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CZA - Coal of Africa Limited - Report for the half-year ended
31 December 2011
Coal of Africa Limited
(Incorporated and registered in Australia)
(Registration number ABN 008 905 388)
ISIN AU000000CZA6
JSE/ASX/AIM share code: CZA
("CoAL or the "Company" or the "Group")
REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2011
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)
Wayne Koonin (Financial Director)
Professor Alfred Nevhutanda
COMPANY SECRETARY Shannon Coates
AUSTRALIA UNITED KINGDOM SOUTH AFRICA
AUDITORS Deloitte Touche N/A Deloitte &
Tohmatsu Touche
240 St Georges Deloitte Place
Terrace Building 1
Perth WA 6000 The Woodlands
Australia 20 Woodlands
Drive
Woodmead 2052
South Africa
BANKERS NAB Limited Investec Bank ABSA Bank
Level 1, 1238 plc Palazzo Towers
Hay Street 2 Gresham Street West
West Perth WA London EC2V 7QP Monte Casino
6005 United Kingdom Boulevard
Australia South Africa
AUSTRALIA UNITED KINGDOM SOUTH AFRICA
BROKERS Euroz Securities J.P. Morgan J.P.Morgan
Limited Cazenove Equities Limited
Level 18, 10 Aldermanbury 1 Fricker Road
Alluvion London EC2V 7RF Illovo,
58 Mounts Bay United Kingdom Johannesburg
Road 2196
Perth WA 6000 South Africa
Australia Investec Bank
5 Gresham Street
London, EC2V 7QP
United Kingdom
Mirabaud
21 St James`
Street
London SW1Y 4JP
United Kingdom
LAWYERS Gilbert + Tobin Hogan Lovells Webber Wentzel
1202 Hay Street International 10 Fricker Road
West Perth WA LLP Illovo Boulevard
6005 Atlantic House Johannesburg
Australia Holborn Viaduct 2196
London EC1A 2FG South Africa
United Kingdom
Corrs Chambers
Westgarth
Bourke Place
600 Bourke Place
Melbourne
Victoria 3000
Australia
NOMAD/ N/A Investec Bank JP Morgan
CORPORATE 5 Gresham Street Equities Limited
SPONSOR London, EC2V 7QP 10 Fricker Road
United Kingdom Illovo
Johannesburg
2196
South Africa
Index
The reports and statements set out below comprise the half-year report presented
to shareholders:
Contents
Directors` Report
Condensed Consolidated Statement of
Comprehensive Income
Condensed Consolidated Statement of Financial
Position
Condensed Consolidated Statement of Changes in
Equity
Condensed Consolidated Statement of Cash Flows
Notes to the Condensed Consolidated Financial
Report
Directors` Declaration
Auditor`s Independence Declaration
Independent Auditor`s Review Report
Directors Report for the half year ended 31 December 2011
The Directors present their report on the consolidated entity comprising Coal of
Africa Limited ("CoAL" or "the Company" or "the Group" or "the Consolidated
Entity") and the entities it controlled for the six months ended 31 December
2011 together with the auditor`s review report thereon:
1. Directors
The Directors of the Company in office during the six months and to the date of
this report are:
Richard Linnell (Chairman)*
Simon Farrell (Deputy Chairman)**
John Wallington (Chief Executive Officer)**
Wayne Koonin (Financial Director)**
Professor Alfred Nevhutanda **
Peter Cordin*
Steve Bywater*
Khomotso Mosehla*
David Murray*
Rudolph Torlage*
Mikki Xayiya*
Non-executive director
** Executive director
Review of Operations
Principal activity and nature of operations
The principal activity of the Company and its subsidiaries is the acquisition,
exploration and development of thermal and metallurgical coal properties in
South Africa.
The Group`s principal assets and projects include:
- two coking coal projects, the Vele Colliery and the Makhado Complex, in the
development stage;
- two exploration and development stage coking and thermal coal complexes,
the Chapudi Complex and the Soutpansberg Complex, each comprising three
large scale coal projects;
- two operational thermal coal collieries, the Mooiplaats Colliery and the
Woestalleen Colliery; and
- in excess of three million tonnes per annum port and rail capacity, with
the option to secure additional capacity at the Matola Terminal in Maputo,
Mozambique.
The Group also has a half interest in an analytical coal laboratory, located in
close proximity to the projects in the Limpopo Province.
Highlights
Highlights for the six months under review include:
- Environmental Authorisation ("EA") for the Vele coking coal colliery ("Vele
Colliery") granted and suspension of the Vele Colliery Integrated Water Use
Licence ("IWUL") lifted allowing for the commencement of full operations
from October 2011.
- Memorandum of Agreement ("MOA") signed with the South African Department of
Environmental Affairs ("DEA") and South African National Parks ("SANParks")
to ensure the conservation and integrity of the globally significant
natural and cultural heritage site and to maintain and strengthen co-
operation between the parties.
- Memorandum of Understanding ("MOU") signed with the Save Mapungubwe
Coalition ("the Coalition") committing the parties to work together and
strengthen co-operation ensuring the sustainable development of the
Mapungubwe cultural landscape.
- Extraction of coal at the Vele Colliery commenced in December 2011 with
approximately 16 800 tonnes of run of mine ("ROM") coal mined to end
January 2012. Wet commissioning of the plant and related infrastructure
completed in December 2011 and hot commissioning completed in February
2012.
- Makhado coking coal project ("Makhado Project") bulk sample results for the
10%, 11% and 12% ash being finalised by Arcelor Mittal South Africa
("AMSA"). Discussions to progress the letter of intent into an off-take
agreement have commenced.
- 2 283 298 tonnes (H2 FY2011: 2 263 417 tonnes) of ROM and 1 183 566 tonnes
(H2 FY2011: 1 381 275 tonnes) of export quality coal produced at the
Woestalleen thermal colliery ("Woestalleen") and the Mooiplaats thermal
colliery ("Mooiplaats").
- Sales of export coal increased by 15.5% from 691 128 tonnes in the previous
six months to 798 311 tonnes in the reporting period as a result of
improved rail and port efficiencies.
- Transfer of the management of mining operations at the Mooiplaats Colliery
together with the commissioning of a fifth underground section resulting in
improved production and product yields.
- Signing of irrevocable undertakings by vendor shareholders and extension of
the time period to obtain regulatory approvals for the acquisition of the
Chapudi Coal Project from Rio Tinto Minerals Development Limited ("Rio
Tinto")/ Kwezi Mining (Proprietary) Limited ("Kwezi").
- Full Mineral Experts Report published and the placement of 130,000,000
shares raising approximately US$106 million together with the securing of a
new US$40 million working capital facility with J.P. Morgan Chase
Limited("New Bank Facility").
- Further progress on disposal of the non-core assets including NiMag
(Proprietary) Limited and Metalloy Resources Investments (Proprietary)
Limited (together "the NiMag Group") by way of a Management Buy Out ("MBO")
and the Holfontein thermal coal project.
- Total cash balance, available and undrawn facilities (excluding the New
Bank Facility of US$40 million) as at the end of December 2011 of US$100.1
million.
Woestalleen Complex - (Vuna Colliery & Woestallen Wash Plant) - Witbank Coal
field
Vuna Colliery ("Vuna") continued its outstanding safety record with no lost time
injury recorded during the six month period ended 31 December 2011. The colliery
has not recorded a single lost time injury since start-up in 2008. Two lost time
injuries were recorded at the Woestalleen processing plant during the reporting
period.
