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BUFFALO COAL CORP - Condensed interim consolidated financial statements

Release Date: 12/11/2015 17:40
Code(s): BUC     PDF:  
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Condensed interim consolidated financial statements

BUFFALO COAL CORP.
(previously Forbes & Manhattan Coal Corp.)
(Registration number: 001891261)
(External company registration number: 2011/011661/10)
Share code on the Toronto Stock Exchange: BUF
Share code on the JSE Limited: BUC
ISIN: CA1194421014
"Buffalo Coal" or "the Company"

CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
For the three and nine months ended September 30, 2015
and the three and ten months ended September 30, 2014
(Presented in South African Rands)

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

                                                                              September 30,    December 31,      September 30,
                                                                                2015                   2014               2015
                                                                                                                      (Note 1)
                                                               Notes                     R                R                 C$
Assets          
Non-current assets          
Property, plant and equipment                                                  354 483 392      561 403 916         33 886 510
Investment in financial assets                                                  33 278 119       29 134 182          3 181 191
Deferred tax asset                                                 1             1 086 754       15 495 588            103 887
Other receivables                                                                4 115 911       14 238 959            393 458
Long-term restricted cash                                                       11 200 000       11 200 000          1 070 654
Total non-current assets                                                       404 164 176      631 472 645         38 635 700
Current assets          
Trade and other receivables                                                     74 920 784       95 474 959          7 161 983
Inventories                                                                     35 126 293       27 034 967          3 357 865
Non-interest bearing receivables                                                 1 671 397        1 587 765            159 776
Taxation receivable                                                                    -          2 336 605                  -
Cash and cash equivalents                                                       15 175 543       12 120 081          1 450 692
Non-current assets held for sale                                   4            43 000 000                -          4 110 545
Total current assets                                                           169 894 017      138 554 377         16 240 861
Total assets                                                                   574 058 193      770 027 022         54 876 561
Equity and liabilities          
Capital and reserves          
Share capital                                                                  971 464 266      937 966 442         92 866 222
Currency translation reserve                                                 (219 945 085)    (219 945 085)       (21 025 446)
Reserves                                                                        16 553 690       19 599 807          1 582 435
Accumulated retained loss                                                    (877 832 973)    (497 359 808)       (83 915 626)
Equity attributable to owners of the company                                 (109 760 102)      240 261 356       (10 492 416)
Non-controlling interest                                                         4 339 142        4 339 142            414 796
Total equity                                                                 (105 420 960)      244 600 498       (10 077 620)
Non-current liabilities          
Borrowings                                                                     104 006 884     132 047 902           9 942 441
Warrant liability                                                                2 525 964       8 818 534             241 467
RCF loan facilities                                                3           199 323 846     132 542 252          19 054 178
Conversion option liability                                        3           137 875 131      54 088 555          13 180 045
Asset retirement obligation                                                     18 850 136      18 758 187           1 801 961
Total non-current liabilities                                                  462 581 961     346 255 430          44 220 092
Current liabilities          
Trade and other payables                                                       185 307 530     170 506 885          17 714 304
Current portion of borrowings                                                   24 000 000       6 000 000           2 294 258
Current tax liability                                                            1 389 469             -               132 825
Current portion of asset retirement obligation                                   2 664 209       2 664 209             254 683
Liabilities for non-current assets held for sale                   4             3 535 984               -             338 019
Current liabilities                                                            216 897 192     179 171 094          20 734 089
Total liabilities                                                              679 479 153     525 426 524          64 954 180
Total equity and liabilities                                                   574 058 193     770 027 022          54 876 561
          
Commitments and contingencies                                      1,6

Approved on behalf of the Board:

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

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

Condensed Interim Consolidated Statement of Profit or Loss and Other comprehensive income
(Presented in South African Rands).

