Wrap Text
Condensed Interim Consolidated Financial Statements
(Unaudited) for the three months ended
March 31, 2018
BUFFALO COAL CORP.
Registration number: 001891261
External company registration number: 2011/011661/10
Share code on the TSX Venture 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 months ended
March 31, 2018 and March 31, 2017
(Presented in South African Rands)
Condensed Interim Consolidated Statements of Financial Position
(Presented in South African Rands)
March 31, December 31, March 31,
2018 2017 2018
(Note 1)
Notes R R C$
Assets
Non-current assets
Property, plant and equipment 111 955 230 106 885 916 12 211 061
Investment in financial assets 6 168 837 181 465 18 415
Other receivables - restricted 53 822 639 53 211 988 5 870 485
Other receivables 5 179 462 5 179 462 564 929
Long-term restricted cash 11 200 000 11 200 000 1 221 594
Total non-current assets 182 326 168 176 658 831 19 886 484
Current assets
Trade and other receivables 102 139 800 121 244 825 11 140 483
Inventories 28 949 159 38 095 072 3 157 512
Non-interest bearing receivables 2 044 850 2 015 578 223 034
Current tax assets 864 710 864 710 94 315
Cash and cash equivalents 13 806 891 21 428 994 1 505 930
Total current assets 147 805 410 183 649 179 16 121 273
Total assets 330 131 578 360 308 010 36 007 757
Equity and liabilities
Capital and reserves
Share capital 5 1 085 641 567 1 082 396 917 118 411 932
Currency translation reserve (219 945 085) (219 945 085) (23 989 614)
Reserves 12 097 388 14 125 416 1 319 473
Accumulated retained loss (1 253 523 668) (1 218 681 917) (136 722 989)
Equity (deficiency) attributable to owners of the
company (375 729 798) (342 104 669) (40 981 198)
Non-controlling interest 4 339 142 4 339 142 473 274
Total equity (deficiency) (371 390 656) (337 765 527) (40 507 923)
Non-current liabilities
RCF loan facilities 303 859 093 314 762 527 33 142 193
Conversion option liability 6 57 406 576 28 289 6 261 389
Asset retirement obligation 34 778 802 30 244 737 3 793 356
Total non-current liabilities 396 044 471 345 035 553 43 196 938
Current liabilities
Trade and other payables 135 879 702 156 497 655 14 820 526
Current tax liability 3 684 023 2 901 399 401 820
Current portion of borrowings 4 158 914 030 187 955 977 17 332 901
Warrant liability 6 1 346 562 29 507 146 871
Current portion of asset retirement obligation 5 653 446 5 653 446 616 627
Current liabilities 305 477 763 353 037 984 33 318 743
Total liabilities 701 522 234 698 073 537 76 515 681
Total equity (deficiency) and liabilities 330 131 578 360 308 010 36 007 757
Commitments and contingencies 1, 7
Approved on behalf of the Board:
Signed, "Craig Wiggill" Signed, "Robert Francis"
The accompanying notes are an integral part of the condensed interim consolidated financial statements.