Total ROM production from Vuna of 1 719 506 tonnes was 2.6% lower than the
comparative six month period of 1 764 830 tonnes primarily due to limited pit
room and a shorter month in December. Operational performance is expected to
improve during the second half of H2 FY 2012, with a projection of 1.62Mt ROM
for the six months to 30 June and full year production outlook of approximately
3.3Mt ROM
The Woestalleen wash plant produced 823 877 tonnes (H2 FY2011: 1 009 519 tonnes)
of export quality coal and a further 334 123 tonnes (H2 FY2011: 161 346 tonnes)
of lower grade product for Eskom Limited ("Eskom"), the South African
electricity utility. Management is actively identifying and assessing potential
feedstock options for the Woestalleen plant with an objective to increase the
economic life of the asset.
The change in ROM coal mix combined with the selective mining initiative
resulted in the overall plant yield marginally increasing to 64.8% (H2 FY2011:
64.3%).
Mooiplaats Colliery - Ermelo Coalfield (100%)
Safety at Mooiplaats continues to be a focus area. Four lost time injuries were
reported at the mine during the six months (H2 FY2011: four lost time injuries).
The transition to an owner-managed mine at the end of June 2011 has facilitated
the direct management of the operation resulting in an improvement in overall
performance. The commissioning of a fifth underground section in September 2011
boosted production from 498 587 ROM tonnes in the previous six months to
563 792 ROM tonnes despite challenging mining conditions and infrastructure
availability issues. The challenging geological conditions are anticipated to
continue for the remainder of the financial year, resulting in a reduction in
the full year forecast to 30 June 2012 from 1.67Mt to approximately 1.3Mt.
Coal processed during the six months decreased to 621 816 ROM tonnes from 731
766 ROM tonnes during the previous six month period. This reduction was due to
ROM coal purchases declining from 152 699 tonnes to 44 862 tonnes during the
reporting period and subsequently returning to normal levels from the start of
the second half of FY2012.
The ROM coal processed yielded a total of 359 689 tonnes (H2 FY2011: 371 756
tonnes) of export quality coal and a further 69 654 tonnes (H2 FY2011: 110 948
tonnes) of the lower grade product supplied to Eskom. With improved mining
controls, ROM contamination was reduced, resulting in yields improving from
66.0% to 69.0% during the six months.
A strategic review of the colliery is in progress with the objective of
increasing the value of the installed capacity at the mine through exploiting
synergies in potential partnerships with other parties. From an operational
perspective an initiative to identify potential improvements in the mining
process in order to target sustainable levels of higher production has
commenced. This process includes the introduction of a support contract with
equipment supplier JOY Mining to ensure a more effective approach for the
maintenance of underground machinery.
Vele Colliery
Significant progress has been made on the various regulatory matters affecting
the Vele Colliery allowing for the re-commencement of construction activities,
extraction of first ROM coal, completion of the plant commissioning and the
commencement of detailed testing of washed coking coal to confirm coal
performance based on a battery of tests with various potential customers. The
sale of first coal expected to commence in Q4 FY2012.
Following the receipt of the EA for the Vele Colliery on 5 July 2011, Non-
Governmental Organisations appealed against the granting of the IWUL resulting
in the immediate suspension of the IWUL. This resulted in the commencement only
of operations not requiring the use of water including the grading of all the
access roads onto site, undertaking some repairs to the coal handling and
processing plant, completing the construction of certain remaining
infrastructure and the remaining aspects of the coal handling and processing
plant.
On 8 August 2011, CoAL lodged an urgent petition requesting the Minister of
Water and Environmental Affairs ("the Minister"), in terms of the National Water
Act No 36 of 1998 ("the Act"), to exercise her discretion to allow the IWUL to
remain in full force and effect pending the final conclusion of the appeal to be
heard by the Water Tribunal. After taking into consideration all relevant facts
including the appeal to the Water Tribunal, in terms of Section 148 (2)(b) of
the Act, the Minister lifted the suspension on 18 October 2011.
All on-mine activities resumed in full on 19 October 2011. The lifting of the
IWUL suspension enabled the re-commencement of construction activities required
to complete the remaining infrastructure and plant development at the mine.
Based on the authorisation received, the IWUL remains in full force and effect
pending an appeal to be heard by the Water Tribunal. This appeal is expected to
be withdrawn following the pending signing of a MOA with the Coalition.
On 1 September 2011, the Company, DEA and SANParks unveiled a historical MOA
with the Mapungubwe Cultural Landscape World Heritage Site ("Heritage Site").
The MOA was concluded pursuant to conditions set out as part of the EA and seeks
to ensure the conservation and integrity of the natural and cultural Heritage
Site and to maintain and strengthen co-operation between CoAL, SANParks and the
DEA.
The additional Heritage Impact Assessment as required by United Nations
Educational Scientific and Cultural Organization (UNESCO) and the DEA was
completed during December 2011 and thereafter, presented during a five day visit
to the Vele Colliery in January 2012 and surrounding area by a delegation of
representatives from UNESCO.
On 24 November 2011 the Company signed a MOU with the Coalition comprising the
Endangered Wildlife Trust, Birdlife South Africa, Wilderness Foundation South
Africa, World Wide Fund for Nature South Africa, Mapungubwe Action Group and the
Association for Southern African Professional Archaeologists. The partners to
the MOU share a commitment to work together and strengthen co-operation in the
interest of sustainable development and the preservation and protection of the
Mapungubwe cultural landscape. This innovative approach aims to set a benchmark
for best practice in relation to managing and mitigating the impacts of Vele
Colliery mining and related activities, specifically the impact on water and
heritage resources.
The process of converting the MoU into an MoA is progressing satisfactorily for
both parties. The past few weeks have seen parties engage in information
sharing, site visits and meetings and workshops to discuss findings. Once the
review of key technical studies has been concluded, the parties will be in a
position to conclude the MoA. The targeted date for the MOA is the middle of
April 2012 to allow the appropriate work to be concluded.
The Vele Colliery commenced extraction of ROM material in December 2011 and had
produced 618 000 m3 of overburden and 16 800 ROM tonnes of coal by the end of
February 2012. Progress continued with the plant and related infrastructure,
with wet commissioning completed in December. The commissioning process
included process adjustments and some equipment repairs caused by the extended
outage of the plant. Hot commissioning of the processing plant was completed by
the construction contractor on 23 February 2012. Samples of 10, 11 and 12% ash
for products are being prepared for further evaluation at Arcelor Mittal and
potential international customers.
Current testwork being conducted at the Vele plant is also aimed at confirming
the design of processing infrastructure which will enable the recovery of
additional coking coal product from the slimes portion of the coal, as well as
the production of a thermal middlings product. Early results are very
encouraging.
Makhado Coking Coal Project
The Makhado Project Definitive Feasibility Study ("DFS") was completed during
the reporting period and is in the final stages of review with all phases of
design work and reporting complete. Independent experts progressed the baseline
social and environmental studies required for the Makhado Project NOMR
application. The consultation process with interested and affected parties
continued and included the involvement of various Government departments.
Additional comments from various interested and affected parties on the
Environmental Impact Assessment, EMP and IWUL submissions were received and the
IWUL Technical and Engineering report is expected to be submitted to the DWA
during H2 FY2012.
A review of the DFS was undertaken by the CoAL Board with a further detailed
review scheduled during the following quarter. Additional options under
consideration as part of the overall finalization of the DFS include the
optionality to include an underground component in the overall mine design and
further planning and plant design work relating to a potential middlings
(thermal coal) product, not previously included in the scope of the original
DFS.
