Company with that of its subsidiary, Slater Coal.
The change in year end required the Company to have a transition year with a
fourteen month period ending February 28, 2011 with comparatives for the
period from inception (November 12, 2009) to December 31, 2009. As a result,
the unaudited condensed interim consolidated financial statements of the
Company for the nine months ended November 30, 2011 are presented with
comparatives for the nine months ended December 31, 2010.
The business of mining and exploring for minerals involves a high degree of
risk and there can be no assurance that current operations will result in
profitable mining operations. The recoverability of the carrying value of
property, plant and equipment, intangibles and goodwill and the Company`s
continued existence is dependent upon the preservation of its interests in
the underlying properties, the discovery of economically recoverable
reserves, the achievement of profitable operations, ability to transport and
sell its coal, or the ability of the Company to raise additional financing,
if necessary, or alternatively upon the Company`s ability to dispose of its
interests on an advantageous basis. Changes in future conditions could
require material write-downs to the carrying values. The Company`s assets
may also be subject to increases in taxes and royalties, renegotiation of
contracts, currency exchange fluctuations and restrictions, and political
uncertainty.
Although the Company has taken steps to verify title to the properties on
which it is conducting its exploration, development and mining activities,
these procedures do not guarantee the Company`s title. Property title may be
subject to government licensing requirements or regulations, unregistered
prior agreements, unregistered claims, aboriginal land claims and non-
compliance with regulatory and environmental requirements.
2) BASIS OF PREPARATION
These condensed interim consolidated financial statements of the Company and
its subsidiaries were prepared in accordance with International Financial
Reporting Standards ("IFRS"), as issued by the International Accounting
Standards Board ("IASB"). As these financial statements represent the
Company`s initial presentation of its results and financial position under
IFRS, they were prepared in accordance with International Accounting
Standard ("IAS") 34, Interim Financial Reporting and by IFRS 1, First-time
Adoption of IFRS. These condensed consolidated interim financial statements
have been prepared in accordance with the accounting policies the Company
expects to adopt in its February 28, 2012 financial statements. Those
accounting policies are based on the IFRS standards and International
Financial Reporting Interpretations Committee ("IFRIC") interpretations
issued and outstanding as of that time. The policies set out below were
consistently applied to all the periods presented unless otherwise noted
below.
The Company`s consolidated financial statements were previously prepared in
accordance with Canadian Generally Accepted Accounting Principles ("GAAP").
Canadian GAAP differs in some areas from IFRS. Certain information and
footnote disclosures which are considered material to the understanding of
the Company`s interim financial statements and which are normally included
in annual financial statements prepared in accordance with IFRS are provided
in notes along with reconciliations and descriptions of the effect of the
transition from Canadian GAAP to IFRS on equity, operations, comprehensive
income (loss), and the statements of financial position and cash flows.
These condensed interim consolidated financial statements should be read in
conjunction with the Company`s condensed interim consolidated financial
statements for the three months ended May 31, 2011.
The preparation of condensed interim consolidated financial statements in
accordance with IAS 34 requires the use of certain critical accounting
estimates. It also requires management to exercise judgement in applying the
Company`s accounting policies.
3)FUTURE ACCOUNTING CHANGES
Certain new standards, interpretations, amendments and improvements to
existing standards were issued by the IASB or IFRIC that are mandatory for
accounting periods beginning after March 1, 2011 or later periods. Updates
are not applicable or are not consequential to the Company have been
excluded thereof.
IFRS 9 Financial Instruments ("IFRS 9") was issued in November 2009 and
contained requirements for financial assets. This standard addresses
classification and measurement of financial assets and replaces the multiple
category and measurement models in IAS 39 for debt instruments with a new
mixed measurement model having only two categories: amortized cost and fair
value through profit or loss. IFRS 9 also replaces the models for measuring
equity instruments, and such instruments are either recognized at fair value
through profit or loss or at fair value through other comprehensive income.
This standard is required to be applied for accounting periods beginning on
or after January 1, 2013, with earlier adoption permitted. The Company is
currently assessing the impact of IFRS 9 on its financial statements.
IFRS 7 Financial instruments - Disclosures ("IFRS 7") was amended by the
IASB in October 2010 and provides guidance on identifying transfers of
financial assets and continuing involvement in transferred assets for
disclosure purposes. The amendments introduce new disclosure requirements
for transfers of financial assets including disclosures for financial assets
that are not derecognized in their entirety, and for financial assets that
are derecognized in their entirety but for which continuing involvement is
retained. The amendments to IFRS 7 are effective for annual periods
beginning on or after July 1, 2011. The Company has not yet determined the
impact of the amendments to IFRS 7 on its financial statements.
IFRS 10 Consolidated Financial Statements ("IFRS 10") provides a single
model to be applied in the control analysis for all investees, including
entities that currently are special purpose entities in the scope of SIC 12.
In addition, the consolidation procedures are carried forward substantially
unmodified from IAS 27 Consolidated and Separate Financial Statements. This
standard is effective for annual period annual period beginning on January
1, 2013. Earlier application is permitted. The Company has not yet
determined the impact of the amendments to IFRS 10 on its financial
statements.
IFRS 11 Joint Arrangements ("IFRS 11") replaces the guidance in IAS 31
Interests in Joint Ventures. Under IFRS 11, joint arrangements are
classified as either joint operations or joint ventures. IFRS 11 essentially
carves out of previous jointly controlled entities, those arrangements which
although structured through a separate vehicle, such separation is
ineffective and the parties to the arrangement have rights to the assets and
obligations for the liabilities and are accounted for as joint operations in
a fashion consistent with jointly controlled assets/operations under IAS 31.
In addition, under IFRS 11 joint ventures are stripped of the free choice of
equity accounting or proportionate consolidation; these entities must now
use the equity method.
Upon application of IFRS 11, entities which had previously accounted for
joint ventures using proportionate consolidation shall collapse the
proportionately consolidated net asset value (including any allocation of
goodwill) into a single investment balance at the beginning of the earliest
period presented. The investment`s opening balance is tested for impairment
in accordance with IAS 28 Investments in Associates and IAS 36 Impairment of
Assets. Any impairment losses are recognized as an adjustment to opening
retained earnings at the beginning of the earliest period presented. The
Company intends to adopt IFRS 11 in its financial statements for the annual
period beginning on January 1, 2013. The Company has not yet determined the
impact of the amendments to IFRS 11 on its financial statements.
IFRS 13 Fair Value Measurement converges IFRS and US GAAP on how to measure
fair value and the related fair value disclosures. The new standard creates
a single source of guidance for fair value measurements, where fair value is
required or permitted under IFRS, by not changing how fair value is used but
how it is measured. The focus will be on an exit price. IFRS 13 is effective
for annual periods beginning on or after January 1, 2013, with early
adoption permitted. The Company has not yet determined the impact of the
amendments to IFRS 13 on its financial statements.
4) PRINCIPLES OF CONSOLIDATION
The condensed interim consolidated financial statements comprise the
financial statements of the Company and its subsidiaries, Slater Coal,
Zinoju, Nyah Resources Inc. and Forbes and Manhattan (Coal) Inc..
Subsidiaries
Subsidiaries are entities over which the Company has control, where control
is defined as the power to govern financial and operating policies of an
entity so as to obtain benefit from its activities. Generally, control is
obtained when the Company has a shareholding of more than one half of the
voting rights in its subsidiaries. The effects of potential voting rights
that are currently exercisable are considered when assessing whether control
exists. Subsidiaries are fully consolidated from the date control is
transferred to the Company, and are de-consolidated from the date control
ceases.
