TIDMMCM
RNS Number : 1261C
MC Mining Limited
27 September 2018
MC MINING LIMITED
AUDITED ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
(Expressed in United States Dollars unless otherwise stated)
MC MINING LIMITED
AUDITED ANNUAL CONSOLIDATED FINANCIAL STATEMENTS INDEX
Page
Directors' Report 2
Auditor's Independence Declaration 21
Directors' Declaration 22
Consolidated Statement of Profit or Loss
and Other Comprehensive Income 23
Consolidated Statement of Financial Position 24
Consolidated Statement of Changes in Equity 25
Consolidated Statement of Cash Flows 26
Notes to the Consolidated Financial Statements 27
Independent Auditor's Report 87
MC MINING LIMITED
DIRECTORS' REPORT
The directors of MC Mining Limited submit herewith the annual
report of the Company and the entities controlled by the Company
(its subsidiaries), collectively referred to as the "Group", for
the financial year ended 30 June 2018. All balances are denominated
in United States dollars unless otherwise stated.
In order to comply with the provisions of the Corporations Act
2001, the directors report as follows:
Information about the directors and key management personnel
The names and particulars of the directors of the Company during
or since the end of the financial year are set out below. Unless
otherwise stated, the directors held office during the whole of the
financial year:
Bernard Robert Independent Non-Executive Mr Pryor is currently the
Pryor Chairman chief executive officer
of Alufer Mining Limited
and was previously the CEO
of African Minerals Limited
and prior to that the Chief
Executive of Q Resources
Plc. Between 2006 and 2010
he held senior executive
positions within Anglo American
Plc as Head of Business
Development, and CEO of
Anglo Ferrous Brazil Inc.
David Hugh Brown Executive Director Mr Brown is a Chartered
and Chief Executive Accountant (CA (SA)) and
Officer completed his articles with
Ernst & Young, graduating
from the University of Cape
Town. Mr Brown joined MC
Mining following a tenure
of almost 14 years at Impala
Platinum Holdings Limited
(Implats). He joined the
Impala Group in 1999 and
served as CFO of Implats
before being appointed chief
executive officer in 2006.
He is currently an independent
Non-executive Director of
Vodacom Group Limited and
Northam Platinum Limited.
In the past he has served
as a non-executive director
of Simmer & Jack Limited,
as well as Edcon Holdings
Limited and chairman of
ASX listed Zimplats Holdings
Limited.
Brenda Berlin Executive Director Ms Berlin was appointed
and Chief Financial as CFO and Executive Director
Officer of MC Mining on 24 April
2018 from Implats where
she held the position of
Group CFO. Brenda joined
Implats in 2004 and held
a number of senior appointments
including head of group
corporate finance activities
until her appointment as
CFO in 2011. She is a CA
(SA) and obtained degrees
from the University of the
Witwatersrand and completed
her articles at PwC South
Africa. Prior to working
at Implats, Brenda worked
for Johnnic Holdings Limited
in the corporate finance
department and following
its unbundling, remained
with JCI Limited (JCI) assuming
responsibility for business
development. After leaving
JCI Brenda commenced working
for Southern Mining Corporation
Limited.
De Wet Olivier Executive Director Mr Schutte resigned as CFO
Schutte and Chief Financial and Executive Director on
Officer 30 November 2017. De Wet
is a CA (SA) and completed
an MBA at the University
of Virginia in 2002. He
has been involved at a senior
level in the mining and
natural resources industry
for the past 16 years, most
notably as Managing Director,
Natural Resources at Macquarie
Bank and CFO at the listed
platinum producer, Atlatsa
Resources Corporation Limited.
Prior to these positions
he worked for Harmony Gold
Mining (Pty) Ltd as its
New Business and Exploration
Executive for a period of
three years.
An Chee Sin Non-executive Director Mr Chee Sin is an Accredited
Tax Practitioner with the
Singapore Institute of Accredited
Tax Professionals and is
also a Chartered Accountant
with the Institute of Singapore
Chartered Accountants. He
has more than 17 years of
extensive experience in
international and local
corporate taxation and co-founded
Pinnacle Tax Services Pte
Ltd (Pinnacle Tax) in 2004.
Prior to joining Pinnacle
Tax he held the position
of Director of Corporate
Tax with KPMG and has coordinated
various advisory projects,
including cross-border fund
structures, corporate restructurings,
treasury and mergers and
acquisitions.
Andrew David Independent Non-Executive Mr Mifflin obtained his
Mifflin Director BSc. (Hons) Mining Engineering
from Staffordshire University
and has a Master's Degree
in Business Administration.
Andrew has over 30 years'
experience specifically
in the coal mining arena.
His experience spans across
various organisations such
as British Coal Corporation,
Xstrata and more recently
GVK Resources. He has gained
in depth knowledge in coal
operations, both thermal
and hard coking coal as
well as in project development.
Brian He Zhen Non-executive Director Mr Zhen holds a bachelor's
degree in business administration
from Sichuan University
and is currently Marketing
and Public Relations Executive
for Pan African Mining Pvt.
Ltd. Between 2012 and 2015,
Brian worked as Managing
Director of Real Gain Investment
Pvt. Ltd and was responsible
for infrastructure and construction
market development, as well
as overseas market investments.
He has previously served
as Construction Manager
for CRI - Eagle Investments
(Pty) Ltd and Eagle Canyon
Investments (Pty) Ltd.
Khomotso Brian Independent Non-Executive Mr Mosehla is a CA (SA)
Mosehla Director and completed his articles
with KPMG. Khomotso worked
at African Merchant Bank
Limited for five years where
he gained a broad range
of experience, including
management buy-out, leveraged
buy-out and capital restructuring/raising
transactions. In 2003, he
established Mvelaphanda
Corporate Finance for the
development of Mvelaphanda's
mining and non-mining interests.
Mr Mosehla served as a director
on the boards of several
companies, including Mvelaphanda
Resources Limited, and he
is currently the CEO of
Mosomo Investment Holdings
Proprietary Limited. Mr
Mosehla is currently a Non-executive
Director of Northam Platinum
Limited as well as Zambezi
Platinum Limited.
Peter George Independent Non-Executive Mr Cordin has a Bachelor
Cordin Director of Engineering from the
University of Western Australia
and is experienced in the
evaluation, development
and operation of resource
projects within Australia
and overseas. He is a Non-executive
Director of Vital Metals
Limited and Aurora Minerals
Limited.
Rudolph Henry Independent Non-Executive Mr Torlage resigned as a
Torlage Director Director of the Company
on 26 April 2018. He is
a CA (SA) and has over twenty
years' experience with ArcelorMittal
South Africa Limited (AMSA).
He is currently General
Manager, Strategy and Special
Projects and a Board member
of various unlisted AMSA
Group companies. He was
previously the Executive
Director Finance at AMSA.
Shangren Ding Non-executive Director Mr Ding is an experienced
professional engineer and
has worked for a number
of mining and energy companies
as well as acting as a consultant
to government geological
bureaus. Shangren has over
30 years' experience predominantly
in the coal mining sector
and has gained extensive
operational coal mining
knowledge through chief
operating roles at a number
of mines in the Heilongjiang
province in the People's
Republic of China. Since
2014, Mr Ding has worked
in a number of senior roles
for Beijing Haohua Energy
Resource Co., Ltd.
Thabo Felix Independent Non-Executive Mr Mosololi is a CA (SA)
Mosololi Director and brings considerable
expertise as a director
of various companies as
well as from his time as
Finance Director and Operations
Director with Tsogo Sun.
Thabo has 20 years of experience
within the South African
corporate environment. Mr
Mosololi is currently a
director of Pan African
Resources PLC.
De Wet Schutte resigned on 30 November 2017 and Rudolph Torlage
resigned on 26 April 2018 while Brenda Berlin, An Chee Sin
and Brian He Zhen were appointed to the Board of Directors
on 24 April 2018. All other directors held office during and
since the end of the previous financial year.
Directorships of other listed companies
Directorships of other listed companies held by the directors in
the three years immediately before the end of the financial year
are as follows:
Director Company Period of directorship
----------------- --------------------------------- -----------------------
Bernard Pryor None
David Brown Vodacom Group Limited 2012 - Present
Northam Platinum Limited 2017 - Present
Brenda Berlin Impala Platinum Holdings Limited 2011-2017
Zimplats Holdings Limited 2011-2017
An Chee Sin None
Andrew Mifflin None
Brian He Zhen None
Khomotso Mosehla Northam Platinum Limited 2015 - Present
Zambezi Platinum Limited 2015 - Present
Peter Cordin Vital Metals Limited 2009 - Present
Aurora Minerals Limited 2014 - Present
Rudolph Torlage None
Shangren Ding None
Thabo Mosololi Evraz Highveld Steel & Vanadium 2013 - 2015
Limited
Pan African Resources PLC 2014 - Present
Directors' shareholdings
The following table sets out each director's relevant interest
in shares or options in shares or debentures of the Company as at
the date of this report. All shareholdings, options and performance
rights reflect the 20:1 share consolidation completed in December
2017.
Director Ordinary shares Performance rights Unlisted options
---------------- ---------------- ------------------- -----------------
B Pryor (1) 7,500 - 50,000
D Brown (2) 41,250 1,674,061 -
B Berlin - - -
A Chee Sin - - -
A Mifflin (3) - - 50,000
H Zhen - - -
K Mosehla (4) - - 50,000
P Cordin (5) 68,553 - 50,000
S Ding - - -
T Mosololi (6) 500 - 50,000
117,803 1,674,061 250,000
---------------- ---------------- ------------------- -----------------
1. Mr Pryor was issued with the following share options:
-- 50,000 share options with an exercise price of GBP1.10, and
expiring three years from date of issue, issued on 27 November
2015.
2. Mr Brown was issued with the following performance rights:
-- 485,702 unlisted conditional performance rights were granted
on 30 November 2015. 562,747 performance rights were granted on 30
November 2016. 625,612 performance rights were granted on 24
November 2017. The performance rights were granted for no
consideration. No exercise price is payable upon exercise of the
performance rights.
3. Mr Mifflin was issued 50,000 share options with an exercise
price of GBP1.10, and expiring three years from date of issue,
issued on 27 November 2015.
4. Mr Mosehla was issued 50,000 share options with an exercise
price of GBP1.10, and expiring three years from date of issue,
issued on 27 November 2015.
5. 47,915 shares are held by the Cordin Pty Ltd (The Cordin
Family Trust) and 20,638 shares held by Cordin Pty Ltd (The Cordin
Superannuation Fund). Mr Cordin is a beneficiary of both the trust
and superannuation fund. Mr Cordin was issued 50,000 share options
with an exercise price of GBP1.10, and expiring three years from
date of issue, issued on 27 November 2015.
6. Mr Mosololi was issued 50,000 share options with an exercise
price of GBP1.10, and expiring three years from date of issue,
issued on 27 November 2015.
Remuneration of directors and key management personnel
Information about the remuneration of directors is set out in
the remuneration report of this directors' report, on pages 15 to
16. Shareholder nominee non-executive directors are not
remunerated. During the reporting period, no senior management
satisfy the criteria of 'key management personnel'.
Share options granted to directors and senior management
During and since the end of the financial year, share options
and performance rights were granted to Directors and key management
personnel of the Company and of its controlled entities as part of
their remuneration. Details of options and performance rights
granted to Directors and senior management are set out on pages 18
to 19.
Company secretary
Mr Tony Bevan, a qualified Chartered Accountant with over 25
years' experience, is the Company Secretary and works with
Endeavour Corporate Pty Ltd, the company engaged to provide
contract secretarial, accounting and administration services to MC
Mining.
Principal activities
The Company is a limited company incorporated in Australia. Its
common shares are listed on the ASX, the AIM and the JSE in South
Africa. The principal activities of the Company and its
subsidiaries are the acquisition, exploration, development and
operation of metallurgical and thermal coal projects in South
Africa.
The Group's principal assets and projects include:
-- The Uitkomst Colliery, an operating metallurgical coal mine
with a circa 16 year life of mine (LOM);
-- Makhado hard coking and thermal coal project;
-- The Vele Colliery, a semi-soft coking and thermal coal mine,
which remains on care and maintenance; and
-- Three exploration and development stage coking and thermal
coal projects, namely Chapudi, Generaal and Mopane in the
Soutpansberg Coalfield;
During the year, the Mooiplaats Colliery, which was on care and
maintenance, was sold in November 2017.
Review of operations - Operational salient features
-- No fatalities (FY2017: none) and one LTI, our first incident in four years (FY2017: none);
-- The Uitkomst Colliery produced 607,960 tonnes (t) of raw coal
comprising 505,130t of run of mine (ROM) coal and 102,830t
bought-in during the period;
-- The Colliery sold 475,089t of coal - 329,060t from ROM coal,
53,699t from blending slurry and 92,330t from purchased coal -
generating sales revenue of $32.7 million;
-- Metallurgical and thermal coal markets were favourable during
the twelve months with coking coal prices increasing due to
weather-associated disruptions in Australia but softened towards
the end of FY2018 while thermal coal prices improved due to steady
demand;
-- The Company completed a revised developed plan for the fully
permitted Makhado Project reducing capital requirements and the
construction period, leading to earlier than planned production, an
extended LOM and amended sales and marketing plans;
-- The Vele Colliery remained on care and maintenance and was
granted an amendment to its Integrated Water Use Licence (IWUL)
during the reporting period. This amendment is required for the
diversion of a perennial stream for the plant modification process.
The Company continues to assess the status of the operation within
the Group;
Corporate salient features
-- Increase of the Uitkomst BEE interest to 30% ensuring the
Colliery complies with the draft Mining Charter 3 ownership
requirements;
-- Successful action resulting in the High Court of South Africa
discharging an interim interdict, originally granted in December
2014, against the Makhado Project Environmental Authorisation;
-- Commencement of Makhado Project hard coking and export
thermal coal off-take discussions with various parties resulting in
negotiations being at an advanced stage at the end of the period.
Discussions with potential funders for Makhado have started and
various funding structures are being assessed;
-- The Company continued the search for a second cash generator
and assessed several potential targets during the period but these
did not meet MC Mining's investment criteria;
-- The Company changed its name from Coal of Africa Limited to
MC Mining during the period to reflect its potential growth,
particularly of its hard coking (metallurgical) coal prospects;
and
-- Completion of a 20:1 share consolidation in December 2017.
Subsequent events
Khethekile Mining (Pty) Ltd
The Group purchased the business operations of Khethekile Mining
(Pty) Ltd (Khethekile), the independent mining contractor at the
Uitkomst Colliery. The transaction resulted in Uitkomst acquiring
all of Khethekile's mining equipment (including conveyor systems
and coal mining and transportation equipment) and taking transfer,
in accordance with section 197 of the Labour Relations Act of South
Africa, of some 340 Khethekile employees. The acquisition of
Khethekile's mining assets cost $4.9 million (R65 million) and all
regulatory approvals and conditions precedent were satisfied and
the transaction closed on 1 August 2018.
Mooiplaats Colliery S102
The S102 application to, amongst other things, incorporate
certain prospecting rights into Mooiplaats Colliery's mining right
was approved by the Department of Mineral Resources ("DMR") in
August 2018. The timing of the ten quarterly payments to settle the
remaining balance of R112.9 million of the purchase price was
dependent on the S102 approval. The first quarterly payment of
R11.3 million was received in August 2018.
Makhado Project Regulatory Progress
In September 2018 the DMR approved the Environmental
Authorisation for the Makhado project.
There have been no other events between 30 June 2018 and the
date of this report which necessitate adjustment to the
consolidated statements of comprehensive income, consolidated
statements of financial position, consolidated statements of
changes in equity and the consolidated statements of cash flows at
that date.
Financial review
-- Operating cash flows of $6.4 million generated by the Uitkomst Colliery;
-- Payment of a $2.3 million dividend by Uitkomst with MC Mining
receiving $2.0 million as a portion of the Black Economic
Empowerment (BEE) partners' dividends, which was utilised to reduce
their vendor-financed investment loans;
-- The sale of Mooiplaats on 2 November 2017 for $12.9 million
(ZAR179.9 million). An initial payment of $4.8 million (ZAR67
million)was received on the transaction closing date of which $1.1
million (ZAR 15.0 million) was paid to the Black Economic Partner,
Ferret Mining and Environmental Services Proprietary Limited, in
full and final settlement of their equity. The balance of the
purchase price, being $8.1 million (ZAR112.9 million) will be
settled in 10 quarterly instalments from August 2018;
-- Cash of $1.5 million released from the restructuring of
rehabilitation-linked guarantees and investments due to excess
collateral in these instruments arising from an improved credit
rating for the Group;
-- $1.5 million (R20 million) available under the Rand Merchant
Bank (RMB) general banking facility secured during FY2018;
-- $9.1 million (R120 million) of the $18.2 million (R240
million) three year Industrial Development Corporation of South
Africa Limited (IDC) loan was available at year-end;
-- The sale of Mooiplaats yielded cost savings of $1.4 million
(R18 million) during the year and a cash release to MC Mining of
$1.1 million;
-- The R/$ exchange rate continues to be volatile and
gains/losses from these elements are unpredictable;
-- Contributing to the loss were non-cash charges of $92.5
million (FY2017: $9.3 million) which includes the following:
o impairment of the investment in Vele of $87.5 million (FY2017:
$nil)
o depreciation and amortisation of $1.5 million (FY2017: $0.4
million)
o share based payment expense of $1.3 million (FY2017: $0.3
million)
o unrealised foreign exchange loss of $ 2.2 million (FY2017:
gain $2 million)
-- Total unrestricted cash balances at year-end of $10.9 million (FY2017: $9.6 million).
Future developments
MC Mining aims to become the premier hard coking coal producer
in South Africa and will continue to build on the progress made
during FY2018. The post balance sheet acquisition of underground
contract mining operations at Uitkomst facilitates further
operational efficiencies. The Company will also continue its search
for a second cash generator enabling it to move to
self-sufficiency.
Uitkomst acquired the independent mining contractor, Khethekile
Mining (Pty) Ltd's (Khethekile), business operations at the
Colliery subsequent to year-end. The underground mining operations
were previously undertaken by Khethekile and in terms of the
transaction, Uitkomst acquired all of Khethekile's mining equipment
and took transfer of approximately 340 employees working at the
Colliery and at Khethekile's Newcastle offices. The integration of
Khethekile's operations together with mining optimization programs
at the Colliery are expected to result in production at the
Colliery improving on FY2018 results.
The new order mining right (NOMR) for MC Mining's 69% (post BEE
transaction) owned Makhado Project was granted in May 2015 and also
has a LOM IWUL. The project has 344.8 million mineable tonnes of
coal in situ and the Company completed a Competent Persons Report
(CPR) during the reporting period, revising the project's
development plan to reduce execution risk, capital expenditure and
shorten the mine's construction period. This revised plan has been
designed to ensure scalability, dependant on market conditions and
Makhado will generate 4.0 million tonnes per annum of ROM coal
yielding hard coking coal and export quality thermal coal.
The revised project delivers similar returns to the original
Makhado Project with significantly reduced execution risk as a
result of the construction period reducing from 26 to 12 months,
resulting in an estimated payback period of 42 months. This
positions Makhado to take advantage of higher global coal prices
due to the limited number of new collieries being built and the
Company awaits access to two farms comprising the project area
prior to development proceeding. These properties are subject to
the finalization of the legislated land claims process and the
Company has also commenced the process to obtain access in terms of
mining legislation. The drive to secure access to the Makhado
Project is running in parallel with the funding and marketing
processes and the Company is hopeful that the construction of this
project will commence during the calendar year.
The exploration and development of MC Mining's Soutpansberg
coalfield prospects is the catalyst for the long-term growth of the
Company. The DMR is processing the Company's NOMR applications for
the Mopane, Generaal, Chapudi and Telema & Gray Projects and
these licences will hopefully be granted during FY2019.
The Vele Colliery is expected to remain on care and maintenance
while its status in the Group is being assessed.
Environmental regulations
The Group's operations are not subject to any significant
environmental regulations under either Commonwealth or State
legislation and there has consequently been no breach. The Group is
subject to numerous environmental regulations in South Africa,
including:
-- The environmental provisions in the Mineral and Petroleum
Resources Development Act (No 28 of 2002);
-- National Environmental Management Act (No. 107 of 1998);
-- National Water Act (No. 45 of 1965);
-- Environment Conservation Act (No. 73 of 1989); and
-- National Environmental Management Air Quality Act (No. 39 of 2004).
The Board believes that there are adequate systems in place for
the management of its environmental impacts but from time to time
statutory non-compliances may occur. The Board takes these
seriously and continues to monitor compliance.
