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Annual Financial Statement Announcement-Commentary
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")
ANNOUNCEMENT 30 August 2013
ANNUAL FINANCIAL STATEMENTS ANNOUNCEMENT
Coal of Africa Limited ("CoAL" or the "Company") is pleased to provide a copy of its Annual Financial
Statements for the year ended 30 June 2013 which are also available on the Company's website,
www.coalofafrica.com. Commentary for the year is provided below.
David Brown, Executive Chairman, commented on the period under review:
"CoAL has made significant progress in the execution of its focussed turnaround strategy during the last
four months. This strategy will reposition CoAL as a project development company with a significant
pipeline of hard coking coal near term and longer term projects.
The first major achievement was the release of the Makhado definitive feasibility study ("DFS") in June
confirming the Company's potential to be a major hard coking coal producer, supported by the positive
economics of the project. In the same month a new experienced management team was put in place; this
team has made the decisive steps needed to reduce the cash losses suffered by the Company over a
prolonged period.
Early June saw the announcement signalling the start of the Mooiplaats regulatory consultative process,
which is expected to be completed at the end of August. In the event that there are no viable alternatives
Mooiplaats is expected to be placed on care and maintenance, significantly reducing CoAL's cash losses
and will enable the Company to embark on a formal sales process of the asset without continuing to incur
these losses. In response to shareholder concerns, the Company has also reduced corporate overhead
costs through a 25% reduction in head count and a review of all expenditure to ensure the Company's
resources are being appropriately utilised.
In addition we identified the non-core assets and set about a disposal process and I am pleased to report
that we have agreements in place for four of the five assets classified as non-core.
We have also made excellent progress on reducing the so called Take or Pay liability associated with our
port allocation at Matola in Mozambique. We have at this time reduced this exposure by 50% and are
aiming to move that up to about 80% by the end of the calendar year.
The next two achievements are enormously positive for the Company. The Board has approved our Vele
technical plan and expansion project, subject to off-take agreements to support the procurement of funding
for the capital and working capital expenditure. This now allows the Company to move forward in
developing a project which will produce sufficient future cash flows to support the group overhead. This is
augmented, in the short term, by the Company receiving a credit approved term sheet which will provide
sufficient bridging financing for CoAL.
These major achievements place the Company on a sound footing as we move forward with confidence.
Despite turbulent operating, market and labour conditions, a number of significant milestones were
accomplished during the year including the investment of $100 million and the signing of a Cooperation
Agreement with strategic investor Beijing Haohua Energy Resource Co. Ltd ("BHE"). The completed
Makhado Project DFS reflects the significant value of this project to the Company as well as the greater
Limpopo province. Makhado has a net present value of $697 million and is expected to cost $406 million to
build while the Company's other three project areas in the Soutpansberg coalfield provide significant long
term scalability for any investment."
Salient features for the year
- One fatality (FY2012: nil) and 14 LTIs recorded during the year compared to 10 in the 2012 financial
period.
- 3.777 million ROM tonnes (FY2012: 4.930 million ROM tonnes) of coal mined from the Vuna,
Mooiplaats and Vele collieries.
- 3.371 million ROM tonnes (FY2012: 4.906 million ROM tonnes) processed, and 2.608 million tonnes
(FY2012: 3.128 million tonnes) of saleable thermal coal produced.
- Total Company coal sales decreased by 25% year on year from 3.374 million tonnes in FY2012 to
2.544 million tonnes in FY2013 due to the depletion of the Vuna Colliery resource and the derailment on
the Maputo rail corridor, resulting in the declaration of force majeure from mid-February to May 2013.
- $100.0 million investment by BHE which now owns 23.6% of CoAL through their subsidiary Haohua
Energy International (Hong Kong) Company Limited ("HEI").
- CoAL signed a Cooperation Agreement enabling it to draw on HEI's commercial, technical and
operational expertise in the development of the Company's project pipeline.
- The new CoAL executive management team started on 1 June 2013 and implemented cost reduction
measures, including the restructuring of corporate and operational structures and the disposal of non-
core assets.
- Completion of the Makhado Project DFS indicating a Net Present Value of R6.8 billion ($697.0 million).
- Reduction of bank debt with the remaining $4.2 million (30 June 2013: $12.5 million) owing to Deutsche
Bank to be paid in September 2013 and Investec equity bank loan of $2.0 million repayable by
November 2013.
- Agreement signed to dispose of the Woestalleen processing plant and related assets, conditional upon
the satisfaction of certain approvals including regulatory aspects.
- The Maputo rail corridor derailment and strike action at the Mooiplaats Colliery in late 2012 resulted in
reduced production of export quality thermal coal, exacerbating losses. In the event that there are no
viable alternatives available in the short term, the Company upon completion of the formal s189 process
will place the asset on care and maintenance.