                                                          9 months      10 months      3  months       3 months       9 months
                                                             ended          ended          ended          ended          ended
                                                     September 30,  September 30,  September 30,  September 30,  September 30,
                                           Notes              2015           2014           2015           2014           2015
                                                                                                                      (Note 1)
                                                                 R              R              R              R             C$

Revenue                                                503 791 141    571 963 271    159 871 114    188 477 230     48 159 445
Cost of sales                                        (566 683 264)  (636 925 498)  (189 386 404)  (211 370 553)   (54 171 559)
Gross loss                                            (62 892 123)   (64 962 227)   (29 515 290)   (22 893 323)    (6 012 114)
Other (expense)/income - net                   5     (190 831 839)  (182 186 763)  (148 113 537)   (21 814 951)   (18 242 392)
General and administration expenses                   (53 485 334)   (70 534 621)   (15 763 320)   (19 367 635)    (5 112 881)
Loss before the undernoted                           (307 209 296)  (317 683 611)  (193 392 147)   (64 075 909)   (29 367 387)
Finance income                                             634 094      1 618 666      (208 619)        280 497         60 616
Finance expense                                       (60 747 178)   (29 940 920)   (24 683 660)   (12 503 019)    (5 807 070)
Loss before income tax                               (367 322 380)  (346 005 865)  (218 284 426)   (76 298 431)   (35 113 841)
Income tax                                     1      (16 822 847)     37 626 066   (43 532 990)      6 218 681    (1 608 162)
Loss for the period                                  (384 145 227)  (308 379 799)  (261 817 416)   (70 079 750)   (36 722 003)
Other comprehensive loss                                         -              -              -              -              -
Total comprehensive loss for the
period                                               (384 145 227)  (308 379 799)  (261 817 416)   (70 079 750)   (36 722 003)

Loss attributable to:
- Owners of the parent                               (384 145 227)  (308 379 799)  (261 817 416)   (70 079 750)   (36 722 003)
- Non-controlling interest                                       -              -              -              -              -
                                                     (384 145 227)  (308 379 799)  (261 817 416)   (70 079 750)   (36 722 003)

Net loss per share - basic and diluted                      (4.72)         (7.46)         (2.48)         (1.41)         (0.45)

Headline loss per share - basic and diluted                 (4.76)         (7.29)         (2.48)         (1.41)         (0.46)
Weighted average number of common
shares outstanding:
 - Basic                                                81 442 267     41 354 916    105 747 621     49 647 238     81 442 267
 - Diluted                                              81 442 267     41 354 916    105 747 621     49 647 238     81 442 267

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

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

                                                                                 Attributable to owners of the Group
                                                                                  Reserves                                      
                                      No. of shares                                                                    Currency                             Non-   Total equity
                                             issued           Share      Option        BEE option    Accumulated    translation                      controlling
                                                            capital     reserve           reserve  retained loss        reserve         Total           interest
                                                                  R           R                 R              R              R             R                  R              R
Balance at November 30, 2013             35 070 108     937 251 979  21 669 502         9 073 711  (186 324 916)  (247 266 389)   534 403 887          4 339 142    538 743 029
Shares issued in relation to RCF
Convertible Loan                         16 996 242      20 658 263           -                 -              -              -    20 658 263                  -     20 658 263
Stock-based compensation                          -               -     302 734                 -              -              -       302 734                  -        302 734
Stock options expired/cancelled                   -             -  (11 165 553)                 -     11 165 553              -             -                  -              -
Other comprehensive gain/(loss) for
the period                                        -       8 140 754     194 122                 -              -   (21 590 833)  (13 255 957)                  -    (13 255 957)
Net loss for the period                           -               -           -                 -  (308 379 799)              - (308 379 799)                  -   (308 379 799)
Other comprehensive gain/(loss) due
to change in functional currency                  -               -           -                 -   (48 912 137)     48 912 137             -                  -               -
Balance at September 30, 2014            52 066 350     966 050 996  11 000 805         9 073 711  (532 451 299)  (219 945 085)   233 729 128          4 339 142     238 068 270
Shares issued in relation to RCF
Convertible Loan                          5 480 361       6 780 191           -                 -              -              -     6 780 191                  -       6 780 191
Stock options expired/cancelled                   -               -   (474 709)                 -        474 709              -             -                  -               -
Cancellation of shares in escrow        (1 350 000)    (34 864 745)           -                 -     34 864 745              -             -                  -               -
Net loss for the period                           -               -           -                 -      (247 963)              -     (247 963)                  -       (247 963)
Balance at December 31, 2014             56 196 711     937 966 442  10 526 096         9 073 711  (497 359 808)  (219 945 085)   240 261 356          4 339 142     244 600 498
Shares issued in relation to RCF
convertible loan                         56 845 463      31 168 239           -                 -              -              -    31 168 239                  -      31 168 239
Shares issued to management and
directors                                 5 525 000       2 329 585           -                 -              -              -     2 329 585                  -       2 329 585
Stock-based compensation                          -               -     625 945                 -              -              -       625 945                  -         625 945
Stock options expired/cancelled                   -               - (3 672 062)                 -      3 672 062              -             -                  -               -
Net loss for the period                           -               -           -                 -  (384 145 227)              - (384 145 227)                  -   (384 145 227)
Balance at September 30, 2015           118 567 174     971 464 266   7 479 979         9 073 711  (877 832 973)  (219 945 085) (109 760 102)          4 339 142   (105 420 960)

