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BUFFALO COAL CORPORATION - Condensed interim consolidated financial statements for the three months ended 31 March 2019 (unaudited)

Release Date: 31/05/2019 15:00
Code(s): BUC     PDF:  
 
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Condensed interim consolidated financial statements for the three months ended 31 March 2019 (unaudited)

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 months ended           
March 31, 2019 and March 31, 2018    
(Presented in South African Rands)   


Condensed Interim Consolidated Statements of Financial Position (Unaudited)
(Presented in South African Rands)
                                                                                                  March 31,      December 31,       March 31,   
                                                                                                       2019              2018            2019   
                                                                                                                                     (Note 1)   
                                                                                   Notes                  R                 R              C$   
Assets                                                                                                                                          
Non-current assets                                                                                                                              
Property, plant and equipment                                                          3         56 737 116        58 483 832       5 231 454   
Right of use assets                                                                    4          4 281 963                 -         394 819   
Investment in financial assets                                                         5            199 720           194 484          18 415   
Other receivables - restricted                                                         5         55 737 617        54 901 857       5 139 295   
Other receivables                                                                                 7 823 306         7 823 306         721 349   
Long-term restricted cash                                                                        11 200 000        11 200 000       1 032 698   
Total non-current assets                                                                        135 979 722       132 603 479      12 538 030   
Current assets                                                                                                                                  
Trade and other receivables                                                                      31 350 680        48 284 245       2 890 694   
Inventories                                                                                      45 334 505        41 823 681       4 180 075   
Current tax assets                                                                                        -           864 711               -   
Cash and cash equivalents                                                                         6 186 706         5 231 958         570 446   
Total current assets                                                                             82 871 890        96 204 595       7 641 216   
Total assets                                                                                    218 851 613       228 808 074      20 179 245   
Equity (deficiency) and liabilities                                                                                                             
Capital and reserves                                                                                                                            
Share capital                                                                                 1 089 305 350     1 089 305 350     100 439 556   
Currency translation reserve                                                                  (219 945 085)     (219 945 085)    (20 280 068)   
Reserves                                                                                          9 697 835         9 697 835         894 190   
Accumulated retained loss                                                                   (1 285 040 248)   (1 285 872 161)   (118 487 320)   
(Deficiency) attributable to owners of the company                                            (405 982 148)     (406 814 061)    (37 433 642)   
Non-controlling interest                                                                          4 339 142         4 339 142         400 091   
Total (deficiency)                                                                            (401 643 006)     (402 474 919)    (37 033 551)   
Non-current liabilities                                                                                                                         
Asset retirement obligation                                                            8         43 077 079        44 605 975       3 971 928   
Lease liabilities                                                                      4          2 640 711                 -         243 487   
Total non-current liabilities                                                                    45 717 790        44 605 975       4 215 415   
Current liabilities                                                                                                                             
Trade and other payables                                                              11         77 444 409        95 352 468       7 140 773   
Current portion of lease liabilities                                                   4          1 641 252                 -         151 332   
Current tax liabilities                                                                             850 865           828 558          78 454   
Current portion of borrowings                                                          7        102 346 641       100 982 963       9 436 887   
RCF loan facilities                                                                    6        387 059 894       381 087 383      35 688 913   
Conversion option liability                                                            5            148 514         3 132 577          13 694   
Warrant liability                                                                      5                  8             7 825               1   
Current portion of asset retirement obligation                                         8          5 285 246         5 285 246         487 327   
Current liabilities                                                                             574 776 829       586 677 020      52 997 381   
Total liabilities                                                                               620 494 619       631 282 995      57 212 796   
Total equity (deficiency) and liabilities                                                       218 851 613       228 808 074      20 179 245   

Commitments and contingencies                                                      1, 13                                                                     
Subsequent events                                                                     14                                                                                    

Approved on behalf of the Board:                                                                          