- Advancement of the technical work on the Greater Soutpansberg Project provides further confidence in
the long term potential of this resource.
- Market conditions for export quality thermal coal deteriorated significantly during the financial year, with
the average price in US dollars being 19.7% lower than FY2012.
Corporate
CoAL continued to work on a number of initiatives to ensure the financial security of the Company which
included the identification of a strategic investor at corporate level. This resulted in HEI, a subsidiary of
BHE, investing $100.0 million in the Company by way of a subscription for shares.
The changes to the CoAL board during the year including the appointment of David Brown as Executive
Chairman and Michael Meeser as Chief Financial Officer on 1 June 2013 resulted in the restructuring of the
Company's operations. A strategic review of staffing resulted in Section 189 processes being completed at
the corporate head office as well as the Vele coking and thermal coal colliery ("Vele Colliery") and Makhado
coking and thermal coal project ("Makhado Project"). This process resulted in a reduction of the number of
people employed by the Company. Post year-end, CoAL agreed to sell the Opgoedenhoop resource and is
in the process of finalising agreements for the disposal of the Holfontein resource near Secunda in
Mpumalanga.
OPERATIONAL REVIEW
The key operational coal statistics for the year are listed below:
Total Total Unit %
FY2013 FY2012* variance variance
ROM production 3,777,305 4,930,477 (1,153,172) (23%)
ROM coal purchased - 191,608 (191,608) (100%)
Total coal feed to plant 3,370,599 4,906,616 (1,536,017) (31%)
Combined average yield** 73.6% 63.7% 9.9% 15.5%
Saleable coal produced 2,607,824 3,128,144 (520,320) (17%)
- Export coal 1,428,736 2,398,105 (969,369) (40%)
- Middlings coal 1,179,088 730,039 449,049 62%
Total coal sales 2,543,902 3,373,781 (829,879) (25%)
- Export*** 1,043,605 1,662,204 (618,599) (37%)
- Inland 542,103 923,160 (381,057) (41%)
- Eskom 958,194 788,417 169,777 22%
Numbers in the table represent tonnes
* FY2012 figures include five months production from Vele Colliery.
** The yield is calculated using feed to plant and saleable coal produced excluding ROM coal sold as middlings coal. Vele Colliery yields will be
included once production reaches steady state.
*** Export sales include coal from the Woestalleen, Mooiplaats Colliery and Vele collieries.
Woestalleen Complex
The Woestalleen Complex comprises the Vuna Colliery and three beneficiation plants. The Vuna Colliery
regrettably recorded a fatality when an employee working for the rehabilitation contractor drowned in a
pollution control dam. Vuna improved its safety record, as measured by lost time injuries ("LTIs"), with one
lost LTI recorded during the 12 months (FY2012: one LTI) and one LTI (FY2012: three LTIs) was recorded
at the Woestalleen processing plant during the period.
With the depletion of the coal resource at the Vuna Colliery during March 2013, the Company implemented
measures to extend the life of the Woestalleen processing facility, resulting in the reprocessing of the
Woestalleen discard dumps to produce middlings quality coal.
The Company has formally agreed to sell the Woestalleen Complex (excluding the Opgoedenhoop NOMR)
to a consortium of investors and the asset is disclosed as an "operation held for sale" in the financial
statements. The purchasers are in the process of providing the Company with satisfactory proof of funding
and the relevant legislative approvals have been or will be submitted. In the interim, the purchaser is
processing third party run of mine ("ROM") coal at Woestalleen on a cost-plus basis.
Unit %
FY2013 FY2012 variance variance
ROM production 2,485,208 3,543,215 (1,058,007) (30%)
Total coal feed to plant 2,088,595 3,318,386 (1,229,791) (37%)
Average yield* 74.7% 63.2% 11.5% 18.2%
Saleable coal produced 1,922,149 2,095,934 (173,785) (8%)
- Export coal 965,473 1,568,745 (603,272) (38%)
- Middlings coal 956,676 527,189 429,487 81%
Total coal sales** 1,207,748 1,310,230 (102,482) (8%)
- Inland 466,014 718,335 (252,321) (35%)
- Eskom 741,734 591,895 149,839 25%
Numbers in the table represent tonnes
* The yield is calculated using feed to plant and saleable coal produced excluding ROM coal sold as middlings coal.
**Export Sales are included in total sales from the Matola Terminal.
Mooiplaats Colliery
Ten LTIs were recorded during the 12 month period compared to six in FY2012 and there will be a refocus
on safety for the coming year.