Corporate Governance
The Group recognises the need for the highest standards of
corporate behaviour and accountability. The Directors have
accordingly followed the recommendations set by the ASX Corporate
Governance Council. For further information on corporate governance
policies adopted by MC Mining Limited, refer to the website :
http://www.mcmining.co.za/corporate-governance/board-committees-and-charters
and the annual report.
Dividends
No dividend has been paid or proposed for the financial year
ended 30 June 2018 (FY2017: nil).
Shares under option or issued on exercise of options or
performance rights
All share, options and performance rights disclosed in this
report reflect changes resulting from the 20:1 share consolidation
completed in December 2017.
Details of unissued shares under option as at the date of this
report are:
Number of Class of shares Exercise Expiry date
shares under price
option
------------------ -------------- ---------------- --------- ------------
Investec options 1,000,000 Ordinary ZAR26.40 21 October
2018
ESOP Unlisted 250,000 Ordinary GBP1.10 27 November
Options 2018
------------------ -------------- ---------------- --------- ------------
Total Unlisted
Options 1,250,000
------------------ -------------- ---------------- --------- ------------
The holders of these options do not have the right, by virtue of
the option, to participate in any share issue of the Company or of
any other body corporate or registered scheme.
Details of unissued performance rights granted as at the date of
this report are:
Number of shares Class of shares Exercise Expiry date
under performance price
rights
-------------------- ------------------- ---------------- --------- ------------
Performance rights 1,027,209 Ordinary Nil 1 December
2018
Performance rights 1,082,875 Ordinary Nil 29 November
2019
Performance rights 1,722,383 Ordinary Nil 23 November
2020
Total performance
rights 3,832,467
-------------------- ------------------- ---------------- --------- ------------
No shares or interests were issued during or since the end of
the financial year as a result of exercise of options.
Indemnification of officers and auditors
During the financial year, the Company paid a premium in respect
of a contract insuring the directors of the Company, the company
secretary, and all executive officers of the Company and of any
related body corporate against a liability incurred by such a
director, secretary or executive officer to the extent permitted by
the Corporations Act 2001.
The Company has not otherwise, during or since the end of the
financial year, except to the extent permitted by law, indemnified
or agreed to indemnify an officer or auditor of the Company or of
any related body corporate against a liability incurred by such an
officer or auditor.
Directors' meetings
The following table sets out the number of directors' meetings
(including meetings of committees of directors) held during the
financial year and the number of meetings attended by each director
(while they were a director or committee member). During the
financial year, a total of four scheduled board meetings were held
as well as four Nomination and Remuneration Committee and Safety
and Health Committee meetings while six Audit and Risk Committee
meetings were held.
Board Meetings Audit and Nomination Safety, Health
Risk Committee and Remuneration and Environment
Meetings Committee Committee
Meetings Meetings
Director Held Attended Held Attended Held Attended Held Attended
--------------- ------ --------- ------ ---------- ------- ----------- ------- ----------
B Pryor 4 4 4 4 6 6 - -
D Brown 4 4 - - 6 6 4 4
B Berlin(1) 2 2 - - - - - -
D Schutte(2) 2 2 - - - - - -
A Chee Sin(3) 1 1 - - - - - -
A Mifflin 4 4 - - - - 4 4
H Zhen(3) 1 1 - - - - - -
K Mosehla 4 4 4 4 - - - -
P Cordin 4 4 - - - - 4 4
R Torlage(4) 3 3 - - - - - -
S Ding 4 4 - - - - - -
T Mosololi 4 2 4 4 6 6 - -
1. Joined the Company in March 2018 and appointed as CFO and
Executive Director in April 2018
2. Resigned in November 2017
3. Appointed in April 2018
4. Resigned in April 2018
Proceedings on behalf of the Company
No persons applied for leave to bring or intervene in
proceedings on behalf of the Company during or since the end of the
financial year.
Non-audit services
Non-audit services were provided during the current financial
year for services rendered relating to additional review
procedures. Details of amounts paid or payable to the auditor for
services provided during the year by the auditor are outlined in
note 10 to the consolidated financial statements.
Auditor's independence declaration
The auditor's independence declaration is included on page 21 of
these consolidated financial statements.
Remuneration report (audited)
This remuneration report, which forms part of the Directors
report, sets out information about the remuneration of MC Mining
Limited's Directors and its senior management for the financial
year ended 30 June 2018. The prescribed details for each person
covered by this report are detailed below under the following
headings:
-- Director details;
-- Remuneration policy;
-- Relationship between the remuneration policy and company performance;
-- Remuneration of Directors and senior management; and
-- Key terms of employment contracts.
The Board is responsible for establishing remuneration packages
applicable to the Board members of the Company. The policy adopted
by the Board is to ensure that remuneration properly reflects an
individual's duties and responsibilities and that remuneration is
competitive in attracting, retaining and motivating people of the
highest calibre.
Directors' remuneration packages are also assessed in the light
of the condition of markets within which the Company operates, the
Company's financial condition and the individual's contribution to
the achievement of corporate objectives. Executive Directors are
remunerated by way of a salary commensurate with their required
level of service.
Total remuneration for all Non-Executive Directors, excluding
share-based payments, as approved by shareholders at the November
2010 General Meeting, is not to exceed A$1,000,000 per annum
($740,700).
The Board has nominated a Nomination and Remuneration Committee
which was made up as follows: Mr Pryor (Chairman), Mr Mosololi and
Mr Brown. The Company does not have any scheme relating to
retirement benefits for Executive or Non-Executive Directors.
Director and key management personnel details
The following persons acted as directors of the Company during
or since the end of the financial year:
-- B Pryor Independent Chairman
-- D Brown Chief Executive Officer and Executive Director
-- B Berlin(1) Chief Financial Officer and Executive Director
-- D Schutte(2) Chief Financial Officer and Executive Director
-- A Chee Sin(1) Non-Executive Director
-- A Mifflin Independent Non-Executive Director
-- H Zhen(1) Non-Executive Director
-- K Mosehla Independent Non-Executive Director
-- P Cordin Independent Non-Executive Director
-- R Torlage(3) Non-Executive Director
-- S Ding Non-Executive Director
-- T Mosololi Independent Non-Executive Director
1. Appointed as Directors on 24 April 2018
2. Mr Schutte resigned as an Executive Director on 30 November 2017
3. Mr Torlage resigned as a Non-Executive Director on 26 April 2018
Key management personnel are those persons having authority and
responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly, including any
director (whether executive or otherwise) of that entity. Apart
from the Executive Directors, no employees satisfy the definition
of 'key management' to be separately disclosed in this remuneration
report.
Remuneration policy
The remuneration policy of MC Mining has been designed to align
key management personnel objectives with shareholder and business
objectives by providing a fixed remuneration component and offering
specific long-term incentives based on key performance areas
affecting the Group's financial results. The Board of MC Mining
believes the remuneration policy to be appropriate and effective in
its ability to attract and retain management personnel to run and
manage the Group, as well as create goal congruence between
Directors, management and shareholders.
The Board's policy for determining the nature and amount of
remuneration for management personnel of the Group is as
follows:
-- The remuneration structure is developed by the Nomination and
Remuneration Committee and approved by the Board after professional
advice is periodically sought from independent external
consultants.
-- Management personnel receive a base salary (based on factors
such as length of service and experience), performance rights and
performance incentives.
-- Incentives paid in the form of cash and performance rights
are intended to align the interests of the Directors, management
and the Company with those of the shareholders.
The Nomination and Remuneration Committee reviews senior
management personnel packages annually by reference to the Group's
performance, executive performance and comparable information from
industry sectors.
The performance of senior management personnel is measured
against criteria agreed annually with each executive and bonuses
and incentives are linked to predetermined performance criteria.
The performance criteria vary and are determined in line with each
individual's performance contract. The Board may, however, exercise
its discretion in relation to approving incentives, bonuses,
options or performance rights, and can recommend changes to the
Nomination and Remuneration Committee's recommendations. Any
changes must be justified by reference to measurable performance
criteria. The policy is designed to attract the highest calibre of
executives and reward them for performance results leading to
long-term growth in shareholder wealth.
All remuneration paid to management personnel is valued at the
cost to the Company and expensed.
The Board's policy is to remunerate Non-executive Directors at
market rates for time, commitment and responsibilities. Shareholder
nominee Non-executive Directors are not remunerated. The Nomination
and Remuneration Committee determines payments to the Non-executive
Directors and reviews their remuneration annually, based on market
practice, duties and accountability. The maximum aggregate amount
of fees, excluding share-based payments that can be paid to
Non-executive Directors is A$1,000,000 ($740,700).
To assist Directors with independent judgement, it is the
Board's policy that if a director considers it necessary to obtain
independent professional advice to properly discharge the
responsibility of their office as a director then, provided the
director first obtains approval from the Chairman for incurring
such expense, the Company will pay the reasonable expenses
associated with obtaining such advice.
Options granted under the Employee Share Option Plan do not
carry dividend or voting rights. Options are valued using a
binomial option pricing model and the Black-Scholes option pricing
model was used to validate the price calculated.
The Company has a shareholder approved performance rights plan
(the Plan) to assist in the reward, retention and motivation of
eligible employees and to align the interest of eligible employee
with the shareholders of the Company. Prior to a performance right
being exercised, the performance grants do not carry any dividend
or voting rights. Any performance rights will be granted for no
consideration and no exercise price is payable upon exercise of the
performance rights.
All the performance rights proposed to be granted are subject to
the following vesting conditions:
-- Vesting of the performance rights will be subject to a hurdle
rate based on the compound annual growth rate in total shareholder
return (TSR) across the three years commencing on the grant date of
the performance rights (Performance Period).
-- The hurdle is a measure of the increase in the Company's
share price and is a target for the TSR.
-- The base price for the TSR calculation will be the volume
weighted average price (VWAP) of shares over the five days prior to
the grant date.
-- The end price for the TSR calculation will be the VWAP over
the last five days of the Performance Period.
Performance-based remuneration
The key performance indicators (KPIs) are set annually, which
includes consultation with management personnel to ensure buy-in.
The measures are specifically tailored to the area each individual
is involved in and has a level of control over. The KPIs target
areas the Board believes hold greater potential for group expansion
and profit, covering financial and non-financial as well as short
and long-term goals.
Performance in relation to the KPIs is assessed annually, with
bonuses being awarded depending on the number and deemed difficulty
of the KPIs achieved.
Hedging of Management Remuneration
No member of executive management entered into an arrangement
during or since the end of the financial year to limit the risk
relating to any element of that person's remuneration.
Relationship between remuneration policy and Company
performance
The tables below set out summary information about the Group's
earnings and movements in shareholder wealth for the five years to
June 2018.
Year ended Year ended Year ended Year ended Year ended
30 June 30 June 30 June 30 June 30 June
2018 2017 2016 2015 2014
$'000 $'000 $'000 $'000 $'000
----------- ----------- ----------- ----------- -----------
Revenue 32,693 - - - 4,060
Net loss before tax from
continuing operations 97,043* 17,662 23,903 6,711 84,120
Net loss after tax from
continuing operations 103,763 17,367 22,472 6,711 84,120
Share price at start of A$0.05 A$0.06 A$0.09 A$0.07 A$0.19
year (1)
Share price at end of year A$0.36 A$0.05 A$0.06 A$0.09 A$0.07
Basic and diluted loss
per share ($ cents) from
continuing operations 73.54* 17.26 1.19 0.47 8.02
---------------------------- ----------- ----------- ----------- ----------- -----------
* includes the $87.5 million impairment of the Vele Colliery
assets
(1) The share price at the start of the year is prior to the
share consolidation that took place in December 2017.
Remuneration of directors and key management personnel
Details of the nature and amount of each major element of the
remuneration of each director are:
Short term employee benefits Post-employment Share-based Total Share
benefits payments based % of
Total
--------------------------------------- ------------------------ ----------------- ------------ ---------- -----------
2018 Salary Bonus Non -monetary Super-annuation Termination Options /
and benefits benefits Shares
fees
-------- -------- ------------------- ------------------------ ----------------- ------------ ---------- -----------
$ $ $ $ $ $ $ %
-------- -------- ------------------- ------------------------ ----------------- ------------ ---------- -----------
Non-Executive
Directors
B Pryor 69,566 - - - - - 69,566 -
A Chee - - - - - - - -
Sin(1)
A Mifflin 46,278 - - - - - 46,278 -
H Zhen(1) - - - - - - - -
K Mosehla 47,076 - - - - - 47,076 -
P Cordin 42,263 - - 4,015 - - 46,278 -
R - - - - -
Torlage(2) - - -
S Ding - - - - - - - -
T Mosololi 47,076 - - - - - 47,076 -
Executive Directors
D Brown 479,667 210,446 - - - 272,924 963,037 28
B Berlin(3) 131,270 - - - - - 131,270 -
D Schutte
(4) 125,344 109,120 - - 178,470 - 412,934 -
988,540 319,566 - 4,015 178,470 272,924 1,763,515 15
-------- -------- ------------------- ------------------------ ----------------- ------------ ---------- -----------
1. Mr Chee Sin and Mr Zhen were appointed on 24 April 2018
2. Mr Torlage resigned on 26 April 2018
3. Ms Berlin was appointed on 24 April 2018.
4. Mr Schutte resigned on 30 November 2017
No director appointed during the period received a payment as
part of his consideration for agreeing to hold the position.
In September 2017, performance bonuses of $0.3 million were paid
out in relation to certain performance targets met for the 2017
financial year. The performance targets were based on a combination
of individual performance and corporate key performance indicators
including; safety, acquisition of a cash generator and the sale of
Mooiplaats.
Short term employee Post-employment Share-based Total Share
benefits benefis payments based
% of
Total
----------------------------------- ---------------- ------------ ------------ ---------- -------
2017 Salary Bonus Non Super-annuation Termination Options Salary Bonus
and fees -monetary benefits / Shares and fees
benefits
---------- -------- ------------- ---------------- ------------ ------------ ---------- -------
$ $ $ $ $ $ $ %
---------- -------- ------------- ---------------- ------------ ------------ ---------- -------
Non-Executive Directors
B Pryor 54,573 - - - - - 54,573 -
A Mifflin 39,964 - - 3,441 - - 43,405 -
K Mosehla 36,371 - - - - - 36,371 -
P Cordin 39,639 - - 3,766 - - 43,405 -
R Torlage 36,371 - - - - - 36,371 -
S Ding - - - - - - - -
T Mosololi 36,371 - - - - - 36,371 -
Executive Directors
D Brown 445,867 179,271 - - - 155,653 780,791 20
D Schutte 278,142 101,173 - - - 98,830 478,145 21
967,298 280,444 - 7,207 - 254,483 1,509,432 17
---------- -------- ------------- ---------------- ------------ ------------ ---------- -------
Key
Management
C Bronn(1) 249,957 58,918 - - - - 308,875 -
1,217,255 339,362 - 7,207 - 254,483 1,818,307 14
---------- -------- ------------- ---------------- ------------ ------------ ---------- -------
1. Mr Bronn resigned as Chief Operating Officer on 30 June 2017.
No replacement was named and there is no additional key management
personnel this year.
Share-based payments granted as compensation for the current
financial year
During the financial year, the following share-based payment
arrangements were in existence:
Exercise Grant
Grant Expiry price date Vesting
Option series Number date date value date
--------------- -------- ----------- ----------- --------- --------- --------
ESOP unlisted
options 250,000 27/11/2015 27/11/2018 GBP1.10 AUD0.024 (1)
1. A total of 250,000 options (post the 20:1 share
consolidation) were granted to non-executive Directors Mr Pryor, Mr
Mifflin, Mr Mosehla, Mr Cordin and Mr Mosololi vesting immediately
on grant date.
The following grants of share-based payment compensation to
executive management personnel relate to the current financial
year:
During the financial year
------------------------------------------------------------------
% of
Name compensation
for the year
% of grant % of grant consisting of
Option series Number granted Number vested vested forfeited options
-------------- ----------------- --------------- -------------- ---------------- --------------- ---------------
Performance
D Brown grant 625,612 - - n/a 28
Performance
D Schutte(1) grant 394,862 - - 100% 0
1. Mr Schutte resigned during the financial year and therefore
forfeited the performance grant.
During the year, none of the executive management personnel
exercised options or performance rights granted to them as part of
their compensation.
Key terms of employment contracts
The Company has entered into formal contractual employment
agreements with the Chief Executive Officer and the Chief Financial
Officer who are both Executive Directors of the Company. There are
no formal contractual employment agreements with any other member
of the Board. The employment conditions of the Chief Executive
Officer and Chief Financial Officer are:
Current
1. Mr Brown's appointment as CEO commenced on 1 February 2014
with an annual remuneration of ZAR6.1 million and a six-month
notice period. During the year, Mr Brown received 625,612
performance rights. The performance rights factor in a hurdle rate
based on the compound annual growth rate of total shareholder
return across the period from the grant date.
2. Ms Berlin was appointed on 24 April 2018 as CFO Financial
Director with an annual remuneration of ZAR5.1 million and a six
month notice period. No performance rights were awarded to Ms
Berlin during the period.
3. Mr Schutte resigned as CFO on 30 November 2017 and under his
agreement he received an annual remuneration of ZAR3.8 million with
a three month notice period. All performance rights previously
awarded to Mr Schutte were forfeited on his resignation.
Loans from Key Management Personnel
No loans were provided to or received from Key Management
Personnel during the year ended 30 June 2018.
Other Transactions
No other transactions were entered into with any member of Key
Management Personnel other than those detailed in this Remuneration
Report.
Director equity holdings
Option holdings
The movement during the reporting period in the number of
options over ordinary shares at GBP1.10, vesting immediately held
directly, indirectly or beneficially by each director including
their personally-related entities, is as follows:
Held at Granted Exercised Expired/Other Held at
1 July as remuneration changes 30 June
2017 2018
--------------------- ---------- ----------------- ---------- -------------- ---------
Non-Executive
Directors
B Pryor 1,000,000 - - (950,000)(1) 50,000
A Chee Sin - - - - -
(950,000)
A Mifflin 1,000,000 - - (1) 50,000
H Zhen - - - - -
(950,000)
K Mosehla 1,000,000 - - (1) 50,000
(950,000)
P Cordin 1,000,000 - - (1) 50,000
R Torlage - - - - -
S Ding - - - - -
T Mosololi 1,000,000 - - (950,000)(1) 50,000
Executive Directors
D Brown - - - - -
B Berlin - - - - -
D Schutte - - - - -
--------------------- ---------- ----------------- ---------- -------------- ---------
1. The number of options reduced as a result of the 20:1 share
consolidation completed during the period
The movement during the reporting period in the number of
performance grants over ordinary shares exercisable in three years'
time subject to performance criteria, held directly, indirectly or
beneficially by each director including their personally-related
entities, is as follows:
Held at Granted Exercised Expired/Other Held at
1 July as remuneration changes 30 June
2017 2018
--------------------- ---------- ----------------- ---------- -------------- ----------
Non-Executive
Directors
B Pryor - - - - -
A Chee Sin - - - - -
A Mifflin - - - - -
H Zhen - - - - -
K Mosehla - - - - -
P Cordin - - - - -
R Torlage - - - - -
S Ding - - - - -
T Mosololi - - - - -
Executive Directors
D Brown 1,048,449 625,612 - - 1,674,061
B Berlin - - - - -
D Schutte(1) 671,683 394,862 - (1,066,545) -
--------------------- ---------- ----------------- ---------- -------------- ----------
1. Mr Schutte resigned during the financial year and therefore
forfeited all performance rights
The movement during the reporting period in the number of
ordinary shares held, directly, indirectly or beneficially by each
director including their personally-related entities, is as
follows:
Held at Granted Exercised Expired/Other Held at
1 July as remuneration changes(1) 30 June
2017 2018
--------------------- ---------- ----------------- ---------- -------------- ---------
Non-Executive
Directors
B Pryor 150,000 - - (142,500) 7,500
A Chee Sin - - - - -
A Mifflin - - - - -
H Zhen - - - - -
K Mosehla - - - - -
P Cordin 1,371,059 - - (1,302,506) 68,553
R Torlage - - - - -
S Ding - - - - -
T Mosololi 10,000 - - (9,500) 500
Executive Directors
D Brown 825,000 - - (783,750) 41,250
B Berlin - - - - -
D Schutte - - - - -
--------------------- ---------- ----------------- ---------- -------------- ---------
1. 20:1 share consolidation completed in December 2017
This marks the end of the remuneration report.
This directors' report is signed in accordance with a resolution
of directors made pursuant to s298(2) of the Corporations Act
2001.
