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HWANGE COLLIERY COMPANY LIMITED - Interim results For the half year ended 30 June 2018

Release Date: 28/09/2018 08:00
Code(s): HWA     PDF:  
 
Wrap Text
Interim results For the half year ended 30 June 2018

HWANGE COLLIERY COMPANY LIMITED
(Incorporated in Zimbabwe under registration number 381/1954)
ZSE Share Code: HCCL.ZW ISIN: ZW0009011934
JSE Share Code: HCCL.ZW ISIN: ZW0009011934
LSE Share Code: HCCL.ZW ISIN: ZW0009011934


UNAUDITED CONDENSED INTERIM FINANCIAL RESULTS
For the half year ended 30 June 2018


CHAIRMAN’S STATEMENT
On behalf of the Board of Directors, I present the unaudited financial
results of Hwange Colliery Company Limited for the half year ended 30
June 2018.


FINANCIAL PERFOMANCE
The Company’s financial performance for the period under review
improved in comparison to the same period in the 2017 financial year.
The Company’s revenue increased by 62% to US$30.5 million from US$18.8
million for the comparable period last year. The increase in revenue
is attributed to an increase in sales volume of 51% and increased
prime grades in the sales mix. The loss for the year decreased by 6%
to US$23 million during the period under review from US$24.5 million
recorded in 2017.


OPERATIONS
Production improved significantly to 819,859 tonnes from 565,298
achieved during the same period in 2017, representing an increase of
45%. Though favorable than the comparable period in 2017, the
company’s production performance for the period under review fell 22%
short of budgetary target of 1,047,026 tonnes. This was attribute to
working capital constraints. The improved production has seen the
Company regaining its market share lost in prior years.
Total sales tonnage was 682,152 from 450,452 for the same period last
year against a budget of 1,242,880. HPS sales to Hwange Power Station
increased by 70% from 221,646 tonnes to 376,695 tonnes and HCC/HIC
coal sales increased by 54% from 174,201 tonnes to 268,570 tonnes.
The cost of sales increased by 46% to $30.6 million from $20.9 million
in June 2017 driven by sales volumes which increased by 231,700
tonnes.


SCHEME OF ARRANGEMENT
The Company’s scheme of arrangement with its creditors afforded the
Company moratorium while building the financial resources to
capacitate the Company to meet its financial obligations in favour of
its creditors. The Board remains confident that the turnaround efforts
shall yield the desired results.


OUTLOOK
The company’s half year performance demonstrates that increased
production can be achieved. This increase will be complemented by some
targeted efficiency interventions that are expected to impact
positively on the costs of sales. That being said, the company’s
strategic priorities for the second half of the year (H2, 2018) will
continue to be the following;
  a) Increased production
     Through to year end, the company shall focus on a sustainable
     monthly production tonnage of 300,000 tonnes per month inclusive
     of the mining contractor’s contribution. Further, since the
     company managed to resuscitate the underground mine operations,
     it shall focus on mining high value coking coal. This is with the
     resuscitation of the company’s own coke oven battery in mind that
     beneficiation of coking coal to coke shall create more value for
     the company. While the company has engaged the National Railways
     of Zimbabwe as a solution to its external logistics, there are
     still challenges which the Company is still engaging NRZ for a
     solution.

  b) Open Cast Mining
     The Company’s open cast operation contributed 296,958 tonnes for
     the half year which represents 36% of the total half year
     production. There are still constraints in the internal logistics
     and processing section of the value chain. Efforts continue to be
     made to secure working capital to address these.

  c) Resuscitation of Underground Mine Operations
     The Company diligently pursued the resuscitation of its
     underground mine operations which was out of production since
     July 2015 after its continuous miner had a major breakdown. The
     Company has managed to bring back the underground mine into
     operation producing an average of 15,000 tonnes per month since
     January 2018. The target is to bring the operation to 50,000
     tonnes per month, which will contribute significantly to the
     company’s bottom line and enhance exports.

  d) Coke Production
     The Company’s intended takeover project of the Hwange Coal
     Gasification Company (HCGC) Coke oven battery pursuant to a BOOT
     Agreement with its Chinese partners in HCGC was delayed. The
     Company has placed more emphasis and attention on the
     resuscitation of its own coke oven battery while it shall still
     continue exploring options for the takeover of the HCGC Battery.

  e) Cost Reduction
     The Company adopted a low-cost high productivity strategy. This
     has remained an on-going strategy and shall be monitored through
     to year end.