Signed, "Craig Wiggill", director   Signed, "Robert Francis", director                                    

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


Condensed Interim Consolidated Statements of Profit or Loss and Other Comprehensive Profit or Loss (Unaudited)
(Presented in South African Rands)
                                                                                                               3 months ended                   
                                                                                                  March 31,         March 31,       March 31,   
                                                                                   Notes               2019              2018            2019   
                                                                                                                                     (Note 1)   
                                                                                                          R                 R              C$   
Revenue                                                                                          96 187 952       190 425 180       8 869 024   
Cost of sales                                                                                  (70 924 084)     (145 168 409)     (6 539 565)   
Gross profit                                                                                     25 263 868        45 256 771       2 329 459   
Other income/(expenses) - net                                                          9          2 423 173      (43 628 104)         223 429   
General and administration expenses                                                   10       (17 218 298)      (21 863 431)     (1 587 616)   
Profit/(loss) before the undernoted                                                              10 468 743      (20 234 764)         965 273   
Finance income                                                                        11            309 985           922 855          28 582   
Finance expense                                                                       11        (9 946 815)      (14 513 772)       (917 148)   
Profit/(loss) before income tax                                                                     831 913      (33 825 681)          76 707   
Income tax expense                                                                                        -       (1 016 071)               -   
Total comprehensive profit/(loss) for the period                                                    831 913      (34 841 751)          76 707   
Profit/(loss) attributable to:                                                                                                                  
- Owners of the parent                                                                              831 913      (34 841 751)          76 707   
- Non-controlling interest                                                                                -                 -               -   
                                                                                                    831 913      (34 841 751)          76 707   
Net profit/(loss) per share - basic and diluted                                                        0.00            (0.08)            0.00   
Headline profit/(loss) per share - basic and diluted                                                   0.00            (0.08)            0.00   
Weighted average number of common shares outstanding:                                                                                           
- Basic                                                                                         421 352 596       411 704 440     421 352 596   
- Diluted                                                                                       421 352 596       411 704 440     421 352 596   

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


Condensed Interim Consolidated Statements of Changes in Equity (Unaudited)
(Presented in South African Rands)
                                                                                      Attributable to owners of the Group
                                                                                                   Reserves
                                                                                                                                                       Currency
                                                                 Share   Option reserve     Equity-settled       BEE option        Accumulated                                    Non-controlling
                                  No. of shares issued                                                                                              translation           Total                        Total equity
                                                               capital                        non-employee          reserve      retained loss                                           interest
                                                                                                                                                        reserve
                                                                                                  benefits   
                                                                     R                R                  R                R                  R                R               R                 R                 R   
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                         6 159 780       3 244 650                -                  -                -                  -                -       3 244 650                 -         3 244 650   
Stock-based compensation                             -               -              812        (2 028 840)                -                  -                -     (2 028 028)                 -       (2 028 028)   
Net (loss) for the period                            -               -                -                  -                -       (34 841 751)                -    (34 841 751)                 -      (34 841 751)   
Balance at March 31, 2018                  413 968 061   1 085 641 567        1 807 867          1 215 810        9 073 711    (1 253 523 668)    (219 945 085)   (375 729 798)         4 339 142     (371 390 656)   
Shares issued to STA                         7 384 535       3 663 783                -                  -                -                  -                -       3 663 783                 -         3 663 783   
Stock-based compensation                             -               -            1 335        (1 215 810)                -                  -                -     (1 214 475)                 -       (1 214 475)   
Stock options expired/cancelled                      -               -      (1 185 078)                  -                -          1 185 078                -               -                 -                 -   
Net (loss) for the period                            -               -                -                  -                -       (33 533 571)                -    (33 533 571)                 -      (33 533 571)   
Balance at December 31, 2018               421 352 596   1 089 305 350          624 124                  -        9 073 711    (1 285 872 161)    (219 945 085)   (406 814 061)         4 339 142     (402 474 919)   
Net profit for the period                            -               -                -                  -                -            831 913                -         831 913                 -           831 913   
Balance at March 31, 2019                  421 352 596   1 089 305 350          624 124                  -        9 073 711    (1 285 040 248)    (219 945 085)   (405 982 148)         4 339 142     (401 643 006)   

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


Condensed Interim Consolidated Statements of Cash Flow (Unaudited)
(Presented in South African Rands)
                                                                                                                    3 months ended                  
                                                                                                    March 31,            March 31,      March 31,   
                                                                                                         2019                 2018           2019   
                                                                                                                                         (Note 1)   
                                                                                                            R                    R             C$   
Cash flows from operating activities                                                                                                                
Cash generated from operations                                                                      5 671 445           35 126 807        522 936   
Interest received                                                                                     309 985              922 855         28 582   
Interest paid                                                                                     (3 336 871)          (7 051 592)      (307 677)   
Net cash generated from operating activities                                                        2 644 559           28 998 070        243 841   
Cash flows from investing activities                                                                                                                
Purchase of property, plant and equipment                                                         (1 689 811)          (6 590 901)      (155 809)   
Movement in non-interest bearing receivables                                                                -             (29 272)              -   
Net cash (utilized in) investing activities                                                       (1 689 811)          (6 620 173)      (155 809)   
Cash flows from financing activities                                                                                                                
Repayment of borrowings                                                                                     -         (30 000 000)              -   
Net cash (utilized in) financing activities                                                                 -         (30 000 000)              -   
Net increase/(decrease) in cash and cash equivalents                                                  954 748          (7 622 103)         88 033   
Cash and cash equivalents at the beginning of the period                                            5 231 958           21 428 994        482 413   
Cash and cash equivalents at the end of the period                                                  6 186 706           13 806 891        570 446   