On behalf of the Directors
Bernard Robert Pryor David Hugh Brown
Chairman Chief Executive Officer
27 September 2018 27 September 2018
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Brookfield Place, Tower 2
123 St Georges Terrace
Perth WA 6000
GPO Box A46
Perth WA 6837 Australia
Tel: +61 8 9365 7000
Fax: +61 8 9365 7001
www.deloitte.com.au
The Board of Directors
MC Mining Limited
Suite8, 7 The Esplanade
Mount Pleasant WA 6153
27 September 2018
Dear Directors
MC Mining Limited (formerly Coal of Africa Limited)
In accordance with section 307C of the Corporations Act 2001, I
am pleased to provide the following declaration of independence to
the directors of MC Mining Limited.
As lead audit partner for the audit of the financial statements
of MC Mining Limited for the financial year ended 30 June 2018, I
declare that to the best of my knowledge and belief, there have
been no contraventions of:
(i) the auditor independence requirements of the Corporations
Act 2001 in relation to the audit; and
(ii) any applicable code of professional conduct in relation to
the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
David Newman
Partner
Chartered Accountants
MC MINING LIMITED
DIRECTORS' DECLARATION
The directors declare that:
a) in the directors' opinion, there are reasonable grounds to
believe that the Company will be able to pay its debts as and when
they become due and payable;
b) in the directors' opinion, the attached consolidated
financial statements are in compliance with International Financial
Reporting Standards, as stated in Note 1.1 to the consolidated
financial statements;
c) in the directors' opinion, the attached consolidated
financial statements and notes thereto are in accordance with the
Corporations Act 2001, including compliance with accounting
standards and giving a true and fair view of the financial position
and performance of the Consolidated Entity; and
d) the directors have been given the declarations required by
s.295A of the Corporations Act 2001.
Signed in accordance with a resolution of the directors made
pursuant to s.295(5) of the Corporations Act 2001.
On behalf of the Directors
Bernard Pryor David Brown
Chairman Chief Executive Officer
27 September 2018 27 September 2018
MC MINING LIMITED
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
for the year ended 30 June 2018
Year ended Year ended
30 June 30 June
2018 2017
Note $'000 $'000
---------------------------------------------------------- ------ -------------- -----------
Continuing operations
Revenue 5 32,693 -
Cost of sales 6 (27,340) -
-------------- -----------
Gross profit 5,353 -
Other operating income 7 1,410 368
Other operating (losses)/gains 8 (1,192) 4,136
Impairment expense 9 (87,475) (10,624)
Administrative expenses 10 (12,704) (10,683)
Operating loss (94,608) (16,803)
Interest income 1,201 326
Finance costs 11 (3,636) (1,185)
Loss before tax (97,043) (17,662)
Income tax (charge)/credit 12 (6,720) 295
-------------- -----------
Net loss for the year from continuing
operations (103,763) (17,367)
Discontinued operations
Profit for the year from operations
classified as held for sale 13 2,185 1,815
LOSS FOR THE YEAR (101,578) (15,552)
-------------- -----------
Other comprehensive (loss)/income,
net of income tax
Items that may be reclassified subsequently
to profit or loss
Exchange differences on translating
foreign operations (2,393) 16,057
-------------- -----------
Total comprehensive (loss)/income
for the year (103,971) 505
-------------- -----------
Loss for the year attributable to:
Owners of the Company (101,413) (15,536)
Non-controlling interests (165) (16)
-------------- -----------
(101,578) (15,552)
-------------- -----------
Total comprehensive (loss)/income
attributable to:
Owners of the Company (103,806) 521
Non-controlling interests (165) (16)
-------------- -----------
(103,971) 505
-------------- -----------
Loss per share 14
From continuing operations and discontinued
operations
Basic and diluted (cents per share) (71.99) (15.45)
From continuing operations
Basic and diluted (cents per share) (73.54) (17.26)
Headline loss per share (12.12) (7.89)
The accompanying notes are an integral part of
these consolidated financial statements.
MC MINING LIMITED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June 2018
30 June 2018 30 June
2017
Note $'000 $'000
----------------------------------------- ----- ------------- ----------
ASSETS
Non-current assets
Development, exploration and evaluation
expenditure 15 144,922 232,822
Property, plant and equipment 16 29,452 30,531
Other receivables 18 226 237
Other financial assets 19 4,324 9,171
Restricted cash 22 84 52
Loan receivable 13 3,946 -
Deferred tax assets 27 - 5,713
------------- ----------
Total non-current assets 182,954 278,526
------------- ----------
Current assets
Inventories 20 730 1,688
Trade and other receivables 21 5,496 6,107
Tax receivable 36 326
Loan receivable 13 3,290 -
Other financial assets 19 4 5
Cash and cash equivalents 22 10,931 9,624
------------- ----------
20,487 17,750
Assets classified as held for
sale 23 - 9,791
Total current assets 20,487 27,541
------------- ----------
Total assets 203,441 306,067
------------- ----------
LIABILITIES
Non-current liabilities
Deferred consideration 24 - 1,916
Borrowings 25 10,191 8,197
Provisions 26 5,458 7,468
Deferred tax liability 27 5,991 6,087
Other liabilities 28 181 -
Total non-current liabilities 21,821 23,668
------------- ----------
Current liabilities
Deferred consideration 24 2,017 -
Trade and other payables 29 6,845 4,224
Provisions 26 569 597
Other liabilities 28 1,024 -
Current tax liabilities 431 1,290
------------- ----------
10,886 6,111
Liabilities associated with assets
held for sale 23 - 3,414
------------- ----------
Total current liabilities 10,886 9,525
------------- ----------
Total liabilities 32,707 33,193
------------- ----------
NET ASSETS 170,734 272,874
------------- ----------
EQUITY
Issued capital 30 1,040,950 1,040,950
Accumulated deficit 31 (851,535) (750,100)
Reserves 32 (19,075) (18,535)
------------- ----------
Equity attributable to owners
of the Company 170,340 272,315
Non-controlling interests 34 394 559
------------- ----------
TOTAL EQUITY 170,734 272,874
------------- ----------
The accompanying notes are an integral part of these consolidated
financial statements.
----------------------------------------------------------------------------------
MC MINING LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2018
Issued Accumulated Share Capital Warrants Foreign Attributable Non-controlling Total
capital deficit based profits reserve currency to owners interests equity
payment reserve translation of the
reserve reserve parent
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
--------------------- ---------- ------------ -------- -------- --------- ------------ ------------- ---------------- ----------
Balance at 1 July
2017 1,040,950 (750,100) 713 91 1,134 (20,473) 272,315 559 272,874
Total comprehensive
loss for
the year - (101,413) - - - (1,879) (103,292) (165) (103,457)
---------- ------------ -------- -------- --------- ------------ ------------- ---------------- ----------
Loss for the year - (101,413) - - - - (101,413) (165) (101,578)
Other comprehensive
loss,
net of tax - - - - - (2,393) (2,393) - (2,393)
Sale of Mooiplaats
Colliery - - - - - 514 514 - 514
---------- ------------ -------- -------- --------- ------------ ------------- ---------------- ----------
Dividends - (22) - - - - (22) - (22)
Performance grants
issued
to employees - - 616 - - - 616 - 616
Share options
cancelled/forfeited - - (161) - - - (161) - (161)
IFRS 2 Black
economic
empowerment
charge - - 884 - - - 884 - 884
Balance at 30 June
2018 1,040,950 (851,535) 2,052 91 1,134 (22,352) 170,340 394 170,734
---------- ------------ -------- -------- --------- ------------ ------------- ---------------- ----------
Balance at 1 July
2016 1,006,435 (736,403) 2,274 91 - (36,530) 235,867 575 236,442
Total comprehensive
loss for
the year - (15,536) - - - 16,057 521 (16) 505
---------- ------------ -------- -------- --------- ------------ ------------- ---------------- ----------
Loss for the year - (15,536) - - - - (15,536) (16) (15,552)
Other comprehensive
loss,
net of tax - - - - - 16,057 16,057 - 16,057
---------- ------------ -------- -------- --------- ------------ ------------- ---------------- ----------
Shares issued for
capital
raising (net of
costs) 14,864 - - - - - 14,864 - 14,864
Shares issued for
conversion
of YBI loan 10,000 - - - - - 10,000 - 10,000
Performance grants
issued
to employees - - 466 - - - 466 - 466
Share options
expired - 1,839 (1,839) - - - - - -
Share options
cancelled/forfeited - - (188) - - - (188) - (188)
Warrants issued to
the IDC - - - - 1,134 - 1,134 - 1,134
Shares issued for
the acquisition
of Uitkomst
Colliery 9,651 - - - - - 9,651 9,651
Balance at 30 June
2017 1,040,950 (750,100) 713 91 1,134 (20,473) 272,315 559 272,874
---------- ------------ -------- -------- --------- ------------ ------------- ---------------- ----------
The accompanying notes are an integral part of these consolidated
financial statements.
Year ended Year ended
30 June 30 June
2018 2017
Note $'000 $'000
-------------------------------------- ------ ----------- ------------
Cash flows from operating activities
Receipts from customers 36,923 117
Payments to suppliers and employees (34,921) (10,341)
----------- ------------
Cash generated from/(used in)
operations 36 2,002 (10,224)
Interest received 603 471
Interest paid (11) (14)
Tax paid (1,234) -
----------- ------------
Net cash generated from/(used
in) operating activities 1,360 (9,767)
----------- ------------
Cash flows from investing activities
Purchase of property, plant and
equipment 16 (2,887) (164)
Proceeds from the sale of property,
plant and equipment 96 2
Investment in development assets 15 (4) (6)
Investment in exploration assets 15 (3,801) (430)
Net cash outflow on business
combination 39 - (8,394)
Proceeds from the sale of Holfontein 23 - 3,042
Net proceeds from the sale of
Mooiplaats Colliery 13 2,315 -
Decrease/(increase) in other
financial assets 19 4,921 (402)
(Increase)/decrease in restricted
cash (32) 197
Net cash generated from/(used
in) investing activities 608 (6,155)
----------- ------------
Cash flows from financing activities
Payment of deferred consideration 24 - (18,247)
Proceeds from loans payable 25 - 9,004
Debt issuance costs 25 - (91)
Proceeds from loans receivable 18 - 457
Proceeds from the issue of shares
(net of share issuance costs) - 14,864
Net cash generated by financing
activities - 5,987
----------- ------------
Net increase/(decrease) in cash
and cash equivalents 1,968 (9,935)
Net foreign exchange differences (683) 58
Cash and cash equivalents at
beginning of the year 9,646 19,523
----------- ------------
Cash and cash equivalents at
the end of the year 22 10,931 9,646
----------- ------------
The accompanying notes are an integral part of these consolidated
financial statements.
MC MINING LIMITED
CONSOLIDATED STATEMENT OF CASH
FLOWS
for the year ended 30 June 2018
--------------------------------------
MC MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
1. GENERAL INFORMATION
MC Mining Limited ("MCM" or the "Company") is a limited company
incorporated in Australia. Its common shares are listed on the
Australian Securities Exchange ('ASX'), the Alternative Investment
Market of the London Stock Exchange ('AIM') and the Johannesburg
Securities Exchange ('JSE') in South Africa. The addresses of its
registered office and principal places of business is Suite 8, 7
The Esplanade, Mt Pleasant, Perth, Western Australia 6000.
The principal activities of the Company and its subsidiaries
('the Group' or 'the Consolidated Entity') are the acquisition,
exploration, development and operation of metallurgical and thermal
coal projects in South Africa.
The Group's principal assets and projects include:
-- The operating mine, Uitkomst Colliery, acquired on 30 June 2017;
-- The Makhado hard coking and thermal coal project that has
been granted a new order mining right ("NOMR"), an integrated water
use licence ("IWUL") and an environmental authorisation;
-- The Vele Colliery, a semi soft coking and thermal coal mine,
currently under care and maintenance and has been granted the final
IWUL relating to the new perennial stream diversion
application;
-- Three exploration and development stage coking and thermal
coal projects, namely Chapudi, Generaal and Mopane; and
-- The Mooiplaats Colliery, which was on care and maintenance,
was sold during the financial year in November 2017.
Going Concern
The Consolidated Entity has incurred a net loss after tax for
the year ended 30 June 2018 of $103.8 million (30 June 2017: $17.4
million). The current period loss included a non-cash impairment
expense of $87.5 million relating to the Vele Colliery (2017: $10.6
million impairment of the intangible asset). During the twelve
month period ended 30 June 2018 net cash inflows from operating
activities were $1.4 million (30 June 2017 net outflow: $9.8
million). As at 30 June 2018 the Consolidated Entity had a net
current asset position of $9.6 million (30 June 2017: net current
asset position of $18 million).
The directors have prepared a cash flow forecast for the period
ended 30 September 2019, taking into account available facilities
and expected cash flows to be generated by Uitkomst, which
indicates that the Consolidated Entity will have sufficient cash
flow to fund their operations for at least the twelve month period
from the date of signing this report and therefore are of the
opinion that the use of the going concern basis remains
appropriate.
Basis of presentation
1.1. Statement of compliance
These consolidated financial statements are general purpose
financial statements which have been prepared in accordance with
the Corporations Act 2001, Accounting Standards and
Interpretations, and comply with other requirements of the law. The
financial statements comprise the consolidated financial statements
of the Group. For the purposes of preparing the consolidated
financial statements, the Company is a for-profit entity.
Accounting Standards include Australian Accounting Standards.
Compliance with Australian Accounting Standards ensures that the
consolidated financial statements and notes of the Company and the
Group comply with International Financial Reporting Standards
("IFRS") as issued by the International Accounting Standards
Board.
The consolidated financial statements were authorised for issue
by the Directors on 27 September 2018.
1.2. Basis of Preparation
The consolidated financial statements have been prepared on the
basis of historical cost, except for other financial assets and
financial instruments that are measured at revalued amounts or fair
values, as explained in the accounting policies below. Historical
cost is generally based on the fair values of the consideration
given in exchange for assets.
All amounts are presented in United States dollars, and rounded
to nearest thousand unless otherwise noted.
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date, regardless of whether
that price is directly observable or estimated using another
valuation technique. In estimating the fair value of an asset or a
liability, the Group takes into account the characteristics of the
asset or liability if market participants would take those
characteristics into account
1. GENERAL INFORMATION (CONTINUED)
when pricing the asset or liability at the measurement date.
Fair value for measurement and/or disclosure purposes in these
consolidated financial statements is determined on such a basis,
except for share-based payment transactions that are within the
scope of AASB 2, and measurements that have some similarities to
fair value but are not fair value, such as net realisable value in
AASB 2 or value in use in AASB 136.
In addition, for financial reporting purposes, fair value
measurements are categorised into Level 1, 2 or 3 based on the
degree to which the inputs to the fair value measurements are
observable and the significance of the inputs to the fair value
measurement in its entirety, which are described as follows:
-- Level 1 inputs are quoted prices (unadjusted) in active
markets for identical assets or liabilities that the entity can
access at the measurement date;
-- Level 2 inputs are inputs, other than quoted prices included
within Level 1, that are observable for the asset or liability,
either directly or indirectly; and
-- Level 3 inputs are unobservable inputs for the asset or liability.
Restatement
Change in classification of expenses
During the period, the Group has changed the method of
classification of expenses within the Consolidated Statement of
Profit or Loss and Other Comprehensive Income. Expenses previously
classified using the nature of the expenses are now classified
using the function of the expenses.
With the acquisition of the Uitkomst colliery effective 30 June
2017, this method will provide more relevant information to users
of the financial statements and align the Group with common
practice within the industry. Prior year comparatives at 30 June
2017 have been reclassified on this basis with additional
information about the nature of expenses disclosed in note 10.
2. ACCOUNTING POLICIES
2.1. Basis of Consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries). Control is achieved when the Company:
-- has power over the investee;
-- is exposed, or has rights, to variable returns from its involvement with the investee; and
-- has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the three elements of control listed above. When the
Company has less than a majority of the voting rights of an
investee, it has power over the investee when the voting rights are
sufficient to give it the practical ability to direct the relevant
activities of the investee unilaterally. The Company considers all
relevant facts and circumstances in assessing whether or not the
Company's voting rights in an investee are sufficient to give it
power, including:
-- the size of the Company's holding of voting rights relative
to the size and dispersion of holdings of the other vote
holders;
-- potential voting rights held by the Company, other vote holders or other parties;
-- rights arising from other contractual arrangements; and
-- any additional facts and circumstances that indicate that the
Company has, or does not have, the current ability to direct the
relevant activities at the time that decisions need to be made,
including voting patterns at previous shareholders' meetings.
Consolidation of a subsidiary begins when the Company obtains
control over the subsidiary and ceases when the company loses
control of the subsidiary. Specifically, income and expenses of a
subsidiary acquired or disposed of during the year are included in
the consolidated statement of profit or loss and other
comprehensive income from the date the Company gains control until
the date when the Company ceases to control the subsidiary.
2. ACCOUNTING POLICIES (CONTINUED)
Profit or loss and each component of other comprehensive income
are attributed to the owners of the Company and to the
non-controlling interests. Total comprehensive income of
subsidiaries is attributed to the owners of the Company and to the
non-controlling interests even if this results in the
non-controlling interests having a deficit balance.
A list of controlled entities is contained in note 36 to the
consolidated financial statements.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies into
line with those used by other members of the Group.
All inter-group transactions, balances, income and expenses are
eliminated in full on consolidation.
Changes in the Group's ownership interests in subsidiaries that
do not result in the Group losing control are accounted for as
equity transactions. The carrying amounts of the Group's interests
and the non-controlling interests are adjusted to reflect the
changes in their relative interests in the subsidiaries. Any
difference between the amount by which the non-controlling
interests are adjusted and the fair value of the consideration paid
or received is recognised directly in equity and attributed to
owners of the Company.
When the Group loses control of a subsidiary, a gain or loss is
recognised in profit or loss and is calculated as the difference
between
(i) the aggregate of the fair value of the consideration
received and the fair value of any retained interest and
(ii) the previous carrying amount of the assets (including
goodwill), and liabilities of the subsidiary and any non-
controlling interests.
When assets of the subsidiary are carried at revalued amounts or
fair values and the related cumulative gain or loss has been
recognised in other comprehensive income and accumulated in equity,
the amounts previously recognised in other comprehensive income and
accumulated in equity are accounted for as if the Company had
directly disposed of the relevant assets (i.e. reclassified to
profit or loss or transferred directly to any category of equity as
specified by applicable Standards). The fair value of any
investment retained in the former subsidiary at the date when
control is lost is regarded as the fair value on initial
recognition for subsequent accounting under Accounting Standard
AASB 139
'Financial Instruments: Recognition and Measurement' or, when
applicable, the cost on initial recognition of an investment in an
associate or joint venture.
2.2. Business combinations
Business combinations occur where an acquirer obtains control
over one or more businesses and results in the consolidation of its
assets and liabilities.
Acquisitions of businesses are accounted for using the
acquisition method. The consideration transferred in a business
combination is measured at fair value which is calculated as the
sum of the acquisition-date fair values of assets transferred by
the Group, liabilities incurred by the Group to the former owners
of the acquiree and the equity instruments issued by the Group in
exchange for control of the acquiree. Acquisition-related costs are
recognised in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and
the liabilities assumed are recognised at their fair value, except
that:
-- deferred tax assets or liabilities are recognised and
measured in accordance with AASB 112 'Income Taxes';
-- assets or liabilities related to employee benefit
arrangements are recognised and measured in accordance with AASB
119 'Employee Benefits';
-- liabilities or equity instruments related to share-based
payment arrangements of the acquiree or share-based payment
arrangements of the Group entered into to replace share-based
payment arrangements of the acquiree are measured in accordance
with AASB 2 'Share-based Payment' at the acquisition date; and
-- assets (or disposal groups) that are classified as held for
sale in accordance with AASB 5 'Non-current Assets Held for Sale
and Discontinued Operations' are measured in accordance with that
Standard.
2. ACCOUNTING POLICIES (CONTINUED)
Goodwill is measured as the excess of the sum of the
consideration transferred, the amount of any non-controlling
interests in the acquiree, and the fair value of the acquirer's
previously held equity interest in the acquiree (if any) over the
net of the acquisition-date amounts of the identifiable assets
acquired and the liabilities assumed. If, after reassessment, the
net of the acquisition-date amounts of the identifiable assets
acquired and liabilities assumed exceeds the sum of the
consideration transferred, the amount of any non-controlling
interests in the acquiree and the fair value of the acquirer's
previously held interest in the acquiree (if any), the excess is
recognised immediately in profit or loss as a bargain purchase
gain.
