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BUFFALO COAL CORPORATION - Condensed Interim Consolidated Financial Statements for the period ended 30 June 2018

Release Date: 10/08/2018 16:03
Code(s): BUC     PDF:  
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Condensed Interim Consolidated Financial Statements for the period ended 30 June 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

CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
For the three and six months ended
June 30, 2018 and June 30, 2017
(Presented in South African Rands) 

Condensed Interim Consolidated Statements of Financial Position
(Presented in South African Rands)
                                                                   June 30,      December 31,        June 30,   
                                                                       2018              2017            2018   
                                                                                                     (Note 1)   
                                                    Notes                 R                 R              C$   
Assets                                                                                                          
Non-current assets                                                                                              
Property, plant and equipment                                   112 238 819       106 885 916      10 741 038   
Investment in financial assets                          3           192 430           181 465          18 415   
Other receivables - restricted                                   54 743 127        53 211 988       5 238 811   
Other receivables                                                 5 782 180         5 179 462         553 343   
Long-term restricted cash                                        11 200 000        11 200 000       1 071 818   
Total non-current assets                                        184 156 556       176 658 831      17 623 425   
Current assets                                                                                                  
Trade and other receivables                                      96 893 475       121 244 825       9 272 518   
Inventories                                                      33 441 033        38 095 072       3 200 242   
Non-interest bearing receivables                                  1 540 066         2 015 578         147 381   
Current tax assets                                                  864 710           864 710          82 751   
Cash and cash equivalents                                        17 279 689        21 428 994       1 653 633   
Total current assets                                            150 018 973       183 649 179      14 356 525   
Total assets                                                    334 175 529       360 308 010      31 979 950   
Equity and liabilities                                                                                          
Capital and reserves                                                                                            
Share capital                                           6     1 086 857 377     1 082 396 917     104 010 149   
Currency translation reserve                                  (219 945 085)     (219 945 085)    (21 048 319)   
Reserves                                                         12 250 999        14 125 416       1 172 397   
Accumulated retained loss                                   (1 243 124 246)   (1 218 681 917)   (118 964 586)   
Equity (deficiency) attributable to owners of the                                                               
company                                                       (363 960 955)     (342 104 669)    (34 830 358)   
Non-controlling interest                                          4 339 142         4 339 142         415 247   
Total equity (deficiency)                                     (359 621 813)     (337 765 527)    (34 415 112)   
Non-current liabilities                                                                                         
RCF loan facilities                                     4                 -       314 762 527               -   
Conversion option liability                             3                 -            28 289               -   
Asset retirement obligation                                      29 999 841        30 244 737       2 870 927   
Total non-current liabilities                                    29 999 841       345 035 553       2 870 927   
Current liabilities                                                                                             
Trade and other payables                                        131 306 848       156 497 655      12 565 809   
Current tax liability                                             4 198 831         2 901 399         401 820   
Current portion of borrowings                           5       145 639 445       187 955 977      13 937 413   
RCF loan facilities                                     4       356 162 532                 -      34 084 065   
Conversion option liability                             3        20 471 270                 -       1 959 061   
Warrant liability                                       3           365 129            29 507          34 942   
Current portion of asset retirement obligation                    5 653 446         5 653 446         541 024   
Current liabilities                                             663 797 501       353 037 984      63 524 135   
Total liabilities                                               693 797 342       698 073 537      66 395 062   
Total equity (deficiency) and liabilities                       334 175 529       360 308 010      31 979 950
   