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

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

                                                                        9 months         10 months           9 months
                                                                           ended             ended              ended
                                                                   September 30,     September 30,      September 30,
                                                                            2015              2014               2015
                                                                                                             (Note 1)
                                                                               R                 R                 C$
Cash flows from operating activities
Cash utilized in operations                                          (5 116 589)      (56 695 791)          (489 117)
Interest received                                                        634 094         1 064 114             60 616
Interest paid                                                        (9 313 512)       (9 977 434)          (890 317)
Taxation received                                                      1 312 059            92 526            125 425
Net cash utilized in operating activities                           (12 483 948)      (65 516 585)        (1 193 393)
Cash flows from investing activities
Investment in financial assets                                       (3 666 415)       (3 821 571)          (350 486)
Purchase of property, plant and equipment                           (44 792 060)     (101 952 380)        (4 281 855)
Proceeds from the disposal of property, plant and equipment            5 500 000         7 051 872            525 767
Settlement of cancelled Riversdale Acquisition                                 -        29 140 388                  -
Movement in non-interest bearing receivables                            (83 632)         (218 331)            (7 994)
Movement in restricted cash                                                    -         1 010 656                  -
Net cash utilized in investing activities                           (43 042 107)      (68 789 366)        (4 114 568)
Cash flows from financing activities
Proceeds from RCF Convertible Loan                                    74 395 051       153 999 688          7 111 725
Issuance costs related to the RCF Convertible Loan                     (134 152)       (6 828 658)           (12 824)
Drawdowns from working capital facility                                1 340 000                 -            128 096
Repayment of working capital facility                               (17 019 382)      (18 944 306)        (1 626 952)
Issuance costs related to restructuring of borrowings                          -       (2 733 605)                  -
Movement in loans payable                                                      -         (214 798)                  -
Net cash generated from financing activities                          58 581 517       125 278 321          5 600 045
Net increase/(decrease) in cash and cash equivalents                   3 055 462       (9 027 630)            292 084
Cash and cash equivalents at the beginning of the period              12 120 081        18 174 486          1 158 608
Exchange loss on cash and cash equivalents                                     -       (3 835 474)                  -
Cash and cash equivalents at the end of the period                    15 175 543         5 311 382          1 450 692

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

Notes to the Condensed Interim Consolidated Finacial Statements for the periods ended September 30 2015 and September 30 2014
(Presented in South African Rands).

1. BASIS OF PREPARATION

The unaudited condensed interim consolidated financial statements (the "Interim Results") of Buffalo Coal Corp. 
("BC Corp" or the "Company") and its subsidiaries (the "Group") for the periods ended September 30, 2015 and
September 30, 2014 have been prepared in accordance with the recognition and measurement criteria of International
Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB") and have
been prepared in accordance with accounting policies based on the IFRS standards and International Financial Reporting
Interpretations Committee ("IFRIC") interpretations and are in compliance with IAS 34, Interim Financial Reporting.

The Interim Results have not been audited by the Group's external auditors. The Interim Results do not include all the
information and disclosures required in the consolidated annual financial statements and should be read in conjunction
with the Group's consolidated annual financial statements for the year ended December 31, 2014, which have been
prepared in accordance with IFRS. The Group has adopted the required new or revised accounting standards in the
current period, as further set out in note 2 below, none of which had a material impact on the Group's results.

The preparation of the Interim Results requires management to make judgments, estimates and assumptions that affect
the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. In
preparing these Interim Results, the significant judgments made by management in applying the Group's accounting
policies and the key sources of estimation and uncertainty were the same as those applied to the consolidated
annual financial statements for the year ended December 31, 2014.