  f) Western Areas Development
     The Company concluded an Exploration Agreement with Fugro Earth
     Resources to undertake exploration and drilling of the Western
     Areas Concession. Commencement of works is expected in the last
     quarter of the current financial year.

  g) Improve efficiencies and competitiveness
     As the Company increases the thrust on the core business of
     mining, it will also look at ways of weaning non-core activities
     such as road maintenance, electrical power distribution and
     sewage treatment. The adoption of enterprise resource planning
     systems to automate the administration of the business will also
     improve efficiencies and lower the cost per ton of coal produced.
Dividend
In view of the loss position, this Board has not proposed an interim
dividend for the period under review.
DIRECTORATE
During the period under review, Mr S.T Makore resigned from his
position as the Company’s Managing Director effective 23 May 2018.
There are still vacancies on the Board. The Board is engaging
shareholders in connection with filling the casual vacancies on the
Board.


APPRECIATION
Whilst the Company is still in a loss position, the financial results
demonstrate signs of recovery resultant from a concerted team effort
to turnaround the Company. The Board is grateful for the support
rendered by all stakeholders to its turnaround plans.
I would like to express my gratitude to my fellow Directors,
Management and Staff for their collective efforts and dedication to
the Company.


J. MUSKWE (MRS)
Acting Chairperson
13 August 2018


OPERATIONAL REVIEW
I have pleasure in submitting my report on the Company’s operations
for the half year ended 30 June 2018.


Overview
An operating plan for the half year was adopted from the five-year
strategic plan aimed at increased and least cost production. This
five-year strategic plan was a culmination of a company-wide approach
involving and incorporating inputs from staff in all departments.
Coal Production and Sales
Mining – Open pit mining increased from an average of 68,986 metric
tonnes per month in the first quarter and peaked at 300 000 metric
tonnes per month in June.
Local sales – The increased production and sales enabled the company
to retain key customers and grow its market share. Sales for the half
year ended 30 June 2018 were 0.68 million metric tonnes which
represented a 51% increase compared to the same period last year.
Thermal coal still contributed the largest potion of sales while
industrial coal sales to the industrial customers and the tobacco
sector also grew. Coking coal sales will be a major area of focus and
growth as the production from 3 main underground increases. The
ultimate strategy will be coke production which is hinged on the
Company’s resuscitation of its own coke oven battery.


Export sales – The Company’s largest export market was Zambia. Export
of industrial coal and coke to this market contributed to the export
revenue. Trial orders of industrial coal to new blue-chip customers in
Zambia and South Africa were also undertaken. These new customers will
be a source of market share growth for the export business. Export
sales contributed only 5% compared to the target of 20% contribution.


Coal Processing
Coke Oven Battery – Refurbishment of the Hwange Colliery coke oven
battery is planned to start in the 4th quarter of 2018.


Estate Division Performance

Revenue grew by 62% to $4.9 million compared to the previous year. The
revenue was generated from the following segments: real estate (56%),
retail (29%), hospitality (8%) and education (7%)



Medical Services Divisions Performance

The Medical Services Division generated revenue of $986,522 in the
period under review. Service provision has improved significantly due
to improved cash flows after the introduction of an externally managed
medical aid.
Safety, Health, Environment and Quality

The Company’s objective is zero harm to the environment, people and
equipment. During the period under review, no fatality was recorded.
The company is pursuing recertification on ISO 9001:2015 by the month
of August 2018 and has also embarked on Integrated Business management
system (IBMS) targeting certification by third quarter 2019.

OUTLOOK

The Operating plan for the second half of the year (H2, 2018) will
continue to focus on increased production and improved efficiencies.
However, increased production requires that the company allocates more
funding to its operations focusing on its core business of mining and
reducing non-mining costs in line with industry best practices.



Innovative ways to deal with the scheme obligations will be explored
while production of high margin and value coking coal will be
increased.



Appreciation

The board, management and staff showed resilience and remained focused
on its turnaround plan implementation. I would like to thank the
Acting Chairperson, Mrs J. Muskwe and the entire board, management and
staff for their support, dedication and relentless commitment during
the period under review and look forward to their support through to
year end.

S. Manamike

Managing Director (Acting)

13August 2018



STATEMENT OF CORPORATE GOVERNANCE

Hwange Colliery Company Limited follows the principles and general
guidelines set out by the King Reports on Corporate Governance and the
National Code on Corporate Governance. As a tri-listed Company, it
    also complies with the listing requirements of the Zimbabwe Stock
    Exchange, Johannesburg Stock Exchange and the London Stock Exchange.



    CODES OF PRACTICE

    The Board has established policies and procedures regulating its own
    processes to ensure good corporate governance.