Commitments and contingencies                              1, 10                                     

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)
                                                                    6 months                         3 months               6 months   
                                                                      ended                            ended                   ended   
                                                             June 30,        June 30,        June 30,        June 30,       June 30,   
                                                                 2018            2017            2018            2017           2018   
                                                                                                                            (Note 1)   
                                                Notes               R               R               R               R             C$   
Revenue                                                   394 745 875     325 866 155     204 320 695     154 442 360     37 776 417   
Cost of sales                                           (293 838 341)   (317 957 435)   (149 213 093)   (159 910 950)   (28 119 761)   
Gross profit/(loss)                                       100 907 534       7 908 720      55 107 602     (5 468 590)      9 656 656   
Other income/(expense) - net                        7    (53 254 685)      44 857 584     (9 626 581)      24 599 183    (5 096 370)   
General and administration expenses                 8    (43 014 224)    (32 641 424)    (20 607 633)    (17 192 696)    (4 116 378)   
Profit before the undernoted                                4 638 625      20 124 880      24 873 388       1 937 897        443 908   
Finance income                                              1 528 053       1 043 080         605 198         625 968        146 232   
Finance expense                                     9    (29 592 934)    (22 794 521)    (15 079 162)     (9 522 866)    (2 831 987)   
(Loss)/profit before income tax                          (23 426 256)     (1 626 561)      10 399 424     (6 959 001)    (2 241 847)   
Income tax                                                (1 016 073)     (1 107 529)             (2)               -       (97 236)   
(Loss)/profit for the period                             (24 442 329)     (2 734 090)      10 399 422     (6 959 001)    (2 339 083)   
Other comprehensive loss                                            -               -               -               -              -   
Total comprehensive (loss)/profit for the period         (24 442 329)     (2 734 090)      10 399 422     (6 959 001)    (2 339 083)   
(Loss)/profit attributable to:                                                                                                         
- Owners of the parent                                   (24 442 329)     (2 734 090)      10 399 422     (6 959 001)    (2 339 083)   
- Non-controlling interest                                          -               -               -               -              -   
                                                         (24 442 329)     (2 734 090)      10 399 422     (6 959 001)    (2 339 083)   
Net (loss)/profit per share - basic and diluted                (0.06)          (0.01)            0.03          (0.02)         (0.01)   
Headline (loss)/profit per share - basic and diluted           (0.06)          (0.01)            0.03          (0.02)         (0.01)   
Weighted average number of common shares outstanding:                                                                                  
- Basic                                                   412 900 283     398 250 175     414 082 986     399 916 419    412 900 283   
- Diluted                                                 412 900 283     398 250 175     414 082 986     399 916 419    412 900 283   

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
                                                                                                                                    Currency                        Non-
                                        No. of shares          Share      Option  Equity-settled  BEE option      Accumulated    translation          Total  controlling    Total equity    
                                               issued        capital     reserve    non-employee     reserve    retained loss        reserve                    interest
                                                                                        benefits                                          
                                  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                        8 711 056      4 401 070           -               -           -                -              -      4 401 070            -       4 401 070
Stock options expired/cancelled                     -              -   (293 604)               -           -          293 604              -              -            -               -
Stock-based compensation                            -              -      35 798        (60 940)           -                -              -       (25 142)            -        (25 142)
Net (loss) for the period                           -              -           -               -           -      (2 734 090)              -    (2 734 090)            -     (2 734 090)
Balance at June 30, 2017                  403 514 078  1 080 282 567   1 802 014       2 114 350   9 073 711  (1 097 727 033)  (219 945 085)  (224 399 476)    4 339 142   (220 060 334)
Shares issued to STA                        4 294 203      2 114 350                                                                              2 114 350                    2 114 350
Stock options expired/cancelled                     -              -           -               -           -                -              -              -            -               -
Stock-based compensation                            -              -       5 041       1 130 300           -                -              -      1 135 341            -       1 135 341
Net (loss) for the period                           -              -           -               -           -    (120 954 884)              -  (120 954 884)            -   (120 954 884)
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                6       8 774 313      4 460 460           -               -           -                -              -      4 460 460            -       4 460 460
Stock-based compensation                            -              -       1 633     (1 876 050)           -                -              -    (1 874 417)            -     (1 874 417)
Net (loss) for the period                           -              -           -               -           -     (24 442 329)              -   (24 442 329)            -    (24 442 329)
Balance at June 30, 2018                  416 582 594  1 086 857 377   1 808 688       1 368 600   9 073 711  (1 243 124 246)  (219 945 085)  (363 960 955)    4 339 142   (359 621 813)