Work required to be undertaken in preparation of the granting of the NOMR later
this year continues as follows:
- commencement of the installation of overhead powerlines to the mine site
initially providing 5MVA feed during the construction phase of the mine and
thereafter upgrading to 10MVA for the operation of the mine;
- front end detailed design work for the mine, plant and rail infrastructure;
- further assessments relating to rock mechanics and geotechnical work;
- finalization of land acquisitions for rail and other infrastructure linking
the plant to the main railway line for the transport of export coal to the
Matola Port in Mozambique;
- establishment of rehabilitation guarantees required to be posted on
granting of the NOMR and
- finalizing discussions with various suppliers of mining equipment for the
open cast truck and shovel operation in order to secure delivery times on
long lead items.
The detailed testing of the Makhado Project bulk sample by AMSA at the
Vanderbijlpark and Newcastle plants in South Africa are complete and the final
results from further tests undertaken at its Newcastle plant in South Africa
have been received by the company. Coal samples have been prepared based on a
10%, 11% and 12% ash levels to accommodate a range of tests at different ash
levels.
The outcome of the individual and blended tests performed by AMSA and additional
independent analysis, confirmed that the 10% ash product performs well relative
to other hard coking coals.
The results are in line with the initial technical assessment and confirm the
expected performance of the coke derived from the coal.
In addition various independent tests have been commissioned for corroboration
of the AMSA results. The independent analysis of the Makhado bulk sample, by an
international specialist consulting firm specializing in the analysis of the
application of specialist coals in the iron and steel industry globally, further
confirms that Makhado coal will be classified as a hard coking coal. The
individual and blended test results confirm the coal`s higher than average
fluidity, dilation and high vitrinite content will more than likely be regarded
as the strongest characteristics of this coal. This will to a large extent
balance the lower maximum reflectance and volatiles for potential customers. The
coking strength reaction results compares favourably with the minimum criteria
for hard coking coal.
A product road show to potential international customers for both the Makhado
Project and Vele Colliery products is planned in March and April 2012.
Discussions to finalise an off-take agreement with AMSA have commenced and are
expected to be concluded in the second half of 2012 and prior to the granting of
the NOMR. Equally, discussions with Exxaro are progressing with a view to
negotiating the shareholders agreement in anticipation of the exercising of the
option to acquire a 30% interest in the project. The process for the detailed
review of the DFS by Exxaro has commenced as part of the process to finalize the
exercising of the option.
Acquisition of Rio Tinto`s South African Assets
The Company secured irrevocable undertakings from the vendor shareholders in
terms of the Sale and Purchase Agreement ("SPA") for the acquisition of Rio
Tinto`s Chapudi Coal Project ("Chapudi") and related exploration properties
(collectively, the "Coal Assets") in the Soutpansberg coal basin in the Limpopo
Province. The date for the fulfilment of the suspensive conditions in the SPA
was extended from 12 August 2011 to 30 April 2012, to allow for obtaining the
remaining regulatory approvals required. The conclusion and the submission of
the BEE shareholders agreement to the Department of Mineral Resources ("DMR") in
February 2012 is a further step in the transaction that consolidates various
tenements and once completed, will make CoAL a substantial holder of coking coal
New Order Prospecting Rights in the Soutpansberg Coalfield.
The Company is in the process of finalising the exploration programme and
mobilising the exploration teams for the work programs to be undertaken on the
various properties. This will for part of the process to finalize the NOMR
applications, provide further data to increase the resource base and unlock the
potential value from these assets.
Soutpansberg Coal Bed Methane Project
During the December quarter, Tshipise Energy (Pty) Ltd ("Tshipise") a joint
venture between CoAL and BEE partner Vibrant Veterans (Pty) Ltd, completed the
exercise to collate desktop studies undertaken by Australian based Geogas (Pty)
Ltd ("Geogas") on the coal bed methane potential of the properties located in
the Soutpansberg coalfields, substantially in the same proximity as the various
coking coal projects the Group is currently involved in.
Geogas compiled desktop studies of the total area granted under Tshipise`s 1,578
km2 Exploration Right and the Company will move into the next phase of the
exploration based on recommendations detailed in the Geogas reports. This will
include the drilling of additional holes and completing further technical
studies in order to prove up a potential coal bed methane resource in accordance
with the JORC code.
Further planning on this work program is underway and is expected to commence in
the following H2 FY2012.
Disposal of the NiMag Group
CoAL entered into a Sale and Purchase Agreement for the disposal of its 100%
interest in the non-core NiMag Group by way of a MBO. The Company will dispose
of its shares in the NiMag Group companies for a total of ZAR54 million
(approximately US$6.6 million) of which 60% is being funded by a combination of
equity contributions and bank debt. The remaining 40% will be financed by an
interest bearing loan provided by CoAL that is repayable over four years.
The closing of the transaction is subject to certain conditions precedent normal
with a transaction of this nature, expected to be satisfied by the end of April
2012.
Disposal of the Holfontein Project
On 30 January 2012, the Company agreed to sell the Holfontein Project for ZAR100
million (approximately US$12.7 million) and a continuing payment to CoAL of
ZAR2.00 (approximately US$0.25) per tonne of saleable coal produced by the
project.
CoAL received an initial non-refundable deposit of ZAR4.0 million (approximately
US$0.5 million) to conduct a detailed review of the project and a further ZAR5.0
million (approximately US$0.6 million) upon signature of the agreement enabling
the proposed purchaser to finalize the DFS in order to complete the acquisition
of the project. Upon completion of the transaction, the total purchase
consideration will be reduced by ZAR9.0 million (approximately US$1.1 million)
with the remaining ZAR91.0 million (approximately US$9.9 million) payable at
that time.
Conditions precedent to closing the transaction include completing the DFS and
obtaining the remaining funding for the project and approval of the transaction
by the Department of Mineral Resources, all of which are required to be
fulfilled by 30 June 2012.
Corporate Activity
As previously announced, the Group is committed to moving to the Main Market of
the London Stock Exchange ("LSE") in conjunction with a restructuring of the
Group to redomicile the holding company.
CoAL has a continuous need for capital for the exploration, development and
continuing operation of its projects, including completion of the Chapudi
acquisition and advancement of the Makhado Project. In connection with these
requirements a Registration Document, prepared in accordance with the Prospectus
Rules of the Financial Services Act (United Kingdom) made under section 73A of
the Financial Services Management Act, was published and the Company issued
130,000,000 shares in November 2011 raising US$106 million (excluding expenses).
The raising of US$106 million satisfied a significant condition precedent to
secure the US$40 million New Bank Facility.
Work continues with the group restructuring and preparation for the migration of
the primary listing from the Australian Stock Exchange to the main market of the
LSE. In preparation for this change and achieving further alignment of corporate
advisors, as part of its existing relationship with J.P. Morgan Cazenove
(London) as corporate sponsor, CoAL appointed J.P. Morgan Equities Limited as
JSE sponsor with effect from 30 January 2012.
Financial Results
Revenue from the sale of coal for the six months totalled US$143.8 million
compared to US$88.3 million for the comparative period.
The loss for the six months under review amounted to US$74.7 million, including
various non-cash charges of US$68.8 million, or 13.36 cents per share compared
to a loss of US$66.5 million, including various non-cash charges of US$30.6m, or
12.30 cents per share for the prior corresponding period.