Business Combinations and Goodwill
On the acquisition of a subsidiary, the purchase method of accounting is
used to account for the acquisition as follows:
- cost is measured as the fair value of the assets given, equity instruments
issued and liabilities incurred or assumed at the date of exchange;
- directly attributable transaction costs are expensed rather than included
in the acquisition purchase price;
- identifiable assets acquired and liabilities assumed are measured at their
fair values at the acquisition date except for non-current assets that are
classified as held for sale in accordance with IFRS 5 `Non-current Assets
Held for Sale and Discontinued Operations`, which are recognized and
measured at fair value less costs to sell;
- the excess of acquisition cost over the fair value of the identifiable net
assets acquired is recorded as goodwill;
- if the acquisition cost is less than the fair value of the net assets
acquired, the difference is recognized directly in profit or loss;
- the interest of non-controlling shareholders in the acquiree is initially
measured at the non-controlling shareholder`s fair value; and
- the measurement of contingent consideration at fair value on the
acquisition date is performed with subsequent changes in the fair value
recorded through the consolidated statement of operations.
All material intercompany transactions are eliminated in consolidation.
After initial recognition, goodwill is measured at cost less any accumulated
impairment losses. Goodwill is not amortized and is tested for impairment
annually. For the purpose of impairment testing, goodwill acquired in a
business combination is, from the acquisition date, allocated to each of the
Company`s cash generating units that are expected to benefit from the
synergies of the combination, irrespective of whether other assets or
liabilities of the acquiree are assigned to those units. The level at which
goodwill is allocated shall represent the lowest level within the entity at
which the goodwill is monitored for internal purposes, but shall not be
larger than an operating segment determined in accordance with IFRS 8
Operating Segments. Where goodwill forms part of a cash-generating unit and
part of the operation within that unit is disposed of, the goodwill
associated with the operation disposed of is included in the carrying amount
of the operation when determining the gain or loss on disposal of the
operation. Goodwill disposed of in this circumstance is measured based on
the relative values of the operation disposed of and the portion of the cash-
generating unit retained.
Transactions and non-controlling interests
Transactions with non-controlling interests are treated as transactions with
equity owners of the Company. For purchases from non-controlling interests,
the difference between the consideration paid and the non-controlling share
of the carrying value of net assets acquired is recorded in equity. Gains or
losses on disposals to non-controlling interests are similarly computed and
also recorded in equity.
5) SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of these condensed interim consolidated financial statements
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
statements and reported amounts of expenses during the reporting period.
Actual outcomes could differ from these estimates. These condensed interim
consolidated financial statements include estimates, which, by their nature,
are uncertain. The impacts of such estimates are pervasive throughout the
condensed interim consolidated financial statements, and may require
accounting adjustments based on future occurrences. Revisions to accounting
estimates are recognized in the period in which the estimate is revised and
the revision affects both current and future periods.
Information about critical judgments and estimates in applying accounting
policies that have the most significant effect on the amounts recognized in
the condensed consolidated financial statements are as follows:
- Asset carrying values and impairment charges
- Estimation of asset lives and related basis for depreciation, depletion
and amortization
- Determination of ore reserve estimates
- Recognition of deferred taxes
- Capitalization of exploration, evaluation costs and development costs
- Contingencies
- Acquisitions and allocation of purchase price
- Determination of economic viability of a project
- Valuation of inventory
- Warrants and stock based compensation valuation
- Income tax accounts
- Loss on share based payments
6)PURCHASE OF SLATER COAL
Purchase of Slater Coal
In November 2009, the Company entered into an agreement to acquire a 100%
interest in Slater Coal. A deposit of $722,500 (ZAR 5,000,000) was made
under the terms of this agreement. Slater Coal is a private South African
coal mining company.
Slater Coal indirectly holds a 70% interest in the Slater Coal Properties
through Zinoju Coal (Pty) Ltd. ("Zinoju") which holds all of the mineral
rights and prospecting permits with respect to the Slater Coal Properties.
The remaining 30% interest in Zinoju is held by South African Black Economic
Empowerment ("BEE") partners. BEE is a statutory initiative on behalf of the
South African government, enacted to increase African access to the South
African economy by increasing African ownership in new South African
enterprises.
The funding the BEE received to purchase the shares was sourced from Slater
Coal. For accounting purposes BEE holds an option to acquire its 30%
interest in Zinoju, and a non-controlling interest has been recorded to
reflect this option related to BEE`s interest upon repayment of the loan
utilized to acquire the interest in Zinoju. The loan is being repaid from
dividends issued by Zinoju.
On April 13, 2010, the Company and the shareholders of Slater Coal agreed on
the terms for the acquisition of all of the issued and outstanding common
shares of Slater Coal. Pursuant to the finalized terms of the agreement the
Company is required to pay ZAR 600,000,000 (approximately $75,300,000) in
cash and common stock to Slater Coal shareholders over a two year period:
- ZAR 5,000,000 deposit ($722,500 paid on November 25, 2009);
- ZAR 22,500,000 ($3,091,500 paid on June 29, 2010);
- ZAR 213,750,000 ($30,006,792 paid on July 23, 2010);
- Issue common shares of the Company with a value of ZAR 78,750,000
($11,029,102) based on $2.80 per share (issued on July 30, 2010);
- Cash payment of ZAR 119,000,000 ($16,457,000 paid February 24, 2011); and
- Cash payment of ZAR 140,000,000 (approximately $17,570,000) payable by
March 1, 2012.
The Company currently holds 76.75% of the outstanding shares of Slater Coal
and will receive shares equivalent to 23.25% of the issued and outstanding
shares after the March 1, 2012 payment has been made. Given the fact that
the final amount of the March 1, 2012 payment is subject to Slater Coal
meeting certain production targets, the incumbent management team and a
majority of the board of directors of Slater Coal have been given a certain
amount of autonomy to be able to reach these targets. During the three
months ended November 30, 2011 Slater Coal met the production target and
subsequently an amount of ZAR 21 million has been added to the final payment
representing a 15% premium.
The March 1, 2012 payment of ZAR 140 million plus the additional ZAR 21
million has been recorded on the condensed interim consolidated statements
of financial position as a current acquisition obligation (Note 10).
The Company received approval from the South African Reserve Bank ("SARB")
for the acquisition by Forbes Coal of all of the issued and outstanding
shares of Slater Coal (Pty) Ltd. ("Slater Coal"). As part of granting the
approval, Forbes Coal has agreed to undertake to list the common shares of
the Company on the JSE within 12 months. As a result on July 28, 2011, the
Company began trading on the JSE under the symbol "FMC".
Slater Coal financial results
Reported revenue for the 2010 comparative period of $15,658,216 (Note 27
(ii)) and related operating expense and amortization and depletion are for
the period from the date of acquisition (July 29, 2010) to December 31,
2010, being an approximate five month period.
BEE TRANSACTION
During the nine-months period ended November 30, 2011, Slater Coal assisted
one of its BEE partners in the buying out of the interest in Zinoju held by
its other BEE partner. To facilitate this buy-out, Slater Coal provided
interest-free financing for the buy-out. The 18% shareholding in Zinoju that
was the subject of the buy-out was valued at ZAR 20,000,000 on the date of
the transaction. The financing is secured by the shareholding in Zinoju and
will be repaid using dividends received from the 18% shareholding in Zinoju.
For accounting purposes, the transaction represents a settlement of the
original call option over the 18% interest in Zinoju with the original BEE
partner and the issuance of a new call option over an 18% interest in Zinoju
with the remaining BEE partner.