The Interim Results have been prepared on the basis of accounting principles applicable to a going concern, which
assume that the Group will continue in operation for the foreseeable future and will be able to realize its assets and
discharge its liabilities in the normal course of operations. Market conditions have deteriorated significantly over the
quarter and the Company continues to incur operating losses and is dependent upon reaching profitable levels of
operation in the future to support working capital needs. The performance at Magdalena deteriorated significantly over
the course of CY 2014, which resulted in the Company implementing a restructuring at Buffalo Coal Dundee (Pty) Ltd
("BC Dundee") in March 2015 and a further restructuring in October 2015 which included the conclusion of agreements
with STA Coal Mining Company Proprietary Limited ("STA"), for the provision of contract mining services, for the sale of
certain underground mining equipment and for a portion of the contract mining fees to be settled in common shares of
BC Corp ("Common Shares"), in order to further alleviate cash flow pressures (note 8). In addition, the Company is in the
process of securing additional funding from Resource Capital Fund V L.P. ("RCF") and Investec Bank Limited ("Investec"),
which is expected to close by the end of November 2015. Without the funding, the Company cannot continue as a going
concern. The Company believes that, barring any further deterioration in the market and subject to its ability to meet
current forecasts which, among other things, contemplate the current steps that the Company is taking including the
additional funding, it should be able to generate positive cash flows in the foreseeable future.

It is likely that the Company will not meet the Investec covenants at December 31, 2015. The Company has initiated
discussions with Investec in this regard.

The Company's assessed loss position has further increased this quarter, increasing the deferred tax asset. Management
has reviewed the guidance per IAS 12, Income Taxes and has concluded a write-off of the net deferred tax asset relating
to BC Dundee. Although management believes that the Group will continue as a sustainable business into the
foreseeable future and believes that the Group is a going concern, the fact that taxable losses have been incurred over
the past few years and in consideration of the need to complete multiple restructurings and refinancings, management
can no longer corroborate that it is probable that BC Dundee will have sufficient taxable profit in the foreseeable future
to utilize the assessed loss, which has resulted in the write-off of the net deferred tax asset in the current quarter. The
Company will continue to review this position in the future.

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

References to CYQ1 2015, CYQ2 2015 and CYQ3 2015 mean the three months ended March 31, 2015, June 30, 2015 and
September 30, 2015 respectively and references to CYQ2 2014 and CY 2014 mean the three months ended September
30, 2014 and the ten months ended December 31, 2014.

References to "R", "Rands" means South African Rands, "C$" means Canadian Dollars and to "US$" means United States
Dollars.

Convenience rate translation

The Company's functional and presentation currency is Rands. The Canadian Dollar amounts provided in the Interim
Results represent supplementary information solely for the convenience of the reader. The financial position as of
September 30, 2015 and the financial results for the nine months ended September 30, 2015 were translated into
Canadian Dollars using a convenience translation at the rate of C$1:R10.4609, which is the exchange rate published on
Oanda.com as of September 30, 2015. Such presentation is not in accordance with IFRS and should not be construed as
a representation that the Rand amounts shown could be readily converted, realized or settled in Canadian Dollars at this
or at any other rate.

2. NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

The following standards, amendments and interpretations are issued and effective for the first time for the
period ended September 30, 2015:

Amendments to IAS 19 – 'Defined Benefit Plans: Employee Contributions'
These narrow scope amendments apply to contributions from employees or third parties to defined benefit plans. The
objective of the amendments is to simplify the accounting for contributions that are independent of the number of years
of employee service, for example, employee contributions that are calculated according to a fixed percentage of salary.
This amendment has not had a significant impact on the Group.

Annual Improvements to IFRSs 2010–2012 Cycle:

IFRS 2, 'Share–based Payments' – The amendments clarify the definition of a 'vesting condition' and separately define
'performance condition' and 'service condition'.

IFRS 3, 'Business Combinations' – The amendments clarify that a contingent consideration that is classified as an asset or
a liability should be measured at fair value at each reporting date, irrespective of whether the contingent consideration
is a financial instrument within the scope of IFRS 9 or IAS 39 or a non–financial asset or liability. Changes in fair value
(other than measurement period adjustments) should be recognized in profit or loss.