Foreign exchange losses total US$42.6 million of which US$37.7 million represent
unrealised losses arising from the translation of inter-group loan balances,
borrowings and cash. Depreciation of US$8.5 million and amortisation of US$19.5
million contributed further to the non-cash charges. The Company recorded a
further impairment to the carrying value of the assets classified as held for
sale, as the result of the exchange rate related adjustment in the carrying
value of the NiMag Group due to the depreciation of the South African Rand
against the United States dollar.
As at 31 December 2011, the Company had cash and available facilities of
US$100.1 million, excluding the US$40 million facility arranged with JP Morgan
Limited, compared to cash and available facilities of US$40.3 million at 30 June
2011.
Marketing and Logistics
International demand for South African coal, specifically from Asia and Europe,
remained subdued during the period and is attributable to continued concerns
regarding the European economy, larger than normal stockpiles in India and
increased availability of lower grade Indonesian coal. The demand for South
African coal increased towards the end of the six months, mainly from Asia, and
this trend has continued in the second half of FY2012.
Index-linked international coal prices for coal from Richards Bay were under
pressure during the six months with sales recorded at discounts to these
indices. South African export coal spot prices declined from just over US$118
per ton at the beginning of the July to approximately US$102 at the end of
November/early December but were offset to some extent in South African rand
terms by the decline in the value of the currency against the US dollar.
Sales of export quality coal on international markets increased by 15.5% to 798
311 tonnes. The increase is attributable to improved rail performance, a slight
recovery of market conditions and increased capacity at the Matola Terminal in
Maputo, Mozambique compared to the previous six month period.
During the six months under review Woestalleen sold 449 237 tonnes (H2 FY2011:
621 799 tonnes) and Mooiplaats sold 80 991 tonnes of export quality coal (H2
FY2011: 124 388 tonnes) to domestic customers. Eskom purchased 344 390 tonnes
(H2 FY2011: 106 003) of middlings coal from Woestalleen and 68 259 tonnes (H2
FY2011: 121 891 tonnes) from Mooiplaats.
Authorised and issued share capital
At 31 December 2011, Coal of Africa Limited had 662 284 573 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
On 6 February 2012, CoAL advised that it has entered into definitive agreements
with Rothe a Black Economic Empowerment ("BEE") company which will also
represent all the local communities in close proximity to the project, to
acquire a 26% shareholding in the wholly-owned CoAL subsidiary, expected to hold
the Chapudi Coal Project and related exploration properties upon completion of
its acquisition from Rio Tinto Minerals Development Limited and Kwezi Mining
Proprietary Limited.
The Company reported previously that in terms of a Share Sale Agreement ("SSA")
concluded with Troy Holdings and Investments Inc, Kusile Mining (Pty) Ltd and
NuCoal Holdings (Pty) Ltd, (together "the Vendors") to acquire 100% of NuCoal
Mining (Pty) Ltd, an amount of approximately US$9.5 million (R65.0 million) was
withheld in respect of claims under the SSA general warranty provisions. The
parties have entered into a settlement agreement whereby an amount of GBP3.0
million (US$4.5 million), approximating 50% of the amount withheld, was paid to
the Vendors in full and final settlement of the matter.
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"). Further announcements will follow in due course.
Rounding off of amounts
The Company is a company of the kind referred to in ASIC Class Order 98/100,
dated 10 July 1998, and in accordance with that Class Order amounts in the
directors` report and the half year financial report are rounded off to the
nearest thousand dollars, unless otherwise indicated.
Auditor`s Independence Declaration
A copy of the auditor`s independence declaration as required under Section 307C
of the Corporations Act 2001 is set out on page 30.
The half-year report set out on pages 12 to 29 was approved by the board on 12
March 2012 and was signed on its behalf by:
John Wallington
Chief Executive Officer
Dated at Johannesburg, South Africa, this 12th day of March 2012.
6 months 6 months
ended ended
31 December 31 December
2011 2010
Note $`000 $`000
Revenue 143 835 88 256
Cost of sales - direct (124 386) (86 019)
Gross profit 19
449 2 237
Employee benefits expense 6 (6 257) (6 788)
Depreciation and amortisation 6 (28 541) (28 624)
Impairment losses 6 (1 927) -
Foreign exchange losses 6 (42 565) (9 238)
Other expenses (17 556) (27 225)
Operating loss (77 397) (69 638)
Finance income 560 1 366
Finance costs (1 687) (631)
Loss before tax (78 524) (68 903)
Income tax credit 3 830 2 364
Loss after income tax (74 694) (66 539)
Other Comprehensive Income
Exchange differences on translating foreign (15 843) 103 347
operations
Total comprehensive (loss)/income for the (90 537) 36 808
period
Loss attributable to:
Owners of the Company (74 694) (66 539)
Non-controlling interests - -
(74 694) (66 539)
Total comprehensive (loss)/income
attributable to:
Owners of the Company (90 537) 36 808
Non-controlling interests - -
(90 537) 36 808
Loss per share
Basic and diluted (cents per share) 7 13.36 12.30
The accompanying notes form part of these half-year financial statements.
31 30 June
December 2011
2011 $`000
$`000
ASSETS Note
Non-current assets
Exploration and evaluation 184 611 195 848
expenditure
Property, plant and equipment 166 182 218 258
Intangible assets 19 376 20 800
Other receivables 12 800 12 800
Other financial assets 13 025 13 594
Restricted cash 11 336 13 323
Deferred tax assets 3 506 4 171
Total non-current assets 410 836 478 794
Current assets
Inventories 26 173 23 122
Trade and other receivables 25 613 44 734
Cash and cash equivalents 90 136 22 761
Total current assets 141 922 90 617
Assets classified as held for sale 4 19 265 22 268
Total assets 572 023 591 679
LIABILITIES
Non-current liabilities
Borrowings 1 445 1 720
Provisions 17 143 18 714
Deferred tax liabilities 14 099 19 435
Total non-current liabilities 32 687 39 869
Current liabilities
Trade and other payables 50 193 73 590
Borrowings 5 43 743 38 631
Provisions 1 380 2 481
Current tax liabilities 135 3 474
Total current liabilities 95 451 118 176
Liabilities classified as held for 4 993 2 843
sale
Total liabilities 129 131 160 888
NET ASSETS 442 892 430 791
EQUITY
Issued capital 3 686
788 592 577
Accumulated deficit (504 283) (429 589)
Reserves 173
158 008 228
Equity attributable to owners of 430
the Company 442 317 216
Non-controlling interests
575 575
TOTAL EQUITY 430
442 892 791
The accompanying notes form part of these half-year financial statements.