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


Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)
For the periods ended March 31, 2019 and March 31, 2018
(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 three months ended March 31, 2019 and
March 31, 2018 have been prepared in accordance with the recognition and measurement criteria of International
Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB") and have
been prepared in accordance with accounting policies based on the IFRS standards and International Financial Reporting
Interpretations Committee ("IFRIC") interpretations and are in compliance with IAS 34, Interim Financial Reporting.
These Interim Results were approved and authorized for issue by the Board of Directors on May 29, 2019.

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, 2018, 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.

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, 2018, except for those disclosed in Note 2.

References to "R", "Rands" mean South African Rands, "C$" mean Canadian Dollars and to "US$" mean United States
Dollars. References to Q1 2019 mean the three months ended March 31, 2019.

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.

The Group's ability to continue as a going concern and ultimately continue long term operations, is dependent on its
ability to realize on the identified short-term opportunities and to secure the funding required for its medium to longer
term projects.

In October 2018, the Board formed a Special Committee to monitor developments. The Special Committee has
undertaken a further strategic review of the Company and its capital structure and is in the process of reviewing further
strategic alternatives that may be in the interests of Buffalo Coal and its stakeholders.

The Group continues to be in breach of certain covenants with respect to its borrowings from Investec Bank Limited
("Investec") at March 31, 2019. As at March 31, 2019, the Investec loan balance amounted to R102.3 million (December
31, 2018: R101.0 million). The Company negotiated further amendments to the repayment terms of the outstanding
term loan (R25.5 million) and revolving credit agreement (R79.8 million) with Investec. Pursuant to the amended
Investec term loan and revolving credit facility agreement dated March 05, 2019, Investec agreed not to exercise its
acceleration rights with respect to any existing events of default under the Investec Facility until June 30, 2019.

The Resource Capital Fund Convertible Loan ("RCF loan") of US$27 million is due and payable on June 30, 2019 (Refer to
Note 6, RCF loan facilities). As at April 15, 2019, RCF agreed to extend the maturity date until December 31, 2019 to
allow the Company to obtain financing in order to settle this amount as it currently does not expect to have the means
to repay this amount in full on the June due date.

It is uncertain what the outcome of the above-mentioned strategic review process will be and if the Company will be
able to obtain financing to settle its debt obligations.

Although the Group has, over time, 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
production and sales forecasts, it should be able to generate positive cash flows in the foreseeable future.

There is no assurance that the Company will be able to meet its covenants in the future, or that Investec will provide
future waivers or that RCF will provide further extensions, if required. These matters constitute material uncertainties
which cast significant doubt as to whether the Group can continue as a going concern.

As at March 31, 2019, the Company had a shareholders' deficiency of R401.6 million (December 31, 2018: R402.5
million), and a working capital deficiency of R491.9 million (December 31, 2018: R490.5 million). The Company recorded
a net profit of R0.8 million for the three months ended March 31, 2019 (March 31, 2018: net loss of R34.8 million).

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

Convenience rate translation

The Company's functional and presentation currency is Rands. The Canadian Dollar amounts provided in the Interim
Results represent supplementary information solely for the convenience of the reader. The financial position as of
March 31, 2019 and the financial results for the three months ended March 31, 2019 were translated into Canadian
Dollars using a convenience translation at the rate of C$1:R10.8454, which is the exchange rate published on
Oanda.com as of March 31, 2019. 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 interim financial statements have been prepared using the same accounting policies and methods as were used for
the Company's consolidated financial statements and the notes thereto for the years ended December 31, 2018 and
December 31, 2017 (the "2018 Annual Financial Statements"), except for the following new accounting
pronouncements which were adopted on January 1, 2019. The Financial Statements should be read in conjunction with
the 2018 Annual Financial Statements.