The estimated fair value of the option settled and the new option issued are
the same on the settlement date. Key assumptions utilized in the valuation
include a maximum maturity date of 8 years, assumption that financing
repayments will be made solely from dividends declared by Zinoju under the
terms of the BEE agreement within 8 years, volatility of 33% and a risk-free
interest rate of 5.20%. The value of the new call option issued on the
transaction date was ZAR 9,073,711 ($1,245,529).
The cash payment of ZAR 20,000,000 made by the continuing BEE partner was
first utilized to reduce the vending BEE partner`s outstanding financing due
to the Company as a result of the original BEE transaction (ZAR 9,158,917).
The net cash of ZAR 10,841,083 paid to the vending BEE partner exceeded the
original fair value of the option being settled.
The settlement of the original call option with the vending BEE partner
represents the settlement of an equity-settled share-based payment
transaction and is accounted for as a repurchase of an equity interest. `Non-
controlling interest` was debited for the fair value of the option settled
in the amount of ZAR 9,073,711 ($1,245,529). The difference between the cash
paid and the original fair value of the original option of ZAR 1,767,372 ($
242,603) represents additional BEE expense and is recognized in `loss on
share-based payments` in fiscal 2012.
The issuance of the new call option to the continuing BEE partner represents
the issuance of an equity-settled share-based payment. The value of the new
call option on the date of issue of ZAR 9,073,711 ($1,245,529) was reflected
as an expense in the statement of comprehensive income in fiscal 2012 as
part of `loss on share based payments` and as a credit in the statement of
changes in equity in the `share-based payment reserves`.
8)OPERATING SEGMENTS
The Company operates in Canada and South Africa. The Company`s revenue from
external customers and information about its assets by geographical location
are detailed below:
$ Current Properties, Mine Other non- Total
Assets plant and properties current assets
equipment assets
February
28, 2011
Canada 14,794,690 - - - 14,794,690
South
Africa 25,191,318 79,316,581 5,911,567 24,190,900 134,610,366
39,986,008 79,316,581 5,911,567 24,190,900 149,405,056
November
30, 2011
Canada 7,231,535 - - 346,235 7,577,770
South
Africa 26,368,370 78,048,139 5,180,441 23,747,033 133,343,983
33,599,905 78,048,139 5,180,441 24,093,268 140,921,753
All of the Company`s coal revenues are earned from production in South
Africa.
9. INTEREST (EXPENSE)
$ Nine months ended
November 30, 2011 December 31, 2010
Interest bearing
borrowings 1,154,173 249,109
Unwinding discount on
rehabilitation provision
60,277 66,490
Interest expense 1,214,450 315,599
Cash and cash
equivalents 305,876 66,072
Restricted cash 81,220 -
Other - 47,535
Interest income 387,096 113,607
Net interest (expense) (827,354) (201,992)
10. ACQUISITION OBLIGATION
$ Current Long-term
Balance as at February 28, 2011 - 20,300,925
Reclassification due to current maturity in
March 2012 20,300,925 (20,300,925)
Effect of foreign currency exchange
difference (2,102,596) -
Accretion 1,539,940 -
Effect of foreign currency exchange
difference on accretion (116,450) -
Change in estimates 119,729 -
Balance as at November 30,2011 19,741,548 -
See Note 6 (a) for details of the acquisition obligation.
11. INTANGIBLES
$ Richards Bay Coal Mineral and Total
Terminal prospecting
entitlements rights
Cost as at
February 28, 2011 4,944,940 1,050,000 5,994,940
Effect of foreign
currency exchange
difference (512,155) (108,750) (620,905)
Cost as at
November 30, 2011 4,432,785 941,250 5,374,035
Depreciation,
depletion and
impairment as at
February 28, 2011 (79,913) (3,460) (83,373)
Effect of foreign
currency exchange
difference 8,278 358 8,636
Charge for the
period (115,131) (3,726) (118,857)
Depreciation,
depletion and
impairment as at
November 30, 2011 (186,766) (6,828) (193,594)
Net book value as
at February 28,
2011 4,865,027 1,046,540 5,911,567
Net book value as
at November 30,
2011 4,246,019 934,422 5,180,441
12) PROPERTY, PLANT AND EQUIPMENT
$ Mining Office Land and Development Mining Total
assets equipment, buildings costs rights
radio
equipment,
fixtures
and
fittings
Cost as at
February
28, 2011 39,056,503 199,854 550,582 2,433,150 43,250, 85,490,84
Effect of 760 9
foreign
currency
exchange
difference (4,045,138) (20,699) (57,025) (252,005)
Additions 15,128,101 139,848 246,289 470,203 (4,479, (8,854,41
Changes in 543) 0)
rehabilitat - 15,984,44
ion 163,216 - - - 1
provision (26,603) - - -
Disposals -
- 163,216
(26,603)
Cost as at
November
30,2011 50,276,079 319,003 739,846 2,651,348 38,771, 92,757,49
217 3
Depreciatio
n and
depletion
as at (4,238,477) (49,126) (19,595) - (1,867, (6,174,26
February 070) 8)
28, 2011
Effect of
foreign
currency 438,986 5,088 2,029 -
exchange 193,375 639,478
difference (5,658,769) (115,387) (29,759) (92,952)
Charge for (3,277, (9,174,56
the period 697) 4)
Depreciatio
n and
depletion
as at (9,458,260) (159,425) (47,325) (92,952) (4,951, (14,709,3
November 392) 54))
30, 2011
Net book
value as at
February 34,818,026 150,728 530,987 2,433,150 41,383, 79,316,58
28, 2011 690 1
Net book
value as at 40,817,819 159,578 692,521 2,558,396
November 33,819, 78,048,13
30, 2011 825 9
Land and building includes a net book value balance of approximately $
95,000 for a property that is not used in production and mine operations.
13. OTHER ASSETS
$ November 30, 2011 February 28, 2011
Endowment policy 4,179,393 3,478,609
Security investments 303,571 -
Long term investments 751,403 838,219
Long term receivables 1,595,900 1,081,997
6,830,267 5,398,825
The other assets consist of an endowment policy held by the Company to fund
payment requirements associated with its instalment sale agreement
obligations. The total endowment policy consists of various individual
policies managed in various investment funds. The investment in this
financial asset is classified as level 3 on the fair value hierarchy as the
inputs required to determine fair value of the investment are actuarially
determined and not supported by market activity.
The table below sets forth the summary of changes in the endowment policy
for the period ended November 30, 2011:
Balance as at February 28, 2011 $3,478,609
Effect of exchange rate change (360,284)
Current year contributions 930,689
Fair value adjustment 130,379
Balance as at November 30, 2011 $4,179,393
14 INVENTORIES
$ November 30, 2011 February 28, 2011
Consumables 346,019 267,631
Work in progress 804,121 154,899
Finished goods 2,087,314 10,104,151
3,237,454 10,526,681
As at November 30, 2011, all inventories were presented at cost.
15. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
$ November 30, 2011 February 28, 2011
Trade payables 5,990,208 5,129,462
Payroll and other statutory
liabilities 1,379,155 389,042
Current tax payable 1,961,680 -
Other payables and accruals 1,186,624 1,512, 692
10,517,667 7,031,196
16. OTHER FINANCIAL LIABILITIES
$ November 30, 2011 February 28, 2011
Capital lease agreements(*) - 97,579
Instalment sale agreements(*) 8,447,756 13,590,838
Third party institutional loan(**) 359,484 699,980
Total interest bearing borrowings 8,807,240 14,388,397
Less:
Current portion of capital lease
agreements - (97,579)
Current portion of instalment sale
agreements (384,566) (2,460,583)
Current portion of third party
institutional loan (89,597) (102,305)
Total current portion of interest
bearing borrowings (474,163) (2,660,467)
Total long term portion of interest
bearing borrowings 8,333,077 11,727,930
(*) The lease and instalment sale agreements related liabilities are payable
over periods from three to five years, at interest rates linked to prime.