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)
                                                                             6 months ended                     3 months ended   
                                                                  June 30,         June 30,      June 30,       June 30,       June 30,   
                                                                      2018             2017          2018           2018           2017   
                                                                                                 (Note 1)                                 
                                                                         R                R            C$              R              R   
Cash flows from operating activities                                                                                                      
Cash generated from operations                                  66 476 554        7 151 077     6 361 678     31 349 747    (1 867 231)   
Interest received                                                1 528 053        1 043 080       146 232        605 198        625 968   
Interest paid                                                 (13 687 876)      (9 654 746)   (1 309 903)    (6 636 284)    (4 524 871)   
Taxation paid                                                    4 198 831        (833 954)       401 820      4 198 831      (833 954)   
Net cash generated from/(utilised in) operating activities      58 515 562      (2 294 543)     5 599 827     29 517 492    (6 600 088)   
Cash flows from investing activities                                                                                                      
Investment in financial assets                                           -      (2 720 385)             -              -    (1 360 192)   
Purchase of property, plant and equipment                     (18 140 378)     (20 329 113)   (1 735 999)   (11 549 477)   (14 164 322)   
Proceeds from the disposal of property, plant and equipment              -            5 614             -              -          5 614   
Movement in non-interest bearing receivables                       475 511         (55 757)        45 505        504 783       (27 879)   
Net cash utilized in investing activities                     (17 664 867)     (23 099 641)   (1 690 494)   (11 044 694)   (15 546 779)   
Cash flows from financing activities                                                                                                      
Drawdowns from working capital facility                                  -       21 500 000             -              -     21 500 000   
Repayment of term loan                                        (45 000 000)                -   (4 306 413)   (15 000 000)              -   
Net cash (utilised in)/generated from financing activities    (45 000 000)       21 500 000   (4 306 413)   (15 000 000)     21 500 000   
Net (decrease)/increase in cash and cash equivalents           (4 149 305)      (3 894 184)     (397 080)      3 472 798      (646 867)   
Cash and cash equivalents at the beginning of the period        21 428 994       13 753 934     2 050 713     13 806 891     10 506 617   
Cash and cash equivalents at the end of the period              17 279 689        9 859 750     1 653 633     17 279 689      9 859 750   

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 June 30, 2018 and June 30, 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 June 30, 2018 and
June 30, 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 August 08, 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 Q2 2018 mean the three months ended June 30, 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 5).

Buffalo Coal currently has approximately 18 months life-of-mine ("LOM") reserves left to mine at its Aviemore Mine and
5 LOM years' reserves at its Magdalena Mine, however, once the Aviemore LOM reserves have been mined out, the
operations will have to close as Magdalena Mine will not be able to carry the full overhead costs on its own.

In order to extend Aviemore's LOM to 15 years, additional capital in the order of approximately R445 million will be
required to open up a new adit at Aviemore Mine which will provide access to additional reserves to mine. Buffalo Coal
Dundee will require additional funding for the capital required to open up the new adit.

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 Mine. To facilitate the process, BC Corp appointed
a Financial Advisor, Northcott Capital, to embark on a process to obtain further funding for the Company.

As at June 30, 2018, the Company had a shareholders' deficiency of R359.6 million (December 31, 2017:
R337.8 million), a working capital deficiency of R137.1 million (December 31, 2017: R169.4 million) and for the six
months ended June 30, 2018, had a net loss of R24.4 million (June 30, 2017: loss of R2.7 million).

The Group continues to be in breach of certain covenants with respect to its borrowings from Investec at June 30, 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, Investec
issued a further letter dated August 02, 2018, in terms of which Investec agreed not to exercise its acceleration rights
with respect to any existing events of default under the Investec Facility until September 28, 2018.