    DIRECTORATE

    The Company’s Articles of Association provide for a maximum of ten
    (10) directors of which one (1) of them is a Managing Director who is
    given executive functions. The Board is chaired by a non-executive
    director. Directors meet at least quarterly and these directors are
    subject to retirement by rotation and re-election by Shareholders in
    accordance with the Company’s Articles of Association.



    DIRECTORS’ INTERESTS

    In terms of good corporate governance and as provided by the Companies
    Act (Chapter 24:03) and the Company’s Articles of Association,
    directors are required to declare in writing during the year, whether
    they have material interests in any contracts or arrangements of
    significance with the Company which could give rise to conflict of
    interest. No such conflicts have been reported during the period under
    review.



    BOARD MEETING ATTENDANCE

    Details of attendance by the Directors at Board and Committee meetings
    for the half year ended 30 June 2018 are set below:

 NAME    MAIN BOARD     HUMAN       AUDIT       MARKETING     TECHNICAL
  OF                  RESOURCES
DIRECT
  OR




          ATT   POSSI   ATTEN   POSSI   ATTEN   POSSI   ATTEN   POSSI   ATTEN   POSSI
          END    BLE     DED     BLE     DED     BLE     DED     BLE     DED     BLE
          ED

Mrs       3     4       4       4       -       -       4       4       -       -
J.Musk
we

Mr S T    4     4       4       4       4       4       4       4       4       4
Makore

Mrs       4     4       -       -       4       4       -       -       4       4
N.Masu
ku

Mr E.N    3     4       -       -       3       4       3       4       3       4
Tome

Mr V      4     4       -       -       2       4       3       4       2       4
Vera



       INTERNAL CONTROLS

       The board reviews the effectiveness of the internal controls through
       the Audit Committee and through executive management reporting to the
       Board. Business plans, budgets and authorisation limits for the
       approval of significant expenditure, including investments are
       appraised and approved by the Board.

       The Company complies with the Zimbabwe Stock Exchange listing rules
       regarding dealings in the Company’s shares and has adopted a share
       dealing code to ensure compliance by the directors and applicable
       employees.



       SHAREHOLDER RELATIONSHIPS
During the year the Company met with shareholders at an annual general
meeting which was held on 29 June 2018.

A.MASIYA

Company Secretary

20 September 2018



Condensed Statement of Profit or loss and other comprehensive income
for the six months ended 30 June 2018

                             6 months to    6 months to   31 December
                            30 June 2018   30 June 2017          2017

                                     USD            USD            USD
                    Notes
                               Unaudited      Unaudited       Audited

Revenue               5       30 538 196     18 814 733    54 497 858

Cost of sales               (30 682 115)   (20 957 538)   (53 150 059)

Gross                          (143 919)    (2 142 805)     1 347 799
(loss)/profit

Other Income                     558 174        218 760       795 358

Other gains and                        -        (3 609)       (3 609)
losses (net)

Marketing costs                (323 038)      (333 237)   (1 232 479)

Administrative              (10 825 269)    (6 415 219)   (25 098 636)
costs

Care and                     (4 119 607)    (5 278 313)                -
maintenance costs

Operating costs             (14 853 659)   (13 954 423)   (24 191 567)

Loss on disposal                       -    (5 921 389)   (6 521 040)
of treasury bills
Finance costs           (8 147 736)    (4 623 896)    (13 062 019)

Share of loss                      -       (63 113)      (63 113)
from equity
accounted
investments

LOSS BEFORE TAX         (23 001 395)   (24 562 821)   (43 837 739)

Income Tax          6              -              -              -

LOSS FOR THE            (23 001 395)   (24 562 821)   (43 837 739)
PERIOD/YEAR

Other
comprehensive
Income:

Other                              -              -              -
Comprehensive
Income for the
period/year, net
of tax

TOTAL                   (23 001 395)   (24 562 821)   (43 837 739)
COMPREHENSIVE
LOSS FOR THE
PERIOD/YEAR

Attributable loss   6         (0.13)         (0.13)        (0.49)
per share - basic

         -diluted   6         (0.13)         (0.13)        (0.49)

Headline loss per   6         (0.13)         (0.13)        (0.48)
    share - Basic

         -diluted   6         (0.13)         (0.13)        (0.48)