IFRS 8, 'Operating Segments' – The amendments require an entity to disclose the judgments made by management in
applying the aggregation criteria to operating segments, including a description of the operating segments aggregated
and the economic indicators assessed in determining whether the operating segments have 'similar economic
characteristics'; and clarify that a reconciliation of the total of the reportable segments' assets to the entity's assets
should only be provided if the segment assets are regularly provided to the chief operating decision–maker.

IFRS 13, 'Fair Value Measurements' – The amendments to the basis for conclusions of IFRS 13 and consequential
amendments to IAS 36 and IFRS 9 did not remove the ability to measure short–term receivables and payables with no
stated interest rate at their invoice amounts without discounting, if the effect of discounting is immaterial.

IAS 16, 'Property, Plant and Equipment' and IAS 38, 'Intangible Assets' – The amendments remove perceived
inconsistencies in the accounting for accumulated depreciation/amortization when an item of property, plant and
equipment or an intangible asset is revalued. The amended standards clarify that the gross carrying amount is adjusted
in a manner consistent with the revaluation of the carrying amount of the asset and that accumulated
depreciation/amortization is the difference between the gross carrying amount and the carrying amount after taking
into account accumulated impairment losses.

IAS 24, 'Related Party Disclosure' – The amendments clarify that a management entity providing key management
personnel services to a reporting entity is a related party of the reporting entity. Consequently, the reporting entity
should disclose as related party transactions the amounts incurred for the service paid or payable to the management
entity for the provision of key management personnel services. However, disclosure of the components of such
compensation is not required.

The amendments did not have a significant impact on the Group.

Annual Improvements to IFRSs 2011–2013 Cycle:

IFRS 3 – The amendment clarifies that the standard does not apply to the accounting for the formation of all types of
joint arrangements in the financial statements of the joint arrangement itself.

IFRS 13 – The amendment clarifies that the scope of the portfolio exception for measuring the fair value of a group of
financial assets and financial liabilities on a net basis includes all contracts that are within the scope of, and accounted
for in accordance with, IAS 39 or IFRS 9, even if those contracts do not meet the definitions of financial assets or financial
liabilities within IAS 32.

IAS 40, 'Investment Property' – The amendment clarifies that IAS 40 and IFRS 3 are not mutually exclusive and application
of both standards may be required. The guidance in IAS 40 assists preparers to distinguish between investment property
and owner–occupied property. Preparers also need to refer to the guidance in IFRS 3 to determine whether the
acquisition of an investment property is a business combination.

The amendments did not have a significant impact on the Group.

3. RCF LOAN FACILITIES

On March 27, 2015, BC Corp closed a second amended and restated agreement with RCF ("Second Amended RCF
Agreement") and secured an additional US$4.0 million loan facility which was advanced as a bridge loan ("2015 Bridge
Loan") and which, on June 19, 2015, upon the Company receiving shareholder approval at the annual and special
meeting of shareholders, rolled over into the US$25.0 million loan facility ("Existing RCF Convertible Loan"), under the
same terms and conditions except for the amendments to the interest rate and conversion price on the full US$29.0
million facility ("RCF Convertible Loan").

The 2015 Bridge Loan bore interest at a rate of 15% per annum, payable on the maturity date which was the earlier of
the date on which the shareholder approval was received or June 30, 2015. No establishment fees were incurred on the
2015 Bridge Loan. Upon receipt of the shareholder approval, interest became payable in Common Shares at a price per
share equal to the 20-day volume weighted average price ("VWAP") as at the date the payment was due. In addition, the
interest rate on the RCF Convertible Loan was increased to 15% per annum and the conversion price was decreased to
C$0.0469, a 25% discount to the 5-day VWAP as at January 30, 2015.

In terms of IAS 39, Financial Instruments – Recognition and Measurement, the revised terms of the Second Amended
RCF Agreement were considered "substantially" different to those of the Existing RCF Convertible Loan. Consequently,
IAS 39 required an extinguishment of the Existing RCF Convertible Loan and the recognition of a new financial liability as
at the date shareholder approval was obtained. A resultant loss on extinguishment of debt of R111.8 million was
recognized in CYQ2 2015, which had no cash flow impact on the Group (note 5).