The RCF loan is due and payable on June 30, 2019 (See Note 4, RCF loan facilities). The Company will need to arrange for
an extension or otherwise obtain other financing in order to settle this amount when it comes due as it currently does
not expect to have the means to repay this amount in full on the due date.

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.

However, 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
June 30, 2018 and the financial results for the six months period ended June 30, 2018 were translated into Canadian
Dollars using a convenience translation at the rate of C$1:R10.4495, which is the exchange rate published on
Oanda.com as of June 30, 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 6 months
ended June 30, 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 recognised financial assets that are within the scope of IAS 39, Financial Instruments: Recognition and Measurement
are required to be subsequently measured at amortised 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 recognised 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 recognise 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 recognises 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 FINANCIAL INSTRUMENTS AT FAIR VALUE

The following table presents the group's financial assets and liabilities that are measured at fair value at June 30, 2018
and December 31, 2017:
                                     Level 1        Level 2     Level 3
                                           R              R           R
June 30, 2018     
Investment in financial assets       192 430              -           -   
Other receivables - restricted                   54 743 127   
Conversion option liability                -     20 471 270           -   
Warrant liability                          -        365 129           -   
December 31, 2017     
Investment in financial assets       181 465              -           -   
Other receivables - restricted                   53 211 988   
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 carrying value of the warrant liability was obtained using the Black-Scholes option pricing model:

                                                 June 30,    March 30,   December 31,       Initial   
                                                     2018         2018           2017   assumptions   
Volatility (based on historical share price)       160.6%       149.0%         114.0%        100.0%   
Life (in years) to maturity date                      1.0          1.3            1.5           5.0   
Risk-free interest rate                             1.77%        1.79%          1.64%         1.71%   
Share price (C$)                                     0.01         0.02           0.01          0.10   
Warrant no of shares                           34 817 237   34 817 237     34 817 237    34 817 237   
Warrant valuation (C$)                             34 942      146 871          2 994     2 284 865   
Warrant valuation (R)                             365 129    1 346 562         29 507    22 987 796   

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 R371.0 million) (December 31, 2017: US$27.0 million (approximately
R334.0 million)) using the effective interest rate method at approximately 5.3% (December 31, 2017: 5.3%).

The fair value of the Conversion Option Liability was obtained using the Black-Scholes option pricing model:

                                                  June 30,     March 30,   December 31,        Initial   
                                                      2018          2018           2017    assumptions   
Volatility (based on historical share price)        160.6%        149.0%          60.2%   51.0%-107.0%   
Life (in years) to maturity date                       1.0           1.3            1.5        3.9-5.0   
Risk-free interest rate                              1.77%         1.79%          1.64%      0.5%-1.5%   
Share price (C$)                                      0.01          0.02           0.01    0.035-0.095   
Potential shares                               756 178 465   742 528 785    722 609 808    720 351 931   
Value of convertible feature (C$)                1 959 061     6 261 389          2 871     18 191 938   
Value of convertible feature (R)                20 471 270    57 406 576         28 289    182 348 706   

Movement in the Conversion Option Liability was as follows during the six months ended June 30, 2018 and year ended
December 31, 2017:
                                                                               June 30,   December 31,   
                                                                                   2018           2017   
Opening balance                                                                  28 289     31 905 346   
Fair value adjustment                                                        17 120 840   (31 720 388)   
Foreign currency translation adjustment                                       3 322 141      (156 669)   
Closing balance - current portion                                          (20 471 270)              -   
Closing balance - long-term portion                                                   -         28 289   

The Conversion Option Liability is linked to the RCF Loan facility which becomes due and payable as at June 30, 2019.
Consequently, the long-term portion of the liability has been reclassified as current as at June 30, 2018.