Issue Accum Shar Capi Forei Attri Non- Total
d u- e- tal gn bu- contr equit
capit lated Base Prof Curre table ollin y
al defic d its ncy to g
it Paym Rese Trans owner inter
ent rve latio s of ests
Rese n the
rve Reser compa
ve ny
$`000 $`000 $`00 $`00 $`000 $`000 $`000 $`000
0 0
Balance 686 (429 88 91 84 430 575 430
at 577 589) 967 170 216 791
1 July
2011
Total - (74 - - (15 (90 - (90
comprehen 694) 843) 537) 537)
sive loss
for the
period
Loss for - (74 - - - (74 - (74
the 694) 694) 694)
period
Other - - - - (15 (15 - (15
comprehen 843) 843) 843)
sive
income,
net of
tax
Shares 104 - - - - 104 - 104
issued 914 914 914
for
capital
raising
Share (3 - - - - (3 - (3
issue 544) 544) 544)
costs
Shares - - - - -
issued on 509 509 509
exercise
of
options
Share - - 623 - - 623 -
based 623
payments
Shares - - - - 136 -
issued as 136 136
part of
bonus
Balance 788 (504 89 91 68 442 575 442
at 31 592 283) 590 327 317 892
December
2011
Issue Accum Shar Capi Forei Attri Non- Total
d u- e- tal gn bu- contr equit
capit lated Base Prof Curre table ollin y
al defic d its ncy to g
it Paym Rese Trans owner inter
ent rve latio s of ests
Rese n the
rve Reser compa
ve ny
$`000 $`000 $`00 $`00 $`000 $`000 $`000 $`000
0 0
Balance 685 (210 86 91 (35 526 4 278 530
at 740 586) 451 300) 396 674
1 July
2010
Total - (66 - - 103 36 - 36
comprehen 539) 347 808 808
sive
(loss)/in
come for
the
period
Loss for - (66 - - - (66 - (66
the 539) 539) 539)
period
Other - - - - 103 103 - 103
comprehen 347 347 347
sive
income,
net of
tax
Share - - 1 - - 1 363 - 1 363
options 363
issued
during
the
period
Balance 685 (277 87 91 564 4 278 568
at 31 740 125) 814 68 567 845
December 047
2010
31 December 31 December
2011 2010
$`000 $`000
Cash Flows from Operating Activities
Receipts from customers 138 120
477 124
Payments to employees and suppliers (156 253) (144 746)
Cash used in operations (17 774) (24 622)
Interest received - 1 072
222
222
Interest paid (598) (632)
Income taxes paid (3 212) (7 563)
Net cash used in operating activities (21 584) (31 745)
Cash Flows from Investing Activities
Purchase of property, plant and equipment (4 819) (10 900)
Increase in restricted cash (142) -
Proceeds from the sale of property, plant and - 2 619
equipment
Capitalised exploration and evaluation (12 452) (3 993)
expenditure
Increase in other financial assets (335) (3 748)
Payments for development assets - (22 929)
Cash classified as held for sale - (1 000)
Net cash used in investing activities (17 748) (39 951)
Cash Flows from Financing Activities
Proceeds from the issue of shares and options, -
net of costs 103 032
Other loans raised / (repaid) 2 074 (928)
-
Increase in export trade finance facility -
8 089
Finance lease repayments (1 819) (1 727)
Net cash provided by/(used in) by financing 111 376 (2 655)
activities
NET INCREASE / DECREASE IN CASH AND CASH 72 044 (74 351)
EQUIVALENTS
Cash and cash equivalents at the beginning of the 22 761 72 054
half-year
Foreign exchange differences (4 669) 8
767 767
750
Cash and cash equivalents at the end of the half-
year 90 136 6 470
The accompanying notes form part of these half-year financial statements.
1. Corporate information
The financial report of Coal of Africa Limited ("CoAL" or the "Company") for the
half-year ended 31 December 2011 was authorised for issue in accordance with a
resolution of the directors on 12th March 2012. 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 Company and its
subsidiaries (the "Group" or the "Consolidated Entity") 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 134 ensures compliance with
International Accounting Standard 34 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 report has been prepared on the going concern basis, which
contemplates the continuity of normal business activity and the realisation of
assets and the settlement of liabilities in the normal course of business.
The Consolidated Entity has incurred a net loss after tax for the half year
ended 31 December 2011 of $74.7 million, (31 December 2010: loss of $66.5
million) and experienced net cash outflows from operating activities of $21.6
million (2010 net outflow: $31.7 million) and net cash outflows from investing
activities of $17.7 million (2010 net outflow: $39.9 million). As at 31 December
2011 the Consolidated Entity had a net current asset position of $46.5 million
(30 June 2011: net current liabilities of $27.6 million), excluding assets and
liabilities classified as held for sale.
During the half year to 31 December 2011 and the period to the date of this
report, the Directors have taken steps to ensure the Consolidated Entity
continues as a going concern. These steps have included:
(i) The Directors have reviewed the quantum and timing of all
discretionary expenditures including exploration and development
costs, and wherever necessary, these costs will be minimised or
deferred to suit the Consolidated Entity`s cash flow from operations.
This includes the active management of working capital commitments.
Based on this review the Directors are satisfied non-discretionary
expenditures and existing liabilities can be met from current cash
resources, forecast cash flows from operations, existing facilities
and proceeds from the sale of assets currently classified as held for
sale.
(ii) CoAL continues to work on renewing existing debt facilities and
securing new debt facilities. CoAL remains confident of renewing
and/or securing one or more of these facilities.
(iii) The Directors are also considering various strategies to raise
funds through additional capital. The form and content of this
strategy, although advanced, has not yet been finalised. The funds
raised from additional capital raisings and new debt facilities as
mentioned in (ii) above, will allow the Consolidated Entity to fund
non-discretionary expenditures.
(iv) As disclosed in Note 5 to the half year financial report the
Consolidated Entity entered into a new 364 day US$40 million revolving
credit facility with JP Morgan Limited. The draw down on the facility
is conditional upon the satisfaction of conditions precedent, the
primary condition being the Company raise minimum gross proceeds of
$75 million from a share placement. This was achieved on 4 November
2011. Other conditions precedent remain outstanding at the date of
signing this report, as a result this facility is not able to be drawn
upon by the Company. Management believes the outstanding conditions
precedent will be satisfied by 31 March 2012.
(v) As disclosed in Note 5 to the half year financial report the
Consolidated Entity breached certain financial covenants with respect
to the thermal coal export finance facility with Deutsche Bank
Amsterdam ("DBA"). Notice of this breach was communicated to DBA
during the period. CoAL considers that under the facility agreement
the breach has not resulted in any change to the terms of the
facility. At the date of signing this report DBA has not confirmed
this position. If DBA do not agree with CoAL regarding the breach, the
facility will become due and payable immediately.
(vi) CoAL has reached conditional agreement to dispose of Holfontein
Investments (Pty) Ltd and the NiMag Group. These disposals are
expected to occur within the next twelve months.
The ability of the Consolidated Entity to continue as a going concern and to pay
its debts as and when they fall due is dependent on the on-going and active
management of the expenditure incurred by the Consolidated Entity to protect the
current cash levels. In particular, the Consolidated Entity`s existing cash
reserves are sufficient to meet all non-discretionary expenditure for a period
of at least 12 months from the date of signing this half year financial report
and non-discretionary expenditure will only be incurred where the Consolidated
Entity is successful in raising funds from additional capital raisings and new
debt facilities.
The Directors have reviewed the Consolidated Entity`s overall position and
outlook in respect of the matters identified above and are of the opinion that
the use of the going concern basis is appropriate in the circumstances.
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 presented in United
States dollars, unless otherwise noted.
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 2011 annual financial report for the financial year ended 30
June 2011, 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 revised the presentation of its consolidated financial statements from
those reported as at and for the year ended 30 June 2011 and those reported as
at and for the half year ended 31 December 2010. These revisions had no impact
on net loss, total assets or total equity.
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.
The adoption of all the new and revised Standards and Interpretations has not
resulted in any changes to the Group`s accounting policies and has no effect on
the amounts reported for the current or prior periods. The new and revised
Standards and Interpretations has not had a material impact and not resulted in
changes to the Group`s presentation of, or disclosure in its half year financial
statements.