Non-controlling interests that represent ownership interests and
entitle their holders to a proportionate share of the entity's net
assets in the event of liquidation may be initially measured either
at fair value or at the non-controlling interests' proportionate
share of the recognised amounts of the acquiree's identifiable net
assets. Non-controlling interests are measured at fair value or,
when applicable, on the basis specified in another Standard.
Where the consideration transferred by the Group in a business
combination includes assets or liabilities resulting from a
contingent consideration arrangement, the contingent consideration
is measured at its acquisition-date fair value. Changes in the fair
value of the contingent consideration that qualify as measurement
period adjustments are adjusted retrospectively, with corresponding
adjustments against goodwill. Measurement period adjustments are
adjustments that arise from additional information obtained during
the 'measurement period' (which cannot exceed one year from the
acquisition date) about facts and circumstances that existed at the
acquisition date.
The subsequent accounting for changes in the fair value of
contingent consideration that do not qualify as measurement period
adjustments depends on how the contingent consideration is
classified. Contingent consideration that is classified as equity
is not remeasured at subsequent reporting dates and its subsequent
settlement is accounted for within equity. Contingent consideration
that is classified as an asset or liability is remeasured at
subsequent reporting dates in accordance with AASB 139, or AASB 137
'Provisions, Contingent Liabilities and Contingent Assets', as
appropriate, with the corresponding gain or loss being recognised
in profit or loss.
Where a business combination is achieved in stages, the Group's
previously held equity interest in the acquiree is remeasured to
fair value at the acquisition date (i.e. the date when the Group
attains control) and the resulting gain or loss, if any, is
recognised in profit or loss. Amounts arising from interests in the
acquiree prior to the acquisition date that have previously been
recognised in other comprehensive income are reclassified to profit
or loss where such treatment would be appropriate if that interest
were disposed of.
If the initial accounting for a business combination is
incomplete by the end of the reporting period in which the
combination occurs, the Group reports provisional amounts for the
items for which the accounting is incomplete. Those provisional
amounts are adjusted during the measurement period (see above), or
additional assets or liabilities are recognised, to reflect new
information obtained about facts and circumstances that existed as
of the acquisition date that, if known, would have affected the
amounts recognised as of that date.
2.3. Functional and presentation currency
The individual financial statements of each group entity are
presented in the currency of the primary economic environment in
which the entity operates (its functional currency). For the
purpose of the consolidated financial statements, the results and
financial position of each group entity are expressed in United
Sates dollars ('$'), which is the presentation currency for the
consolidated financial statements.
Transactions in foreign currencies are initially recorded in the
functional currency at the rate of exchange ruling at the date of
the transaction. Monetary assets and liabilities denominated in
foreign currencies are translated to the spot rate of exchange
ruling at the reporting date. All differences are taken to the
consolidated statement of profit or loss and other comprehensive
income.
Non-monetary items that are measured at historical cost in a
foreign currency are translated using the exchange rates at the
date of the initial transaction.
Exchange differences on monetary items are recognised in profit
or loss in the period in which they arise except for:
-- exchange differences on foreign currency borrowings relating
to assets under construction for future productive use, which are
included in the cost of those assets when they are regarded as an
adjustment to interest costs on those foreign currency
borrowings;
-- exchange differences on transactions entered into in order to
hedge certain foreign currency risks; and
2. ACCOUNTING POLICIES (CONTINUED)
-- exchange differences on monetary items receivable from or
payable to a foreign operation for which settlement is neither
planned nor likely to occur (therefore forming part of the net
investment in the foreign operation), which
are recognised initially in other comprehensive income and
reclassified from equity to profit or loss on repayment of the
monetary items.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Group's foreign operations are
translated into United States dollars using the spot rate of
exchange ruling at the reporting date. Income and expense items are
translated at the average exchange rates for the period, unless
exchange rates fluctuated significantly during that period, in
which case the exchange rates at the dates of the transactions are
used. Exchange differences arising, if any, are recognised in other
comprehensive income and accumulated in equity (attributed to
non-controlling interests as appropriate).
On the disposal of a foreign operation (i.e. a disposal of the
Group's entire interest in a foreign operation, or a disposal
involving loss of control over a subsidiary that includes a foreign
operation, loss of joint control over a jointly controlled entity
that includes a foreign operation, or loss of significant influence
over an associate that includes a foreign operation), all of the
accumulated exchange differences in respect of that operation
attributable to the Group are reclassified to profit or loss.
Goodwill and fair value adjustments on identifiable assets and
liabilities arising on the acquisition of a foreign operation are
treated as assets and liabilities of the foreign operation and
translated at the spot rate of exchange ruling at the reporting
date. Exchange differences arising are recognised in equity.
2.4. Non-current assets held for sale
Non-current assets and disposal groups are classified as held
for sale if their carrying amount will be recovered principally
through a sale transaction rather than through continuing use. This
condition is regarded as met only when the sale is highly probable
and the non-current asset (or disposal group) is available for
immediate sale in its present condition. Management must be
committed to the sale, which should be expected to qualify for
recognition as a completed sale within one year from the date of
classification.
When the criteria above are met and the Group is committed to a
sale plan involving loss of control of a subsidiary, all of the
assets and liabilities of that subsidiary are classified as assets
held for sale and liabilities associated with assets held for sale
in the consolidated statement of financial position. The income and
expenses from these operations are not included in the various line
items in the consolidated statement of profit or loss and other
comprehensive income but the net results from these operations
classified as held for sale are disclosed as a separate line within
the statement of profit or loss.
Non-current assets (and disposal groups) classified as held for
sale are measured at the lower of their previous carrying amount
and fair value less costs to sell.
2.5. Exploration and evaluation expenditure
(i) Pre-licence costs
Pre-licence costs relate to costs incurred before the Group has
obtained legal rights to explore in a specific area. Such costs may
include the acquisition of exploration data and the associated
costs of analysing that data. These costs are expensed in the
period in which they are incurred.
(ii) Exploration and evaluation expenditure
Exploration and evaluation activity involves the search for
mineral resources, the determination of technical feasibility and
the assessment of commercial viability of an identified
resource.
2. ACCOUNTING POLICIES (CONTINUED)
Exploration and evaluation activity includes:
i. Researching and analysing historical exploration data
ii. Gathering exploration data through geophysical studies
iii. Exploratory drilling and sampling
iv. Determining and examining the volume and grade of the resource
v. Surveying transportation and infrastructure requirements
vi. Conducting market and finance studies
Licence costs paid in connection with a right to explore in an
existing exploration area are capitalised and
amortised over the term of the permit.
Once the legal right to explore has been acquired, exploration
and evaluation expenditure is charged to profit or loss as
incurred, unless the Group conclude that a future economic benefit
is more likely than not to be realised.
Capitalised expenditure includes costs directly related to
exploration and evaluation activities in the relevant area of
interest, including materials and fuel used, surveying costs,
drilling costs and payments made to contractors. General and
administrative costs are allocated to an exploration or evaluation
area of interest and capitalised as an asset only to the extent
that those costs can be related directly to operational activities
in the relevant area of interest.
Exploration and evaluation assets acquired in a business
combination are initially recognised at fair value, including
resources and exploration potential that are valued beyond proven
and probable reserves. Similarly, the costs associated with
acquiring an exploration and evaluation asset (that does not
represent a business) are also capitalised. They are subsequently
measured at cost less accumulated impairment.
All capitalised exploration and evaluation expenditure is
written off where the above conditions are no longer satisfied, and
assessed for impairment if facts and circumstances indicate that an
impairment may exist. See note 2.11.
Exploration and evaluation expenditure that has been capitalised
is reclassified to property, plant and equipment - development
assets, when the technical feasibility and commercial viability of
extracting a mineral resource are demonstrable. Prior to such
reclassification, exploration and evaluation expenditure
capitalised is tested for impairment.
2.6. Property, plant and equipment - Development assets
Development expenditure incurred by or on behalf of the Group is
accumulated separately for each area of interest in which
economically recoverable resources have been identified. Such
expenditure comprises costs directly attributable to the
construction of a mine and the related infrastructure.
No depreciation is recognised in respect of development
assets.
Development assets are assessed for impairment if facts and
circumstances indicate that an impairment may exist. See note
2.12.
A development asset is reclassified as a 'mining property' at
the end of the commissioning phase, when the mine is capable of
operating in the manner intended by management. Immediately prior
to such reclassification, development assets are tested for
impairment.
2.7. Property, plant and equipment - Mining property
Mining property includes expenditure that has been incurred
through the exploration and development phases, and, in addition,
further development expenditure that is incurred in respect of a
mining property after the commencement of production, provided
that, in all instances, it is probable that additional future
economic benefits associated with the expenditure will flow to the
Group. Otherwise such expenditure is classified as cost of
sales.
Mining property includes plant and equipment associated with the
mining property.
2. ACCOUNTING POLICIES (CONTINUED)
When a mine construction project moves into the production
phase, the capitalisation of certain mine construction costs
ceases, and costs are either regarded as part of the cost of
inventory or expensed, except for costs which qualify for
capitalisation relating to mining asset additions, improvements or
new developments, underground mine development or mineable reserve
development.
Depreciation on plant and equipment included within mining
property is computed on a straight-line basis over five years.
Depreciation on other components of mining property, is charged
using the units-of-production method, with separate calculations
being made for each area of interest. The units-of-production basis
results in a depreciation charge proportional to the depletion of
proved and probable reserves.
Mining property is assessed for impairment if facts and
circumstances indicate that an impairment may exist. See note
2.12.
2.8. Deferred stripping costs
Stripping costs comprise the removal of overburden and other
waste products from a mine. Stripping costs incurred in the
development of a mine before production commences are capitalised
as part of the cost of constructing the mine (initially within
development assets) and are subsequently depreciated over the life
of the operation.
Stripping costs incurred during the production stage of a mine
are deferred when this is considered the most appropriate basis for
matching the costs against the related economic benefits. The
amount deferred is based on the waste-to-ore ratio ('stripping
ratio'), which is calculated by dividing the tonnage of waste mined
by the quantity of ore mined. Stripping costs incurred in a period
are deferred to the extent that the current period ratio exceeds
the expected life-of mine-ratio. Such deferred costs are then
charged to the consolidated statement of profit or loss and other
comprehensive loss to the extent that, in subsequent periods, the
current period ratio falls below the life-of mine-ratio. The
life-of-mine stripping ratio is calculated based on proved and
probable reserves. Any changes to the life-of-mine ratio are
accounted for prospectively.
Where a mine operates more than one open pit that is regarded as
a separate operation for the purpose of mine planning, stripping
costs are accounted for separately by reference to the ore from
each separate pit. If, however, the pits are highly integrated for
the purpose of the mine planning, the second and subsequent pits
are regarded as extensions of the first pit in accounting for
stripping costs. In such cases, the initial stripping (i.e.
overburden and other waste removal) of the second and subsequent
pits is considered to be production phase stripping relating to the
combined operation.
Deferred stripping costs are included in the cost base of assets
when determining a cash-generating unit for impairment assessment
purposes.
2.9. Property, plant and equipment - Mining Rights
Mining rights are classified as property plant and equipment on
commencement of commercial production.
Depreciation is charged using the units-of-production method.
The units-of-production basis results in a depreciation charge
proportional to the depletion of proved and probable reserves.
Mining rights are assessed for impairment if facts and
circumstances indicate that an impairment may exist.
2.10. Property, plant and equipment (excluding development
assets, mining property and mining rights)
Freehold land is stated at cost and is not depreciated.
Items of property, plant and equipment are stated at cost less
accumulated depreciation and accumulated impairment losses. Where
items of property, plant and equipment contain components that have
different useful lives to the main item of plant and equipment,
these are capitalised separately to the plant and equipment to
which the component can be logically assigned.
The initial cost of an asset comprises its purchase price or
construction cost, any costs directly attributable to bringing the
asset into operation, the initial estimate of the rehabilitation
obligation, and, for qualifying assets (where relevant), borrowing
costs. The purchase price or construction cost is the aggregate
amount paid and the fair value of any other consideration given to
acquire the asset. The capitalised value of a finance lease is also
included in property, plant and equipment.
2. ACCOUNTING POLICIES (CONTINUED)
Depreciation is recognised so as to write off the cost of assets
(other than freehold land) less their residual values over their
useful lives, using the straight-line method. The estimated useful
lives, residual values and depreciation method are reviewed at the
end of each reporting period, with the effect of any changes in
estimate accounted for on a prospective basis.
Assets held under finance leases are depreciated over their
expected useful lives on the same basis as owned assets. However,
when there is no reasonable certainty that ownership will be
obtained by the end of the lease term, assets are depreciated over
the shorter of the lease term and the useful lives.
An item of property, plant and equipment is derecognised upon
disposal or when no future economic benefits are expected to arise
from the continued use of the asset. Any gain or loss arising on
the disposal or retirement of an item of property, plant and
equipment is determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognised in
profit or loss.
The annual depreciation rates applicable to each category of
property, plant and equipment are as follows:
Furniture, fittings and office equipment 13% - 50%
Buildings 20%
Plant and equipment 20%
Motor vehicles 20% - 33%
Leasehold improvements 25%
Computer equipment 33%
Leased assets Lease period
2.11. Intangible assets, excluding goodwill
An intangible asset is recognised at cost if it is probable that
future economic benefits will flow to the Group and the cost can be
reliably measured. The cost of intangible assets acquired in a
business combination is their fair value at the date of
acquisition. Following initial recognition, intangible assets are
carried at cost less any accumulated amortisation and accumulated
impairment losses, if any.
Intangible assets are amortised on a straight-line basis over
their estimated useful lives. The amortisation method used and the
estimated remaining useful lives are reviewed at least
annually.
Gains or losses arising from derecognition of an intangible
asset are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognised in
the consolidated statement of profit or loss and other
comprehensive income when the asset is derecognised.
Intangible assets are assessed for impairment if facts and
circumstances indicate that an impairment may exist. See note
2.11.
2.12. Impairment of tangible and intangible assets other than
goodwill
The carrying amounts of the Group's tangible and intangible
assets are reviewed at each reporting date to determine whether
there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent
of the impairment loss (if any).
Where it is not possible to estimate the recoverable amount of
an individual asset, the Group estimates the recoverable amount of
the cash-generating unit to which the asset belongs. Where a
reasonable and consistent basis of allocation can be identified,
corporate assets are also allocated to individual cash-generating
units, or otherwise they are allocated to the smallest group of
cash-generating units for which a reasonable and consistent
allocation basis can be identified.
Recoverable amount is the higher of fair value less costs to
sell and value-in-use. In assessing value-in-use, the estimated
future cash flows are discounted to their present value using a
post-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been
adjusted.
2. ACCOUNTING POLICIES (CONTINUED)
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised immediately in
profit or loss.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (or cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset (or cash-generating unit) in prior years. A reversal
of an impairment loss is recognised immediately in profit or
loss.
2.13. Leasing
Leases are classified as finance leases whenever the terms of
the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as
operating leases.
Assets held under finance leases are initially recognised as
assets of the Group at their fair value at the inception of the
lease or, if lower, at the present value of the minimum lease
payments. The corresponding liability to the lessor is included in
the consolidated statement of financial position as a finance lease
obligation.
Lease payments are apportioned between finance expenses and
reduction of the lease obligation so as to achieve a constant rate
of interest on the remaining balance of the liability. Finance
expenses are recognised immediately in profit or loss, unless they
are directly attributable to qualifying assets, in which case they
are capitalised in accordance with the Group's general policy on
borrowing costs (see 2.23 below). Contingent rentals are recognised
as expenses in the periods in which they are incurred.
Operating lease payments are recognised as an expense on the
straight-line basis over the lease term, except where another
systematic basis is more representative of the time pattern in
which economic benefits from the leased asset are consumed.
Contingent rentals arising under operating leases are recognised as
an expense in the period in which they are incurred.
2.14. Inventories
Inventories are stated at the lower of cost and net realisable
value. Costs of inventories include expenditure incurred in
acquiring the inventories, production or conversion costs and other
costs incurred in bringing them to their existing location and
condition.
Cost is determined by using the weighted-average method and
comprises direct purchase costs and an appropriate portion of fixed
and variable overhead costs, including depreciation and
amortisation, incurred in converting materials into finished goods,
based on the normal production capacity
Any provision for obsolescence is determined by reference to
specific items of stock. A regular review is undertaken to
determine the extent of any provision for obsolescence.
Net realisable value represents the estimated selling price for
inventories less all estimated costs of completion and costs
necessary to make the sale.
2.15. Trade receivables
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method, less provision for impairment.
A provision for impairment of trade receivables is established
when there is objective evidence that the Group will not be able to
collect all amounts due according to the original terms of the
receivables. Significant financial difficulties of the debtor,
probability that the debtor will enter bankruptcy or financial
reorganization, and default or delinquency in payments are
considered indicators that the trade receivable is impaired. The
amount of the provision is the difference between the asset's
carrying amount and the present value of estimated future cash
flows, discounted at the original effective interest rate. The
carrying amount of the asset is reduced through the use of an
allowance account, and the amount of the loss is recognised in the
consolidated statement of profit or loss. When a trade receivable
is uncollectible, it is written off against the allowance account
for trade receivables. Subsequent recoveries of amounts previously
written off are credited in the consolidated statement of profit or
loss and other comprehensive loss.
2. ACCOUNTING POLICIES (CONTINUED)
2.16. Cash and cash equivalents
Cash and cash equivalents comprise cash balances and short-term
deposits.
Restricted cash comprise cash balances which are encumbered and
the Group does therefore not have access to these funds.
2.17. Financial instruments
Recognition
Financial assets and financial liabilities are recognised when a
Group entity becomes a party to the contractual provisions of the
instrument.
Financial assets and financial liabilities are initially
measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and
financial liabilities (other than financial assets and financial
liabilities at fair value through profit or loss) are added to or
deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets
or financial liabilities at fair value through profit or loss are
recognised immediately in profit or loss.
Effective interest method
The effective interest method is a method of calculating the
amortised cost of a financial asset or financial liability and of
allocating interest over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future
cash receipts (including all fees on points paid or received that
form an integral part of the effective interest rate, transaction
costs and other premiums or discounts) through the expected life of
the instrument, or, where appropriate, a shorter period, to the net
carrying amount on initial recognition.
Income is recognised on an effective interest basis for debt
instruments other than those financial assets classified as at fair
value through profit or loss ('FVTPL').
Financial assets
Financial assets are classified into the following specified
categories: FVTPL, 'held-to-maturity' investments,
'available-for-sale' ('AFS') financial assets and 'loans and
receivables'. The classification depends on the nature and purpose
of the financial assets and is determined at the time of initial
recognition. All regular way purchases or sales of financial assets
are recognised and derecognised on a trade date basis. Regular way
purchases or sales are purchases or sales of financial assets that
require delivery of assets within the time frame established by
regulation or convention in the marketplace.
Financial assets at FVTPL
Financial assets are classified as at FVTPL when the financial
asset is either held for trading or it is designated as at
FVTPL.
A financial asset is classified as held for trading if:
-- it has been acquired principally for the purpose of selling it in the near term; or
-- on initial recognition it is part of a portfolio of
identified financial instruments that the Group manages together
and has a recent actual pattern of short-term profit-taking; or
-- it is a derivative that is not designated and effective as a hedging instrument.
A financial asset other than a financial asset held for trading
may be designated as at FVTPL upon initial recognition if:
-- such designation eliminates or significantly reduces a
measurement or recognition inconsistency that would otherwise
arise; or
-- the financial asset forms part of a group of financial assets
or financial liabilities or both, which is managed and its
performance is evaluated on a fair value basis, in accordance with
the Group's documented risk management or investment strategy, and
information about the grouping is provided internally on that
basis; or
-- it forms part of a contract containing one or more embedded
derivatives, and AASB 139 'Financial Instruments: Recognition and
Measurement' permits the entire combined contract (asset or
liability) to be designated as at FVTPL.
2. ACCOUNTING POLICIES (CONTINUED)
Financial assets at FVTPL are stated at fair value, with any
gains or losses arising on remeasurement recognised in profit or
loss. The net gain or loss recognised in profit or loss
incorporates any dividend or interest earned on the financial asset
and is included in the 'other gains and losses' line item. Fair
value is determined in the manner described in note 35.
Held to maturity investments
Non-derivative financial assets with fixed or determinable
payments and fixed maturity dates that management has the intent
and ability to hold to maturity are classified as held to maturity.
These investments are included in non-current assets, except for
maturities within 12 months from the financial year-end date, which
are classified as current assets. Held to maturity investments are
carried at amortised cost using the effective interest rate method
less any impairment.