Instalment sale related liabilities are secured by mining assets and an
endowment policy with a book value of approximately $9,100,000.
(**) The loan is repayable in monthly instalments over period of
approximately four years. The loan is unsecured.
The other financial liabilities are repayable as follows:
Year Amount
2012 $509,736
2013 $7,043,081
2014 $1,123,046
2015 $131,377
$8,807,240
The interest rate exposure of borrowings of the Company was as follows:
Instalment sales agreements at floating rates $8,447,756
Loan at rates of 8,9% $359,484
$8,807,240
17 ASSET RETIREMENT OBLIGATION
Balance as at February 28, 2011 $3,054,506
Effect of foreign currency exchange difference $(316,359)
Accretion expense $55,109
Net additional provision $163,216
Balance as at November 30,2011 $2,956,472
Total asset retirement obligation as at November 30, 2011 is comprised of:
Current portion $354,340
Long-term portion $2,602,132
$2,956,472
The asset retirement obligation for close down rehabilitation costs reflects
the net present value of the estimated cost of restoring the environmental
disturbance that has occurred up to the condensed interim consolidated
statements of financial position date and is expected to be paid out over 1
to 10 years using a 9.5% discount rate.
18. LOANS PAYABLE
$ November 30, February 28,
2011 2011
Directors and officers of Slater Coal 38,184 260,297
Other 14,156 1,637
52,340 261,934
Loans are unsecured, non interest bearing, with no fixed terms of repayment.
19. ISSUED CAPITAL
Authorized unlimited number of common shares without par value:
Issued Number of Stated value
shares $
Balance as at January 1, 2010 2,600,000 800,160
Private placement (i) 100,000 500,000
Private placement (ii) 14,972,368 41,922,630
Public offering (vii) 8,000,000 36,400,000
Issue costs - (8,674,699)
Shares issued on business combination (iv) 3,938,965 11,029,102
Shares issued on Nyah transaction (ii and v) 1,279,384 4,073,578
Performance shares issued into escrow (vi) 2,700,000 7,196,100
Options exercised 75,000 243,750
Options exercised - valuation reallocation - 182,250
Balance as at February 28, 2011 33,665,717 93,672,871
Public offering (vii) 1,200,000 5,460,000
Issue costs - (339,945)
Balance as at November 30, 2011 34,865,717 $98,792,926
On July 16, 2010 the Company consolidated its share capital on the basis of
ten existing common shares of the Company for one new common share of the
Company. The number of outstanding common shares has been retroactively
restated throughout these condensed consolidated financial statements to
reflect the consolidation.
(i) On March 15, 2010 the Company completed a private placement financing
issuing 100,000 common shares of the Company at a price of $5.00 per share
for gross proceeds of $500,000. The sole subscriber of this issuance was
Aberdeen International Inc ("Aberdeen") (see Note 23 Related Party
Disclosure).
(ii) Effective July 16, 2010, and in connection with the transaction with
Nyah, the Company amended its articles to effect consolidation of its issued
and outstanding common shares on the basis of ten existing common shares of
the Company for one new common share of the Company.
(iii) In July and August, 2010, the Company completed an offering of special
warrants ("Special Warrants") at a price of $2.80 per Special Warrant for
gross proceeds of $41,922,630. Each Special Warrant converted automatically
and without any further action on the part of the holder into one common
share of the Company (each an "Underlying Share") on September 21, 2010
immediately prior to the completion of the acquisition of all of the issued
and outstanding shares of the Company by Nyah (see Note 23 Related Party
Disclosure).
As compensation for its services rendered in connection with the Forbes Coal
financing, the underwriters were paid a cash commission equal to 6% of the
gross proceeds of the brokered portion of the Forbes Coal financing and were
issued 763,887 broker warrants exercisable to acquire the same number of
common shares of the Company at a price of $2.80 per common share for a
period of 18 months following the closing of the Slater Coal acquisition.
(iv) In July 2010, the Company completed the next instalment for the
acquisition of Slater Coal by making a cash payment of ZAR 213,750,000
($30,006,792) and issuing 3,938,965 common shares of the Company at $2.80
per share valued at ZAR 78,750,000 ($11,029,102).
(v) On September 21, 2010 1,279,384 common shares were issued upon the
completion of the Transaction with Nyah. The common shares were assigned a
value of $4,073,578 ($3.18 per share). (See Note 23 Related Party
Disclosure).
(vi) On September 21, 2010 2,700,000 common shares were issued and put into
escrow upon the completion of the transaction with Nyah. The common shares
were assigned a value of $7,196,100 ($2.67 per share). The value was
recorded in stock based compensation expense for the period.
(vii) On February 22, 2011, the Company closed a bought deal offering (the
"Offering") of 8,000,000 common shares (the "Offered Shares") of the Company
at a price of $4.55 per Offered Share for aggregate gross proceeds of
$36,400,000. A syndicate of underwriters have also been granted an over-
allotment option to purchase up to an additional 1,200,000 common shares of
the Company at a price of $4.55 per common share which was exercised on
March 3, 2011.
As compensation for its services rendered in connection with the Forbes Coal
Offering, the underwriters were paid a cash commission equal to 6% of the
gross proceeds and were issued 480,000 broker warrants exercisable to
acquire the same number of common shares of the Company at a price of $4.55
per common share for a period of 24 months following the closing of the
Slater Coal acquisition.
20) SHARES IN ESCROW
On July 20, 2010, the shareholders of Forbes Coal on that date were issued
2,700,000 performance special warrants (the "Performance Special Warrants").
Each Performance Special Warrant was automatically exercised into one common
share of Forbes Coal (each "Performance Share" and, collectively, the
"Performance Shares") for no additional consideration immediately prior to
the completion of the Nyah acquisition, provided that such Performance
Shares shall be deposited in escrow with an escrow agent (the "Escrowed
Shares"), to be released as follows:
i) 50% of the Escrowed Shares (the "First Tranche Escrowed Shares") will be
released once the Company achieves US$22,000,000 in EBITDA from the Slater
Coal Properties over a 12 consecutive month period by July 20, 2013. During
the period ended November 30, 2011 the US$22,000,000 in EBITDA from Slater
Coal Properties was achieved and the above mentioned Escrowed Shares were
released;
ii) The remaining Escrowed Shares will be released once the Company achieves
US$35,000,000 in EBITDA from the Slater Coal Properties over a 12
consecutive month period within a three year period following the release of
the First Tranche Escrowed Shares. For further clarity, EBITDA generated
from the Slater Coal Properties will exclude any gains or losses generated
by the combined company from the disposition of the Slater Coal Properties.
In the event of not achieving US$35,000,000 in EBITDA from Slater Coal
Properties, the above mentioned Escrowed Shares will be cancelled. (EBITDA
is a non-IFRS measure and defined as earnings before interest, taxes,
depreciation and amortization).