         -diluted   6         (0.13)         (0.13)        (0.13)
Condensed Statement of Financial Position as at 30 June 2018
                                                           31 December
                              30June2018    30 June 2017          2017
                 Notes               USD   USD Unaudited           USD
                               Unaudited                       Audited
Assets
Non-current
assets
Property,          7         104 062 428    112 433 601    107 569 137
plant and
equipment
Investment         8           4 490 000      4 490 000        4 490 000
Property
Investments        9          14 753 031     14 753 031        14 753 031
accounted for
using the
equity method
Intangible        10             592 882         862 411          699 313
assets
Exploration                      685 813               -                -
and
evaluation
Inventories                    8 138 714      9 218 421        8 138 714
non-current
portion
                             132 722 868    141 757 464    135 650 195
Current
assets
Stripping         11           6 462 360               -       8 871 563
activity
asset
 Inventories      12          19 151 915     22 381 506        13 413 017
Trade and         13          18 339 519     22 021 505        31 427 775
other
receivables
Cash and cash     14           5 056 509     30 130 558        8 864 181
equivalents
                              49 010 303     74 533 569     62 576 536
Total assets                 181 733 171    216 291 033    198 226 731
EQUITY AND
LIABILITIES
Capital and
reserves
Share Capital   15        45 962 789     45 962 789      45 962 789
Non-                       4 358 468      4 358 468       4 358 468
distributable
reserves
Share premium                577 956        577 956         577 956
Revaluation               39 948 518     39 948 518      39 948 518
reserve
Accumulated            (325 431 087)   (283 154 774)   (302 429 692)
losses
                       (234 583 356)   (192 307 043)   (211 581 961)
Non-current
liabilities
Finance lease   16.1         600 000         700 000         600 000
liabilities
Borrowings      17.1    154 003 630     145 940 958     150 312 838
Long term       18.2     59 703 306     184 776 428     210 226 851
creditors
4% debentures   19      123 999 364                -              -
Income tax               10 054 850                -     10 054 850
liability
                        348 361 150     331 417 386     371 194 539
Current
Liabilities
Finance lease   16.2         390 969         397 723         390 969
liability
Borrowings      17.2      12 605 825              -               -
Trade and       18.1      35 845 937     53 162 651      24 364 013
other
payables
Debentures      19         4 093 352              -               -
Provisions      20        15 019 294     13 565 466      13 859 171
Current tax                        -     10 054 850               -
liability
                         67 955 377      77 180 690      38 614 153
Total equity            181 733 171     216 291 033     198 226 031
and
liabilities
Condensed statement of cash flows for the six months ended 30 June
2018
                                                           31 December
                            30 June 2018   30 June 2017           2017
                                     USD            USD            USD
                   Notes       Unaudited      Unaudited        Audited
Cash generated
from operating
activities
Loss before                 (23 001 395)   (24 562 821)   (43 837 739)
taxation
Adjustments for               14 036 861     11 820 397     25 040 660
non-cash items
Net effect of                 22 400 608     16 523 635   (229 085 781)
changes in
working capital
Net cash                      13 436 074      3 781 211   (247 882 860)
(utilised
in)/generated
from operations
Interest paid                          -       (28 656)               -
Tax paid                               -              -               -
Net cash                      13 436 074      3 752 555   (247 882 860)
(utilised
in)/generated
from operating
activities
Cash flows from
investing
activities
Purchase of                  (2 551 902)       (13 443)    (1 707 063)
property, plant
and equipment
Proceeds from                          -              -               -
disposal of
assets
Exploration and                (685 813)              -               -
evaluation
Net cash                     (3 237 715)       (13 443)    (1 707 063)
utilised in
investing
activities
Cash flows from
financing
activities
Proceeds from                    12 518 150              -    52 284 000
borrowings
Repayment of                               -     (125 000)   (4 335 506)
borrowings
Long term                      (26 524 181)              -   210 226 979
creditors
Net cash                       (14 006 031)      (125 000)   258 175 473
generated from/
(utilised in)
financing
activities
Net (decrease)/                 (3 807 672)      3 614 112     8 585 550
increase in cash
and cash
equivalent
Cas and cash                      8 864 181        465 977       278 631
equivalents at
beginning of the
period
Cash and cash         14          5 056 509      4 080 089     8 864 181
equivalents at
end of
period/year