The following standards, amendments and interpretations are issued and effective for the first time for the 3 months
ended March 31, 2019:

IFRS 16 - 'Leases'

The Company adopted IFRS 16 effective January 1, 2019, and the standard was applied using the modified retrospective
method. The modified retrospective method does not require restatement of prior period financial information as it
recognizes the cumulative effect, if any, as an adjustment to opening retained earnings and applies the standard
prospectively. Accordingly, comparative information in the Company's consolidated financial statements are not
restated and continues to be reported under IAS 17.

On adoption of IFRS 16, the Company has recognized right of use ("ROU") assets and a corresponding lease liability in
relation to all lease arrangements, excluding commitments in relation to arrangements not containing leases (service
agreements), measured at the present value of the remaining lease payments as at December 31, 2018. ROU assets and
a lease liability were recorded as of January 1, 2019, with no impact on the Company's deficit.

When measuring the lease liability, the Company discounts lease payments using the interest rate implicit in the lease,
or the Company's incremental borrowing rate if the interest rate implicit in the lease cannot be readily determined.

The Company assesses new contracts at inception to determine whether it contains a lease. This assessment involves
the exercise of judgement about whether the asset is specified for the Company, whether the Company obtains
substantially all the economic benefits from use of that asset, and whether the Company has the right to direct the use
of the asset.

Leases are recognized as a ROU asset with a corresponding liability at the date of which the leased asset is available for
use by the Company. Each lease payment is allocated between the lease liability and finance expense. The finance
expense is charged to the statement of profit or loss over the lease term to produce a constant periodic rate of interest
on the remaining balance of the liability for each reporting period. The ROU asset is depreciated over the shorter of the
asset's useful life and the lease term on a straight-line basis. Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include the net present value of fixed payments, less any lease
incentives receivable, variable lease payments that are based on an index or a rate, amounts expected to be payable by
the lessee under residual value guarantees, the exercise price of a purchase option if the lessee is reasonably certain to
exercise that option, and payments of penalties for terminating the lease, if the lease term reflects the lessee exercising
that option. It is remeasured when there is a change in the future lease payments arising from a change in an index or
rate, if there is a change in the amount expected to be payable under a residual value guarantee or if there is a change
in the assessment of whether the Company will exercise a purchase, extension or termination option that is within the
control of the Company. ROU assets are measured at cost comprising of the amount of the initial measurement of lease
liability, any lease payments made at or before the commencement date, any initial direct costs and restoration costs.

Payments associated with short-term leases and leases of low-value assets are recognized on a straight-line basis as an
expense in the statement of profit or loss. Short-term leases are leases with a lease term of 12 months or less.

In determining the lease term, management considers all facts and circumstances that create an economic incentive to
exercise an extension option, or not exercise a termination option. The assessment is reviewed if a significant event or a
significant change in circumstances occurs which affects this assessment.

IFRIC 23 - "Uncertainty over Income Tax Treatments"

On January 1, 2019, the Company also adopted the new accounting standard IFRIC 23. The interpretation provides
guidance on the accounting for current and deferred tax liabilities and assets in circumstances in which there is
uncertainty over income tax treatments. The Company has concluded that there is no significant impact resulting from
the application of this new standard on its consolidated financial statements.

3      PROPERTY, PLANT AND EQUIPMENT

                                                                                              Office                                                   
                                                                                          equipment,    Development                                    
                                                           Land and                     fixtures and          costs                                    
                                                          buildings    Mining assets        fittings    capitalized   Mineral rights           Total   
                                                                  R                R               R              R                R               R   
Year to date March 31, 2019                                                                                                                            
Opening net book value                                    1 523 187       40 957 393       1 137 030     14 866 222                -      58 483 832   
Additions                                                         -          697 585               -        992 226                -       1 689 811   
Change in estimates of asset retirement obligation                -          231 639               -              -                -         231 639   
Depreciation                                               (41 535)      (2 851 653)        (94 750)      (680 228)                -     (3 668 166)   
Net book value at end of March 2019                       1 481 652       39 034 964       1 042 280     15 178 220                -      56 737 116   
Year to date March 31, 2019                                                                                                                            
Cost                                                      7 757 896      406 999 457       8 850 063     50 460 227       14 009 756     488 077 399   
Accumulated depreciation                                (6 276 244)    (367 964 493)     (7 807 783)   (35 282 007)     (14 009 756)   (431 340 283)   
Net book value at end of March 2019                       1 481 652       39 034 964       1 042 280     15 178 220                -      56 737 116   
                                                                                              