The model used to fair value the Performance Special Warrants applies
standard Monte Carlo simulation techniques and is based on correlated one-
factor geometric Brownian motions. The key inputs used in the model
include:
ZAR/USD FX: 7.3194
ZAR/CAD FX: 7.0897
Equity value of a comparable company: 3.45
API4 Coal Price: 91.81
ZAR/USD FX Volatility: 11.6%
ZAR/CAD FX Volatility: 8.1%
Volatility of a comparable company: 64.3%
21) SHARE-BASED PAYMENT RESERVES
No of Weighted Value of No of Weighted Value Total
options average options warrant average of value
exercise $ s exercise warrant $
price price s
$ $ $
Balance as
at
February
28, 2011 2,482,798 3.49 6,263,430 1,243,8 3.48 2,149,8 8,413,28
Granted 87 53 3
and vested 962,500 3.93 1,996,489 -
Settlement - - 1,996,48
of BEE 9
option - - 1,245,529 -
Expired (360,000) 3.42 (897,050) - - -
- - 1,245,52
9
(897,050
)
Balance as
at
November
30,2011 3,085,298 3.63 8,608,398 1,243,8 3.48 2,149,8 10,758,2
87 53 51
Employee share options plan
The Company has an ownership-based compensation scheme, to be administered
by the board of directors of the Company, for directors, officers, employees
and consultants. The plan provides for the issuance of share options to
acquire up to 10% of the Company`s issued and outstanding capital. The
number of shares reserved for issuance pursuant to the grant of share
options will increase as the Company`s issued and outstanding share capital
increases. In accordance with the terms of the plan, as approved by
shareholders at a previous annual general meeting, directors, officers,
employees and consultants of the Company may be granted options to purchase
common shares at an exercise price determined by the board of directors, but
which shall not be lower than the market price of the underlying common
shares at the time of grant.
Each employee share option converts into one common share of the Company on
exercise. No amounts are paid or payable by the recipient on receipt of the
option. The options carry neither rights to dividends nor voting rights.
Options may be exercised at any time from the date of vesting to the date of
their expiry.
During the nine months ended November 30, 2011, 962,500 (period ended
February 28, 2011 - 2,435,000) share options were granted to directors,
officers, employees and consultants of the Company. These options had a
grant date estimated fair value of $1,996,489 (period ended February 28,
2011 - $8,475,849) and are to vest immediately, over 4 quarters and over 8
quarters. The options expire five years from the date of issue, or 30 days
after the resignation of the director, officer, employee or consultant.
The following share-based payment arrangements were in existence as at
November 30, 2011:
Share options
Number of Number of Grant Expiration Exercise Grant date
options options date date price estimated
outstanding exercisable $ fair value
$
17,662 17,662 20-9-10 27-2-12 7.96 12,579
2,405 2,405 20-9-10 27-2-12 7.96 1,713
36,432 36,432 20-9-10 31-5-12 2.39 65,512
55,276 55,276 20-9-10 31-5-12 13.93 27,537
11,023 11,023 20-9-10 4-1-13 7.96 12,343
235,000 235,000 15-3-10 13-3-15 2.80 940,746
1,850,000 1,850,000 13-10-10 13-10-15 3.25 4,495,500
740,000 740,000 24-3-10 24-3-16 4.10 1,650,200
100,000 25,000 6-6-11 6-6-16 3.00 101,614
37,500 37,500 13-6-11 13-6-16 2.77 55,125
3,085,298 3,010,298 3.63 7,362,869
Expected volatility Expected Expected Risk-free
% life dividend interest
years yield rate
% %
100 1.44 0.00 1.54
100 1.44 0.00 1.54
100 1.70 0.00 1.54
100 1.70 0.00 1.54
100 2.29 0.00 1.54
100 5.00 0.00 2.39
100 5.00 0.00 1.74
63 5.00 0.00 2.15
61 5.00 0.00 2.23
61 5.00 0.00 2.24
For the three and nine months ended November 30, 2011, the diluted
weighted average number of common shares outstanding excluded 3,010,298
options and 2,738,866 options respectively, as they were anti-dilutive.
Settlement of BEE option
Details of the transactions are provided in Note 7 - BEE Transaction.
Broker warrants
No of warrants No of Grant Expiration Exercise price
outstanding warrants date date $
exercisable
763,887 763,887 23-7-10 23-1-12 2.80
480,000 480,000 22-2-11 22-2-13 4.55
1,243,887 1,243,887 3.48
Grant date Expected Expected Expected Risk free
estimated fair volatility life dividend interest rate
value % years yield %
$ %
993,053 100 1.50 0.00 1.53
1,156,800 100 2.00 0.00 1.79
2,149,853 1.70
For the three and nine months ended November 30, 2011, the diluted weighted
average number of common shares outstanding excluded 1,243,887 warrants and
480,000 warrants respectively, as they were anti-dilutive.
22) FINANCIAL INSTRUMENTS
Details of the significant accounting policies and methods adopted
(including the criteria for recognition, the bases of measurement, and the
bases for recognition of income and expenses) for each class of financial
asset and financial liability are disclosed in Note 6 of the condensed
interim consolidated financial statements for the three months ended May 31,
2011.
The Company`s financial assets and financial liabilities as at November 30,
2011 and February 28, 2011 were as follows:
$ Cash loans Assets/ Other Total
and (liabilities financial
receivable ) at fair assets/
s value (liabilities
through )
profit
February 28, 2011
Cash 15,252,651 - - 15,252,651
Restricted cash 1,736,000 - - 1,736,000
Receivables 12,410,375 - - 12,410,375
Other assets 1,081,997 4,316,828 - 5,398,825
Accounts payable and
accrued liabilities - - (7,031,196) (7,031,196)
Acquisition obligation - - (20,300,925) (20,300,925)
Other financial
liabilities - current - - (2,660,467) (2,660,467)
Other financial
liabilities - long term - - (11,727,930) (11,727,930)
Loan payable - - (261,934) (261,934)
November 30, 2011
Cash 16,832,573 - - 16,832,573
Restricted cash 1,912,290 - - 1,912,290
Receivables 11,441,728 - - 11,441,728
Other assets 1,595,900 5,234,367 - 6,830,267
Accounts payable and
accrued liabilities - - (10,517,667) (10,517,667)
Acquisition obligation - - (19,741,548) (19,741,548)
Other financial
liabilities - current - - (474,163) (474,163)
Other financial
liabilities - long term - - (8,333,077) (8,333,077)
Loan payable - - (52,340) (52,340)
At November 30, 2011, there are no significant concentrations of credit risk
for loans and receivables designated at fair value through the condensed
interim consolidated statement of operations and comprehensive income
(loss). The carrying amount reflected above represents the Company`s maximum
exposure to credit risk for such loans and receivables.
CAPITAL MANAGEMENT
The capital of the Company consists of common shares, warrants and options.
The Company manages and adjusts its capital structure based on available
funds in order to support the acquisition, exploration and development of
mining properties. The Company manages its capital structure and makes
adjustments to it in light of changes in economic conditions and the risk
characteristics of the underlying assets. In order to maintain or adjust its
capital structure, the Company may issue new shares, seek debt financing, or
acquire or dispose of assets. The Board of Directors does not establish
quantitative return on capital criteria for management, but rather relies on
the expertise of the Company`s management to sustain future development of
the business.
The Company is not subject to any externally imposed capital requirements.
Management reviews its capital management approach on an on-going basis and
believes that this approach, given the relative size of the Company, is
reasonable. There have been no significant changes in the risks, objectives,
policies and procedures in fiscal 2011 or 2012.
As at November 30, 2011, the capital structure of the Company consists of
equity attributable to the owners, share based payment reserves attributable
to directors, officers, employees and consultants of the company totalling
$83,851,008 (February 28, 2011 - $84,116,342).