Loans and receivables
Trade receivables, loans, and other receivables that have fixed
or determinable payments that are not quoted in an active market
are classified as 'loans and receivables'. Loans and receivables
are measured at amortised cost using the effective interest method,
less any impairment. Interest income is recognised by applying the
effective interest rate, except for short-term receivables when the
effect of discounting is immaterial.
Available for sale investments
AFS financial assets are non-derivatives that are either
designated as AFS or are not classified as (a) loans and
receivables, (b) held-to-maturity investments or (c) financial
assets at FVTPL.
Changes in the carrying amount of AFS monetary financial assets
relating to changes in foreign currency rates (see below), interest
income calculated using the effective interest method and dividends
on AFS equity investments are recognised in profit or loss. Other
changes in the carrying amount of AFS financial assets are
recognised in other comprehensive loss. Where the investment is
disposed of or is determined to be impaired, the cumulative gain or
loss previously accumulated in the equity is reclassified to profit
or loss.
The fair value of AFS monetary financial assets denominated in a
foreign currency is determined in that foreign currency and
translated at the spot rate prevailing at the end of the reporting
period. The foreign exchange gains and losses that are recognised
in profit or loss are determined based on the amortised cost of the
monetary asset. Other foreign exchange gains and losses are
recognised in other comprehensive loss.
Dividends on AFS equity instruments are recognised in profit or
loss when the Group's right to receive the dividends is
established.
AFS equity investments that do not have a quoted market price in
an active market and whose fair value cannot be reliably measured
and derivatives that are linked to and must be settled by delivery
of such unquoted equity investments are measured at cost less any
identified impairment losses at the end of each reporting
period.
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for
indicators of impairment at the end of each reporting period.
Financial assets are considered to be impaired when there is
objective evidence that, as a result of one or more events that
occurred after the initial recognition of the financial asset, the
estimated future cash flows of the investment have been
affected.
For listed or unlisted equity investments classified as AFS, a
significant or prolonged decline in the fair value of the security
below its cost is considered to be objective evidence of
impairment.
For certain categories of financial asset, such as trade
receivables, assets that are assessed not to be impaired
individually are, in addition, assessed for impairment on a
collective basis. Objective evidence of impairment for a portfolio
of receivables could include the Group's past experience of
collecting payments, an increase in the number of delayed payments
in the portfolio past the average credit period, as well as
observable changes in national or local economic conditions that
correlate with default on receivables.
For financial assets carried at amortised cost, the amount of
the impairment loss recognised is the difference between the
asset's carrying amount and the present value of estimated future
cash flows, discounted at the financial asset's original effective
interest rate.
2. ACCOUNTING POLICIES (CONTINUED)
For financial assets carried at cost, the amount of the
impairment loss is measured as the difference between the asset's
carrying amount and the present value of the estimated future cash
flows discounted at the current market rate of return for a similar
financial asset. Such impairment loss will not be reversed in
subsequent periods.
The carrying amount of the financial asset is reduced by the
impairment loss directly for all financial assets with the
exception of trade receivables, where the carrying amount is
reduced through the use of an allowance account. When a trade
receivable is considered uncollectible, it is written off against
the allowance account. Subsequent recoveries of amounts previously
written off are credited against the allowance account. Changes in
the carrying amount of the allowance account are recognised in
profit or loss.
When an AFS financial asset is considered to be impaired,
cumulative gains or losses previously recognised in other
comprehensive income are reclassified to profit or loss in the
period.
For financial assets measured at amortised cost, if, in a
subsequent period, the amount of the impairment loss decreases and
the decrease can be related objectively to an event occurring after
the impairment was recognised, the previously recognised impairment
loss is reversed through profit or loss to the extent that the
carrying amount of the investment at the date the impairment is
reversed does not exceed what the amortised cost would have been
had the impairment not been recognised.
In respect of AFS equity securities, impairment losses
previously recognised in profit or loss are not reversed through
profit or loss. Any increase in fair value subsequent to an
impairment loss is recognised in other comprehensive income and
accumulated under the heading of investments revaluation reserve.
In respect of AFS debt securities, impairment losses are
subsequently reversed through profit or loss if an increase in the
fair value of the investment can be objectively related to an event
occurring after the recognition of the impairment loss.
Derecognition
The Group derecognises a financial asset when the contractual
rights to the cash flows from the asset expire, or when it
transfers the financial asset and substantially all the risks and
rewards of ownership of the asset to another entity. Any interest
in financial assets transferred that is created or retained by the
group is recognised as a separate asset or liability.
The Group may enter into transactions whereby it transfers
assets recognised on its consolidated statement of financial
position, but retains either all risks and rewards of the
transferred assets or a portion of them. If all, or substantially
all, risks and rewards are retained, then the Group continues to
recognise the financial asset and also recognises a collateralised
borrowing for the proceeds received.
On derecognition of a financial asset in its entirety, the
difference between the asset's carrying amount and the sum of the
consideration received and receivable and the cumulative gain or
loss that had been recognised in other comprehensive income and
accumulated in equity is recognised in profit or loss.
On derecognition of a financial asset other than in its entirety
(e.g. when the Group retains an option to repurchase part of a
transferred asset or retains a residual interest that does not
result in the retention of substantially all the risks and rewards
of ownership and the Group retains control), the Group allocates
the previous carrying amount of the financial asset between the
part it continues to recognise under continuing involvement, and
the part it no longer recognises on the basis of the relative fair
values of those parts on the date of the transfer. The difference
between the carrying amount allocated to the part that is no longer
recognised and the sum of the consideration received for the part
no longer recognised and any cumulative gain or loss allocated to
it that had been recognised in other comprehensive income is
recognised in profit or loss. A cumulative gain or loss that had
been recognised in other comprehensive income is allocated between
the part that continues to be recognised and the part that is no
longer recognised on the basis of the relative fair values of those
parts.
Financial liabilities
Financial liabilities are initially measured at fair value.
Financial liabilities comprise short-term and long-term
interest-bearing borrowings and trade and other payables (excluding
income received in advance).
Subsequent to initial measurement, such liabilities are carried
at amortised cost using the effective interest method.
Borrowings
Borrowings comprise short-term and long-term interest-bearing
borrowings. Premiums or discounts arising from the difference
between the fair value of borrowings raised and the amount
repayable at maturity date are recognised in the consolidated
statement of profit or loss as borrowing costs based on the
effective interest rate method.
2. ACCOUNTING POLICIES (CONTINUED)
Derecognition
Financial liabilities are derecognised when the associated
obligation has been discharged, cancelled or has expired.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of the Group after deducting all of its
liabilities, and includes ordinary share capital. Equity
instruments issued by the Group are recorded at the proceeds
received, net of direct issue costs.
2.18. Trade payables
Trade payables are obligations to pay for goods or services that
have been acquired in the ordinary course of business from
suppliers. Trade payables are classified as current liabilities if
payment is due within one year or less. If not, they are presented
as non-current liabilities.
Trade payables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method.
2.19. Provisions
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of a past event, it is probable
that the Group will be required to settle the obligation, and the
amount can be reliably estimated. Provisions are not recognised for
future operating losses.
The amount recognised as a provision is the best estimate of the
consideration required to settle the present obligation at the end
of the reporting period, taking into account the risks and
uncertainties surrounding the obligation. When a provision is
measured using the cash flows estimated to settle the present
obligation, its carrying amount is the present value of those cash
flows (where the effect of the time value of money is material).
The increase in provisions due to the passage of time is included
in the finance cost line item in the consolidated statement of
profit or loss and comprehensive loss.
Financial Guarantee Contracts
A financial guarantee contract is a contract that requires the
issuer to make specified payments to reimburse the holder for a
loss it incurs because a specified debtor fails to make payment
when due in accordance with the original or modified terms of a
debt instrument.
The entity recognizes a provision for financial guarantees when
it is probable that an outflow of resources embodying economic
benefits and will be required to settle the obligation and a
reliable estimate of the obligation can be made.
Determining whether an outflow of resources is probable in
relation to financial guarantees requires judgement. Indications
that an outflow of resources may be probable are:
- Financial difficulty of the debtor
- Defaults or delinquencies in interest and capital repayment of
the debtor
- Breaches of the terms of the debt instrument that result in it
being payable earlier than the agreed term and the ability of the
debtor to settle its obligation on the amended terms.
- A decline in prevailing economic circumstances (e.g. high
interest rates, inflation and unemployment) that impact on the
ability of entities to repay their obligations.
Rehabilitation provision
A provision for rehabilitation is recognised when there is a
present obligation as a result of exploration, development or
production activities undertaken, it is probable that an outflow of
economic benefits will be required to settle the obligation, and
the amount of the provision can be measured reliably.
The nature of these restoration activities includes: dismantling
and removing structures; rehabilitating mines and tailings dams;
dismantling operating facilities; closing plant and waste sites;
and restoring, reclaiming and revegetating affected areas.
The provision for future rehabilitation costs is the best
estimate of the present value of the expenditure required to settle
the rehabilitation obligation at the reporting date, based on
current legal and other requirements and technology. Future
rehabilitation costs are reviewed annually and any changes in the
estimate are reflected in the present value of the rehabilitation
provision at each reporting date.
2. ACCOUNTING POLICIES (CONTINUED)
The initial estimate of the rehabilitation provision relating to
exploration, development and production facilities is capitalised
into the cost of the related asset and depreciated or amortised on
the same basis as the related asset. Changes in the estimate of the
provision are treated in the same manner, except that the unwinding
of the effect of discounting on the provision is recognised as a
finance cost rather than being capitalised into the cost of the
related asset.
2.20. Share-based payments transactions of the Group
Equity-settled
Equity-settled share-based payments to employees and others
providing similar services are measured at the fair value of the
equity instruments at the grant date. Details regarding the
determination of the fair value of equity-settled share-based
transactions are set out in note 33.
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on the
straight-line basis over the vesting period, based on the Group's
estimate of equity instruments that will eventually vest, with a
corresponding increase in equity. At the end of each reporting
period, the Group revises its estimate of the number of equity
instruments expected to vest. The impact of the revision of the
original estimates, if any, is recognised in profit or loss such
that the cumulative expense reflects the revised estimate, with a
corresponding adjustment to the equity-settled employee benefits
reserve.
Equity-settled share-based payment transactions with parties
other than employees are measured at the fair value of the goods or
services received, except where that fair value cannot be estimated
reliably, in which case they are measured at the fair value of the
equity instruments granted, measured at the date the entity obtains
the goods or the counterparty renders the service.
Accounting for BEE transactions
Where equity instruments are issued to a black economic
empowerment ('BEE') party at less than fair value, these are
accounted for as share-based payments. Any difference between the
fair value of the equity instrument issued and the consideration
received is accounted for as an expense in the consolidated
statement of profit or loss and other comprehensive loss.
A restriction on the BEE party to transfer the equity instrument
subsequent to its vesting is not treated as a vesting condition,
but is factored into the fair value determination of the
instrument.
2.21. Taxation, including sales tax
The income tax expense or income for the period represents the
sum of the tax currently payable or recoverable and deferred
tax.
Current taxation
The tax currently payable or recoverable is based on taxable
profit or loss for the year. Taxable profit or loss differs from
profit or loss as reported in the consolidated statement of profit
or loss and other comprehensive loss because of items of income or
expense that are taxable or deductible in other years and items
that are never taxable or deductible. The Group's liability for
current tax is calculated using tax rates that have been enacted or
substantively enacted at the reporting date in countries where the
Group operates and generates taxable income.
Deferred taxation
Deferred taxation is recognised on temporary differences between
the carrying amounts of assets and liabilities in the consolidated
financial statements and the corresponding tax bases used in the
computation of taxable profit or loss. Deferred tax liabilities are
generally recognised for all taxable temporary differences.
Deferred tax assets are generally recognised for all deductible
temporary differences to the extent that it is probable that
taxable profits will be available against which those deductible
temporary differences can be utilised. Such deferred tax assets and
liabilities are not recognised if a taxable temporary difference
arises from the initial recognition of goodwill or any temporary
difference arises from the initial recognition (other than in a
business combination) of other assets and liabilities in a
transaction that affects neither the taxable profit nor the
accounting profit.
Deferred tax assets are reviewed at each reporting date and are
reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset
to be recovered.
2. ACCOUNTING POLICIES (CONTINUED)
Deferred tax balances are calculated using the tax rates that
are expected to apply to the reporting period or periods when the
temporary difference reverse, based on tax rates and tax laws
enacted or substantively enacted at the end of the reporting
period.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
Deferred tax liabilities are recognised for temporary
differences associated with investments in subsidiaries and
associates, and interests in joint ventures, except where the
timing of the reversal of the temporary difference is controlled by
the Group and it is probable that the temporary difference will not
reverse in the foreseeable future. Deferred tax assets arising from
deductible temporary differences associated with such investments
and interests are only recognised to the extent that it is probable
that there will be sufficient taxable profits against which to
utilise the benefits of the temporary differences and they are
expected to reverse in the foreseeable future.
Current and deferred tax for the year
Current and deferred tax are recognised in profit or loss,
except when they relate to items that are recognised in other
comprehensive income or directly in equity, in which case the
current and deferred tax are also recognised in other comprehensive
income or directly in equity, respectively.
Where current tax or deferred tax arises from the initial
accounting for a business combination, the tax effect is included
in the accounting for the business combination.
Sales tax
Revenues, expenses and assets are recognised net of the amount
of the applicable sales tax, except:
-- where the amount of sales tax incurred is not recoverable
from the taxation authority, it is recognised as part of the cost
of acquisition of an asset or as part of an item of expense; or
-- for receivables and payables which are recognised inclusive of sales tax.
The net amount of sales tax recoverable from, or payable to, the
taxation authority is included as part of receivables or
payables.
Cash flows are included in the cash flow statement on a gross
basis. The sales tax component of cash flows arising from investing
and financing activities which is recoverable from, or payable to,
the taxation authority is classified within operating cash
flows.
2.22. Revenue recognition
Revenue is recognised at fair value of the consideration
received net of the amount of applicable sales tax.
Sale of goods
Revenue from the sale of goods is recognised when all the
following conditions are satisfied:
-- the Group has transferred to the buyer the significant risks
and rewards of ownership of the goods;
-- the Group retains neither continuing managerial involvement
to the degree usually associated with ownership nor effective
control over the goods sold;
-- the amount of revenue can be measured reliably;
-- it is probable that the economic benefits associated with the
transaction will flow to the Group; and
-- the costs incurred or to be incurred in respect of the
transaction can be measured reliably.
Specifically, revenue from the sale of goods is recognised when
goods are delivered and legal title is passed.
Many of the Group's sales are subject to an adjustment based on
inspection of the shipment by the customer. In such cases, revenue
is recognised based on the Group's best estimate of the grade at
the time of shipment, and any subsequent adjustments are recorded
against revenue when advised. Historically, the differences between
estimated and actual grade have not been significant.
2. ACCOUNTING POLICIES (CONTINUED)
Interest income
Interest income is recognised when it is probable that the
economic benefits will flow to the Group and the amount of revenue
can be measured reliably. Interest income is accrued on a time
basis, by reference to the principal outstanding and at the
effective interest rate. Interest income is recognised in
investment income on the consolidated statement of profit or loss
and other comprehensive income.
2.23. Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets, which are assets
that necessarily take a substantial period of time to get ready for
their intended use or sale, are added to the cost of those assets,
until such time as the assets are substantially ready for their
intended use or sale.
All other borrowing costs are recognised in profit or loss in
the period in which they are incurred.
2.24. Employee benefits
A liability is recognised for benefits accruing to employees in
respect of wages and salaries, annual leave and sick leave when it
is probable that settlement will be required and they are capable
of being measured reliably.
2.25. Segment information
Reportable segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Company's executive
committee.
Management has determined the reportable segments of the Group
based on the reports reviewed by the Company's executive committee
that are used to make strategic decisions. The Group has three
reportable segments: Exploration, Development and Mining (see note
4).
2.26. Adoption of new and revised Accounting Standards and
Interpretations
In the current year the Group has adopted all of the new and
revised standards and interpretation issued by the Australian
Accounting Standards Board (AASB) that are relevant to its
operations and effective for the current annual reported period.
New and revised standards and amendments therof and interpretations
effective for the current reporting period that are relevant to the
Group include:
-- AASB 2016-1 Amendments to Australian Accounting Standards -
Recognition of Deferred Tax Assets for Unrealised Losses which
clarify that the existence of a deductible temporary difference
depends solely on a comparison of the carrying amount of an asset
and its tax base at the end of the reporting period, and it is not
effected by possible future changes in the carrying amount or
expected manner of recovery of the asset;.
-- AASB 2016-2 Amendments to Australian Accounting Standards -
Disclosure Initiative: Amendments to AASB 107 which amend existing
presentation and disclosure requirements to evaluate changes in
liabilities arising from financing activities, including both
changes arising from cash flows and non-cash changes; and
-- AASB 2017-2 Amendments to Australian Accounting Standards -
Further Annual Improvements 2016 - 2016 Cycle which clarify the
existing disclosure requirements and scope of AASB 12 Disclosure of
Interest in Other Entities to apply to interests that are
classified as held for sale or distribution.
The adoption of these new and revised standards has not resulted
in any significant changes to the Group's accounting policies or to
the amounts reported for the current or prior periods.
2. ACCOUNTING POLICIES (CONTINUED)
At the date of the authorisation of this financial report, a
number of Standards and Interpretations were in issue but not yet
effective. The Group has assessed those that are relevant to its
operations as follows:
Mandatory
application
date/ Date of
Title of Nature of adoption
standard change Impact by Group
AASB 9 AASB 9 addresses The Group has performed Must be applied
Financial the a detailed assessment for
Instruments classification, and reviewed its financial financial years
measurement assets and liabilities commencing
and derecognition and is expecting the following on or after 1
of financial impacts as discussed below. January
assets and The other financial assets 2018.
financial held by the Group include: Based on the
liabilities, * equity investments currently measured at fair value transitional
introduces through profit or loss which would likely continue to provisions in the
new rules be measured on the same basis under AASB 9. completed AASB 9,
for hedge early adoption in
accounting phases was only
and a new Accordingly, the Group permitted
impairment does not expect the new for annual
model for guidance to have a significant reporting
financial impact on the classification periods beginning
assets. and measurement of its before 1 February
financial assets. 2015. After that
There will be no impact date, the new
on the Group's accounting rules
for financial liabilities, must be adopted
as the new requirements in
only affects the accounting their entirety.
for financial liabilities Expected date of
that are designated at adoption by the
fair value through profit Group:
or loss and the Group 1 July 2018
does not have any such
liabilities. The derecognition
rules have been transferred
from AASB 139 Financial
Instruments: Recognition
and Measurement and have
not been changed.
The new impairment model
requires the recognition
of impairment provisions
based on expected credit
losses ('ECL') rather
than only incurred credit
losses as is the case
under AASB 139. It applies
to financial assets classified
at amortised cost, debt
instruments measured at
fair value through other
comprehensive income,
contract assets under
AASB 15 Revenue from Contracts
with Customers, lease
receivables, loan commitments
and certain financial
guarantee contracts. The
Group has undertaken a
detailed assessment of
how its impairment provisions
on trade receivables would
be affected by the new
model and concludes that
it will not have a material
impact upon initial adoption.
The new standard also
introduces expanded disclosure
requirements and changes
in presentation. These
are expected to change
the nature and extent
of the Group's disclosures
about its financial instruments
particularly in the year
of the adoption of the
new standard.
------------------ ------------------------------------------------------------ ------------------
AASB 15 The AASB has Management has assessed Mandatory for
Revenue issued a new the effects of applying financial
from Contracts standard for the new standard on the years commencing
with Customers the recognition Group's financial statements, on or after 1
of revenue. especially with the acquisition January
This will of Uitkomst Colliery on 2018, but
replace AASB 30 June 2017. available
118 which The assessment is as follows: for early
covers revenue Revenue, from the sale adoption.
arising from of coal will not be materially Expected date of
the sale of affected by the adoption adoption by the
goods and AASB 15. Group:
the rendering 1 July 2018.
of services
and AASB 111
which covers
construction
contracts.
The new standard
is based on
the principle
that revenue
is recognised
when control
of a good
or service
transfers
to a customer.
The standard
permits either
a full
retrospective
or a modified
retrospective
approach for
the adoption.