Condensed statement of changes in equity for the six months ended 30
June 2018



              Share           Non-      Share Revaluatio
             Capita    distributab     Premiu n Reserve               Tota
                  l    le reserves          m        USD Accumulate      l
                USD            USD        USD              d losses    USD
                                                                USD
Balance as   45 962        4 358 468      577 39 948 518   (302 429   (211
at 1            789                   956                   692)    581
January                                                            961)
2018
Total             -             -       -           -    (23 001    (23
Comprehensi                                                 395)    001
ve loss for                                                        395)
the period
(unaudited)
Balance at    45 962    4 358 468     577 39 948 518    (325 431   (234
30 June          789                  956                   087)    583
2018                                                               356)
(Unaudited)
Balance at    45 962    4 358 468     577 39 948 518    (258 591   (167
1 January        789                  956                   953)    744
2017                                                               222)
Total             -             -       -           -    (24 562    (24
comprehensi                                                 821)    562
ve loss for                                                        821)
the period
(unaudited)
Balances at   45 962    4 358 468     577 39 948 518    (283 154   (192
30 June          789                  956                   774)    307
2017                                                               043)
(unaudited)
Balance at    45 962    4 358 468     577 39 948 518    (258 591   (167
1 January        789                  956                   953)    744
2017                                                               222)
Total             -             -       -           -    (43 837    (43
comprehensi                                                 739)    837
ve loss for                                                        739)
the year
(audited)
Balances at   45 962    4 358 468     577 39 948 518    (302 429   (211
31 December      789                  956                   692)    581
2017                                                               961)
(audited)


Notes to the condensed interim financial statements for the six months
ended 30 June 2018.
  1. Nature of operations
  Hwange Colliery Company Limited is a Company whose principal
  activities include extraction, processing and distribution of
  coal and coal products and provision of health services and
  provision of properties for rental and various retail goods and
  services

2. Basis of preparation of the condensed financial statements
   The condensed interim financial statements for the six months
   ended 30 June 2018 have been prepared in accordance with IAS
   34,’interim financial reporting’. They do not include all of the
   information required for full annual financial statements and
   should be read in conjunction with the audited annual financial
   statements for the year ended 31 December 2017, which have been
   prepared in accordance with International Financial Reporting
   Standards; Companies Act (Chapter 24:03) and the relevance
   statutory instruments (SI 33/99 and SI 63/96).

  The Company is a limited liability company and domiciled in
  Zimbabwe. It is listed primarily on the Zimbabwe Stock Exchange
  (ZSE) and also on the Johannesburg Stock Exchange (JSE) and
  London Stock Exchange (LSE)

  This condensed interim financial information has been reviewed,
  not audited.

  These condensed interim financial statements were approved for
  issue by the Board of directors on 19 September 2018.


3. Significant accounting policies
   The interim financial statements have been prepared in accordance
   with the accounting policies adopted in the Company’s most recent
   annual financial statements for the year ended 31 December 2017.

4. Estimates
   The preparation of interim financial requires management to make
   judgments, estimates and assumptions that affect the application
   of accounting policies and reported amounts of assets and
   liabilities, income and expense. Actual results may differ from
   these estimates.

  In preparing the condensed interim financial statements, the
  significant judgments made by management in applying the
      Company’s accounting policies and the key sources of estimation
      uncertainty were the same as those that applied to the audited
      annual financial statements as at end of the year ended 31
      December 2017.


                                                    6 months Year Ended
                                     6 months     to 30 June 31 December
                                   to 30 June           2017        2017
                                     2018 USD            USD         USD
                                    Unaudited      Unaudited     Audited
      5
      Revenue
      Coal sales
      HCC/HIC                        268    570      174   021     510    459
      HPS coal                       376    695      221   646     669    124
      Coal fines and breeze           36    724       51   542     103    922
      Total Coal sales               681    989      447   209   1 283    506
      Coke tonnes                           163        3   243       4    979
      Total sales                    682    152      450   452   1 288    485
                                            USD            USD            USD
      Mining                       24 507   948   15 457   085   44 292   950
      Estates                       4 980   727    3 082   171      668   434
      Medical services                986   522      275   477    9 536   474
      Total                        30 538   196   18 814   733   54 497   858
      6
      Taxation
      Current tax                            -               -              -
      Deferred tax                           -               -              -
 6    Loss per share




6.1     Basic
Basic loss per share is calculated by dividing the loss attributable
to shareholders by the weighted average number of ordinary shares in
issue during the period/year

      Loss attributable to           (23 001         (24 562     (43 837
      shareholders                      395)            821)        740)
      Weighted average number of     183 757         183 757 183 720 699
      ordinary shares in issue           366             366
      Basic loss per share            (0.13)          (0.13)      (0.24)
6.2   Diluted
      Loss used to determine           (23 001     (24 562       (43 837
      diluted loss per share              395)        821)          740)
      The weighted average
      number of ordinary shares
      for the purpose of diluted
      loss per share, reconciles
      to the weighted average
      number of ordinary shares
      used in the calculation of
      basic loss per share as
      follows:
      The weighted average             183 757     183 757 183 720 699
      number of ordinary shares            366         366
      in issue
      Weighted average number of       183 757     183 757 183 720 699
      ordinary shares for                  366         366
      diluted loss per share
      Diluted loss per share            (0.13)      (0.13)        (0.24)