The new financial liability was recognized in two parts, a component liability with an initial value of R156.3 million, and a
conversion option liability with an initial value of R182.3 million. The initial carrying value of the conversion option
liability relating to the new financial liability was obtained using the Black-Scholes option pricing model and the following
assumptions: volatility of 77.41%, life of 4.04 years, risk free rate of 0.8% and expected dividend yield of 0%.

The component liability will be accreted to its face value of US$29 million (R406.8 million), being the full amount drawn
down from the RCF Convertible Loan as at September 30, 2015, using the effective interest rate method at approximately 42.3%.

The fair value of the conversion option liability at September 30, 2015 was obtained using the Black Scholes option
pricing model and the following assumptions: volatility of 72.72%, life of 3.75 years, risk free rate of 0.68% and expected
dividend yield of 0%.

The Company issued Common Shares to RCF during CYQ3 2015 in settlement of interest owing on the Existing RCF
Convertible Loan and RCF Convertible Loan for the periods ended June 30, 2015, July 31, 2015 and August 31, 2015. An
additional 9 700 895, 10 147 748 and 10 801 354 Common Shares were issued at weighted average VWAP prices of
C$0.0480, C$0.0446 and C$0.0443, respectively. Of the 9 700 895 Common Shares issued in July, 2 397 202 related to
accrued interest on the 2015 Bridge Loan, issued at prices ranging from C$0.0467 to C$0.0682, and 7 303 693 related to
the Existing RCF Convertible Loan, issued at C$0.0467.

4. NON-CURRENT ASSETS HELD FOR SALE

The non-current assets held for sale relate to the sale of two continuous miners to STA following management's
negotiations during CYQ3 2015 to sell the machines to STA in order to generate cash flow for the business (note 8). The
liability relates to the remaining instalments owing on one of the continuous miners, which is expected to be settled by
November 30, 2015. In accordance with IFRS 5, the assets were written down to their fair value less costs to sell of
R43.0 million which was based on an independent valuation and which was incorporated into an asset sale and purchase
agreement signed subsequent to September 30, 2015 (note 8).

5       OTHER (EXPENSE)/INCOME – NET

                                                              9 months      10 months       3 months       3 months       9 months
                                                                 ended          ended          ended          ended          ended
                                                         September 30,  September 30,  September 30,  September 30,  September 30,
                                          Notes                   2015           2014           2015           2014           2015
                                                                                                                          (Note 1)
                                                                     R              R              R              R             C$
Foreign exchange (loss)/gain - net                        (34 250 352)    (2 882 691)   (30 943 406)    (7 611 468)    (3 274 131)
Impairment of escrow funds                                           -   (19 426 928)              -              -              -

Impairment of goodwill, intangible assets
and property, plant and equipment                        (123 330 795)  (152 007 765)  (123 330 795)              -   (11 789 693)
Loss on remeasurement of non-current
assets held for sale                          4           (10 833 333)              -   (10 833 333)              -    (1 035 602)
Fair value adjustment on financial assets                      504 558        734 002      (394 059)        294 643         48 233
Fair value adjustment on conversion
option and warrant liability                                88 072 666   (18 643 926)     16 552 136   (15 536 480)      8 419 225
Loss on extinguishment of debt                3          (111 842 509)              -              -              -   (10 691 481)
Other income                                                   847 926     10 040 545        835 920      1 038 354         81 057
                                                         (190 831 839)  (182 186 763)  (148 113 537)   (21 814 951)   (18 242 392)

Impairment test

At September 30, 2015, management identified indicators of impairment which existed at that date and determined the
recoverable amount of the BC Dundee Group on a fair value less costs to sell basis. The fair value calculation was
determined using pre-tax cash flow projections on constant terms, based on the BC Dundee Group's Life of Mine
("LOM") model. As of September 30, 2015, an impairment loss of R123.3 million was recognized as the Group's fair value
less costs to sell was less than the carrying value as of September 30, 2015 (CYQ2 2014: Nil).