Dividends
No dividend has been paid or is proposed in respect of the half-year ended 31
December 2011 (2010: None).
31
December
2011
$`000
ISSUED CAPITAL
662 284 573 (30 June 2011: 531 139 651)
fully paid ordinary shares 788 592
Movements in issued capital
Opening balance 686 577
Shares issued on exercise of options 509
Shares issued as part of bonus 136
Shares issued for capital raising, net of 101 370
costs
788 592
The holders of ordinary shares are entitled to one vote per share and are
entitled to receive dividends when declared.
On 3 November 2011, CoAL successfully placed 130,000,000 new ordinary shares in
CoAL to institutional and other investors.
The placing price was set at 51 pence per share or 6.50 South African Rand. The
placing price is equivalent to a 10.5% discount to the closing mid-market price
on the AIM market of the London Stock Exchange ("AIM") on 2 November 2011.
Accordingly, the placing raised gross proceeds of US$104.9 million. The placing
shares represent approximately 24.4% of CoAL`s issued share capital prior to the
placing.
3. ISSUED CAPITAL (continued)
Options
The following unlisted options to subscribe for ordinary fully paid shares are
outstanding at 31 December 2011:
Number Exercise Expiry Date
Issued Price
250 000 A$2.05 1 May 2012
7 000 A$1.25 30 September
000 2012
1 000 A$1.90 30 September
000 2012
600 000 A$1.25 1 May 2012
1 650 A$3.25 31 July 2012
000
5 000 A$2.74 30 November 2014
000
818 500 A$1.90 30 June 2014
2 500 A$1.20 9 November 2015
000
1* GBGBP0.6 1 November 2014
0
1 441 A$1.40 30 September
061 2015
A total of 1 000 000 Class A options were exercised during the six months ended
31 December 2011.
*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.
31 30 June
December 2011
2011 $`000
$`000
4. ASSETS CLASSIFIED AS HELD FOR SALE
Holfontein Investments (Pty) Ltd 11 631 11 721
NiMag Group 6 641 7 704
18 272 19 425
Assets classified as held for sale
Holfontein Investments (Pty) Ltd 11 633 11 724
NiMag Group 7 632 10 544
19 265 22 268
Liabilities classified as held for sale
Holfontein Investments (Pty) Ltd 2 3
NiMag Group 991 2 840
993 2 843
18 272 19 425
4.1 Holfontein Investments (Pty) Ltd
Assets classified as held for sale
Exploration and evaluation assets 11 724
11 633
Liabilities classified as held for sale
Trade payables and accrued expenses 3
2
Net assets of Holfontein Investments 11 721
(Pty) Ltd 11 631
On 30 January 2012, the Company agreed
with an external third party, to acquire
from CoAL an exclusive right to acquire
by 30 June 2012, the Holfontein thermal
coal project for a total consideration of
ZAR100.0 million (approximately US$12.7
million) and a continuing payment to CoAL
of ZAR2.00 (approximately US$0.25) per
tonne of saleable coal produced by the
project.
The potential acquirer paid an initial
non-refundable deposit of ZAR4.0
million (approximately US$0.5 million) to
conduct a detailed review of the project
and a further amount upon signature of
this agreement of ZAR5.0 million
(approximately US$0.6 million), to
finalise the Definitive Feasibility Study
("DFS") in order to complete the
acquisition of the project. Upon
completion of the transaction, the total
purchase consideration will be reduced by
ZAR9.0 million (approximately US$1.1
million) with the remaining ZAR91.0
million (approximately US$9.9 million)
payable at that time.
Conditions precedent to closing the
transaction include, the potential
acquirer completing the DFS and obtaining
the remaining funding for the project and
approval of the transaction by the
Department of Mineral Resources.
4. ASSETS CLASSIFIED AS HELD FOR SALE (continued)
31 30 June
December 2011
2011 $`000
$`000
4.2 NiMag Group
Assets classified as held for sale
Property, plant and equipment 2 342 2 622
Goodwill - 4 409
Other financial assets 3 5
Deferred tax asset 38 45
Inventories 2 873 3 279
Trade and other receivables 2 960 3 761
Cash and cash equivalents 1 343 1 528
9 559 15 649
Liabilities classified as held for sale
Interest bearing liabilities 285
168
Provisions 381
142
Trade payables and accrued expenses 2 277
696
Current tax liabilities (15) (103)
2 840
991
Net assets of NiMag Group 12 809
8 568
Impairment (1 927) (5 105)
7 704
6 641
On 23 December 2011, CoAL entered into a
definitive sale and purchase agreement
for the disposal of its 100% interest in
NiMag (Pty) Ltd and Metalloy Resources
Investment (Pty) Ltd (together the "NiMag
Group") by way of a Management Buy-Out
("MBO"). The Company will dispose of its
shares in the NiMag Group companies for a
total purchase consideration of ZAR54
million (approximately US$6.6 million) of
which 60% is being funded by a
combination of equity contributions and
bank debt. The remaining 40% will be
financed by an interest bearing loan
provided by CoAL that is repayable over
four years. The closing of the
transaction is subject to certain
conditions precedent normal with a
transaction of this nature, including
finalisation of bank loan financing
agreements and, to the extent necessary,
exchange control approval from the South
African Reserve Bank, expected to be
satisfied by 30 April 2012.
5.BORROWINGS
The Company, through its wholly owned
subsidiary Langcarel (Pty) Ltd has a
revolving thermal coal export finance
facility for up to US$50 million with
Deutsche Bank Amsterdam ("DB").
The facility is subject to certain
covenants associated with a facility of
this nature. As a result of the
unrealised foreign exchange loss
associated with the loan in the books of
Langcarel (Pty) Ltd, the total equity
measure fell below the set threshold.
Notice of this breach was communicated to
DB during the period.
5. BORROWINGS (continued)
The Company considers that under the
facility agreement the breach has not
resulted in any change to the terms of
the facility. At the date of signing this
report DB has not confirmed this
position. If DB do not agree with the
Company regarding the breach, the
facility will become due and payable
immediately. The Directors have assessed
the likelihood of the loan being called
and consider the probability to be low.
During the period the Company entered
into a new 364 day US$40 million
revolving credit facility with JP Morgan
Limited. Drawdown on the facility was
conditional upon the Company raising
minimum gross proceeds of US$75 million
from a share placement. This condition
was satisfied on 4 November 2011. Other
conditions precedent remain outstanding
at the date of signing this report, as a
result this facility is not able to be
drawn upon by the Company.
The Company believe the outstanding
conditions precedent will be satisfied by
around 31 March 2012.
31 31
December December
2011 2010
$ $
6.OPERATING LOSS
Loss for the period has been
arrived at after charging /(crediting):
Employee benefit expenses
Share-based payments 623 1 363
Other employee benefits 5 634 5 425
Total employee benefits 6 257 6 788
Depreciation and amortisation
Depreciation on property, plant and 8 455 9 016
equipment
Amortisation of mining properties 19 480 19 053
Amortisation of intangible assets 606 555
Total depreciation and amortisation 28 541 28 624
Foreign exchange losses
Unrealised foreign exchange losses 37 704 651
Realised foreign exchange losses 4 861 8 587
Total foreign exchange losses 42 565 9 238
Impairment losses
Impairment loss on assets held for sale 1 927 -
Total impairment losses 1 927 -
7. LOSS PER SHARE
Basic loss per share
The calculation of basic loss per share
at 31 December 2011 was based on the loss
attributable to ordinary equity holders
of the Company of $74.69 million (2010:
$66.54 million) and a weighted average
number of ordinary shares outstanding
during the period ended 31 December 2011
of 558 969 237 (2010: 530 514 663),
calculated as follows:
Loss for the period attributable to
ordinary shareholders
Loss attributable to owners of the 74 694 66 539
Company ($`000)
Weighted number of ordinary shares
Weighted number of ordinary shares (`000) 558 969 530 515
Diluted loss per share
Due to the loss incurred, there is no dilutive effect from share options.