Condensed Interim Consolidated Statements of Profit or Loss and Other Comprehensive Income
(Presented in South African Rands)
3 months
ended
March 31, March 31, March 31,
2018 2017 2018
(Note 1)
Notes R R C$
Revenue 190 425 180 171 423 795 20 769 851
Cost of sales (144 625 249) (158 046 485) (15 774 410)
Gross profit 45 799 931 13 377 310 4 995 441
Other income/(expense) - net 3 (43 628 104) 20 258 401 (4 758 559)
General and administration expenses (22 406 591) (15 448 727) (2 443 908)
(Loss)/profit before the undernoted (20 234 764) 18 186 984 (2 207 025)
Finance income 922 855 417 112 100 657
Finance expense (14 513 772) (13 271 655) (1 583 031)
(Loss)/profit before income tax (33 825 681) 5 332 441 (3 689 399)
Income tax (1 016 071) (1 107 530) (110 824)
(Loss)/profit for the period (34 841 751) 4 224 911 (3 800 223)
Other comprehensive loss - - -
Total comprehensive (loss)/profit for the period (34 841 751) 4 224 911 (3 800 223)
(Loss)/profit attributable to:
- Owners of the parent (34 841 751) 4 224 911 (3 800 223)
- Non-controlling interest - - -
(34 841 751) 4 224 911 (3 800 223)
Net (loss)/profit per share - basic and diluted (0.08) 0.01 (0.01)
Headline (loss)/profit per share - basic and diluted (0.08) 0.01 (0.01)
Weighted average number of common shares outstanding:
- Basic 411 704 440 396 565 418 411 704 440
- Diluted 411 704 440 396 565 418 411 704 440
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
Attributable to owners of the Group
Reserves
Share Option Equity-settled BEE option Currency Non-controlling
No. of shares issued capital reserve non-employee reserve Accumulated retained loss translation Total interest Total equity
benefits reserve reserve
Notes R R R R R R R R R
Balance at December 31, 2016 394 803 022 1 075 881 497 2 059 820 2 175 290 9 073 711 (1 095 286 547) (219 945 085) (226 041 314) 4 339 142 (221 702 172)
Shares issued to STA 4 286 908 2 175 290 - - - - - 2 175 290 - 2 175 290
Stock options expired/cancelled - - (293 604) - - 293 604 - - - -
Stock-based compensation - - 26 889 50 491 - - - 77 380 - 77 380
Net profit for the period - - - - - 4 224 911 - 4 224 911 - 4 224 911
Balance at March 31, 2017 399 089 930 1 078 056 787 1 793 105 2 225 781 9 073 711 (1 090 768 032) (219 945 085) (219 563 733) 4 339 142 (215 224 591)
Shares issued to STA 8 718 351 4 340 130 4 340 130 4 340 130
Stock-based compensation - - 13 950 1 018 869 - - - 1 032 819 - 1 032 819
Net (loss) for the period - - - - - (127 913 885) - (127 913 885) - (127 913 885)
Balance at December 31, 2017 407 808 281 1 082 396 917 1 807 055 3 244 650 9 073 711 (1 218 681 917) (219 945 085) (342 104 669) 4 339 142 (337 765 527)
Shares issued to STA 5 6 159 780 3 244 650 - - - - - 3 244 650 - 3 244 650
Stock-based compensation - - 812 (2 028 840) - - - (2 028 028) - (2 028 028)
Net (loss) for the period - - - - - (34 841 751) - (34 841 751) - (34 841 751)
Balance at March 31, 2018 413 968 061 1 085 641 567 1 807 867 1 215 810 9 073 711 (1 253 523 668) (219 945 085) (375 729 798) 4 339 142 (371 390 656)
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)
3 months ended
March 31, March 31, March 31,
2018 2017 2018
(Note 1)
R R C$
Cash flows from operating activities
Cash generated from operations 35 126 807 9 018 308 3 831 313
Interest received 922 855 417 112 100 657
Interest paid (7 051 592) (5 129 875) (769 124)
Net cash generated from operating activities 28 998 070 4 305 545 3 162 846
Cash flows from investing activities
Investment in financial assets - (1 360 193) -
Purchase of property, plant and equipment (6 590 901) (6 164 791) (718 876)
Movement in non-interest bearing receivables (29 272) (27 878) (3 193)
Net cash utilized in investing activities (6 620 173) (7 552 862) (722 069)
Cash flows from financing activities
Repayment of term loan (30 000 000) - (3 272 128)
Net cash utilized in financing activities (30 000 000) - (3 272 128)
Net decrease in cash and cash equivalents (7 622 103) (3 247 317) (831 351)
Cash and cash equivalents at the beginning of the period 21 428 994 13 753 934 2 337 280
Cash and cash equivalents at the end of the period 13 806 891 10 506 617 1 505 929
The accompanying notes are an integral part of the condensed interim consolidated financial statements.
Notes to the Condensed Interim Consolidated Financial Statements
For the periods ended March 31, 2018 and March 31, 2017
(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 March 31, 2018 and
March 31, 2017 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.
These Interim Results were approved and authorized for issue by the Board of Directors on May 15, 2018.
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, 2017, 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, 2017.
References to "R", "Rands" mean South African Rands, "C$" mean Canadian Dollars and to "US$" mean United States
Dollars. References to Q1 2018 mean the 3 months ended March 31, 2018.