Notes to the condensed interim financial statements for the six months
ended 30 June 2018


                                                    30 June   31 December
                                   30 June 2018        2017          2017
                                            USD         USD           USD
                                      Unaudited   Unaudited       Audited
 6    Loss per share
      (Continued)
6.2   Diluted (continued)
      Headline loss per share
      excludes all items of a
      capital nature and
      represents an after-tax
      amount. It is calculated
      by dividing the headline
      loss shown below by the
      number of shares in issue
      during the year.
      Reconciliation between
      headline loss and basic
      lose:
      ISA 33 - losses             (23 001 395)    (24 562       (43 837
                                                     821)          740)
      Non-recurring items:
      Proceeds on sale of scrap     (234 205)     (3 198)      (90 037)
      Retrenchment costs                    -           -     4 382 064
      Loss on disposal of                   -           -     6 521 040
      treasury bills
      Tax effect of the above                -          -    (2 260 089)
      Headline losses             (23 235 600)    (24 566        (35 284
                                                     019)           762)
      Weighted average number     183 757 366     183 757    183 720 699
      of ordinary shares in                           366
      issue
      Headline loss per share          (0.13)      (0.13)         (0.19)
7     Property, plant and
      equipment
      Carrying amount at the      107 569 137     119 261    119 261 362
      beginning of the                                362
      period/year
      Additions                     2 551 902      77 120      1 707 063
      Disposals                             -           -              -
      Depreciation charge for     (6 058 611)      (6 904        (13 399
      the period/year                                881)           288)
      Carrying amount at the      104 062 428     112 433    107 569 137
      end of the period/year                          601
8     Investment property
      Fair value                    4 490 000    4 490 000    4 490 000
      Investment property
      comprises of:
      -Land situated at lot 7
      of stand 2185, Salisbury
      Township Harare with an
      administration building
      thereon.
      -Land situated at stand
      555, Bulawayo Township
      Bulawayo with an
      administration building
      thereon.
8.1   The following amount has
      been recognised in profit
      or loss:
      Rental income                 226 162     175 318     528 879
9     Investment in equity
      accounted investments
      Investments in associates           -           -            -
      (note 11.1)
      Investments in joint        14 753 031 14 753 031   14 753 031
      venture (11.2)
                                  14 753 031 14 753 031   14 753 031
9.1   Investments in associates
      Carrying amount as at               -      63 113       63 113
      beginning of period/year
      Share of loss                       -    (63 113)    (63 113)
      Carrying amount at the              -           -           -
      end of the period/year
      The company holds 49%
      voting and equity
      interest in clay products
      (Private) Limited. The
      Company also holds a 44%
      voting and equity
      interest in Zimchem
      Refineries (Private)
      Limited. The investments
      are accounted for using
      the equity method.
      The Company did not
      recognise losses for the
      period accounting to USD
      146 254 (2017: USD 336
      428) for Zimchem
      Refineries (Private)
      Limited as the cumulative
      losses exceed the
      carrying amount of the
      investment in associate.
      The Company did not
      recognise losses for the
      period amounting to USD
      35 371 (2017: 887) for
      Clay products (Private)
      Limited at the cumulative
      losses exceed the
      carrying amount of the
      investment in associate.
9.2   Investment in joint
      venture
      Carrying amount as at 1     14 753 031 14 753 031     14 753 031
      January
      Share of loss                        -          -              -
      Carrying amount at the      14 753 031 14 753 031     14 753 031
      end of the period/year
      Hwange coal gasification
      Company (Private) Limited
      is the only jointly
      controlled entity and the
      ultimate ownership
      interest is 25%. The
      investment in the joint
      venture has been
      accounted for using the
      equity method.
10    Intangible assets
      Opening carrying amount        699 313      968 842     968 842
      Additions                            -            -           -
      Impairment losses                    -            -           -
      Amortisation charge          (106 431)    (106 431)   (269 529)
      Closing carrying amount        592 882      862 411     699 313

Intangible assets comprise of mining rights and an enterprise
resource planning (ERP) software. The Company acquires the ERP
software to support the administration and control of the Company.
Some modules for mine planning and marketing are still to be
developed. Mining rights comprise new coal mining claims acquired
during the year. No intangible assets have been pledged as security
for liabilities.