------------------ ------------------------------------------------------------ ------------------
AASB 16 AASB 16 was The standard will affect Mandatory for
Leases issued in primarily the accounting financial
February 2016. for the Group's operating years commencing
It will result leases. on or after 1
in almost As at the reporting date, January
all leases the Group has operating 2019. At this
being recognized leases of $1.1 million. stage,
on the balance Some of these operating the Group does
sheet, as leases may be covered not
the distinction by the exception for short-term intend to adopt
between operating and low-value leases and the
and finance some commitments may relate standard before
leases is to arrangements that will its
removed. Under not qualify as leases effective date.
the new standard, under AASB 16 and will
an asset (the be recognised on a straight-line
right to use basis as an expense in
the leased profit or loss.
item) and However, the Group has
a financial not yet assessed what
liability other adjustments, if
to pay rentals any, are necessary for
are recognized. example because of the
The exceptions change in the definition
are short-term of the lease term and
and low-value different treatment of
leases. variable lease payments
and of extension and termination
options. It is therefore
not yet possible to estimate
the amount of the rights
of use assets and leases
liabilities that will
have to be recognised
on adoption of the new
standard and how this
may affect the Group's
profit or loss and classification
of its cash flows going
forward.
------------------ ------------------------------------------------------------ ------------------
3. CRITICAL ACCOUNTING ESTIMATES AND KEY JUDGEMENTS
Estimates assume a reasonable expectation of future events and
are based on current trends and economic data, obtained both
externally and within the Group. Actual results may differ from
these estimates. Estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimates are revised and in
any future periods affected. The primary areas in which estimates
and judgements are applied are discussed below.
Asset carrying values and impairment charges
The Group assesses impairment at the end of each reporting
period by evaluating conditions and events specific to the Group
that may be indicative of impairment triggers. Recoverable amounts
of relevant assets are reassessed using value-in-use calculations
which incorporate various key assumptions. Key assumptions include
future coal prices, future operating costs, discount rates, foreign
exchange rates and coal reserves. Refer to note 15.
Coal reserves
Economically recoverable coal reserves relate to the estimated
quantity of coal in an area of interest that can be expected to be
profitably extracted, processed and sold.
The Group determines and reports coal reserves under the
Australasian Code of Reporting of Mineral Resources and Ore
Reserves (the 'JORC Code'). This includes estimates and assumptions
in relation to geological, technical and economic factors,
including: quantities, grades, production techniques, recovery
rates, production costs, transport costs, exchange rates and
expected coal demand and prices.
Because the economic assumptions used to estimate reserves
change from period to period, and because additional geological
data is generated during the course of operations and mining
operations conducted, estimates of reserves may change from period
to period. Changes in reported reserves may affect the Group's
financial results and financial position in a number of ways,
including the following:
-- asset carrying values may be affected due to changes in estimated future cash flows; and
-- depreciation and amortisation charges may change where such
charges are determined by the units of production basis, or where
the useful economic lives of assets change.
Depreciation and amortisation charges in the consolidated
statement of profit or loss may change where such charges are
determined by the units of production basis, or where the useful
economic lives of assets change.
Exploration and evaluation assets
Determining the recoverability of exploration and evaluation
expenditure capitalised requires estimates and assumptions as to
future events and circumstances, in particular, whether successful
development and commercial exploitation, or alternatively sale, of
the respective areas of interest will be achieved. The Group
applies the principles of AASB 6 and recognises exploration and
evaluation assets when the rights of tenure of the area of interest
are current, and the exploration and evaluation expenditures
incurred are expected to be recouped through successful development
and exploitation of the area. If, after having capitalised the
expenditure under the Group's accounting policy, a judgment is made
that recovery of the carrying amount is unlikely, an impairment
loss is recorded in profit or loss. Refer to note 15.
3. CRITICAL ACCOUNTING ESTIMATES AND KEY JUDGEMENTS (CONTINUED)
Development expenditure
Development activities commence after the commercial viability
and technical feasibility of the project is established. Judgment
is applied by management in determining when a project is
commercially viable and technically feasible. Any judgments may
change as new information becomes available. If, after having
commenced the development activity, a judgment is made that a
development asset is impaired, the appropriate amount will be
written off to the consolidated statement of comprehensive income.
Refer to note 15.
The Company considers the following items as pre-requisites
prior to concluding on commercial viability:
-- All requisite regulatory approvals from government
departments in South Africa have been received and are not subject
to realistic legal challenges;
-- The Company has the necessary funding to engage in the
construction and development of the project as well as general
working capital until the project is cash generative;
-- A JORC compliant resource proving the quantity and quality of
the project as well as a detailed Mine Plan reflecting that the
colliery can be developed and will deliver the required return
hurdle rates;
-- The Company has secured off-take and/or logistics agreements
for a significant portion of the product produced by the mine and
the pricing has been agreed; and
-- The Company has the appropriate skills and resources to develop and operate the project.
Rehabilitation and restoration provisions
Certain estimates and assumptions are required to be made in
determining the cost of rehabilitation and restoration of the areas
disturbed during mining activities and the cost of dismantling of
mining infrastructure. The amount the Group is expected to incur to
settle its future obligations includes estimates regarding:
-- the future expected costs of rehabilitation, restoration and dismantling.
-- the expected timing of the cash flows and the expected life
of mine (which is based on coal reserves noted above);
-- the application of relevant environmental legislation; and
-- the appropriate rate at which to discount the liability.
Changes in the estimates and assumptions used could have a
material impact on the carrying value of the rehabilitation
provision and related asset. The provision is reviewed at each
reporting date and updated based on the best available estimates
and assumptions at that time. The carrying amount of the
rehabilitation provision is set out in note 24.
Recoverability of non-current assets
As set out in note 15, certain assumptions are required to be
made in order to assess the recoverability of non-current assets
where there is an impairment indicator. Key assumptions include
future coal prices, future operating costs, discount rate, foreign
exchange rates and estimates of coal reserves. Estimates of coal
reserves in themselves are dependent on various assumptions (refer
above). Changes in these assumptions could therefore affect
estimates of future cash flows used in the assessment of
recoverable amounts, estimates of the life of mine and
depreciation. Refer to note 15.
Non-current assets held for sale and discontinued operations
A non-current asset, or disposal group, is classified as held
for sale if its carrying amount will be recovered principally
through a sale transaction rather than continued use. In accordance
with AASB 5 'Non-current Assets Held for Sale and Discontinued
Operations', assets which meet the definition of held for sale are
valued at the lower of carrying value and fair value less costs to
sell.
Judgement is required by management in determining whether an
asset meets the AASB 5 criteria of held for sale, including whether
the asset is being actively marketed, is available for sale in its
current condition and whether a sale is highly probable within 12
months of classification as held for sale. When calculating fair
value less costs to sell, estimates of future disposal proceeds are
also required. Refer to note 23 for further details.
4. SEGMENT INFORMATION
The Group has three reportable segments: Exploration,
Development and Mining.
The Exploration segment is involved in the search for resources
suitable for commercial exploitation, and the determination of the
technical feasibility and commercial viability of resources. As of
30 June 2018, projects within this reportable segment include four
exploration stage coking and thermal coal complexes, namely Chapudi
(which comprises the Chapudi project, the Chapudi West project and
the Wildebeesthoek project), Generaal (which comprises the Generaal
project and the Mount Stuart project), Mopane (which comprises the
Voorburg project and the Jutland project) and Makhado (comprising
the Makhado project and the Makhado Extension project).
The Development segment is engaged in establishing access to and
commissioning facilities to extract, treat and transport production
from the mineral reserve, and other preparations for commercial
production. As of 30 June 2018, the only project included within
this reportable segment is the Vele Colliery, in the early
operational and development stage.
The Mining segment is involved in day to day activities of
obtaining a saleable product from the mineral reserve on a
commercial scale and consists of Uitkomst Colliery and the
Klipspruit project. No revenue or costs were recognised for the
Uitkomst Colliery for the prior year as the effective date of
acquisition was 30 June 2017.
The accounting policies of the reportable segments are the same
as those described in Note 2, Accounting policies.
The Group evaluates performance on the basis of segment
profitability, which represents net operating (loss) / profit
earned by each reportable segment.
Each reportable segment is managed separately because, amongst
other things, each reportable segment has substantially different
risks.
The Group accounts for intersegment sales and transfers as if
the sales or transfers were to third parties, i.e. at current
market prices.
The Group's reportable segments focus on the stage of project
development and the product offerings of coal mines in
production.
In order to reconcile the segment results with the consolidated
statement of profit or loss and other comprehensive income, the
discontinuing operations should be deducted from the segment total
and the corporate results (as per the reconciliation later in the
note should be included).
4. SEGMENT INFORMATION (CONTINUED)
For the year ended 30 June 2018
Exploration Development Mining Total
Revenue - - 32,693 32,693
Cost of sales - - (27,340) (27,340)
----------------------- ----------------------- -------------------- --------------------
Gross profit - - 5,353 5,353
Other income 11 102 988 1,101
Other operating (losses)/gains - - 25 25
Impairment expense - (87,475) - (87,475)
Administrative expenses (1,129) (985) (1,275) (3,389)
----------------------- ----------------------- -------------------- --------------------
Operating (loss)/profit (1,118) (88,358) 5,091 (84,385)
Interest income 21 - 173 194
Finance costs (2,578) (464) (75) (3,117)
----------------------- ----------------------- -------------------- --------------------
(Loss)/profit before
tax (3,675) (88,822) 5,189 (87,308)
Income tax charge (461) (5,816) (1,744) (8,021)
----------------------- ----------------------- -------------------- --------------------
Net loss for the
year (4,136) (94,638) 3,445 (95,329)
----------------------- ----------------------- -------------------- --------------------
Segment assets 122,175 28,180 30,821 181,176
Items included in
the Group's measure
of segment assets
* Addition to non-current assets 3,801 4 1,881 5,686
Segment liabilities (14,166) (4,464) (9,272) (27,902)
4. SEGMENT INFORMATION (CONTINUED)
For the year ended 30 June 2017
Exploration Development Mining Total
Revenue - - - -
Cost of sales - - - -
----------------------- ----------------------- ------------------- --------------------
Gross profit - - - -
Other income 87 172 - 259
Other operating (losses)/gains 1,556 3 - 1,559
Administrative expenses (2,088) (1,173) - (3,261)
----------------------- ----------------------- ------------------- --------------------
Operating (loss)/profit (445) (998) - (1,443)
Interest income 2 14 - 16
Finance costs (1,062) (120) - (1,182)
----------------------- ----------------------- ------------------- --------------------
(Loss)/profit before
tax (1,505) (1,104) - (2,609)
Income tax credit - 295 - 295
----------------------- ----------------------- ------------------- --------------------
Net loss for the
year (1,505) (809) - (2,314)
----------------------- ----------------------- ------------------- --------------------
Segment assets 124,216 120,406 31,016 275,638
Items included in
the Group's measure
of segment assets
* Addition to non-current assets (including Uitkomst) 679 6 31,016 31,701
Segment liabilities (8,758) (6,672) (9,045) (24,475)
4. SEGMENT INFORMATION (CONTINUED)
Reconciliations of the total segment amounts to respective items
included in the consolidated financial statements are as
follows:
Year ended Year ended
30 June 30 June
2018 2017
$'000 $'000
----------- -----------
Total loss for reportable segments (95,329) (2,314)
Reconciling items:
Other operating income 309 2,085
Other operating (losses)/gains (1,216) 2,329
Impairment expense - (10,624)
Administrative expenses (9,315) (9,150)
----------- -----------
Interest income 1,006 310
Finance costs (519) (3)
----------- -----------
Income tax credit 1,301 -
----------- -----------
Net loss for the year from continuing
operations (103,763) (17,367)
(Profit)/loss for the year from operations
classified as held for sale 2,185 1,815
----------- -----------
Loss for the year (101,578) (15,552)
----------- -----------
Total segment assets 181,176 275,638
Reconciling items:
Unallocated property, plant and equipment 2,688 4,118
Other financial assets 3,574 7,311
Other receivables 7,645 -
Unallocated current assets 8,358 9,310
Assets classified as held for sale - 9,690
----------- -----------
Total assets 203,441 306,067
----------- -----------
Total segment liabilities 27,902 24,475
Reconciling items:
Deferred consideration 2,016 1,916
Unallocated liabilities 2,789 3,388
Liabilities associated with assets
held for sale - 3,414
----------- -----------
Total liabilities 32,707 33,193
----------- -----------
The Group operates in two principal geographical areas -
Australia (country of domicile) and South Africa (country of
operations).
The Group's revenue from external customers by location of
operations and information about its non-current assets by location
of assets are detailed below.
4. SEGMENT INFORMATION (CONTINUED)
Year ended Year ended
30 June 30 June
2018 2017
$'000 $'000
----------- -----------
Revenue by location of operations
South Africa 32,693 -
Australia - -
----------- -----------
Total revenue 32,693 -
----------- -----------
Non-current assets by location of operations
South Africa 182,946 278,526
Australia - -
----------- -----------
Total non-current assets 182,946 278,526
----------- -----------
5. REVENUE
Revenue consists solely of the sale of coal by the Uitkomst
Colliery.
6. COST OF SALES
Cost of sales consists of:
Employee costs (3,232) -
Depreciation and amortisation (1,240) -
Inventory (3,433) -
Mining contractor (12,912) -
Utilities (454) -
Human resources (756) -
Training (53) -
Wash plant (418) -
Administration (349) -
Environmental (60) -
Logistics (1,109) -
Engineering (2,602) -
Safety (105) -
Security (226) -
Royalties (391) -
------------- ------
(27,340) -
------------- ------
There were no comparative figures for the cost of sales, as
Uitkomst was acquired on 30 June 2017. Refer to Note 39.
7. OTHER OPERATING INCOME
Other operating income includes:
Year ended Year ended
30 June 2018 30 June
2017
$'000 $'000
------------------ ------ -----------------
Rental income 212 196
Scrap sales 102 172
Transport income 728 -
Diesel recoupment 239 -
Other 129 -
------------------ -----------------
1,410 368
------------------ -----------------
8. OTHER OPERATING (LOSSES)/GAINS
Other operating (losses)/gains include:
Foreign exchange (loss)/gain
- unrealised (2,211) 1,971
- realised 699 1,393
Other 320 944
------------ ----------
(1,192) 4,308
------------ ----------
9. IMPAIRMENT EXPENSE
During the period, the Group made the decision to prioritise the
Makhado Project and consequently to delay the redevelopment of the
Vele Colliery to better align with the timing of the Musina-Makhado
SEZ in Limpopo. This has resulted in the forecast production date
for the Vele Colliery being delayed, with production now expected
to commence in July 2021. In terms of AASB 136 - Impairment of
Assets, management identified this as an indicator that the Vele
assets may be impaired and performed a formal impairment assessment
at 31 December 2017. Refer to note 13 for details of the
impairment.
In the prior period, MC Mining decided not to renew the take or
pay obligation with TCM, a subsidiary of Grindrod, the operator of
the Matola Terminal, and CMR Engineers & Project Managers
Proprietary Limited. In August 2008 the Company entered into a
throughput agreement with TCM. This agreement granted the Company
one million tonnes per annum ("mtpa") of port capacity through the
Matola terminal commencing 1 January 2009, for an initial term of
five years. This capacity was increased to approximately three mtpa
in March 2011 and the Company had the right to renew the agreement
(subject to certain conditions) at the end of the initial term, for
further periods of three successive periods of five years each for
a total of 15 years.
MC Mining decided not to renew the take or pay obligation beyond
31 December 2016 to avoid any further liabilities until export
orientated production can be forecast with certainty, and as a
result impaired the intangible asset.
New terms can be negotiated if required to facilitate any
production by its Vele Colliery and Makhado Project.
10. ADMINISTRATIVE EXPENSES
Year ended Year ended
30 June 2018 30 June
2017
$'000 $'000
------------------ ------ ----------------------
Employee expense (5,979) (4,646)
IFRS2 Black Economic Empowerment expense (884) -
(1)
Depreciation (264) (354)
Professional fees (542) (1,102)
Transaction costs (608) (1,135)
Legal expenses (534) (378)
Other overheads (3,893) (3,068)
------------------ ----------------------
(12,704) (10,683)
------------------ ----------------------
(1) The Black Economic Empowerment expense relates to the 21%
shareholding that Pan African Resources Coal Holdings Proprietary
Limited (the majority shareholder in Uitkomst Colliery) sold to the
Black economic empowerment parties on 1 January 2018, in order to
comply with BEE legislation pertaining to the mining industry and
ensure a social licence to operate.
Included in administrative expenses is auditors' remuneration as
follows:
Remuneration for audit and review of the financial report:
Deloitte - Australia (115) (92)
Deloitte - South Africa (289) (200)
---------- ----------
(404) (292)
---------- ----------
Non-audit related services performed:
Deloitte - Australia (7) (34)
Deloitte - South Africa (4) (5)
--------- ---------
(11) (39)
--------- ---------
11. FINANCE COSTS
Interest on borrowings (2,932) (1,051)
Unwinding of interest (559) (120)
Other (145) (14)
------------ ------------
Tax expense in respect of the prior
year (3,636) (1,185)
------------ ------------
12. INCOME TAX (CHARGE)/CREDIT
Income tax recognised in profit or loss from continuing
operations
Current tax
Tax expense in respect of the current (1,565) -
year
Tax expense in respect of the prior 878 -
year
Deferred tax (Note 27)
Recognition of deferred tax assets on
assessed losses - 295
Deferred tax asset derecognised (5,816) -
Current year deferred tax (213) -
Withholding taxes (4) -
------------ --------
Total income tax (expense)/credit recognised (6,720) 295
------------ --------
12. INCOME TAX (CHARGE)/CREDIT (CONTINUED)
The Group's effective tax rate for the year from continuing
operations was 6.9% (2017: (2%)). The tax rate used for the 2018
and 2017 reconciliations below is the corporate tax rate of 30% for
Australian companies. The income tax expense for the year can be
reconciled to the accounting profit as follows:
Year ended Year ended
30 June 2018 30 June
2017
$'000 $'000
------------------ ------ ---------------
Loss from continuing operations before
income tax (97,045) (17,662)
Income tax benefit calculated at 30%
(2017: 30%) 29,114 5,299
Tax effects of:
Expenses that are not deductible for
tax purposes (26,846) (157)
Differences in tax rates (53) (127)
Income not taxable 380 436
Other temporary differences not recognized (4,080) (5,156)
Other (297) -
Prior year adjustments 878 -
Derecognition of deferred tax asset (5,816) -
- Losses
------------------ ---------------
Income tax (expense)/credit (6,720) 295
------------------ ---------------
Income tax recognised in profit or loss from discontinued
operations
Current tax
Tax expense in respect of the current - -
year
------ ------
- -
------ ------
Deferred tax (Note 27)
Recognition of deferred tax asset - - -
Losses
------ ------
Income tax credit - -
------ ------
The Group's effective tax rate for the year from discontinued
operations was (0%) (2017: 0%). The tax rate used for the 2018 and
2017 reconciliations below is the corporate tax rate of 30% payable
by Australian corporate entities. The income tax expense for the
year can be reconciled to the accounting profit as follows:
Profit/(loss) before income tax from
discontinued operations 2,185 1,815
Income tax benefit calculated at 30%
(2017: 30%) (656) (545)
Tax effects of:
Expenses that are not deductible for
tax purposes (144) (80)
Differences in tax rates (10) 37
Income not taxable 936 846
Other temporary differences not recognized (126) (258)
Income tax credit - -
---------- ----------
13. DISCONTINUING OPERATIONS
13.1 Disposal of Langcarel (Pty) Ltd ("Mooiplaats")
During the period, the Company as well as it's BEE partner
Ferret, entered into a sale of shares and claims agreement ("the
Agreement") with MCH and Mooiplaats Mining Limited ("Mooiplaats
Mining"). In terms of the Agreement, MC Mining and Ferret disposed
of 100% of their shares in Mooiplaats Mining and the Group disposed
of its respective claims against Mooiplaats Mining and its
wholly-owned subsidiary Langcarel Proprietary Limited ("the
Transaction"), the owner
13. DISCONTINUING OPERATIONS (CONTINUED)
of the Mooiplaats Colliery. The sale was finalized on 2 November
2017 for an aggregate purchase price of $13.1 million (ZAR179.9
million). The purchase price will be settled as follows:
-- an initial tranche of $4.9 million (ZAR 67 million) on the
effective date of sale ($3.8 million (ZAR52 million) to the Group
and $1.1 million (ZAR15 million) to Ferret for full and final
settlement of their equity); and
-- the balance of $8.2 million (ZAR112.9 million) to be settled
in not more than 10 quarterly instalments, with the first Deferred
Payment expected to be due by the end of August 2018, to coincide
with the timing of the incorporation of Portions 2, 3 and the
remaining extent of the farm Klipbank 295 IT into the Mooiplaats
Colliery NOMR.