8. CONTINGENT LIABILITIES AND COMMITMENTS
In accordance with normal industry practice, the Company has agreed to provide
financial support to its controlled entities.
The Group is currently involved in litigation as outlined below (US$ amounts
presented within have been computed using the exchange rate as at 31 December
2011 unless otherwise stated):
Ferret Mining and Environmental Services (Pty) Ltd (`Ferret`) / RH Boer, JA Nel,
Coal Of Africa Limited And GVM Metals Limited
Ferret alleges that the previous owner (Johannes Nel) of Mooiplaats sold 100% of
the shares in Mooiplaats Mining Limited to the Company, however, in doing so
lacked ownership to 26% of the shareholding as those belonged to Ferret. Ferret
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.
If Ferret is successful in its claim and becomes entitled to the shares in
Mooiplaats Mining Limited, the Company has received legal advice that Johannes
Nel (the second respondent in the Ferret claim) will in any event be obliged to
compensate the Company due to the fact that he lacked legal ownership of the
shares at the time when the Company purchased them from him. In this regard, the
Company has delivered its conditional counterclaim on Johannes Nel. Ferret as
the applicant has not yet applied for a date for the hearing of its application,
and it is unlikely that a date will be heard by the court before Q3 of 2012.
The Company is evaluating the details of the case and will defend the case and
any subsequent claims on their merits. As the Company does not currently believe
that a loss is probable no provision for any liability has been recorded.
Motjoli Resources (Pty) Ltd & Motjoli Resources Advisory Services cc / Coal of
Africa, Mooiplaats Mining Ltd and JA Nel
Motjoli Resources (Pty) Ltd and Motjoli Resources Advisory Services CC
(together, `Motjoli`) were appointed as consultants to Mooiplaats in order to
obtain the granting of a mining right of Mooiplaats for Langcarel (Pty) Ltd and
in order to obtain Section 11 approval for the transaction between the Company
and Mooiplaats. The fees to be paid were US$0.6 million (ZAR4.0 million),
computed using the exchange rate on the date of settlement of the obligation)
plus the issue of 4,750,000 paid up ordinary shares in the Company to Motjoli.
Motjoli contends that it complied with its obligations and whilst it received
cash of US$0.6 million (ZAR4.0 million), the Company did not settle its
obligation to issue 4,750,000 paid up ordinary shares to Motjoli. In addition,
Motjoli claims that in the event that the shares are not issued, it should be
awarded an amount of US$13.9 million (ZAR95.5 million) with interest by the
defendants jointly and severally.
The trial was initially set down for hearing on 7 November 2011. The parties
subsequently agreed to refer the matter to arbitration which arbitration is
scheduled to take place in June 2012.
As the Company does not currently believe that a loss is probable, no provision
for any liability has been recorded.
Envicoal (Pty) Ltd (`Envicoal`) / Nucoal Mining (Pty) Ltd
In 2010 Envicoal launched arbitration proceedings against Nucoal claiming that
Nucoal failed to deliver coal as prescribed in terms of the agreement concluded
between the parties. As a result, Envicoal claims damages to the value of a
minimum US$20.3 million (ZAR139.0 million) and maximum of US$27.6 million
(ZAR189.0 million). The arbitration proceedings are scheduled to be heard in
October 2012. On 20 February 2012 Envicoal filed a notice of intention to
amended its statement of claim mainly in respect of the quantum of loss to
either ZAR 1087 million or ZAR 32.4 million.
The Company is evaluating the details of the case and will defend the case and
any subsequent claims on their merits. As the Company does not currently
believe that a loss is probable no provision for any liability has been
recorded.
AMCI International AG ("AMCI") / NuCoal Mining (Pty) Ltd
On 14 July 2009 NuCoal issued a letter of demand against AMCI and Polmaise
Colliery (Pty) Ltd ("Polmaise"). NuCoal claimed that in terms of a coal supply
agreement AMCI had undertaken that, in the event of the parties failing to agree
on a coal production budget, it would off-take 50 000 tons of coal per month
from NuCoal. AMCI failed to take delivery of the full 50 000 tons per month and
NuCoal estimated that it had suffered damages to the amount of ZAR42.5 million.
NuCoal also claimed that it had, on the instructions of AMCI, directly supplied
coal to Polmaise. NuCoal and AMCI agreed that AMCI would be invoiced. NuCoal
duly invoiced AMCI for an amount of ZAR1.591million and ZAR3.7 million, which
amount AMCI failed to pay. It appears that the matter was settled during 2009.
The provision of the settlement appear to be that: the coal supply agreement
would be suspended until AMCI decided to take further deliveries of coal; NuCoal
undertook to pay the amount owing by Polmaise if Polmaise failed to pay.
Coal of Africa / Troy Holdings and Investments Inc (`Troy`), Kusile Mining (Pty)
Ltd (`Kusile`) and Nucoal Holdings (Pty) Ltd (`Nucoal`)
In terms of a share sale agreement concluded with Troy, Kusile and Nucoal and in
order to acquire Nucoal Mining (Pty) Ltd, the sellers agreed to certain
withholding warranties and warranty claims in terms of the agreement. IN
accordance with the agreement, an amount of US$9.5 million (R65.0 million) was
withheld in respect of claims under the general warranty provision. The parties
have entered into a settlement agreement whereby an amount of GBP3.0 million
(US$4.5 million), approximating 50% of the amount withheld, was paid to the
vendors in full and final settlement of the matter.
Apex Forex Trading Limited (`Apex`) / Coal of Africa Limited
On 31 January 2011, Van Huyssteens attorneys alleged in writing that Apex was
provisionally liquidated in 2000 but purchased a 30% interest in Mooiplaats
Mining (Pty) Ltd. This shareholding was according to Van Huyssteens transferred
to the Company without payment of any money due to the liquidated estate. Van
Huyssteens have failed to respond to the Company`s written request regarding
proof of their allegations.
There are no other significant contingent liabilities as at 31 December 2011.
In November 2010 Coal of Africa, through one of its subsidiaries, entered into
an agreement to acquire all the Chapudi assets for a total of US$75 million. Of
the original purchase consideration of US$75 million for the Chapudi
Acquisition, US$73 million remains payable in two separate tranches of US$43
million and US$30 million. The US$43 million is anticipated to be paid by April
2012, with the remainder due one year from this payment.
Vuna Mining Enterprises (Pty) Ltd
NuCoal Mining has committed to mine at least 1 200 000 tonnes from the Vuna
colliery annually.
There are no other significant commitments as at 31 December 2011.
9. EVENTS SUBSEQUENT TO REPORTING DATE
On 6 February 2012, CoAL advised that it has entered into definitive agreements
with Black Economic Empowerment ("BEE") companies and a company representing all
the local communities in close proximity to the project, to acquire a 26%
shareholding in the wholly-owned CoAL subsidiary, expected to hold the Chapudi
Coal Project and related exploration properties upon completion of its
acquisition from Rio Tinto Minerals Development Limited and Kwezi Mining
Proprietary Limited.