FINANCIAL RISK FACTORS
The Company is exposed to a variety of financial risks.
The Company`s overall management programme focuses on the unpredictability
of financial markets and seeks to minimize potential adverse effects on the
Company`s financial performance. The Company does not use derivative
financial instruments, such as forward exchange contracts, to hedge certain
exposures.
(a) Market risk
i Foreign exchange risk
The Company`s functional currency is the Canadian dollar. The Company
operates internationally and is exposed to foreign exchange risk arising
from various currency exposures, primarily with respect to the South African
Rand ("Rand") and the US dollar. Foreign exchange risk arises from future
commercial transactions and recognized assets and liabilities. The Company
purchased its South African Company in Rand and is required to make future
payments in Rand. In addition, coal is priced on international markets in
United States dollars and converted to Rand to support operations in South
Africa.
Management has set up a policy to require its companies to manage their
foreign exchange risk against their functional currency. Foreign exchange
risk arises when future commercial transactions or recognised assets or
liabilities are denominated in a currency that is not the entity`s
functional currency.
A 10% increase in the Rand against the Company`s functional currency, the
Canadian dollar would have increased (decreased) the Company`s income by
approximately $900,000 for the nine months ended November 30, 2011. A 10%
increase in the United States dollar would have increased (decreased) the
Company`s income by $6,600,000 for the nine months ended November 30, 2011.
The Company does not currently use derivative financial instruments such as
forward exchange contracts to hedge currency risk exposures.
The following assets and liabilities are presented in Canadian dollar values
and denominated in different currencies as at November 30, 2011 and February
28, 2011:
Denominated in Total
CAD ZAR USD
Cash and cash
equivalents 13,786,713 1,455,408 10,530 15,252,651
Restricted cash - 1,736,000 - 1,736,000
Amounts receivable 905,161 5,766,954 5,738,260 12,410,375
Inventories - 10,526,681 - 10,526,681
Prepaid expenses 54,434 5,867 - 60,301
Property, plant and
equipment - 79,316,581 - 79,316,581
Mine properties - 5,911,567 - 5,911,567
Goodwill - 18,672,014 - 18,672,014
Other assets - 5,398,825 - 5,398,825
Deferred income taxes - 120,061 - 120.061
Accounts payable and
accrued liabilities (789,749) (6,078,926) (162,521) (7,031,196)
Acquisition obligation - (20,300,925) - (20,300,925)
Other financial
liabilities - current - (2,660,467) - (2,660,467)
Other financial
liabilities - long term
Asset retirement - (11,727,930) - (11,727,930)
obligation - current
Asset retirement - (389,177) - (389,177)
obligation - long term
Loans payable - (2,665,329) - (2,665,329)
Deferred income taxes - (261,934) - (261,934)
- (18,654,227) - (18,654,227)
Net balance sheet as at
February 28,2011 13,956,559 66,171,043 5,586,269 85,713,871
Cash and cash
equivalents 5,948,230 10,773,480 110,863 16,832,573
Restricted cash 50,000 1,556,200 306,090 1,912,290
Amounts receivable 605,994 10,795,976 39,758 11,441,728
Inventories - 3,237,454 - 3,237,454
Prepaid expenses 170,600 5,260 - 175,860
Property, plant and
equipment - 78,048,139 - 78,048,139
Mine properties - 5,180,441 - 5,180,441
Goodwill - 16,672,014 - 16,672,014
Other assets 303,571 6,526,696 - 6,830,267
Long term prepaid
expenses 42,664 418,229 - 460,893
Deferred income taxes - 130,094 - 130,094
Accounts payable and
accrued liabilities (352,287) (10,165,380) - (10,517,667)
Acquisition obligation - (19,741,548) - (19,741,548)
Other financial
liabilities - current - (474,163) - (474,163)
Other financial
liabilities - long term
Asset retirement - (8,333,077) - (8,333,077)
obligation -current
Asset retirement - (354,340) - (354,340)
obligation - long term
Loans payable - (2,602,132) - (2,602,132)
Deferred income taxes - (52,340) - (52,340)
- (14,356,466) - (14,356,466)
Net balance sheet as at
November 30,2011 6,768,772 77,264,537 456,711 84,490,020
(i) Interest rate risk
The Company`s interest rate risk arises from deposits held with banks and
interest-bearing liabilities. Borrowings issued at variable rates expose the
Company to cash flow interest rate risk which is partially offset by cash
held at variable rates. A 1% increase in interest rates would create
additional income of approximately $37,000 per month.
(ii) Price risk
The Company is exposed to price risk with respect to commodity prices.
Commodity prices fluctuate on a daily basis and are affected by numerous
factors beyond the Company`s control. The supply and demand for commodities,
the level of interest rates, the rate of inflation, investment decisions by
large holders of commodities including governmental reserves and stability
of exchange rates can all cause significant fluctuations in commodities
prices. Such external economic factors are in turn influenced by changes in
international investment patterns and monetary systems and political
developments. A 10% change in the market price of coal would have resulted
in a corresponding change in revenues of approximately $8,600,000 for the
nine months ended November 30, 2011.
(b) Credit risk
The Company`s credit risk is primarily attributable to cash and cash
equivalents and accounts and other receivables. Cash equivalents consist of
guaranteed investment certificates and bankers acceptances, which have been
invested with reputable financial institutions, from which management
believes the risk of loss to be remote. Other receivables primarily consist
of goods and services tax due from the Federal Government of Canada and
amounts owing from coal sales. Management believes that the credit risks
concentration with respect to these amounts receivables are remote.
Restricted cash totaling $1,912,290 was primarily on deposit with the First
National Bank, to be released to a supplier if payments are not made to
them, in GIC investment with Royal Bank of Canada held as collateral against
credit card limits used by the Company and in a lawyer`s trust account.
(c) Liquidity risk
As November 30, 2011, the Company had net working capital of $2,459,847
(February 28, 2011 - $29,643,234) which included cash and restricted cash of
$18,744,863 (February 28, 2011 - $16,988,651), accounts receivable and other
receivables of $11,441,728 (February 28, 2011 - $12,410,375), and
inventories of $3,237,454 (February 28, 2011 - $10,526,681), offset by
current liabilities of $31,140,058 (February 28, 2011 - $10,342,774).
Prudent liquidity risk management implies maintaining sufficient cash and
the availability of funding through credit facilities. The Company aims to
maintain flexibility in funding by keeping committed credit lines available
in its operating entities Undrawn committed borrowing are available at all
times so that the Company does not breach borrowing limits or covenants
(where applicable) on any of its borrowing facilities.
(d) Fair value of financial instruments
The Company has designated its cash equivalents, investments and certain
other assets as held-for-trading, measured at fair value. Accounts
receivable, other receivables, restricted cash and cash are classified as
loans and receivables, which are measured at amortized cost. Accounts
payable and accrued liabilities, acquisition obligation, loans payable and
other financial liabilities are classified as other financial liabilities,
which are measured at amortized cost.
The three levels of the fair value hierarchy are as follows:
Level 1 - Unadjusted quoted prices in active markets for identical
assets or liabilities;
Level 2 - Inputs other than quoted prices included in Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and
Level 3 - Inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
As at November 30, 2011, the carrying and fair value amounts of the
Company`s financial instruments are approximately the same due to the
limited term of these instruments. The following table illustrates the
classification of the Company`s Financial Instruments within the fair-value
hierarchy as at November 30, 2011 and February 28, 2011:
August 31, 2011
Level 1 Level 2 Level 3
Endowment policy and investments $ 303,571 $- $ - $4,930,796
February 28, 2011
Level 1 Level 2 Level 3
Endowment policy and investments $ - $ - $4,316,828
23) RELATED PARTY DISCLOSURE
In March 2010, a company with common directors solely participated in two
private placements of common shares of the Company (Note 19 (i)).