The Deferred Payments of $8.2 million (ZAR 112.9 million) have
been present valued to an amount of $6.6 million at 2 November
2017, to account for the time value of money.
Mooiplaats was classified as held for sale as at 30 June
2017.
The profit/(loss) for the period until the sale of Mooiplaats is
analysed as follows:
Period ended Year ended
30 June
2017
2 November $'000s
2017
$'000s
------------------------ ------ ------------
Other gains 3,126 -
------------------------ ------------
-
Expenses (941) (1,207)
------------------------ ------------
Profit/(loss) before tax 2,185 (1,207)
------------------------ ------------
Profit/(loss) for the year from operations
held for sale (attributable to owners
of the Company) 2,185 (1,207)
------------------------ ------------
Included in other gains is the reversal of prior year asset
impairments of $3.1 million.
Net cash outflows from operating activities (483) (860)
Net cash infows/(outflows) from investing
activities 1,451 (140)
Net cash inflows from financing activities 513 761
---------- ----------
Net cash inflows/(outflows) 1,481 (239)
---------- ----------
The major classes of assets and liabilities of Mooiplaats at the
effective date of sale were as follows:
Assets classified as held for sale
Property, plant and equipment 8,332 9,407
Other financial assets - 239
Inventories 1 1
Trade and other receivables 234 21
Cash and cash equivalents 1,403 22
------------ ------------
9,970 9,690
------------ ------------
Liabilities classified as held for sale
Provisions (2,744) (2,937)
Trade payables and accrued expenses (30) (477)
------------ ------------
(2,774) (3,414)
------------ ------------
Net assets classified as held for sale 7,196 6,276
Impairment reversal 3,160 -
------------ ------------
Net assets of Mooiplaats 10,356 6,276
------------ ------------
13. DISCONTINUING OPERATIONS (CONTINUED)
Consideration received or receivable:
Year ended Year ended
30 June 2018 30 June
2017
$'000 $'000
------------------ ------ ---------------
Cash 3,718 -
Receivable 6,638 -
------------------ ---------------
Total disposal consideration 10,356 -
Carrying value of net assets sold (10,356) -
------------------ ---------------
- -
------------------ ---------------
Present value of loan receivable at 6,638 -
2 November 2017
Unwinding of interest 505 -
Foreign exchange difference 93 -
------------ ------
7,236 -
Current portion of receivable at 30 (3,290) -
June 2018
------------ ------
Long term portion of receivable at 30 3,946 -
June 2018
------------ ------
13.2 Analysis of loss for the year from discontinuing
operations
The combined results of the operations held for sale included in
the loss for the year are set out below. The comparative losses and
cash flows from operations held for sale have been re-presented to
include those operations classified as held for sale in the current
year.
Loss for the year from discontinuing operations
Reversal of impairment 3,120 3,022
Other gains 6 -
---------- ------------
3,126 3,022
Expenses (941) (1,207)
---------- ------------
Profit before tax 2,185 1,815
---------- ------------
Profit for the year from operations
held for sale (attributable to owners
of the Company) 2,185 1,815
---------- ------------
These operations have been classified and accounted for at 30
June 2017 as a disposal group held for sale (see note 23).
13.3 Holfontein (Pty) Ltd ('Holfontein')
The Company finalized the disposal of the Holfontein thermal
coal project near Secunda in Mpumalanga during the prior financial
year. Holfontein was disposed for $3.8 million (ZAR50 million), of
which $0.8 million (ZAR10 million) was received in prior
periods.
14. LOSS PER SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY
14.1. Basic loss/(profit) per share
Year ended Year ended
30 June 2018 30 June
2017
$'000 $'000
---------------- ------ ----------------------
Cents per Cents per
share share
From continuing operations (73.54) (17.26)
From discontinuing operations 1.55 1.81
---------------- ----------------------
(71.99) (15.45)
---------------- ----------------------
Loss for the year attributable to owners
of the Company (101,413) (15,536)
Less: (Profit)/loss for the year from
operations held for sale (2,185) (1,815)
-------------- -------------
Loss used in the calculation of basic
loss per share from continuing operations (103,598) (17,351)
-------------- -------------
Weighted number of ordinary shares
'000 shares '000 shares
---------------- ----------------
Weighted average number of ordinary
shares for the purposes of basic loss
per share 140,880 100,531
---------------- ----------------
The comparative loss per share has been adjusted to reflect the
share consolidation completed during the current period (refer Note
30).
14.2. Diluted loss per share
Diluted loss per share is calculated by dividing loss
attributable to owners of the Company by the weighted average
number of ordinary shares outstanding during the year plus the
weighted average number of diluted ordinary share that would be
issued on conversion of all the dilutive potential ordinary shares
into ordinary shares.
As at 30 June 2018, 1,250,000 options and 2,408,752 warrants
(2017 - 4,031,762 (pre consolidation 80,635,237) options and
283,771 (5,675,415 pre consolidation) weighted average number of
warrants), were excluded from the computation of the loss per share
as their impact is anti-dilutive.
14.3. Headline loss per share (in line with JSE
requirements)
The calculation of headline loss per share at 30 June 2018 was
based on the headline loss attributable to ordinary equity holders
of the Company of $17.1 million (2017: $7.9 million) and a weighted
average number of ordinary shares outstanding during the period
ended 30 June 2018 of 140,879,585 (2017: 100,531,081).
The adjustments made to arrive at the headline loss are as
follows:
Loss for the period attributable to
ordinary shareholders (101,413) (15,536)
Adjust for:
Impairment expense 87,475 7,602
Asset held for sale impairment reversal (3,120) -
on disposal of property, plant and (10) -
equipment
-------------- -------------
Headline earnings (17,068) (7,934)
-------------- -------------
Headline loss per share (cents per share) (12.12) (7.89)
15. DEVELOPMENT, EXPLORATION AND EVALUATION EXPITURE
Development, exploration and evaluation expenditure
comprises:
Year ended Year ended
30 June 2018 30 June
2017
$'000 $'000
------------------ ------ ---------------
Exploration and evaluation assets 116,889 118,652
Development expenditure 28,033 114,170
------------------ ---------------
Balance at end of year 144,922 232,822
------------------ ---------------
A reconciliation of development, exploration and evaluation
expenditure is presented below:
Exploration and evaluation assets
Balance at beginning of year 118,652 104,893
Additions 3,801 430
Movement in Rehabilitation asset (79) (37)
Transfer from development assets - 2,342
Acquisition of Uitkomst Colliery (refer
note 39) - 249
Foreign exchange differences (5,485) 10,775
------------ ------------
Balance at end of year 116,889 118,652
------------ ------------
Development assets
Balance at beginning of year 114,170 103,030
Additions 4 6
Movement in Rehabilitation asset (2,323) 2,004
Transfer to exploration and evaluation
assets - (2,342)
Impairment expense (87,475) -
Foreign exchange differences 3,657 11,472
------------- ------------
Balance at end of year 28,033 114,170
------------- ------------
Impairment testing
Exploration and Evaluation Assets
As of 30 June 2018, the net book value of the following project
assets were classified as Exploration and Evaluation assets:
-- Greater Soutpansberg Project: $62.9 million
-- Makhado Project: $53.7 million
-- Uitkomst North adit: $0.2 million
-- Other: $0.1 million
In terms of AASB 6 - Exploration for and Evaluation of Mineral
Resource management have performed an assessment of whether facts
and circumstances suggest that the carrying amount of an
exploration and evaluation asset may exceed its recoverable amount.
In performing its assessment, management have considered its
exploration rights to the exploration areas, its planned &
budgeted exploration activities and the likelihood of the
recoverability of the net book value from the successful
development of the areas of interest. Management have concluded
that no indicators of impairment for its Exploration and Evaluation
assets exist as at 30 June 2018.
15. DEVELOPMENT, EXPLORATION AND EVALUATION EXPITURE (CONTINUED)
Development Assets
As of 30 June 2018 the net book value of the following project
assets were included in Development Assets:
-- Vele Colliery: $28 million
During the half year to 31 December 2017, the Group made the
decision to prioritise the Makhado Project and consequently to
delay the redevelopment of the Vele Colliery to better align with
the timing of the Musina-Makhado SEZ in Limpopo. This resulted in
the forecast production date for the Vele Colliery being delayed
with production now expected to commence in July 2021. In terms of
AASB 136 - Impairment of Assets, management identified this as an
indicator that the Vele assets may be impaired and management
performed a formal impairment assessment at 31 December 2017.
The recoverable value of the project was calculated using the
fair value less costs of disposal approach to estimate the
recoverable amount of the project, before comparing this amount
with the carrying value of the associated assets and liabilities in
order to assess whether an impairment of the carrying value was
required under AASB 136. Due to the recoverable value being less
than the carrying value, an impairment charge of $87.5 million was
recognised during the half year ended 31 December 2017, and
accordingly forms part of this annual report.
In calculating the fair value less costs of disposal, management
forecasted the cash flows associated with the project over its
expected life of 15 years until 2037 based on the current life of
mine model. The cash flows are estimated for the assets of the
colliery in its current condition together with capital expenditure
required for the colliery to resume operations, discounted to its
present value using a post-tax discount rate that reflects the
current market assessments of the risks specific to the Vele
Colliery. The identification of impairment indicators and the
estimation of future cash flows required management to make
significant estimates and judgments. Details of the key assumptions
used in the fair value less costs of disposal calculation at 31
December 2017 have been included below.
Management have identified no indicators that the Vele assets
may be any further impaired than the impairment charge processed at
31 December 2017. Accordingly, as no indicators were noted
management have not performed an additional impairment assessment
as at 30 June 2018.
Key assumptions
2018 2019 2020 2021 LT
Thermal coal price (USD, nominal)(1) 80 75 69 69 70(2)
----- ----- ----- ----- --------
Hard coking coal price (USD, nominal)3 153 135 129 125 129(4)
----- ----- ----- ----- --------
Exchange rate (USD / ZAR, nominal) 12.7 12.5 13.2 14.3 15.0(5)
----- ----- ----- ----- --------
Discount rate(6) 16.75%
------------------------------------
Inflation rates USD 2.1%
ZAR 5.1%
------------------------------------
Production start date(7) FY 2022
------------------------------------
15. DEVELOPMENT, EXPLORATION AND EVALUATION EXPITURE (CONTINUED)
(1) Management's assumptions reflect the Richards Bay export thermal coal (API4) price.
(2) Long-term thermal coal price equivalent to USD 65 per tonne in 2017 dollars.
(3) Management's assumption of the hard coking coal price was
made after considering relevant broker forecasts.
(4) Long-term hard coking coal price equivalent to USD 120 per tonne in 2017 dollars.
(5) From 2022, the exchange rate is derived with reference to
the 2021 assumption, and inflated by the compounding differential
between USD and ZAR inflation rates. The comparative discount rate
applied at 30 June 2017 is 16.1%.
(6) Management prepared a nominal ZAR-denominated, post-tax
discount rate, which was calculated with reference to the Capital
Asset Pricing Model (CAPM).
(7) The production start date assumes that sufficient project
finance is able to be raised by management in order to commence
production in July 2021. Management is in the early stages of
considering the financing options available.
Impairment Assessment
USD million
Carrying Value of Vele Cash Generating Unit 117.8
------------
Recoverable value 30.3
------------
Impairment expense (allocated to development assets) (87.5)
------------
Sensitivity Analysis
Sensitivity Change in variable Effect on fair value less costs of disposal
Long term coal prices +10.0% 21
-10.0% (24)
------------------- --------------------------------------------
Long term exchange rate +10.0% 25
-10.0% (29)
------------------- --------------------------------------------
Discount rate +1.0% (2)
-1.0% 2
------------------- --------------------------------------------
Operating costs +10.0% (14)
-10.0% 14
------------------- --------------------------------------------
Delays in production start date +12 months (4)
------------------- --------------------------------------------
16. PROPERTY, PLANT AND EQUIPMENT
Mining Mining Land Leasehold Motor Other Total
property, rights and buildings improvements vehicle
plant and
equipment
$'000 $'000 $'000 $'000 $'000 $'000 $'000
----------- -------- --------------- -------------- --------- ------ --------
30 June 2018
Cost
At beginning
of year 1,996 20,243 8,783 438 1,048 2,037 34,545
Additions 296 - 2,566 - - 25 2,887
Disposals (23) - - (318) (22) (23) (386)
Rehabilitation
asset 207 - - - - - 207
Exchange differences (128) (975) (1,691) - (79) (112) (2,985)
----------- -------- --------------- -------------- --------- ------ --------
At end of year 2,348 19,268 9,658 120 947 1,927 34,268
----------- -------- --------------- -------------- --------- ------ --------
Accumulated depreciation
At beginning
of year 34 - 1,184 438 610 1,748 4,014
Depreciation
charge 149 974 197 - 63 121 1,504
Accumulated depreciation
on disposals (9) - - (318) (22) (22) (371)
Exchange differences (11) (64) (70) - (96) (90) (331)
----------- -------- --------------- -------------- --------- ------ --------
At end of year 163 910 1,311 120 555 1,757 4,816
----------- -------- --------------- -------------- --------- ------ --------
Net carrying
value at end
of fiscal year
2018 2,185 18,358 8,347 - 392 170 29,452
----------- -------- --------------- -------------- --------- ------ --------
16. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Mining Mining Land Leasehold Motor Other Total
property, rights and buildings improvements vehicle
plant and
equipment
$'000 $'000 $'000 $'000 $'000 $'000 $'000
----------- -------- --------------- -------------- --------- ------ -------
30 June 2017
Cost
At beginning
of year 42 - 7,368 390 605 1,597 10,002
Additions - 5 - 7 152 164
Disposals - - - - (17) (4) (21)
Acquisition of
Uitkomst Colliery
(refer note 39) 1,948 20,243 433 - 373 90 23,087
Exchange differences 6 - 977 48 80 202 1,313
----------- -------- --------------- -------------- --------- ------ -------
At end of year 1,996 20,243 8,783 438 1,048 2,037 34,545
----------- -------- --------------- -------------- --------- ------ -------
Accumulated depreciation
At beginning
of year 30 - 880 389 494 1,454 3,247
Depreciation
charge - - 181 - 66 107 354
Accumulated depreciation
on disposals - - - - (17) (2) (19)
Exchange differences 4 - 123 49 67 189 432
----------- -------- --------------- -------------- --------- ------ -------
At end of year 34 - 1,184 438 610 1,748 4,014
----------- -------- --------------- -------------- --------- ------ -------
Net carrying
value at end
of fiscal year
2017 1,962 20,243 7,599 - 438 289 30,531
----------- -------- --------------- -------------- --------- ------ -------
17. INTANGIBLE ASSETS
Year ended Year ended
30 June 2018 30 June
2017
$'000 $'000
------------------- ------- ---------------
Balance at beginning of year - 10,489
Amortisation - -
Impairment - (10,624)
Foreign exchange differences - 135
---------------------------- ---------------
Balance at end of year - -
---------------------------- ---------------
In August 2008 the Company entered into a throughput agreement
with Terminal de Carvao da Matola ("TCM"), a subsidiary of
Grindrod, the operator of the Matola Terminal, and CMR Engineers
& Project Managers Proprietary Limited.
This agreement granted the Company one mtpa of port capacity
through the Matola terminal commencing 1 January 2009, for an
initial term of five years. This capacity was increased to
approximately three mtpa in March 2011 and the Company had the
right to renew the agreement (subject to certain conditions) at the
end of the initial term, for further periods of 3 successive
periods of 5 years each for a total of 15 years.
17. INTANGIBLE ASSETS (CONTINUED)
During the 2015 financial year, the Company reached an agreement
with Grindrod to settle the current liabilities to date as well as
cover all future take or pay obligations until 31 December 2016.
During the year ended 30 June 2017 MC Mining decided not to renew
the take or pay obligation beyond 31 December 2016 to avoid any
further liabilities until export orientated production can be
forecast with certainty, and as a result impaired the intangible
asset in full, with no further rights to port capacity currently
existing following termination.
New terms can be negotiated if required to facilitate any
production by its Vele Colliery and Makhado Project.
18. OTHER RECEIVABLES
Carrying amount of: Year ended Year ended
30 June 2018 30 June
2017
$'000 $'000
------------------ ------ ---------------
Other loans 226 237
226 237
------------------ ---------------
Balance at beginning of year 237 1,013
Loans repaid - (457)
Interest - 61
Other - 7
Foreign exchange differences (11) 108
Transfer Nimag loan to trade and other
receivables - (495)
--------- ----------
Balance at end of year 226 237
--------- ----------
Nimag loan
MC Mining provided a loan as part of the NiMag disposal to
settle the balance of the purchase consideration. The loan was
settled in full in the current financial year. The loan bore
interest at the South African prime overdraft rate less 0.5%,
payable quarterly in arrears.
19. OTHER FINANCIAL ASSETS
Carrying value of financial assets at fair value through profit
or loss
Listed securities
* Equity securities 4 5
Unlisted securities
- Equity securities in investment funds* 3,901 7,489
- Acquisition of Uitkomst Colliery - 19
3,905 7,513
---------- ----------
Fair value movements in other financial assets are recognised in
other (losses)/gains in the consolidated statement of profit or
loss. Refer note 8.
* Listed investments are carried at the market value as at the
reporting date and unlisted investments are valued with reference
to the investment company's fund statement.
Deposits 423 1,663
4,328 9,176
---------- ----------
19. OTHER FINANCIAL ASSETS (CONTINUED)
Year ended Year ended
30 June 2018 30 June
2017
$'000 $'000
------------------ ------ ---------------
Balance at beginning of year 9,176 7,221
Revaluations 297 521
Interest received - 2
Disposal of investment (5,712) (760)
Deposit received - (21)
Acquisition of investments 791 1,181
Acquisition of Uitkomst Colliery (refer
note 39) - 19
Foreign exchange differences (224) 1,013
------------------ ---------------
Balance at end of year 4,328 9,176
------------------ ---------------
20. INVENTORIES
Finished goods 249 -
Consumable stores 212 12
Other 278 292
Acquisition of Uitkomst (refer note 39) - 1,384
Provision for obsolete inventory (9) -
-------- ----------
730 1,688
-------- ----------
The Uitkomst inventory acquired in the prior year consisted of
finished goods of $1.2 million (ZAR15.3 million), consumable stores
of $0.2 million (ZAR2.9 million) and a provision for obsolete
inventory of $0.02 million (ZAR0.2 million).
The cost of inventories recognised as an expense during the year
in respect of continuing operations was $3.4 million (2017: $0.03
million).
21. TRADE AND OTHER RECEIVABLES
Trade receivables 4,189 127
Other receivables 1,678 1,519
Allowance for doubtful debts (371) (390)
Acquisition of Uitkomst Colliery (refer
note 39) - 4,851
5,496 6,107
---------- ----------
The carrying amount of trade and other receivables approximate
their fair value due to their short-term maturity.
The maximum exposure to credit risk at the reporting date is the
carrying value of each class of receivables as disclosed above. The
Group does not hold any collateral as security.
Movements on the allowance for doubtful debts are as
follows:
Balance at beginning of year (390) (345)
Allowance for bad debts in current year - -
Foreign exchange differences 19 (45)
(371) (390)
---------- ----------
21. TRADE AND OTHER RECEIVABLES (CONTINUED)
Trade receivables are exposed to the credit risk of end-user
customers within the coal mining industry.
The Group has an established credit policy under which customers
are analysed for creditworthiness before the Group's payment and
delivery terms and conditions are offered. Customer balances are
monitored on an ongoing basis to ensure that they remain within the
negotiated terms and conditions offered.
Credit quality of trade receivables
Year ended Year ended
30 June 2018 30 June
2017
$'000 $'000
------------------ ------ ---------------
Not past due 4,189 127
Past due 0 to 30 days - -
Past due 31 to 60 days - -
Past due 61 to 90 days - -
Currency analysis of trade receivables
SA Rand 4,189 127
4,189 127
---------- --------
22. CASH AND CASH EQUIVALENTS
Bank balances 10,931 9,624
Bank balances included in a disposal
group held for sale - 22
10,931 9,646
----------- ----------
Restricted cash 84 52
Restricted cash included in a disposal - -
group held for sale
84 52
------- -------
The restricted cash balance of $0.1 million (2017 - $0.1
million) is held on behalf of subsidiary companies in respect of
the rehabilitation guarantees issued to the DMR in respect of
environmental rehabilitation costs of $6.3 million (2017: $6.3
million). This cash is not available for use other than for those
specific purposes.
Credit risk
Cash at bank earns interest at a floating rate based on daily
bank deposit rates. Cash is deposited at highly reputable financial
institutions of a high quality credit standing within Australia,
the United Kingdom and the Republic of South Africa.