4 RCF LOAN FACILITIES

Movement in the RCF Convertible Loan was as follows:
                                                                               June 30,   December 31,   
                                                                                   2018           2017   
Opening balance                                                             314 762 527    336 288 222   
Accretion expense                                                             6 164 040     12 932 321   
Effect of foreign currency exchange difference                               35 235 965   (34 458 016)   
Closing balance - current portion                                         (356 162 532)              -   
Closing balance - long-term portion                                                   -    314 762 527   

The RCF loan becomes due and payable as at June 30, 2019. Consequently, the long-term portion of the liability has
been reclassified as current as at June 30, 2018.

5 INVESTEC BORROWINGS

Borrowings consisted of the Investec loan facilities as detailed below:

                                                                               June 30,   December 31,   
                                                                                   2018           2017   
Opening balance                                                             187 955 977    161 016 413   
Accretion of warrant asset                                                    3 185 717      4 800 140   
Amortisation of deferred cost                                                   220 082        440 163   
Interest accrued                                                             10 360 484     20 523 512   
Interest paid                                                              (11 082 815)   (20 324 251)   
Net drawdown from working capital facility                                            -     21 500 000   
Repayments                                                                 (45 000 000)              -   
Current portion                                                             145 639 445    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 availability period of the working capital facility was extended to June 22, 2018;
  -   the maturity date for any amounts drawn against the Supplemental Credit was 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 principal payment amount of R7.5 million due on March 31, 2018 was extended to June 29, 2018;
  -   Investec agreed not to exercise its acceleration rights with respect to any existing events of default under the
      Investec Facility and appointed 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. The Northcott agreement has been extended with a further 3 months until September 30,
      2018, unless subsequently extended by mutual agreement.

All the above conditions have been met on April 10, 2018. On June 25, 2018, the Group also settled the required
principal payments of R7.5 million for each of the March and June quarters (R15 million in total). The Group did not
utilise the additional R16 million facility that was made available by Investec.

As of June 30, 2018, R154.6 million (December 31, 2017: R200.3 million) of the drawn Investec loan facilities was still
outstanding, comprising of R30 million on the Term Loan Facility (December 31, 2017: R75 million), R45.5 million on the
Bullet Facility (December 31, 2017: R45.5 million) and R79.1 million on the Working Capital Facility 
(December 31, 2017: R79.7 million).

The R145.6 million current liability at June 30, 2018 comprised of R154.6 million loan owing to Investec less R8.1 million
warrant asset and R0.9 million balance in deferred costs. The R188 million current liability at December 31, 2017
comprised of R200.3 million loan owing to Investec less R11.2 million warrant asset and R1.1 million balance in deferred
costs.

6 ISSUANCE OF COMMON SHARES TO STA

The Company issued the following common shares to STA during the six months ended June 30, 2018 pursuant to the
STA Equity Settlement Agreement entered into during the financial year ended December 31, 2015:

                                            Common Shares       Share price      Share price
Date                                               issued                C$                R
January 22, 2018                                3 194 097              0.05             0.48
February 14, 2018                               2 965 683              0.05             0.47
June 26, 2018                                   2 614 533              0.05             0.51

These shares were valued at the fair value of the services received. As at June 30, 2018, STA held 36,943,905 shares
(8.9%) in the Company (December 31, 2017: 31,363,689 (7.6%)).

7 OTHER INCOME/(EXPENSE) – NET
                                                                    6 months                     3 months
                                                                      ended                        ended
                                                             June 30,        June 30,      June 30,       June 30,
                                                                 2018            2017          2018           2017