11    Stripping activities
      Carrying amount as at 1      8 871 563           -              -
      January
      Pre-stripping costs          2 895 112           -    8 871 563
      incurred
      Costs charged/(credited)    (5 304 315)          -              -
      to cost of sales
     Closing carrying amount     6 462 360           -   8 871 563
12   Inventories
     Raw materials/consumables   10 089 391 13 107 614   9 144 098
     Finished goods
     Coal and coal fines          9 062 524  9 273 892    4 268 919
     coke                                 -          -            -
                                 19 151 915 22 381 506   13 413 017
13   Trade and other
     receivables
     trade                       16 414 023 16 746 975   22 013 350
     Other                        1 925 495  5 274 530    9 414 425
                                 18 339 519 22 021 505   31 427 775
14   Cash and cash equivalence
     For the purposes of
     statement of cash flows,
     cash and cash equivalents
     include cash on hand and
     cash in banks and
     investments in money
     market instruments, net
     of outstanding bank
     overdrafts. Cash and cash
     equivalents at the end of
     the period/year as shown
     in the statement of cash
     flows can reconciled to
     the related items in the
     statement of financial
     position as follows:
     Bank and cash balances      5 056 509 30 130 558    8 864 181
     Bank overdraft                      -          -            -
                                 5 056 509 30 130 558    8 864 181
15   Share capital
     Authorised
     204 000 000 0rdinary        51 000 000 51 000 000   51 000 000
     shares of USD 0.25 each
     Issued and fully paid
     110 237 432 ordinary        27 559 358 27 559 358   27 559 358
     shares of USD 0.25 each
     5 962 366 ordinary shares   1 514 039   1 514 039   1 514 039
     issued under share option
     scheme
                                  29 073 397 29 073 397    29 073 397
     67 557 568 “A” Ordinary      16 889 392 16 889 392    16 889 392
     shares of USD 0.25 each
                                  45 962 789 45 962 789    45 962 789
 16 Lease liability
16.1 Non-current
      Finance lease liabilities       600 000    700 000     600 000
      due after one year
17 Borrowings
Borrowings relate to loans from the Government of Zimbabwe, CABS and
CBZ with an average borrowing cost of 7%. CBZ loan is securitized
against immovable property and an assignment of proceeds from two
major customers in a ring fence arrangement. The CABS loan is
guaranteed by the Reserve Bank of Zimbabwe.

17.1 Non-current
     Loans due after one year    154 003 630     145 940   150 312 838
                                                     958
17.2 Current
     Bank overdraft                        -           -            -
     Loans payable within one     12 605 825           -   12 605 825
     year
 18 Trade and other payables
18.1 Trade and other payables
     - current
     Trade                         1 485 510 23 356 436     9 382 539
     Other                        34 360 427 29 806 215    14 981 474
                                  35 845 937 53 162 651    24 364 013
18.2 Trade and other payables
     – long term
     Trade                                 - 60 843 209     73 277 839
     Other                        59 703 306    123 933    136 949 011
                                                    219
                                  59 703 306    184 776    210 226 850
                                                    428

19 Debentures
Debentures have been issued to creditors as per the terms of the
creditors scheme of arrangement. Regulatory approvals were obtained
prior to the issuing of the debentures will be paid quarterly with
effect from June 2019.
     Current                           4 093 352           -             -
     Long term                       123 999 364           -             -
                                     128 092 716           -             -
 20 Provisions
20.1 Provisions of
     rehabilitation
     At the beginning of the          7 217 507    6 371 883     6 371 883
     period/year
     Additional provisions              733 084      370 024       845 624
     made during the
     period/year
     At the end of the                7 950 591    6 741 907     7 217 507
     period/year
20.2 Other provisions
     Leave pay and other              7 068 703    6 823 559     6 641 664
     provisions
     Total provisions                15 019 294 13 565 466      13 859 171