Going Concern
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. In prior years, in response to conditions at the time, the
Group concluded agreements with STA Coal Mining Company Proprietary Limited ("STA"). The arrangements with STA
include the provision of contract mining services by STA at Magdalena ("STA Contract Mining Agreement"), the sale of
certain underground mining equipment to STA and an equity settlement arrangement ("STA Equity Settlement
Agreement") in terms of which a portion of the contract mining fees will be settled through the issuance of common
shares of the Company ("Common Shares"), in order to alleviate cash flow pressures. During the year ended December
31, 2017, Investec agreed to release R22.0 million of undrawn Working Capital Facility funds, which was subject to
agreement being reached on the 6th amendment to the term loan and revolving credit agreement. The Company
negotiated further amendments to the term loan and revolving credit agreement with Investec during Q1 2018 (refer to
Note 4).
Although the Group has implemented various restructuring initiatives, the Group continues to experience operational
challenges. The Group remains dependent upon sustaining profitable levels of operation, as well as the continued
support of Investec, RCF and other stakeholders and believes that subject to its ability to meet current forecasts, it
should be able to generate positive cash flows in the foreseeable future.
A new adit is being considered at Aviemore in order to access the remainder of the reserve. This is due to the current
adit reaching its limits by 2020, and will extend the life-of-mine ("LOM") to 2033. The Group's ability to continue long
term operations and ultimately continue as a going concern, is dependent on its ability to secure funding required for
the adit expansion at Aviemore. There will be a focus on obtaining additional funding in the form of equity and/or debt
to fund the expansion. This process will be facilitated by a Financial Advisor, Northcott Capital (refer note 4).
As at March 31, 2018, the Company had a shareholders' deficiency of R371.4 million (December 31, 2017:
R337.8 million), a working capital deficiency of R157.7 million (December 31, 2017: R169.4 million) and for the three
month period ended March 31, 2018, had a net loss of R34.8 million (March 31, 2017: profit of R4.2 million). The Group
continues to be in breach of certain covenants with respect to its borrowings from Investec at March 31, 2018. On
November 22, 2016, Investec provided a forbearance letter stating that it does not intend to exercise its rights to
request early payment of the outstanding debt; however, no waiver has been provided and Investec has reserved its
right to review this decision periodically, with no obligation to keep the Company advised in this regard. Also, in terms of
the Amendment signed with Investec on March 19, 2018, Investec agreed not to exercise its acceleration rights with
respect to any existing events of default under the Investec Facility until June 30, 2018. There is no assurance that the
Company will be able to meet its covenants in the future, or that Investec will provide future waivers, if required. These
matters constitute material uncertainties which cast significant doubt as to whether the Group can continue as a going
concern.
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. Such adjustments could be material.
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
March 31, 2018 and the financial results for the three months period ended March 31, 2018 were translated into
Canadian Dollars using a convenience translation at the rate of C$1:R9.1683, which is the exchange rate published on
Oanda.com as of March 31, 2018. 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 3 months
ended March 31, 2018:
IFRS 9 - Financial Instruments
IFRS 9, issued in November 2009, introduced new requirements for the classification and measurement of financial
assets. IFRS 9 was subsequently amended in October 2010 to include requirements for the classification and
measurement of financial liabilities and for their derecognition, and in November 2013 to include the new requirements
for general hedge accounting. Another revised version of IFRS 9 was issued in July 2014 mainly to include a) impairment
requirements for financial assets and b) limited amendments to the classification and measurement requirements by
introducing a 'fair value through other comprehensive income' ("FVTOCI") measurement category for certain simple
debt instruments.
All recognized financial assets that are within the scope of IAS 39, Financial Instruments: Recognition and Measurement
are required to be subsequently measured at amortized cost or fair value. In addition, entities may make an irrevocable
election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other
comprehensive income, with only dividend income generally recognized in profit or loss.
With regard to the measurement of financial liabilities designated as at fair value through profit or loss, IFRS 9 requires
that the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that
liability is presented in other comprehensive income ("OCI"), unless the recognition of the effects of changes in the
liability's credit risk in OCI would create or enlarge an accounting mismatch in profit or loss. Changes in fair value
attributable to a financial liability's credit risk are not subsequently reclassified to profit or loss. Under IAS 39, the entire
amount of the change in fair value of the financial liability designated as fair value through profit or loss is presented in
profit or loss.
In relation to the impairment of financial assets, IFRS 9 requires an expected credit loss model, as opposed to an
incurred credit loss model under IAS 39. The expected credit loss model requires an entity to account for expected credit
losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial
recognition.