                                                                    R              R              R              R
Foreign exchange (loss)/gain - net                       (38 806 902)     17 420 998   (54 337 568)      9 156 348
Fair value adjustment on financial assets                   1 531 139        827 105        920 488        331 664
Fair value adjustment on conversion option and warrant
liability                                                (17 387 004)     24 048 926     43 192 205     13 396 042
Other income                                                1 408 082      2 560 555        598 293      1 715 129
                                                         (53 254 685)     44 857 584    (9 626 581)     24 599 183
8 GENERAL AND ADMINISTRATION EXPENSES
                                                        6 months                       3 months
                                              June 30,           June 30,     June 30,           June 30,
                                                  2018               2017         2018               2017
                                                     R                  R            R                  R
Audit fees                                   1 369 231          1 174 557      325 506            859 557
Bad debts                                    1 668 350                -              -                  -
Consulting fees                              5 325 517          3 465 484    4 076 261          2 198 742
Directors fees                               1 471 204          1 522 502      747 573            785 307
Insurance                                    2 688 836          3 910 496    1 284 695          2 535 384
Legal fees                                   1 281 237          1 301 331      217 156            425 615
Penalties                                    2 000 000                -              -                  -
Salaries and wages                          19 102 774         15 937 125    9 749 098          8 289 156
Social and labour plan expenses              2 341 782                -      1 696 052                -
Shareholder communication                      387 215            472 726      215 605            179 809
Travel and accommodation                     1 289 228          1 374 287      487 071            425 090
Other                                        4 088 850          3 482 914    1 808 616          1 494 036
                                            43 014 224         32 641 424   20 607 633         17 192 696

Included in consulting fees for the three months ended June 30, 2018 was R2.1 million (June 30, 2017: R0.3 million) for
the strategic review process and bankable feasibility study costs related to the new adit at Aviemore Mine. Consulting
fees for the six months ended June 30, 2018 included R2.4 million (June 30, 2017: R0.3 million) for the strategic review
process and bankable feasibility study costs related to the new adit at Aviemore Mine.

9 FINANCE EXPENSE
                                                                 6 months                     3 months
                                                           June 30,       June 30,     June 30,      June 30,
                                                               2018           2017         2018          2017
                                                                  R              R            R             R
Interest on borrowings                                   16 407 549     10 311 205    8 443 704     2 435 023
Interest on the RCF loan facilities                         642 279        611 490      294 302       267 095
Interest on STA accounts payable                          2 696 278      2 468 393    1 184 245     2 237 425
Interest to South African Revenue Service ("SARS")                -        396 626            -             -
Unwinding discount on asset retirement obligation           588 506        535 004      335 031       266 601
Loan accretion                                            9 246 455      8 454 564    4 818 291     4 313 885
Other                                                        11 867         17 239        3 590         2 837
Total                                                    29 592 934     22 794 521   15 079 162     9 522 866

Included in interest on borrowings was royalties payable to Investec of R5.8 million for the six months ended June 30,
2018 (June 30,2017: Rnil) and R3.1 million for the three months ended June 30, 2018 (June 30, 2017: Rnil) pursuant to
the 6th Amendment Agreement in terms of which a Life of Mine Royalty ("LOMR") is payable to Investec on all
bituminous coal sales with effect from July 1, 2017, calculated at a rate of 3.54% on all bituminous coal sold which was
mined from the Magdalena reserve.

10 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 June 30, 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:
                                     June 30,      December 31,         June 30,   
                                         2018              2017             2018   
                                            R                 R               C$   
Property, plant and equipment       7 322 671         7 252 129          700 765   

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 had to apply for a Section 24G
retrospective Environmental Impact Analysis ("EIA"). R2.5 million had been provided for during December 2017 to settle
potential penalties for the non-compliance, this amount has been included in the provision balance as at June 30, 2018.

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. R2.0 million had been provided for during March 2018 to settle potential penalties for non-compliance, this
amount is included in the provision balance as at June 30, 2018.

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.

11 SUBSEQUENT EVENTS

Other Matters

Except for the matters discussed above and specifically under Note 1, Basis of preparation - Going Concern, 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.


August 10, 2018
Sponsor: Questco Corporate Advisory Proprietary Limited

Date: 10/08/2018 04:03:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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