                                                                                              Office                                                   
                                                                                          equipment,    Development                                    
                                                           Land and                     fixtures and          costs                                    
                                                          buildings    Mining assets        fittings    capitalized   Mineral rights           Total   
                                                                  R                R               R              R                R               R   
Year ended December 31, 2018                                                                                                                           
Opening net book value                                    2 177 512       69 850 758         447 452     26 766 779        7 643 415     106 885 916   
Additions                                                    93 756       19 596 213         945 318      9 045 462                -      29 680 749   
Change in estimates of asset retirement obligation                -       11 957 124               -              -                -      11 957 124   
Disposals                                                         -        (252 865)               -              -                -       (252 865)   
Impairment loss                                           (548 298)     (49 139 353)        (12 864)   (17 789 887)                -    (67 490 402)   
Reclasification of impairment recorded at year-end           12 932        6 413 590         130 376      1 086 517      (7 643 415)               -   
Depreciation                                              (212 715)     (17 468 074)       (373 252)    (4 242 649)                -    (22 296 690)   
Net book value at end of year                             1 523 187       40 957 393       1 137 030     14 866 222                -      58 483 832   
Year ended December 31, 2018                                                                                                                           
Cost                                                      7 757 896      406 070 234       8 850 063     49 468 000       14 009 756     486 155 949   
Accumulated depreciation                                (5 686 411)    (315 973 488)     (7 700 169)   (16 811 891)     (14 009 756)   (360 181 715)   
Impairment loss                                           (548 298)     (49 139 353)        (12 864)   (17 789 887)                -    (67 490 402)   
Net book value at end of year                             1 523 187       40 957 393       1 137 030     14 866 222                -      58 483 832   


Office equipment includes items to the value of R0.1 million (December 31, 2018: R0.1 million) that are not directly used
in production and operations and relate to property, plant and equipment in the Company's corporate office in South
Africa. All property, plant and equipment is located in South Africa.

Depreciation expense of R3.6 million for the three months ended March 31, 2019 and R5.5 million for the three months
ended March 31, 2018, respectively, was recognized in 'cost of sales'.

4       LEASES

Lease liabilities

On adoption of IFRS 16, the Company recognized liabilities in relation to leases which had previously been classified as
operating leases under the principles of IAS 17 Leases. These liabilities were measured at the present value of the
remaining lease payments, discounted using the Company's incremental borrowing rate as at January 1, 2019 of
11.15%.

                                                                                                             March 31, 2019   
                                                                                    Land      Buildings               Total   
                                                                                       R              R                   R   
Lease liabilities recognized at January 1, 2019                                3 703 026        989 250           4 692 276   
Finance charges                                                                  106 605          6 956             113 561   
Payments made                                                                  (342 344)      (181 530)           (523 874)   
Closing balance                                                                3 467 287        814 676           4 281 963   
Current lease liabilities                                                        942 960        698 292           1 641 252   
Non-current lease liabilities                                                  2 524 326        116 385           2 640 711   


Right of use assets

The associated right of use assets were measured at the amount equal to the lease liability and they relate to the
following types of assets:

                                                                                                             March 31, 2019   
                                                                                    Land      Buildings               Total   
                                                                                       R              R                   R
Right of use assets recognized at January 1, 2019                              3 703 026        989 250           4 692 276   
Depreciation                                                                   (235 739)      (174 574)           (410 313)   
Closing balance                                                                3 467 287        814 676           4 281 963   


Included in the lease of land is a servitude agreement between Zinoju Coal and Avemore Trust whereby a servitude is
granted over a portion of land, used for operations. The servitude is calculated at a fixed rate per ROM tonnes produced,
escalated each year at a percentage equal to the CPI of the previous year. The expiry date is the date on which
operations ceases.

Also included in the lease of land is an agreement with the Magdalena landowners relating to the lease of the
Magdalena farm. The total lease amount of R1.8 million has been paid for in advance during December 2010.
The balance included in trade and receivables as prepaid expenses is R1.0 million as at March 31, 2019 (December 31,
2018: R1.1 million).

Buildings being leased relate to the Company's corporate office in Centurion, South Africa, which has been renewed for
a further period to June 30, 2020.