The new general hedge accounting requirements retain the three types of hedge accounting mechanisms currently
available in IAS 39. Under IFRS 9, greater flexibility has been introduced to the types of transactions eligible for hedge
accounting, specifically broadening the types of instruments that qualify for hedging instruments and the types of risk
components of non-financial items that are eligible for hedge accounting. In addition, the effectiveness test has been
overhauled and replaced with the principle of an 'economic relationship'. Retrospective assessment of hedge
effectiveness is also no longer required. Enhanced disclosure requirements about an entity's risk management activities
have also been introduced. The new standard did not have a significant impact on the Group.
IFRS 15 - Revenue from Contracts with Customers
IFRS 15 was issued which establishes a single comprehensive model for entities to use in accounting for revenue arising
from contracts with customers. IFRS 15 supersedes the previous revenue recognition guidance including IAS 18,
Revenue; IAS 11, Construction Contracts and the related Interpretations.
The core principle of IFRS 15 is that an entity should recognize revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in
exchange for those goods or services. Under IFRS 15, an entity recognizes revenue when (or as) a performance
obligation is satisfied, i.e. when 'control' of the goods or services underlying the particular performance obligation is
transferred to the customer. Far more prescriptive guidance has been added in IFRS 15 to deal with specific scenarios.
Furthermore, extensive disclosures are required by IFRS 15. The new standard did not have a significant impact on the
Group.
IFRIC 22 - Foreign Currency Transactions and Advance Consideration
IFRIC 22 was issued in December 2016 and addresses foreign currency transactions or parts of transactions where there
is consideration that is denominated in a foreign currency; a prepaid asset or deferred income liability is recognised in
respect of that consideration, in advance of the recognition of the related asset, expense or income; and the prepaid
asset or deferred income liability is non-monetary. The interpretation committee concluded that the date of the
transaction, for purposes of determining the exchange rate, is the date of initial recognition of the non-monetary
prepaid asset or deferred income liability. The new standard did not have a significant impact on the Group.
IFRS 2 - Share-based payments
This amendment clarifies the measurement basis for cash-settled, share-based payments and the accounting for
modifications that change an award from cash-settled to equity-settled. It also introduces an exception to the principles
in IFRS 2 that will require an award to be treated as if it was wholly equity-settled, where an employer is obliged to
withhold an amount for the employee's tax obligation associated with a share-based payment and pay that amount to
the tax authority. The amendment did not have a significant impact on the Group.
3 OTHER INCOME/(EXPENSE) - NET
3 months 3 months 3 months
ended ended ended
March 31, March 31, March 31,
2018 2017 2018
(Note 1)
R R C$
Foreign exchange gain - net 15 530 666 8 252 280 1 693 944
Fair value adjustment on financial assets 610 651 466 156 66 604
Fair value adjustment on conversion option and warrant
liability (60 579 210) 10 652 884 (6 607 431)
Other income 809 789 887 081 88 324
(43 628 104) 20 258 401 (4 758 559)
4 INVESTEC BORROWINGS
Borrowings consist of the Investec loan facilities as detailed below:
December 31, 2018 December 31, 2017
Investec loan facilities 158,914,030 187,955,977
Current portion (158,914,030) (187,955,977)
Long-term portion - -
On March 19, 2018, BC Dundee entered into a further amendment to the term loan and revolving credit agreement (the
"Amendment"). Pursuant to the Amendment, among other things and subject to customary terms and conditions:
- the working capital facility under the Investec Facility was increased by R16 million (the "Supplemental Credit")
to R96 million, with the aggregate Investec Facility increasing from R220 million to R236 million;
- the Supplemental Credit is available subject to the provision of a utilization report acceptable to Investec;
- the availability period of the working capital facility was extended to June 22, 2018;
- the maturity date for any amounts drawn against the Supplemental Credit will be June 29, 2018;
- BC Dundee had to immediately repay to Investec the amount of R36.6 million currently due to Investec under
the existing Investec Facility, of which R30.0 million reduces the aggregate amount outstanding on the Investec
Facility, with the remaining R6.6 million applied to the mine royalty payment in the amount of R6.1 million and
the balance of R0.5 million applied to default interest, all of which were due and payable on March 16, 2018
(this payment was effected on March 19, 2018);
- the due date for the principal payment amount of R7.5 million due on March 31, 2018 will be extended to June
29, 2018;
- Investec agrees not to exercise its acceleration rights with respect to any existing events of default under the
Investec Facility and will appoint a technical advisor until June 30, 2018 to provide certain monthly reports to
Investec; and
- The Group had to provide Investec with a certified copy of a signed mandate with Northcott Capital Limited
("Northcott"), pursuant to which Northcott will conduct a review of the strategic options available to the Group.