21 Segment reporting
Management currently identifies the Company’s three business units as
its operating segments. These operating segments are monitored by the
Company’s Board of Director’s and strategic decisions are made on the
basis of adjusted segment operating results.
Segment information for the reporting periods is as follows:
                                                    Medical
                           Mining       Estates    services          Total
                              USD           USD         USD            USD
30 June 2018
Revenue
From external          24 570 944     4 980 395     986 522    30 537 860
customers
From other segments             -       199 218       70 726      269 944
Total segments         24 570 944     5 179 612    1 057 248   30 807 804
revenues
Segment operating          (14 862      735 827    (726 724)       (14 853
(loss)/profit                 762)                                    659)
Segment assets         154 942 934   12 685 795 14 104 443     181 733 171
Segment liabilities    363 873 959   24 319 525 28 123 043     416 316 527
30 June 2017
Revenue
From external         15 457 085    3 082 172     238 332    18 777 588
customers
From other segments            -      239 111      813 377    1 052 488
Total segment         15 457 085    3 321 283    1 051 709   19 830 076
revenues
Segment operating         (14 783   (852 602)    (633 329)       (16 269
loss                         974)                                   906)
Segment assets        300 973 607   11 700 447 13 584 191    326 258 245
Segment liabilities   300 973 607   19 225 347 23 194 584    343 393 538
31 December 2017
Revenue
From external         44 292 950    9 536 474     668 434    54 497 858
customers
From other segments            -       540 728   1 327 596    1 868 324
Total segment         44 292 950    10 077 202   1 996 030   56 366 182
revenue
Segment operating         (29 592   (210 158)    (909 514)       (30 712
(loss)/profit                836)                                   508)
Segment assets        106 838 702           -    7 345 987   114 184 689


22 Going Concern
The Company is experiencing matters that may cast significant doubt on
its ability to continue as a going concern. Management has considered
the following matters:


Net current liability position
The company’s current liabilities exceeded its current assets by USD
17 677 138 as at 30 June 2018 (30 June 2017: 2 747 121; 31 December
2017 current assets exceeded current liabilities: USD 23 962 383).
This is attributable to a portion of the scheme debt which is now due
within the next 12 months and losses incurred in the 6-month period.
The losses are a result of high fixed overheads associated with the
company’s operations and lower than plan production in the period. In
mitigation the company has reengaged a contractor to provide mining
services at its open cast mine and has relocated the company’s open
cast operation to JKL pit in a n effort to increase high margin coking
coal production. The following plans are also being implemented to
ensure that the operation returns to profitability:
3 Main Underground Mine Resuscitation
Resuscitation of 3 Main underground mine is on course with receipt of
the underground mining suite having began mid-June and by mid-July all
equipment was on site and in the process of being commissioned. The
receipt of equipment will see underground mining operations coming
back online with full production capacity of 50,000 tonnes per month
expected to be achieved by end of September 2018.The operation will be
producing coking coal.


Expansion of 3 main Underground mine
The Company is actively looking at ways to increase production from
its underground mine through the introduction of a second continuous
miner section. This should see production from the underground
operations doubling from 50,000 tonnes per month to 100.000 tonnes per
month This project is being aggressively persued to ensure adequate
feed is available for the former ZISCO cokeworks now under ZIMCOKE.The
cokeworks expected to be operational from the 2nd quarter 2019.


Coke Oven Battery
Following the resuscitation of underground mining operations which
provide the coking coal feed for the HCCL battery the Company put out
a tender for the refurbishment of its coke oven battery. The tender is
currently being adjudicated. Resuscitation of the battery should see
the company’s profitability improve in the medium term.


Disposal of houses and town infrastructure
The Company is also looking at disposing part of its housing stock and
town infrastructure to reduce its debt and financing cost. Valuations
have been analysed.


Operating loss
The operating loss of USD 14 853 661 (30 June 2017: USD 13 954 423; 31
December 2017: USD 24 191 567) is mainly attributable to the lower
revenue recorded in the period under review. The Company’s current
initiatives are expected to reverse the general poor production and
trading performance.
23 Financial risk management objectives and policies
The company’s principal financial liabilities comprise finance lease
liabilities, loans payable, bank overdrafts and trade payable. The
main purpose of these financial liabilities is to raise finance for
the Company’s operations. The Company has various financial assets
such as trade receivables and cash and short-term deposits, which
arise directly from its operations. Exposure to credit, interest rate
and currency risk arises in the normal course of Company’s business
and these are the main risks arising from the company’s financial
instruments.


23.1 Credit Risk
Management has a credit policy in place and the exposure to credit
risk is monitored on an ongoing basis. The Company assumes foreign
credit risk only on customers approved by the board and follows credit
review procedures for local credit customers.
Investments are allowed only in liquid securities and only with
approved financial institutions. At the reporting date there were no
significant concentrations of credit risk. The maximum exposure to
credit risk is represented by the carrying amounts of each financial
asset in the statement of financial position.


23.2 Interest rate risk
The company’s exposure to the risk of changes in market interest rates
relates primarily to the company’s long term and short-term debt
obligations and bank overdrafts. The Company’s policy is to manage its
interest cost using a mix of fixed and variable rate debts.


Harare
28 September 2018
Sponsor: Sasfin Capita (a member of the Sasfin group)

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