5      FINANCIAL INSTRUMENTS AT FAIR VALUE

The following table presents the Group's financial assets and liabilities measured at fair value at March 31, 2019 and
December 31, 2018:

                                                        Level 1            Level 2           Level 3   
                                                              R                  R                 R   
March 31, 2019                                                                                         
Investment in financial assets                          199 720                  -                 -   
Other receivable - restricted                                 -         55 737 617                 -   
Conversion option liability                                   -            148 514                 -   
Warrant liability                                             -                  8                 -   
December 31, 2018                                                                                      
Investment in financial assets                          194 484                  -                 -   
Other receivable - restricted                                 -         54 901 857                 -   
Conversion option liability                                   -          3 132 577                 -   
Warrant liability                                             -              7 825                 -   
                       

Warrant liability

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 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 calculated using the Black-Scholes option pricing model:

                                                      March 31,        December 31,          Initial   
                                                           2019                2018      assumptions   
Volatility (based on historical share price)             117.9%              131.5%           100.0%   
Life (in years) to maturity date                            0.3                 0.5              5.0   
Risk-free interest rate                                   1.47%               1.90%            1.71%   
Share price (C$)                                           0.01                0.01             0.10   
Potential shares                                     34 817 237          34 817 237       34 817 237   
Warrant valuation (C$)                                        1                 741        2 284 865   
Warrant valuation (R)                                         8               7 825       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 R390.9 million) (December
31, 2018: US$27.0 million (approximately R388.7 million)) using the effective interest rate method at approximately
5.3% (December 31, 2018: 5.3%).

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

                                                       March 31,       December 31,          Initial   
                                                            2019               2018      assumptions   
Volatility (based on historical share price)              117.9%             131.5%     51.0%-107.0%   
Life (in years) to maturity date                             0.3                0.5          3.9-5.0   
Risk-free interest rate                                    1.47%              1.90%        0.5%-1.5%   
Share price (C$)                                            0.01               0.01      0.035-0.095   
Potential shares                                     768 566 226        784 738 593      720 351 931   
Value of convertible feature (C$)                         13 694            296 616       18 191 938   
Value of convertible feature (R)                         148 514          3 132 577      182 348 706   


Movement in the Conversion Option Liability was as follows during the three months ended March 31, 2019 and year
ended December 31, 2018:

                                                                      March 31, 2019       December 31, 2018   
                                                                                   R                       R   
Opening balance                                                            3 132 577                  28 289   
Fair value adjustment                                                    (2 982 402)               (831 739)   
Foreign currency translation adjustment                                      (1 660)               3 936 027   
Current portion                                                              148 514               3 132 577   
Long-term portion                                                                  -                       -   


The Conversion Option Liability is linked to the RCF Loan facility which becomes due and payable as at June 30, 2019
(Refer to Note 6). Consequently, the long-term portion of the liability has been reclassified as current as at December 31,
2018 and March 31, 2019.

6      RCF LOAN FACILITIES

Movement in the RCF Convertible Loan was as follows:

                                                                      March 31, 2019       December 31, 2018   
                                                                                   R                       R   
Opening balance                                                          381 087 383             314 762 527   
Accretion expense                                                          3 656 929              13 585 885   
Effect of foreign currency exchange difference                             2 315 582              52 738 971   
Current portion                                                          387 059 894             381 087 383   
Long-term portion                                                                  -                       -   


The RCF loan becomes due and payable as at June 30, 2019. Consequently, the entire liability has been presented as
current as at December 31, 2018 and March 31, 2019.

On April 15, 2019, RCF agreed to extend the maturity date until December 31, 2019 to allow the Company to obtain
other financing in order to settle this amount as the Company currently does not expect to have the means to repay this
amount in full on the due date (Refer to Note 1, Basis of Preparation - Going Concern). This maturity date extension does
not affect the classification of the loan as current.

7       INVESTEC BORROWINGS

Borrowings consisted of the Investec loan facilities as detailed below:

                                                                      March 31, 2019       December 31, 2018   
                                                                                   R                       R 
Opening balance                                                          100 982 963             187 955 977   
Accretion of warrant asset                                                 2 077 966               6 816 773   
Effect of foreign currency exchange difference                             (732 170)                  98 381   
Amortisation of deferred cost                                                      -               1 129 715   
Interest accrued                                                           3 362 982              16 649 213   
Interest paid                                                            (3 345 100)            (16 667 096)   
Repayments                                                                         -            (95 000 000)   
Current portion                                                          102 346 641             100 982 963   
             

On March 05, 2019, the Company accepted and agreed to Investec's amendment to the Term Loan and Revolving Credit
Facility Agreement. Pursuant to the amended agreement, the final maturity date has been extended from December 31,
2019 to September 30, 2020, with revised quarterly repayment instalments of R25.5 million at the end of June 2019, R20
million at the end of September 2019 and December 2019, R10 million at the end of March 2020, and R15 million at the
end of June 2020 and September 2020. The Corporation is obliged to pay any accrued royalties payable to Investec at
the end of September 2020 (R5.8 million as at March 31, 2019, December 31, 2018: R5.6 million). In addition, Investec
agreed not to exercise its acceleration rights with respect to any existing events of default under the Investec Facility
until June 30, 2019.