The Northcott mandate replaced the agreement in place with Northcott at the time and will terminate no later
than June 30, 2018.
All the above conditions have been met on April 10, 2018.
As of March 31, 2018, R169.6 million (December 31, 2017: R200.3 million) had been drawn pursuant to the Investec loan
facilities. The Group was fully drawn on each of the Term Loan Facility (R45.0 million), Bullet Facility (R45.5 million) and
Working Capital Facility (R79.1 million).
The R158.9 million current liability at March 31, 2018 comprised of the R169.6 million loan owing to Investec less the
R9.6 million warrant asset and R1 million balance in deferred costs. The R188 million current liability at December 31,
2017 comprised of R200.3 million loan owing to Investec less the R11.2 million warrant asset and R1.1 million balance in
deferred costs.
As of the date of these Interim Financial Statements, the Group had R16.0 million available from the Working Capital
Facility.
Due to Investec being entitled to request early payment of the outstanding debt, as a result of the breach in covenants
referred to preceding, management has determined that the total Investec debt be classified as current borrowings.
5 ISSUANCE OF COMMON SHARES TO STA
On January 22, 2018 and February 14, 2018, the Company issued Common Shares to STA pursuant to the STA Equity
Settlement Agreement entered into during the financial year ended December 31, 2015. An additional 3 194 097 and
2 965 683 Common Shares were issued based on an agreed share price of C$0.05 (January 22, 2018: R0.48 and February
14, 2018: R0.47). These shares were valued at the fair value of the services received.
6 FINANCIAL INSTRUMENTS AT FAIR VALUE
The following table presents the group's financial assets and liabilities that are measured at fair value at March 31, 2018
and December 31, 2017:
Level 1 Level 2 Level 3
R R R
March 31, 2018
Investment in financial assets 168 837 - -
Conversion option liability - 57 406 576 -
Warrant liability - 1 346 562 -
December 31, 2017
Investment in financial assets 181 465 - -
Conversion option liability - 28 289 -
Warrant liability - 29 507 -
Warrant liability
On July 3, 2014, BC Dundee finalized a restructuring of the Investec loan facilities ("First Amended Investec Agreement").
In connection with the First Amended Investec Agreement, Investec subscribed for 34 817 237 warrants in the Company
with a strike price of C$0.1446, the proceeds of which, if exercised, will be applied against settlement of the Investec
five-year senior secured loan facility of R50.0 million (the "Bullet Facility"). RCF has the right to acquire the warrants
from Investec at agreed pricing until July 3, 2019.
The Bullet Facility and the warrants have been treated as a compound financial instrument, as the Bullet Facility could
effectively be settled through the issuance of Common Shares. Furthermore, an embedded derivative exists due to the
warrants being denominated in Canadian Dollars and the functional currency of the Company being Rands. The Bullet
Facility has been recognized in two parts, a liability component (included in borrowings) and a warrant liability. The
liability component will be accreted to its face value of R40.5 million using the effective interest rate method at
approximately 35.5%.
The initial carrying value of the warrant liability was obtained using the Black-Scholes option pricing model and the
following assumptions: expected volatility of 100%, life of 5.0 years, risk-free interest rate of 1.71%, share price of
C$0.095 and an expected dividend yield of 0%.
The fair value of the warrant liability at March 31, 2018 was obtained using the Black-Scholes option pricing model and
the following assumptions: expected volatility of 149% (based on historical volatility in the share price), life of 1.3 years,
risk-free interest rate of 1.8%, share price of C$0.02 and an expected dividend yield of 0% (year ended December 31,
2017: expected volatility of 114%, life of 1.5 years, risk-free interest rate of 1.6%, share price of C$0.005 and an expected
dividend yield of 0%).