The fair value calculation is categorized as level 3 in terms of the fair value hierarchy. A significant portion of the inputs
into the model were unobservable, as defined, and were based on Company specific assumptions. The key assumptions
used in the pre-tax cash flow projection are as follows: estimates of future production based on a LOM model, assuming
that all production is sold and using forecast macro assumptions, such as the API 4 coal index, which are based on
observable market expectations. The pre-tax discount rate was determined by calculating the Company's weighted
average cost of capital which was based on peer company information and other observable market inputs.

The key assumptions used in the fair value less costs to sell calculations for September 30, 2015 compared to December
31, 2014 are as follows:

                                              September 30,         December 31,
                                                       2015                 2014
Pre-tax discount rate                                13.32%               12.37%
Gross fair value                             R422.9 million       R550.5 million
Costs to sell                                  R8.5 million        R11.0 million
Recoverable amount                           R414.5 million       R539.5 million

6. COMMITMENTS AND CONTINGENCIES

Management Contracts

Management contracts in place require that payments of approximately R13.0 million be made upon the occurrence of a
change in control, other than a change of control attributable to RCF. As no triggering event has taken place, no
provision has been recognized as of September 30, 2015.

Subsequent to September 30, 2015, the Company entered into a retention agreement with key management personnel.
The contract contains a minimum commitment of R5.3 million until December 31, 2016.

Capital Commitments

Capital expenditures contracted for at the statement of financial position date but not recognized in the condensed
interim consolidated financial statements are as follows:

                                     September 30,   December 31,   September 30,
                                              2015           2014            2015
                                                 R              R              C$
Property, plant and equipment            2 994 686     27 378 909         286 274
 
Included in the R27.4 million disclosed as of December 31, 2014 are commitments relating to the purchase of machinery
and equipment which were funded by equipment advances from RCF.

Environmental Contingency

The Company's mining and exploration activities are subject to various laws and regulations governing 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 continue to comply with such laws and regulations.

Outstanding Legal Proceedings

On March 20, 2015, the Association of Mineworkers and Construction Union ("AMCU") brought an application against
BC Dundee and Zinoju Coal (Pty) Ltd ("Zinoju") in the Labour Court of South Africa pertaining to the Section 189A
restructuring process implemented by BC Dundee during CYQ1 2015 in terms of the South African Labour Relations Act,
No 66 of 1995 ("LRA"), as announced on March 11, 2015. The matter was heard in Court on April 14, 2015, and on
April 24, 2015, the LRA dismissed the application brought by AMCU with costs. An application for leave to appeal was
lodged by AMCU on April 29, 2015 which was heard by the Labour Appeal Court on November 4, 2015. The outcome of
the hearing is still pending.

On April 10, 2015, BC Dundee received notice that AMCU had referred a dispute to the Commission for Conciliation,
Mediation and Arbitration ("CCMA") in respect of the substantive fairness of the S189A restructuring process
implemented in CYQ1 2015, which was heard on May 18, 2015. The CCMA referred the matter to the Labour Court.
AMCU had until August 17, 2015 to submit this dispute, however no submission was made before this deadline.

On April 20, 2015, the trustees of the Avemore Trust brought an application in the High Court of South Africa against,
among others, the South African Minister of Mineral Resources ("the Minister"), BC Dundee and Zinoju, in respect of
Mining Right 174 ("MR174"). In terms of the application, the trustees of the Avemore Trust challenged the decision by
the Minister, subsequent to an internal appeal process concluded during September 2014, to grant a converted mining
right to BC Dundee and to grant consent for the cession of the converted mining right to Zinoju. There have been various
settlement offers between the parties, but should settlement not be reached, BC Dundee and Zinoju intend to oppose
the application.

On August 27, 2015, notice was received from the Minister that Mining Right 301 ("MR301") had been withdrawn as
well as the withdrawal of the approval by the Regional Manager of the Environmental Management Plan in respect of
MR301. The reasons given by the Minister for the withdrawal of the right are procedural issues in respect of the award
process, in relation to an objection received from Avemore Trust in October 2013 against the awarding of the right. On
August 28, 2015, the Company instituted proceedings against both the Minister, as the first respondent, and the
Avemore Trust, as the second respondent, to seek urgent relief. The urgent application was heard on September 15,
2015 and relief was granted as requested for the Ministerial decision to be of no force and effect, to interdict the
Minister from awarding MR301 to any other party and for the Company to continue to mine in terms of MR301. A full
review application has subsequently been instituted by the Company to obtain final relief in the form of an order setting
aside the Ministerial decision, and the Company's legal team, including Senior Counsel, has indicated a strong likelihood
of the review application being successful.