The current portion at March 31, 2018 and December 31, 2018 comprised of the following:

                                                                      March 31, 2019       December 31, 2018   
                                                                                   R                       R  
Investec Loan Facilities Outstanding                                     105 345 628             105 327 746   
Bullet Facility                                                           25 508 327              25 508 327   
Working Capital Facility                                                  79 837 301              79 819 419   
Less: Warrant asset                                                      (2 998 987)             (4 344 783)   
Current portion                                                          102 346 641             100 982 963   


8      ASSET RETIREMENT OBLIGATION                                                    

                                                                      March 31, 2019       December 31, 2018   
                                                                                   R                       R    
Opening balance                                                           49 891 221              35 898 183   
Change in estimate                                                       (1 528 896)              13 993 038   
- Included in property, plant and equipment                                  231 639              11 957 124   
- Reversal of provision                                                  (2 393 521)                       -   
- Allocation to current provisions                                           200 332                 552 642   
- Unwinding of discount                                                      432 654               1 483 272   
Closing balance                                                           48 362 325              49 891 221   
Current portion                                                          (5 285 246)             (5 285 246)   
Non-current portion                                                       43 077 079              44 605 975   


The change in estimate during the year ended December 31, 2018 included R12.0 million that resulted from a reduction in
rehabilitation period of the rehabilitation obligation associated with Magdalena from 15 years to 7 years based on the
decision to close Magdalena. The reversal of provision during the three months ended March 31, 2019 relates to the
changes in the discount and inflation rates used.

The provision is calculated using the following rates:

                                                                      March 31, 2019       December 31, 2018   
Discount rate (%)                                                               8.53                    9.62   
Inflation rate (%)                                                              4.10                    5.30   


9   OTHER INCOME/(EXPENSE) - NET                                                                     
                                                                                   3 months ended   
                                                                      March 31, 2019          March 31, 2018   
                                                                                   R                       R   
Foreign exchange (loss)/gain - net                                       (1 774 418)              15 530 666   
Net profit on disposal of property, plant and equipment                      182 298                       -   
Scrap sales                                                                   63 546                       -   
Fair value adjustment on financial assets                                    835 760                 610 651   
Fair value adjustment on conversion option and warrant liability           2 990 205            (60 579 210)   
Other income                                                                 125 782                 809 789   
Total                                                                      2 423 173            (43 628 104)   


10   GENERAL AND ADMINISTRATION EXPENSES                                        
                                                                                   3 months ended   
                                                                      March 31, 2019          March 31, 2018   
                                                                                   R                       R   
Audit and tax related fees                                                   964 660               1 043 725   
Bad debts                                                                  5 346 707               1 668 350   
Consulting fees                                                            1 056 075               1 249 255   
Directors fees                                                               685 239                 723 632   
Insurance                                                                  2 198 180               1 365 526   
Legal fees                                                                   294 331               1 064 082   
Penalties (DMR)                                                          (1 075 000)               2 000 000   
Rent paid                                                                     12 640                 177 530   
Rehabilitation adjustment (income)/expenses                              (2 193 190)                 254 393   
Salaries and wages                                                         7 838 591               9 380 465   
Shareholder communication and listing fees                                   231 922                 171 610   
Travel and accommodation                                                     372 616                 802 157   
Telephone, internet and computer expenses                                    453 889                 577 058   
Other                                                                      1 031 636               1 385 648   
Total                                                                     17 218 298              21 863 431   


During the three months ended March 31, 2019, two debtors went into business rescue. The outcome of the business
rescue processes was not known as at the date of these interim financial statements and consequently the entire R5.3
million amount outstanding related to these debtors was provided for as bad debt.

The provision for penalties payable in connection with the Calcine plant provided for during the year ended December
31, 2018, was reduced from R2.0 million to R0.9 million, during the three months ended March 31, 2019, following the
outcome of the 24G assessment and penalty issued by the Economic Development, Tourism and Environmental Affairs.