The Transaction with Nyah was a related party transaction because at the
time of the Transaction certain directors and officers of the Company were
also directors, officers and shareholders of Nyah.
During the Special Warrants offering (Note 19 (iii)) certain directors,
officers and a company with common directors subscribed to Special Warrants,
which subsequently were converted into common shares of the Company.
The Company shares its premises with other companies that have common
directors and officers and the Company reimburses the related companies for
its proportional share of the expenses. At November 30, 2011 an amount of
$97,376 (February 28, 2011 - $nil) was prepaid and $nil (February 28, 2011 -
$33,718) was payable in relation to these expenses. These amounts are
unsecured, non-interest bearing with no fixed terms of repayment.
As a result of the Nyah transaction, Forbes Coal acquired a receivable of
$1,015,574 which consisted primarily of a receivable from Valencia Ventures
Inc. ("Valencia") in the amount of $1,000,000 for the sale of the Agnew Lake
Project. In October 2010, $500,000 of this amount was received from Valencia
and in July 2011 the second payment of $250,000 was received in form of the
shares of Valencia. Mr. Stan Bharti is a director of Valencia. Valencia and
the Company have certain directors and or officers in common. Also as a
result of the Nyah transaction Forbes Coal acquired a payable in the amount
of $100,000 payable to Forbes & Manhattan Inc., a company of which Stan
Bharti is an officer and director, which was paid in full as at February 28,
2011.
As a result of Slater Coal acquisition, Forbes Coal acquired receivables and
payables in the net amount of $121,394 owed from the former Slater Coal
shareholders and their related parties to the Company. As at the date of
these condensed interim consolidated financial statements an amount of
$38,184 in loans payable to directors and officers of Slater Coal was
recorded. Also an amount of $1,125,703 in loans receivable from directors
and officers of Slater Coal was recorded.
Also as a result of Slater Coal acquisition, business relationships with
certain related parties were inherited which resulted in total transactions
for nine months being for services purchased being $5,636,000 and for sales
of goods being $1,778,000.
The related party transactions are in the normal course of operations and
are measured at the exchange amount, which is the amount of consideration
established and agreed to by the related parties.
Compensation of key management personnel
The remuneration of directors and other members of key management personnel
during the period were as follows:
$ Nine months ended
November 30,2011 December 31, 2010
Short term benefits 1,517,103 1,879,833
Share-based payments 1,674,000 4,374,000
$3,191,103 $6,244,833
COMMITMENTS AND CONTINGENCIES
Management contracts
The Corporation is party to certain management contracts. These contracts
require that additional payments of approximately $2,370,000 be made upon
the occurrence of a change of control. As the likelihood of these events
taking place is not determinable, the contingent payments have not been
reflected in these condensed interim consolidated financial statements.
Minimum commitments remaining under these contracts were approximately
$400,000 all due within one year.
Instalment sale agreements payment obligations
The Company is committed to minimum amounts under instalment sale agreements
for plant and equipment. Minimum commitments remaining under these leases
were $8,447,756 over the following years:
Year Amount
2012 384,566
2013 6,917,912
2014 1,013,901
2015 131,377
8,447,756
Environmental contingency
The Company`s mining and exploration activities are subject to various
federal, provincial and international laws and regulations governing of the
environment. 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 comply
with such laws and regulations.
Throughput, transportation and sales contracts
The Corporation is party to certain throughput, transportation and sales
contracts. As the likelihood of full non-performance by the Company on these
contracts is not determinable, the contingent payments have not been
reflected in these condensed interim consolidated financial statements.
SUBSEQUENT EVENTS
No material events occurred subsequent to the period end.
INVESTEC LOAN FACILITY
The Company, through its subsidiary Slater Coal, has secured a ZAR 230
million (approximately $29 million) loan facility from Investec Limited
("Investec"). The loan facility consists of a five year senior secured
amortizing term loan facility of up to ZAR 200 million (approximately $25
million) and a revolving loan facility of up to ZAR 30 million
(approximately $4 million). Both facilities are flexible in terms of
drawdowns and repayments. The facilities are secured against the assets of
Slater Coal and bear interest at the 3 month JIBAR rate, plus 3%, compounded
quarterly. The interest rate will increase by 1% if the earnings before
interest, taxes, depreciation and amortization of Slater Coal falls below
ZAR 100 million annually (approximately $13 million). As at November 30,
2011, no amounts have been drawn under this facility.
TRANSITION TO IFRS
The Company`s financial statements for the year ending February 28, 2012
will be the first annual financial statements that comply with IFRS and
these condensed interim consolidated financial statements were prepared as
described in Note 2, including the application of IFRS 1. IFRS 1 requires an
entity to adopt IFRS in its first annual financial statements prepared under
IFRS by making an explicit and unreserved statement in those financial
statements of compliance with IFRS. The Company will make this statement
when it issues its 2012 annual financial statements.
IFRS 1 also requires that comparative financial information be provided. As
a result, the first date at which the Company has applied IFRS was January
1, 2010 (the "Transition Date"). IFRS 1 requires first-time adopters to
retrospectively apply all effective IFRS standards as of the reporting date,
which for the Company will be February 28, 2012. However, it also provides
for certain optional exemptions and certain mandatory exceptions for first
time IFRS adopters.
Initial elections upon adoption
Set forth below are the IFRS 1 applicable exemptions and exceptions applied
in the conversion from Canadian GAAP to IFRS.
IFRS Exemption Applied
Share-based payments - IFRS 2, Share-based Payments, encourages application
of its provisions to equity instruments granted on or before November 7,
2002, but permits the application only to equity instruments granted after
November 7, 2002 that had not vested by the Transition Date. The Company
elected to avail itself of the exemption provided under IFRS 1 and applied
IFRS 2 for all equity instruments granted after November 7, 2002 that had
not vested by its Transition Date.
Business combinations and consolidated and separate financial statements -
IFRS 1 provides the option to apply IFRS 3, Business Combinations,
retrospectively or prospectively from the Transition Date. The Company has
elected to apply IFRS 3 prospectively. The Company did not apply IFRS 3
retrospectively to business combinations that occurred prior to its
Transition Date and such business combinations have not been restated. In
accordance with IFRS 1, if a Company elects to apply IFRS 3 Business
Combinations retrospectively, IAS 27 Consolidated and Separate Financial
Statements must also be applied retrospectively. As the Company elected to
apply IFRS 3 prospectively, the Company has also elected to apply IAS 27
prospectively.
IFRS Mandatory Exceptions
Estimates - Hindsight is not used to create or revise estimates. The
estimates previously made by the Company under Canadian GAAP were not
revised for application of IFRS except where necessary to reflect any
difference in accounting policies.
Reconciliations of Canadian GAAP to IFRS
IFRS 1 requires an entity to reconcile its equity, comprehensive income
(loss) and cash flows for prior periods. The changes made to the condensed
interim consolidated statements of financial position and condensed interim
consolidated statements of comprehensive income (loss) have resulted in
reclassifications of various amounts on the statements of cash flows.
However, as there have been no changes to the net cash flows, no
reconciliations have been presented.
Adjustments on transition to IFRS:
In addition to the exemptions and exceptions discussed above, the following
narratives explain the significant differences between the previous
historical Canadian GAAP accounting policies and the current IFRS policies
applied by the Company. Please refer to the Company`s May 31, 2011 condensed
interim consolidated financial statements for a complete description of the
accounting policies used.