The Mooiplaats thermal coal colliery ("Mooiplaats Colliery") continued to experience challenging geological
conditions during the year resulting in lower than budgeted ROM coal production. Various operational
initiatives to identify potential improvements in the mining process to facilitate sustainable increased
production have been undertaken at the colliery. These included the introduction of support contracts with
equipment suppliers as well as cost control and optimisation measures. Despite initial improvements,
Mooiplaats has not performed in line with managements' expectations and continues to experience
constrained production output and the mine remains unprofitable. The labour unrest in the South African
mining industry affected production and Mooiplaats experienced a wage related strike in September and
October 2012 while the February 2013 force majeure declaration resulted in the colliery becoming a
middlings only colliery and all coal produced was sold to the state power utility, Eskom ("Eskom").
The colliery is considered non-core and is recorded as an "operation held for sale" at 30 June 2013. The
Company expects to commence a formal sales process in September 2013.
Unit %
FY2013 FY2012 variance variance
ROM production 755,251 1,226,155 (470,904) (38%)
ROM coal purchased - 191,608 (191,608) (100%)
Total coal feed to plant 762,286 1,425,941 (663,655) (47%)
Average yield 70.3% 69.1% 1.1% 1.6%
Saleable coal produced 535,985 986,144 (450,079) (46%)
- Export coal 313,573 783,294 (469,271) (59%)
- Middlings coal 222,412 202,850 19,562 9%
Total coal sales** 292,549 401,347 (108,798) (27%)
- Inland 76,089 204,825 (128,736) (63%)
- Eskom 216,460 196,522 19,938 10%
Numbers in the table represent tonnes
*Export sales include coal from Woestalleen, Mooiplaats and Vele and are reported.
**Export Sales are included in total sales from the Matola Terminal.
Vele
The Vele Colliery recorded one LTI during the year (FY2012: nil LTIs) and various safety, health and
environmental policies continued to be monitored during year.
The Vele Colliery was adversely affected by higher than normal rainfall in January 2013, resulting in
flooding of the pit and the declaration of force majeure. The February 2013 derailment on the Maputo rail
corridor resulted in the closure of the railway line and a further force majeure period. During this period
stockpile capacity was saturated resulting in the cessation of mining activities at site and the colliery
recommenced railing of export quality thermal coal in May 2013. The Company has finalised additional core
drilling and core testing in order to ascertain the coal quality at the colliery. This data has been utilised in a
financial model which supports the investment case for a plant to produce semi-soft coking coal as well as
sized and un-sized thermal coal. The board approved the technical plan and project plan which will allow
the commencement of discussions on the required funding for Vele with the aim of and concluding the
appropriate agreements by the end of the first quarter in CY2014 at which time construction will commence
for the majority of CY2014 with production to commence in CY2015.
Unit %
FY2013 FY2012* variance variance
ROM production 536,846 161,107 375,739 233%
Total coal feed to plant 519,718 162,289 357,429 220%
Saleable coal produced 149,690 46,066 103,624 224%
- Export coal 149,690 46,066 103,624 224%
- Middlings coal - - - -
Total coal sales** - - - -
- Inland - - - -
- Eskom - - - -
Numbers in the table represent tonnes. (Vele Colliery yields will be included once production reaches steady state.)
*Production at the Vele Colliery commenced in February 2012.
**Export Sales are included in total sales from the Matola Terminal.
Makhado Project
The Makhado Project recorded no LTIs (FY2012: nil LTIs) during the year.
The Makhado Project DFS was completed during the year and indicates that the project has 344.8 million
mineable tonnes in situ and a 16 year life of mine. The opencast project is expected to produce 12.6 million
tonnes per annum ("Mtpa") of ROM coal yielding 2.3Mtpa of hard coking coal and 3.2Mtpa of thermal coal
for the domestic or export markets. The estimated average on-mine operating costs are R865 ($89) per
tonne of hard coking coal (after thermal by-product credit) and the project is expected to cost R3.96 billion
($406 million) (including contingency) to build. The project's Internal Rate of Return ("IRR") of 30.1% and
Net Present Value ("NPV") of R6.79 billion ($697 million) were calculated using independently forecast
average hard coking coal prices over the life of the mine.
The Makhado Project is included in the annual report as an exploration project and the Company is in the
process of fulfilling the Black Economic Empowerment requirements in conjunction with fund raising
activities for the project prior to the granting of a new order mining right ("NOMR").
MbeuYashu Project (Greater Soutpansberg Project)
The MbeuYashu Project recorded one LTI (FY2012: nil LTIs) during the year.
The exploration and development of the CoAL prospects in the Soutpansberg coalfield is the catalyst for
the long-term growth of the Company. The Department of Mineral Resources has accepted the Company's
NOMR applications for the Mopane, Generaal and Chapudi projects, all forming part of the MbeuYashu
project. Further exploration on these areas is expected to occur in FY2014.
