Wrap Text
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
Date: 31/05/2019 03:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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