The Company reported previously that in terms of a Share Sale Agreement
concluded with Troy Holdings and Investments Inc, Kusile Mining (Pty) Ltd and
NuCoal Holdings (Pty) Ltd, the vendors ("the vendors") to acquire 100% of NuCoal
Mining (Pty) Ltd, an amount of US$9.5 million (R65.0 million) was withheld in
respect of claims under the general warranty provision. The parties have entered
into a settlement agreement whereby an amount of GBP3.0 million (US$4.5
million), approximating 50% of the amount withheld, was paid to the vendors in
full and final settlement of the matter.
10. SEGMENTAL INFORMATION
The Group has three reportable segments: Exploration, Development and Mining.
The Exploration segment is involved in the search for resources suitable for
commercial exploitation, and the determination of the technical feasibility and
commercial viability of resources. As at 31 December, 2011, projects within
this reportable segment include two exploration and development stage coking and
thermal coal complexes, namely the Chapudi Complex (which comprises the Chapudi
project, the Chapudi West project and the Wildebeesthoek project), and the
Soutpansberg Complex (which comprises the Voorburg project, the Mt Stuart
project and the Jutland project.) The Development segment is engaged in
establishing access to and commissioning facilities to extract, treat and
transport production from the mineral reserve, and other preparations for
commercial production. As at 31 December, 2011 projects included within this
reportable segment include two coking coal projects, namely the Vele Colliery
and the Makhado Complex (comprising the Makhado project, the Makhado Extension
project and the Generaal project), both in the early operational and development
stage, respectively. The Mining segment is involved in day to day activities of
obtaining a saleable product from the mineral reserve on a commercial scale. As
of 31 December 2011 the Group had two operational thermal collieries included in
this segment, namely the Mooiplaats Colliery and the Woestalleen Colliery.
The Group evaluates performance on the basis of segment profitability, which
represents net operating (loss) / profit earned by each reportable segment
before impairment of financial assets, impairment of mining assets,
depreciation, amortisation, foreign exchange gains, and impairment of assets
held for sale.
They are managed separately because, amongst other things, each reportable
segment has substantially different risks.
The Group accounts for intersegment sales and transfers as if the sales or
transfers were to third parties, ie at current market prices.
10. SEGMENTAL INFORMATION (continued)
The Group`s reportable segments focus on the stage of project development and
the product offerings of coal mines in production
For the 6 months ended 31
December 2011
Explor Develop Mining Total
ation ment $`000 $`000
$`000 $`000
Revenue
Revenue from external customers - - 125 125
887 887
Inter-segment revenue - - 34 007 34 007
Revenue - - 159 159
894 894
Segment loss 8 352 20 216 20 576
Items included within Group`s
measure of segment loss:
- Depreciation and amortisation - 21 27 293 27 314
As at 31 December 2011
Segment assets 65 950 117 247 217 400
790 987
Items included within the
Group`s measure of segment
assets
- Additions to non-current 5 434 7 018 2 096 14 548
assets
Segment liabilities 4 582 8 501 110 123
510 593
10. SEGMENTAL INFORMATION (continued)
For the 6 months ended 31
December 2010
Explor Develop Mining Total
ation ment $`000 $`000
$`000 $`000
Revenue
Revenue from external customers - - 87 874 87 874
Inter-segment revenue - - 20 687 20 687
Revenue - - 108 108
561 561
Segment loss 1 223 3 698 26 368
31 289
Items included within Group`s
measure of segment loss:
- Depreciation and amortisation - 23 14 598 14 621
As at 30 June 2011
Segment assets 75 156 125 449 294 494
364 969
Items included within the
Group`s measure of segment
assets
- Additions to non-current 19 350 7 981 59 584 86 915
assets
Segment liabilities 4 289 7 009 142 153
172 470
Reconciliations of the total segment amounts to respective items included in the
consolidated financial statements are as follows:
Half Half
Year Year
ended ended
31 31
December December
2011 2010
$`000 $`000
Total loss for reportable segments 20 576 31 289
Reconciling items:
Unallocated corporate (income) / costs 20 459 16 994
Depreciation 641 -
Impairment of assets held for sale 1 926 11 253
Diminution in investments - 131
Foreign exchange loss 34 922 9 236
Loss before taxation 78 524 68 903
10. SEGMENTAL INFORMATION (continued)
31 30 June
December 2011
2011
Total segment assets 400 987 494 969
Reconciling items:
Unallocated property, plant and equipment 21 877 24 035
Assets classified as held for sale 19 265 22 268
Intangible assets 19 376 20 800
Other financial assets 13 024 7 948
Other receivables 12 800 12 800
Unallocated current assets 84 694 8 859
Total assets 572 023 591 679
Total segment liabilities 123 593 153 470
Reconciling items:
Liabilities held for sale 993 2 843
Unallocated liabilities 4 544 4 575
Total liabilities 129 131 160 888
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 2011 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, made pursuant to section 303(5) of the Corporations Act 2001.
On behalf of the Directors
John Wallington
Chief Executive Officer
Dated at Johannesburg, South Africa, this 12th day of March 2012.
For more information contact:
John Wallington
Chief Executive Officer
Coal of Africa
+27 11 575 7423
Wayne Koonin
Financial Director
Coal of Africa
+27 11 575 6797
Shannon Coates
Company Secretary
Coal of Africa
+61 893 226 776
Sakhile Ndlovu
IR & PR Manager
Coal of Africa
+27 11 575 6858 or 27 83 306 7058
Chris Sim/Jeremy Ellis/Neil Elliot
Nominated Adviser
Investec Bank plc
+44 20 7071 4300
Jos Simson/Emily Fenton
Financial PR
Tavistock
+44 207 920 3150
Charmane Russell/Jane Kamau
Financial PR S.Africa
Russell & Associates
+27 11 880 3924
+27 82 372 5816
www.coalofafrica.com
Ruben Govender
Sponsor
J.P. Morgan Equities Limited
+27 11 507 0430
About CoAL:
CoAL is an AIM/ASX/JSE listed coal exploration, development and mining company
operating in South Africa. CoAL`s key projects include the Vele Colliery (coking
and thermal coal), the Makhado Project (coking coal) and the Mooiplaats and
Woestalleen Collieries (both thermal coal).
The Mooiplaats Colliery commenced production in 2008. The Woestalleen Colliery,
acquired through the acquisition of NuCoal Mining (Pty) Limited in January 2010,
currently processes approximately 2.5Mtpa of saleable coal for domestic and
export markets. The Woestalleen Complex also incorporates three beneficiation
plants with a total processing capacity of 350,000 ROM feed tonnes per month.
CoAL`s Vele Colliery commenced production in Q3FY2012. During the initial phase,
the operation is targeting 2.7Mtpa ROM production to produce 1Mtpa of saleable
coking coal. The Makhado Project, CoAL`s flagship project in the Soutpansberg
coalfield, is well into the feasibility stage, with a DFS completed. Application
for a new order mining right for the Makhado Project was submitted in January
2011.
In November 2010, CoAL agreed to acquire the Chapudi coal project and several
other coal exploration properties in the Soutpansberg coal basin in South Africa
from the previous owners, including Rio Tinto. Upon completion, the acquisition
of these projects will significantly extend the scale and scope of certain of
CoAL`s existing projects in the region and will more than double the resource of
the existing Makhado Project.
Date: 12/03/2012 08:40:24 Supplied by www.sharenet.co.za
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