11   FINANCE INCOME AND EXPENSE                                                        
                                                                                   3 months ended   
                                                                      March 31, 2019          March 31, 2018   
                                                                                   R                       R   
Finance income                                                                                                 
Interest on cash and restricted cash                                         309 985                 922 855   
Total                                                                        309 985                 922 855   
Finance expense                                                                                                
Interest on borrowings                                                   (2 865 187)             (7 963 845)   
Interest on the RCF loan facilities                                        (243 079)               (347 976)   
Interest on STA accounts payable                                           (504 942)             (1 512 033)   
Interest to South African Revenue Service ("SARS")                          (30 756)                       -   
Unwinding discount on asset retirement obligation                          (432 654)               (253 476)   
RCF Loan accretion expense                                               (3 656 929)             (2 961 315)   
Investec accretion of warrant asset                                      (2 077 966)             (1 466 849)   
Finance charges on lease liabilities                                       (113 562)                       -   
Other                                                                       (21 740)                 (8 278)   
Total                                                                    (9 946 815)            (14 513 772)   

Interest on borrowings included royalties payable to Investec of R0.1 million for the three months ended March 31, 2019
(March 31, 2018: R2.7 million) 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. As at March 31, 2019, R5.8 million in royalties
payable to Investec was included in Trade and other payables (December 31, 2018: R5.7 million).

12     RELATED PARTIES

During the three months ended March 31, 2019 and March 31, 2018, the Company did not enter into any transactions
with related parties in the ordinary course of business.

The following balances were outstanding as at March 31, 2019 and December 31, 2018:

R'000                                                                 March 31, 2019       December 31, 2018   
Related party payables                                                                                         
RCF (1)                                                                       5 093                    4 846   
   
These amounts are unsecured, non-interest bearing with no fixed terms of repayment.

(1) RCF is a related party to the Company as a result of owning a controlling investment in the Company. As set out in the
third amended and restated convertible loan agreement with RCF, RCF has invoiced the Company for costs incurred
relating to the loan facilities, which are disclosed above. In addition to these costs, included in payables are accrued
interest payable to RCF of R3.3 million (December 31, 2018: R3.1 million) on the RCF Convertible loan as well as costs
invoiced by RCF to the Company in previous years that have not been settled.

Compensation of key management personnel

In accordance with IAS 24 - Related-Party Disclosures, key management personnel are those persons having authority
and responsibility for planning, directing and controlling the activities of the Company directly or indirectly, including any
directors (executive and non-executive) of the Company.

The remuneration of directors and other key members of management personnel (officers) during the three months
ended March 31, 2019 and March 31, 2018 were as follows:

                                                                                     3 months ended   
R'000                                                                 March 31, 2019          March 31, 2018   
Short-term benefits                                                            2 410                   2 844   
Share-based payments                                                               -                       1   
Total                                                                          2 410                   2 845   
                                               

Amounts owing to directors and other members of key management personnel were R0.3 million as of March 31, 2019
(December 31, 2018: R0.4 million).

13     COMMITMENTS AND CONTINGENCIES

Management Agreements

Certain management contracts require that payments of approximately R3.9 million be made upon the occurrence of a
change of control, other than a change of control attributable to RCF and/or Investec. As no triggering event has taken
place, no provision has been recognised as of March 31, 2019.

Capital Commitments

Capital expenditures contracted for at the statement of financial position date but not recognized in the Interim Results
are as follows:

                                                                      March 31, 2019        December 31, 2018   
                                                                                   R                        R   
Property, plant and equipment                                              8 961 022                5 219 959   


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 in the process implementing such devices with completion scheduled for the end of calendar
2019.

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 previously 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"). R2.45 million had been provided for during December 2017 to
settle potential penalties for the non-compliance. The mine has not yet been issued with any penalties in this regard.
Accordingly, the full amount has been included in Provisions (Trade and other payables) as at March 31, 2019.

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"). An additional R2.0 million had been
provided for in Q1 2018 to settle estimated fines for non-compliance. On April 24, 2019, the Company received a fine
letter from the EDTEA which imposed a fine of R925,000 for non-compliance. Accordingly, the provision included in
Trade and other payables was reduced to R0.9 million as at March 31, 2019.

The Company has made, and expects to make in the future, expenditures to comply with environmental laws and
regulations.

14     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.

31 May, 2019

Sponsor: Questco Corporate Advisory Proprietary Limited



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