Conversion option liability
The RCF Convertible Loan has been recognized in two parts, a liability component and a conversion option liability. An
embedded derivative exists due to the convertible loan facility being denominated in US Dollars, the conversion feature
being exercisable in Canadian Dollars and the functional currency being Rands. The liability component will be accreted
to its face value of US$27.0 million (approximately R319.3 million) (year ended December 31, 2017: US$27.0 million
(approximately R334.0 million)) using the effective interest rate method at approximately 5.3% (year ended December
31, 2017: 5.3%).
The initial carrying value of the conversion option liability at each advance was obtained using the Black-Scholes option
pricing model and the following assumptions: expected volatility between 51% and 107% (based on historical volatility in
the share price), life of between 3.9-5.0 years, risk-free interest rate of 0.5%-1.5%, share price of between C$0.035-
C$0.095 and expected dividend yield of 0%.
The fair value of the conversion option liability at March 31, 2018 was obtained using the Black-Scholes option pricing
model and the following assumptions: expected volatility of 149% (based on historical volatility in the share price), life of
1.3 years, risk-free interest rate of 1.8%, share price of C$0.02 and expected dividend yield of 0% (year ended December
31, 2017: expected volatility of 60.2%, life of 1.5 years, risk-free interest rate of 1.6%, share price of C$0.005 and
expected dividend yield of 0%).
7 COMMITMENTS AND CONTINGENCIES
Director Agreement
Certain management contracts require that payments of approximately R4.7 million be made upon the occurrence of a
change of control, other than a change of control attributable to RCF and/or Investec. As no triggering event has taken
place, no provision has been recognised as of March 31, 2018.
STA Contract Mining Agreement
In terms of the STA Contract Mining Agreement, STA is mining at Magdalena at a fixed contract mining fee per tonne,
effective October 31, 2015. The STA Contract Mining Agreement has a three-year term, and the option for a further
two-year extension if agreed to by all parties. In terms of the STA Equity Settlement Agreement, a portion of the
contract mining fees will be settled in Common Shares, in order to alleviate cash flow pressures.
The STA Contract Mining agreement can be terminated on 60 days notice for which period the Company will be liable
for payment for the tonnes mined at the fixed rate per tonne.
Capital Commitments
Capital expenditures contracted for at the statement of financial position date but not recognized in the Interim Results
are as follows:
March 31, December 31, March 31,
2018 2017 2018
R R C$
Property, plant and equipment 6 799 208 8 7 252 129 741 596
In terms of Regulation 8.10 of the Mine Health and Safety Act, 29 of 1996 Regulations, the Company is required to take
reasonably practicable measures to ensure that pedestrians are prevented from being injured as a result of collisions
between trackless mobile machines and pedestrians, by way of the installation of proximity devices on specified
machines. The Company is currently investigating its options in this regard. The Company has proposed the phase in of
such devices over a five-year period.
Environmental and Regulatory Contingency
The Company's mining and exploration activities are subject to various laws and regulations governing the environment
and mine operations. These laws and regulations are continually changing and generally becoming more restrictive.
The current operational adit at Magdalena does not have an amended Environmental Management Program ("EMP") or
an amended Integrated Water Use License Application ("IWULA"). As a result the mine needs to apply for a Section 24G
retrospective Environmental Impact Analysis ("EIA"). As at March 31, 2018, R2.5 million has been provided to settle
potential penalties for the non-compliance.
The Company's Calcine plant has been operating without an Air Emissions License ("AEL"), and this has necessitated that
a Section 24G application be submitted to the Economic Development, Tourism and Environmental Affairs ("EDTEA").
The Section 24G application relates to the commencement of certain listed activities which have commenced at the
Calcine plant at Coalfields, prior to obtaining environmental authorization ("EA"). To comply with legislation, a full
scoping and EIA report should be undertaken. With the aim to continually strive to be compliant with the operations of
the Calcine plant, the Company approached the EDTEA for AEL. Once the plant has been refurbished it was agreed with
EDTEA that stack tests will be carried out and the results submitted. Once the results are submitted, EDTEA will issue a
fine, and once paid, the EA will be issued. On approval of the EA, an AEL can then be obtained in compliance with the Air
Quality Act. As at March 31, 2018, R2.0 million has been provided to settle potential penalties for the non-compliance.
The Company is currently completing specialist studies to complete these environmental applications. The Company has
made, and expects to make in the future, expenditures to comply with any such laws and regulations.
8 SUBSEQUENT EVENTS
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.
17 May 2018
Sponsor: Questco Proprietary Limited
Date: 17/05/2018 11:55:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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