SALIENT FINANCIAL FEATURES
- Classification of the Mooiplaats Colliery and Woestalleen Complex as "operations held for sale" and the
continued classification of the Vele Colliery as a development asset.
- $145.4 million (FY2012: $242.5 million) in revenue generated by the Mooiplaats and Woestalleen
operations for the year with revenue declining due to:
- reduced ROM coal availability;
- lower international coal prices compared to the previous year; and
- a change of sales mix resulting from the force majeure.
- Coal sales mix was made up as follows:
- export coal sales decreased by 37% to 1.044 million tonnes (FY2012: 1.662 million tonnes)
as a result of the derailment in February 2013 preventing the transport of coal to the Matola
terminal and, the depletion of the Vuna colliery resource;
- inland sales of export quality coal decreased by 41% to 0.542 million tonnes (FY2012: 0.923
million tonnes) due to reduced availability of export quality coal; and
- sales to Eskom increased by 22% to 0.958 million tonnes (FY2012: 0.788 million tonnes) as
a result of the Mooiplaats Colliery producing middlings coal only from February 2013 and the
supply of a portion of the Vuna ROM coal to Eskom.
- Loss for the year of $148.2 million (FY2012: $138.9 million) including non-cash charges of $106.6
million (FY2012: $115.9 million) which includes:
- impairment of Mooiplaats of $48.5 million (FY2012: $324k reversal);
- depreciation and amortisation of $28.6 million (FY2012: $70.0 million);
- unrealised foreign exchange losses of $28.6 million (FY2012: $41.6 million) as a result of the
South African rand weakening against the United States dollar; and
- share based payment expense of $0.7 million (FY2012: $5.0 million).
- Total unrestricted cash balances available to the Company at year-end of $29.9 million (FY2012: $19.5
million).
- CoAL continues to work on a number of initiatives to ensure the financial security of the Company
going forward and is pleased to announce that it has signed, but is yet to execute, a credit approved
term sheet relating for a bridging facility of not less than $10.0 million. The ability of the Company to
continue as a going concern and pay its debts as and when they fall due is dependent on the execution
of this document and, the sale of the Woestalleen Colliery and other non-core assets during the next
six months as well as the sale of the Mooiplaats Colliery during the next financial year.
- Headline loss for the year of $0.11 (FY2012: loss of $0.23).
In conclusion, I take this opportunity to re-iterate the commitment of the Company to developing its
valuable assets in a responsible manner. Furthermore, CoAL is fortunate to have dedicated shareholders
and loyal staff with the desire and ambition to see the Company succeed.
David Brown
Executive Chairman
For more information contact:
David Brown Executive Chairman Coal of Africa +27 11 575 4363
Michael Meeser Chief Financial Officer Coal of Africa +27 11 575 4363
Tony Bevan Company Secretary Endeavour Corporate Services +61 08 9316 9100
Company advisors:
Jos Simson/Emily Fenton Financial PR (United Kingdom) Tavistock +44 20 7920 3150
Chris Sim/George Price/Jeremy Ellis Nominated Adviser Investec Bank plc +44 20 7597 5970
Charmane Russell/Jane Kamau Financial PR (South Africa) Russell & Associates +27 11 880 3924 or
+27 84 800 8048
Investec Bank Limited is the nominated JSE Sponsor
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 Greater Soutpansberg Project /MbeuYashu, including CoAL's Makhado Project (coking and thermal coal).
Financial results presentation:
CoAL invites you to the presentation of our financial results, with simultaneous webcast and conference call, for the year ended 30 June 2013.
DATE: 30 August 2013
VENUE: Hackle Brooke, 110 Conrad Drive, corner Conrad Drive and Jan Smuts Avenue, Craighall Park, Johannesburg
TIME: 11:30 (CAT)
The simultaneous webcast and conference call will be accessible at http://themediaframe.eu/links/coalofafrica130830.html or
CoAL's website at www.coalofafrica.com.
(a) TELECONFERENCE
Country Access number
Other countries (International Toll) +27 11 535 3600
Other countries - Alternative +27 10 201 6800
South Africa - Johannesburg 011 535 3600
South Africa - Johannesburg Alternative 010 201 6800
UK (Toll-Free) 0808 162 4061
(b) PLAYBACK
A playback of the teleconference will be available for 48 hours afterwards on the following telephone numbers:
Country Access number
Other countries (International Toll) +27 11 305 2030
South Africa (Telkom) 011 305 2030
UK (Toll-free) 0808 234 6771
Date: 30/08/2013 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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