Share-based compensation - Forfeitures
Canadian GAAP - Forfeitures of awards are recognized as they occur.
IFRS - An estimate is required of the number of awards expected to vest,
which is revised if subsequent information indicates that actual forfeitures
are likely to differ from the estimate. No adjustments were required.
Reverse Acquisition
Canadian GAAP - The reverse acquisition was treated as a capital transaction
with the cost of the transaction measured at the fair value of the
consideration given or the assets acquired, whichever is more reliably
measured. As the valuation of the consideration is calculated using the
Black-Scholes option pricing model which requires assumptions to be used,
the Company measured the transaction based on the fair value of the net
assets acquired, which was in a deficit position and therefore, recorded the
transaction directly into deficit.
IFRS - The substance of the transaction is a reverse acquisition of a non-
operating company which does not constitute a business combination as Nyah
does not meet the definition of a business. The transaction is accounted for
as a capital transaction with the consideration paid by the Company measured
with the excess over the fair value of the assets being recognized in the
statement of operations and comprehensive (loss). As the purchase price paid
exceeded the fair value of the identified net assets acquired, the
difference was recorded in the statement of operations and comprehensive
(loss).
Impact on Condensed Interim Consolidated Statements of Financial Position
and Statements of Operations
December 31, 2010 June 30, 2010
Share capital $2,537,221 $-
Loss on share based payments $(2,537,221) $-
(c) Deferred Income Taxes
Canadian GAAP - Future income tax liabilities are presented as either
current or long term.
IFRS - Deferred income tax liabilities are presented as long-term.
Transitional reconciliations
The reconciliations between the previously reported financial results under
Canadian GAAP and the current reported financial results under IFRS are
provided as follows:
(i) Reconciliation of the condensed interim consolidated statement of
financial position as at December 31, 2010;
(ii) Reconciliation of the condensed interim consolidated statement of
operations and comprehensive (loss) for the nine months ended December 31,
2010;
(iii) Reconciliation of the condensed interim consolidated statement of
operations and comprehensive (loss) for the nine months ended December 31,
2010;
(i)Reconciliation of the condensed interim consolidated statement of
financial position as at December 31, 2010
Canadian GAAP accounts Note Canadian IFRS IFRS
27 GAAP adjustments balances
balances $ $
$
ASSETS
Current
Cash and cash equivalents 4,390,062 - 4,390,062
Restricted cash 1,872,400 - 1,872,400
Accounts and other receivables 8,461,750 - 8,461,750
Inventories 12,135,729 - 12,135,729
Prepaid expenses 68,082 - 68,082
26,928,023 - 26,928,023
Property, plant and equipment 36,023,791 - 36,023,791
Mineral property and rights 72,694,776 - 72,694,776
Investment property 123,096 - 123,096
Goodwill 1,400,558 - 1,400,558
Other assets 5,363,209 - 5,363,209
Deferred income taxes 121,705 - 121,705
142,655,158 - 142,655,158
LIABILITIES
Current
Accounts payable and accrued
liabilities 7,268,234 - 7,268,234
Acquisition obligation 19,915,721 - 19,915,721
Other financial liabilities 1,393,428 - 1,393,428
Loans payable 616,406 - 616,406
29,193,789 - 29,193,789
Acquisition obligation 21,515,392 21,515,392
Asset retirement obligation 1,881,044 1,881,044
Other financial liabilities 8,307,388 8,307,388
Deferred income taxes 27,065,470 27,065,470
87,963,083 - 87,963,083
SHAREHOLDERS` EQUITY
Share capital b 58,266,624 2,357,221 60,623,845
Warrants 993,053 - 993,053
Contributed surplus 6,445,680 - 6,445,680
Deficit b (16,913,226) (2,357,221) (19,270,447)
Currency translation reserve 5,899,944 - 5,899,944
Equity attributable to the
owners of the company 54,692,075 - 54,692,075
$142,655,158 - $142,655,158
(ii) Reconciliation of the condensed interim consolidated statement of
operations and comprehensive (loss) for the nine months ended December 31,
2010
Canadian GAAP accounts Note Canadian GAAP IFRS IFRS
27 balances adjustments balances
REVENUE 15,658,216 - 15,658,216
COST OF SALES
Operating expenses 10,988,685 - 10,988,685
Amortization and depletion 1,969,312 - 1,969,312
12,957,997 - 12,957,997
GROSS PROFIT 2,700,219 - 2,700,219
EXPENSES
Consulting and professional 1,267,382 - 1,267,382
fees 1,107,085 - 1,107,085
General and administration 13,418,096 - 13,418,096
Stock based compensation
15,792,563 - 15,792,563
Net loss before other items (13,092,344) - (13,092,344)
OTHER ITEMS
Other income 207,914 - 207,914
Business combination (1,222,390) - (1,222,390)
transaction costs (1,615,365) - (1,615,365)
Accretion
Change of estimates on 2,724,711 - 2,724,711
contingent acquisition (201,992) - (201,992)
liability b (2,482,321) - (2,482,321)
Interest (expense) - (2,357,221) -
Foreign exchange (loss)
Loss on share based payments
NET LOSS before income tax (15,681,787) (2,357,221) (18,039,008)
Income tax expense (815,382) - (815,382)
NET LOSS for the period (16,497,169) (2,357,221) (18,854,390)
Other comprehensive income
items
Unrealized gain on foreign 5,899,944 - 5,899,944
currency translation
COMPREHENSIVE LOSS for the $(10,597,225) $(2,357,221) (12,954,446)
period
Net loss per share - basic (1.38) (0.20) (1.58)
and diluted
Weighted average number of 11,949,521 11,949,521 11,949,521
common shares outstanding -
basic and diluted
(III) Reconciliation of the condensed interim consolidated statement of
operations and comprehensive (loss) for the three months ended December 31,
2010
Canadian GAAP accounts Note Canadian IFRS IFRS
27 GAAP adjustments balances
balances
REVENUE 9,030,977 - 9,030,977
COST OF SALES
Operating expenses 7,598,811 - 7,598,811
Amortization and depletion 178,617 - 178,617
7,777,428 - 7,777,428
GROSS PROFIT 1,253,549 - 1,253,549
EXPENSES
Consulting and professional fees 745,940 - 745,940
General and administration 407,004 - 407,004
Stock based compensation 5,795,596 - 5,795,596
6,948,540 - 6,948,540
Net loss before other items (5,694,991) - (5,694,991)
OTHER ITEMS
Other income 56,805 - 56,805
Business combination transaction (195,155) - (195,155)
costs (976,329) - (976,329)
Accretion
Change of estimates on 2,724,711 - 2,724,711
contingent acquisition liability 3,998 - 3,998
Interest income (1,073,650) - (1,073,650)
Foreign exchange (loss)
NET LOSS before income tax (5,154,611) - (5,154,611)
Income tax expense (10,970) - (10,970)
NET LOSS for the period (5,165,581) - (5,165,581)
Other comprehensive income items
Unrealized gain on foreign
currency translation 4,989,070 - 4,989,070
COMPREHENSIVE LOSS for the $(176,511) - $(176,511)
period
Net loss per share - basic and (0.20) - (0.20)
diluted
Weighted average number of 25,590,793 25,590,793 25,590,793
common shares outstanding -
basic and diluted
JOHANNESBURG
18 January 2012
Sponsor
Sasfin Capital (a division of Sasfin Bank Limited)
Date: 18/01/2012 11:00:01 Supplied by www.sharenet.co.za
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