7. CHANGES IN DIRECTORS AND OFFICERS

On July 23, 2015, the Company announced the resignation of Ms. Lorraine Harrison as Corporate Secretary of BC Corp,
effective July 24, 2015. On that date, the Company appointed Ms. Sarah Williams as Corporate Secretary of BC Corp.

On September 1, 2015, the Company announced the appointments of Mr. Edward Scholtz and Mr. John Wallington to
the Board of Directors. The appointments of Mr. Scholtz and Mr. Wallington follow the resignations of Mr. John Dreyer
and Dr. Michael Price who stepped down as directors of the Company.

8. SUBSEQUENT EVENTS

Toronto Stock Exchange ("TSX") Delisting Review

The TSX advised the Company that it had been placed under a remedial delisting review in terms of whether the
Company meets the continued listing requirements of the TSX in the following areas: (i) the Company's financial
condition and operating results, and (ii) the market value of publicly held listed securities of the Company. The Company
had an initial period of 120 days to comply with all requirements of the TSX for continued listing. The Company
subsequently applied to voluntarily delist its Common Shares from the TSX and is in the process of submitting an application for the
listing and posting of the Common Shares on the TSX Venture Exchange (the "TSXV").

It is expected that the Common Shares will be delisted and therefore no longer trade on the TSX with effect from the
end of November 2015. In addition, the Company will make an application to the Johannesburg Stock Exchange ("JSE") to
transfer its JSE listing from the Main Board of the JSE to the Alternative Exchange in order to maintain its South African
listing as a secondary listing.

Restructuring of Mining Operations

In May 2015, BC Dundee initiated a second restructuring process focusing on Magdalena, which at that time continued
to underperform, particularly relative to the capital which had been spent on new equipment over the past year. This
restructuring was implemented by BC Dundee in October 2015. In conjunction with the implementation of the
restructuring, Zinoju and BC Dundee signed a contract mining agreement with STA to mine four sections at Magdalena
underground mine at a fixed contract mining fee per ton, effective October 31, 2015. The contract mining agreement
has a three year term, and the option for a further two year extension if agreed to by all parties. As a result, the
majority of the employees who were retrenched were employed by STA, resulting in minimal staff becoming redundant.
A provision for retrenchment costs of R6.4 million (excluding leave pay which was previously provided for) was recognized in CYQ2 2015,
of which R4.7 million was paid subsequent to September 30, 2015.

The STA agreement can be terminated on 60 days notice for which period the Company will be liable for payment for the
tons mined at the fixed rate per ton. In addition, there are minimum commitments of R17.7 million under this
agreement as of October 31, 2015.

BC Dundee and Zinoju have also entered into an agreement to sell two continuous miners to STA. The selling price will
be settled by STA by way of offset against amounts due to STA in terms of the existing arrangements between the
parties, and the balance by way of a reduction in the contract mining rate going forward, until such time as the selling
price has been settled in full.

Zinoju, BC Dundee and STA have further entered into an agreement with BC Corp, in terms of which the Company is
entitled, at its election, to settle an agreed portion of STA's contract mining fees through the issuance of Common
Shares to STA ("the Equity Portion"). The Equity Portion will be calculated monthly based on production levels at
Magdalena, with the Common Shares priced at the higher of the 20-day VWAP per Common Share, and any minimum
pricing restriction applicable to the stock exchanges on which Buffalo is listed. The Common Shares will be issued to STA
at the end of each calendar quarter, subject to regulatory approvals. The parties have agreed that the percentage of
Common Shares held by STA will not exceed 9.9% of the Company's outstanding shares at any point in time.

Issuance of Share Capital

Subsequent to September 30, 2015, the Company issued additional shares to RCF in settlement of interest owing on the
RCF Convertible Loan for periods ended September 30, 2015 and October 31, 2015. An additional 11 083 086 and
10 776 136 Common Shares were issued at prices of C$0.0439 and C$0.0440, in October and November respectively.

Other Matters

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

November 12, 2015

Sponsor
Questco(Pty)Ltd


Date: 12/11/2015 05:40:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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