The fair value of cash and cash equivalents equates to the
values as disclosed in this note.
23. ASSETS CLASSIFIED AS HELD FOR SALE
Carrying amounts of
Year ended Year ended
30 June 2018 30 June
2017
$'000 $'000
------------------- ------- ---------------
Langcarel Proprietary Limited ('Mooiplaats') - 6,276
Property held for sale - Uitkomst - 101
Assets classified as held for sale
Mooiplaats - 9,690
Property held for sale-Uitkomst - 101
- 9,791
-------- ----------
Liabilities associated with assets held for sale
Mooiplaats - 3,414
- 3,414
-------- ----------
Assets classified as held for sale
Property, plant and equipment - 9,407
Other financial assets - 239
Restricted cash - -
Inventories - 1
Trade and other receivables - 21
Cash and cash equivalents - 22
Uikomst property, plant and equipment - 101
-------- ----------
- 9,791
-------- ----------
Liabilities classified as held for sale
Provisions - 2,937
Trade payables and accrued expenses - 477
-------- ----------
- 3,414
-------- ----------
Net assets held for sale - 6,377
-------- ----------
Holfontein
In the prior period, the sale of Holfontein was finalised and
the Company received the balance outstanding of $3 million (ZAR40
million). The sale resulted in a reversal of prior period
impairments of $3 million.
Opgoedenhoop
During the prior year, the Company received $0.1 million (ZAR1
million) of the balance outstanding of $1.3 million (ZAR17.3
million) from the sale of the undeveloped Opgoedenhoop mining
right. The balance outstanding at 30 June 2018 is $1.5 million
(ZAR19.1 million). The outstanding balance is accruing interest at
the South African prime rate plus 4% as there has been a default in
the payment terms. Subsequent to year-end, a final settlement
agreement was entered into for $1.2 million (R16.5 million), of
which $1 million (R14.1 million) was received on 31 August 2018.
The balance of $0.2 million (2.4 million) is due by 31 December
2018.
Uitkomst property
In the prior period Uitkomst had signed an "offer to purchase"
for the sale of a building for $0.1 million (ZAR1.3 million). The
sale was finalised in the current year.
24. DEFERRED CONSIDERATION
Year ended Year ended
30 June 2018 30 June
2017
$'000 $'000
------------------ ------ ---------------
Deferred consideration 2,017 1,916
------------------ ---------------
Balance at beginning of year 1,916 16,016
Uitkomst deferred consideration (refer
note 36) - 1,916
Repaid during the year - (18,247)
Interest accrued 374 839
Foreign Exchange (273) 1,392
Balance at end of year 2,017 1,916
---------- -------------
Current 2,017 -
Non-Current - 1,916
2,017 1,916
---------- ----------
The opening balance Deferred Consideration in the prior year
relates to the second tranche (part of the total acquisition price
of $75 million for Chapudi and Kwezi) of $30 million payable to Rio
Tinto. Full and final settlement of the outstanding balance plus
all accrued interest was made in June 2017. The loan included
interest at 4% as per the original agreement.
The additional deferred consideration present as at 30 June 2017
related to a deferred amount of $1.9 million (R25 million) included
in the acquisition price of $21.1 million (ZAR275 million), payable
to Pan African Resources Plc ("Pan African") for the acquisition by
the Company of PAR Coal (refer note 39). The amount bears interest
at the South African prime rate and will be settled on 30 June
2019. The Company is entitled to prepay any amounts in respect of
the deferred consideration at any time until 30 June 2019. To the
extent that certain coal buy in opportunities are not secured by or
with the assistance of Pan African, within 2 years from the
effective date, which could result in MC Mining suffering a lower
economic benefit, the deferred consideration can be reduced by such
value, subject to a maximum of $1.3 million (ZAR15 million).
25. BORROWINGS
Industrial Development Corporation of
South Africa Limited 10,191 8,197
----------- ----------
10,191 8,197
----------- ----------
Balance at beginning of year 8,197 10,000
Yishun Brightrise Investment PTE Limited
- converted to equity - (10,000)
Industrial Development Corporation
of South Africa Limited - 9,004
Debt issuance costs capitalised -cash
based - (91)
Debt issuance costs capitalised - warrants - (1,096)
Interest 2,439 212
Foreign Exchange (445) 168
Balance at end of year 10,191 8,197
----------- -------------
Yishun Brightrise Investment PTE Limited
During the 2016 period, a loan for $10 million was provided to
the Company by its shareholder Yishun. The loan carried no interest
and was only repayable in limited circumstances, including
conditions relating to Baobab Mining and Exploration Proprietary
Limited.
25. BORROWINGS (CONTINUED)
During the 2017 financial year, the loan was converted into the
Company's shares (245,037,981 shares were issued at a price of
$0.04081 per share). Post consolidation of the shares these shares
translated to 12,251,899 shares.
Industrial Development Corporation of South Africa Limited
During the prior period, the Company entered into a loan
agreement (the "Loan Agreement") with the Industrial Development
Corporation of South Africa Limited ("IDC") and Baobab Mining and
Exploration Proprietary Limited ("Baobab"), a subsidiary of MC
Mining and owner of the mining right for the Makhado Project ("the
Project"). In terms of the Loan Agreement, the IDC will advance
loan funding up to $18.4 million (ZAR240 million) to Baobab for use
in the Project to advance the operations and implementation of the
Project. Under the Loan Agreement, the loan funding is to be
provided in two equal tranches of $9.2 million (ZAR120 million)
upon written request from Baobab.
In May 2017, the first tranche was drawn down by the Company.
This is repayable on the third anniversary of each advance. On the
third anniversary, the Company is required to repay the loan amount
plus an amount equal to the after tax internal rate of return equal
to 16% of the amount of each advance.
MCM is also required to issue warrants under the Loan Agreement,
in respect of MCM shares, to the IDC pursuant to each advance date
as soon as the relevant shareholder approval is obtained. The
warrants for the first draw down equates to 2.5% of the entire
issued share capital of MCM as at 5 December 2016. This equated to
2,408,752 (pre consolidation: 48,175,033) shares. The price at
which IDC shall be entitled to purchase the MCM shares is equal to
a thirty percent premium to the 30 day volume weighted average
price of the MCM shares as traded on the JSE as at 5 December 2016
(R0.60 per share pre the share consolidation). The IDC is entitled
to exercise the warrants for a period of five years from the date
of issue.
Furthermore, upon each advance date, Baobab shall be required to
issue new ordinary shares in Baobab to the IDC equivalent to 5% of
the entire issued share capital of Baobab at such time. New
ordinary shares equivalent to 5% in Baobab were issued to the IDC
following the first advance.
If the second tranche of $9.2 million (ZAR120 million) is not
required by Baobab and therefore not advanced by Baobab, the IDC
may elect to exercise one of the following rights:
-- Baobab shall issue new ordinary shares in Baobab equivalent
to 5% of the entire issued share capital of Baobab to the IDC for
an aggregate subscription price of $4.6 million (ZAR60 million);
or
-- Baobab shall issue ordinary shares in Baobab equivalent to 1%
of the entire issued share capital of Baobab to the IDC for an
aggregate share price of $0.08 (ZAR1); or
-- A penalty fee of $0.9 million (ZAR12 million) shall be paid to the IDC by Baobab.
The second tranche remains undrawn at the date of this
report.
26. PROVISIONS
Year ended Year ended
30 June 2018 30 June
2017
$'000 $'000
------------------ ------ ---------------
Employee provisions 378 381
Biodiversity offset provision 2,146 2,126
Rehabilitation provisions 3,503 5,558
6,027 8,065
------------------ ---------------
Employee provisions
The provision for employees represents unused annual leave
entitlements.
26. PROVISIONS (CONTINUED)
Biodiversity offset provision
The Biodiversity offset agreement("BOA") was signed by the
Department of Environmental Affairs ("DEA"), South African National
Parks Board and the Company to the value of $4.0 million ( ZAR55
million ) over a 25 year period. The BOA commits the Company to pay
$4.0 million (ZAR55 million ) to the South African National Parks
Board over a period of 25 years. The following payment arrangement
has been agreed:
Phase 1 - ZAR2 million paid in 2015
Phase 2 - ZAR15 million from year 2016 to 2021 (ZAR2.5 million
annually)
Phase 3 - ZAR13million from year 2022 to 2028 (ZAR1.8 million
annually)
Phase 4 - ZAR13million from 2029 to 2033 (ZAR2.6 million
annually)
Phase 5 - ZAR12million from 2034 to 2038 (ZAR2.4 million
annually)
For the purpose of the present value calculation these payments
have been assume as equal annual payment and discounted at the
South Africa inflation rate of 6%.
Rehabilitation provision
Year ended Year ended
30 June 2018 30 June
2017
$'000 $'000
------------------ ------ ---------------
Balance at beginning of year 5,558 2,338
Unwinding of discount 427 120
Change in assumptions on rehabilitation
provisions (2,337) 1,821
Acquisition of Uitkomst Colliery (refer
note 39) - 888
Foreign Exchange (145) 391
Balance at end of year 3,503 5,558
------------------ ---------------
The rehabilitation provision represents the current cost of
environmental liabilities as at the respective year end. An annual
estimate of the quantum of closure costs is necessary in order to
fulfil the requirements of the DMR, as well as meeting specific
closure objectives outlined in the mine's Environmental Management
Programme ('EMP').
Although the ultimate amount of the obligation is uncertain, the
fair value of the obligation is based on information that is
currently available. This estimate includes costs for the removal
of all current mine infrastructure and the rehabilitation of all
disturbed areas to a condition as described in the EMP.
The period assumed in the calculation of the present value of
the obligation is the shorter of the remaining period of the mining
licence and the aggregate of the construction period of the mine
and the total estimated LOM.
The current estimate available is inflated by the South African
inflation rate of 4.4% annually and the discount rate applied to
establish the current obligation is a South Africa government bond
rate at 30 June 2018 of 9.25% (2017: 8.92%) annually.
Due to the changes in assumptions the Vele Colliery had a
decrease in the present value of the environmental obligation.
The Makhado Project is still in Exploration phase and no formal
decision to mine is currently in place.
Provisions have been analysed between current and non-current as
follows:
Current 569 597
Non-current 5,458 7,468
6,027 8,065
---------- ----------
27. DEFERRED TAX
Year ended Year ended
30 June 2018 30 June
2017
$'000 $'000
------------------ ------ ---------------
Deferred tax asset - 5,713
Deferred tax liability - Acquisition
of Uitkomst Colliery (note 39) - (6,087)
Deferred tax liability 5,991 -
------------------ ---------------
Net deferred tax liability 5,991 (374)
------------------ ---------------
The gross movement on the deferred tax account is as
follows:
Balance at beginning of year (374) 4,773
Recognised on tax losses - 296
Provisions 104 (1)
Capital allowances (225) -
Acquisition of Uitkomst Colliery (refer
note 39) - (6,087)
Prior year adjustment (92) -
Deferred tax asset derecognised (1) (5,816) -
Foreign Exchange 412 645
Balance at end of year (5,991) (374)
------------ ------------
The deferred tax balances at year end are represented by:
Deferred tax assets
Capital allowances on development assets
(1) - 3,825
Tax losses (1) - 1,889
Provisions 371 -
Acquisition of Uitkomst Colliery -
Provisions - 377
------------ ------------
Balance at end of year 371 6,091
Deferred tax liabilities
Provisions - (1)
Acquisition of UItkomst - Property,
plant and equipment - (6,464)
Capital allowances on property plant (6,362) -
and equipment
------------ ------------
Balance at end of year (6,362) (6,465)
------------ ------------
Net deferred tax (liabilities)/assets (5,991) (374)
------------ ------------
Deferred income tax assets are recognised for tax losses
carried-forward to the extent that the realisation of the related
tax benefit through future taxable profits is probable. The Group
did not recognise deferred income tax assets of $101.7 million
(2017: $152.3 million) in respect of losses amounting to $226.7
million (2017: $306.4 million) and unredeemed capital expenditure
of $126.9 million (2017: $149.5 million) that can be carried
forward against future taxable income.
(1) The deferred tax asset balance at 30 June 2017 of $5.8
million, relating to the Vele Colliery, was derecognised with no
additional deferred tax assets being recognized during the period.
This decision was made due to the increased risk of recoverability
of the deferred tax asset through future taxable earnings. This
arises from the later commencement date of the Vele mine due to
management's view of development of the SEZ and the prioritization
of the Makhado Project. The charge to profit and loss was $5.8
million as a result of foreign exchange differences.
28. OTHER LIABILITIES
This liability relates to a retention agreement entered into
with employees to provide a retention payment to encourage
employees to remain with the Company, perform in a highly effective
manner and proactively execute the commercial strategy that the
Company employs.
29. TRADE AND OTHER PAYABLES
Year ended Year ended
30 June 2018 30 June
2017
$'000 $'000
------------------ ------ ---------------
Trade payables 1,395 2,925
Accrued expenses 4,942 1,107
Other 508 192
------------------ ---------------
6,845 4,224
------------------ ---------------
The average credit period is 30 days. Interest at the South
African prime overdraft rate is charged on overdue creditors.
30. ISSUED CAPITAL
During the reporting period, there were no shares issued,
however the Company implemented a share consolidation of 20 to 1,
on 6 December 2017, resulting in a post consolidation of shares of
140,879,585. The share consolidation had no impact on voting
rights.
Fully paid ordinary shares
140,879,585 (2017: 2,817,587,529 pre
consolidation) fully paid ordinary shares 1,040,950 1,040,950
Movements in fully paid ordinary shares Number $'000
-------------------- --------------
At 30 June 2016 1,927,001,328 1,006,435
Issue of shares, net of issuance costs 890,586,201 34,515
-------------------- --------------
At 30 Jun 2017 2,817,587,529 1,040,950
Share consolidation (20:1) (2,676,707,944) -
-------------------- --------------
At 30 Jun 2018 140,879,585 1,040,950
-------------------- --------------
Holders of ordinary shares are entitled to receive dividends as
declared from time to time and are entitled to one vote per share
at shareholders meetings.
In the event of winding up of the Company ordinary shareholders
rank after all other shareholders and creditors and are fully
entitled to any proceeds of liquidation.
Changes to the then Corporations Law abolished the authorised
capital and par value concept in relation to share capital from 1
July 1998. Therefore, the Company does not have a limited amount of
authorised capital and issued shares do not have a par value.
Share options granted
Share options granted under the Company's employee share option
plan and performance rights carry no rights to dividends and no
voting rights. The options were included in the implementation of
the share consolidation. Further details of the employee share
option plan are provided in note 33.
31. ACCUMULATED DEFICIT
Accumulated deficit at the beginning
of the financial year (750,100) (736,403)
Net loss attributed to Owners of the
Company (101,413) (15,536)
Transferred from share based payment
reserve - 1,839
Dividend expense (22)
-------------- --------------
Accumulated deficit at the end of the
financial year (851,535) (750,100)
-------------- --------------
32. RESERVES
Year ended Year ended
30 June 2018 30 June
2017
$'000 $'000
------------------ ------ ---------------
Capital profits reserve 91 91
Share based payment reserve 2,052 713
Warrants reserve 1,134 1,134
Foreign currency translation reserve (22,352) (20,473)
------------------ ---------------
(19,075) (18,535)
------------------ ---------------
Movements for the year can be reconciled as follows:
Share-based payments reserve
Opening balance 713 2,274
Share options issued during the year 616 466
Transfer from share based payment reserve - (1,839)
Share options cancelled/forfeited (161) (188)
IFRS 2 Black economic empowerment charge 884 -
---------- ------------
Closing balance 2,052 713
---------- ------------
Foreign currency translation reserve
Opening balance (20,473) (36,530)
Exchange differences on translating
foreign operations (2,393) 16,057
Sale of Mooiplaats Colliery 514 -
------------- -------------
Closing balance (22,352) (20,473)
------------- -------------
Warrants reserve
Opening balance 1,134 -
Warrants issued to the IDC - 1,134
Closing balance 1,134 1,134
---------- ----------
Nature and purpose of reserves:
Capital reserve
The capital profits reserve contains capital profits derived
during previous financial years.
Share-based payment reserve
Share based payments represent the value of unexercised share
options and performance rights to directors and employees. It also
includes IFRS2 Black Economic Empowerment charges.
Foreign currency translation reserve
The foreign currency translation reserve records the foreign
currency differences arising from the translation of foreign
operations.
Warrants reserve
The warrants reserve relates to the warrants issued to the IDC
in terms of the Loan Agreement to advance funding to Baobab. Refer
note 25.
33. SHARE-BASED PAYMENTS
Employee share option plan
The Group maintains certain Employee Share Option Plans
('ESOP's') for executives and senior employees of the Group as per
the rules approved by shareholders on 30 November 2009. In
accordance with the terms of the schemes, eligible executives and
senior employees may be granted options to purchase ordinary
shares. Share options have not been granted to employees.
Share options granted to Directors and Officers
The Group also grants share options to directors, officers,
lenders and equity funders of the Group outside the ESOP. In
accordance with the Group's policies, directors and officers may be
granted options to purchase ordinary shares.
Share Option Terms, Vesting Requirements and Options Outstanding
at 30 June 2018
Each option converts into one ordinary share of the Company on
exercise. No amounts are paid or payable by the recipient on
receipt of the option. The options hold no voting or dividend
rights, and are not transferable. Upon exercise of the options the
ordinary shares received rank equally with existing ordinary
shares.
The following share-based payment arrangements existed during
the financial period ended 30 June 2018:
-- The Company finalised an 18-month, ZAR210 million working
capital facility from Investec Bank Limited during October 2013 and
announced that it would issue 20,000,000 options to Investec. The
20,000,000 shareholder approved options were issued on 30 January
2015 and have an exercise price of ZAR1.32 and expire on 21 October
2018. Upon conversion the shares will rank equally with existing
shares, are not transferable and hold no voting or dividend rights.
Post the share consolidation, Investec holds 1,000,000 options. At
reporting date, none of the options had been taken up or had
lapsed.
-- On 27 November 2015, 1,000,000 options were awarded and
vested to each of the five independent non-executive directors at a
price of GBP0.055 per option. The options expire on 27 November
2018. Upon conversion the shares will rank equally with existing
shares, are not transferable and hold no voting or dividend rights.
Post the share consolidation the independent non-executive
directors each hold 50,000 options. At reporting date, none of the
options had been taken up or had lapsed.
There has been no alteration of the terms and conditions of the
above share based payment arrangements since the grant date. The
following share-based payment arrangements were in existence at the
end of the current year:
Weighted
average
Far value remaining
Grant Expiry Exercise at grant contractual
Option series Number date date price date life
------------------------ ---------- ------------- -------------- -------------- ------------- -------------
Investec options 1,000,000 30/01/2015 21/10/2018 ZAR26.40(1) ZAR15(1) 0.3 years
Non-executive director 27/11/2015 27/11/2018 GBP1.10 ZAR15.40 0.4 years
options 250,000
----------
1,250,000
----------
(1) The pre consolidation exercise price and fair value at grant
date were ZAR1.32 and ZAR0.75 respectively
(2) The pre consolidation exercise price and fair value at grant
date were GBP0.055 and ZAR0.77 respectively
Fair value of share options granted during the year
There were no share options granted during the period.
Options were priced using a binomial option pricing model and
the Black-Scholes option pricing model was used to validate the
price calculated. Where relevant, the expected life used in the
model has been adjusted based on management's best estimate of the
effects of non-transferability, exercise restrictions (including
the probability of meeting market conditions attached to the
option), and behavioural considerations.
Expected volatility is calculated by Hoadley's volatility
calculator for one, two and three year periods and a future
estimated volatility level of 100% was used in the pricing
model.
The total share based payment expense recognised in the current
financial year is disclosed in the statement of changes in
equity.
33. SHARE-BASED PAYMENTS (CONTINUED)
Movement in share options (post share consolidation)
Year ended Year ended
30 June 2018 30 June
2017
$'000 $'000
------------------ ------ ---------------
Options outstanding at beginning of
year 1,250,000 2,108,896
Options expired - (330,146)
Options cancelled - (528,750)
Options outstanding at end of year 1,250,000 1,250,000
------------------ ---------------
Weighted average exercise price (A$) 1.40 1.40
Options exercisable 1,250,000 1,250,000
Share options exercised during the year
No share options were exercised during the period.
Share options outstanding at the end of the year
The share options outstanding at the end of the year had a
weighted average exercise price of A$1.40 (2017: A$1.40), post the
share consolidation, and a weighted average contractual life of
0.32 years (2017: 1.32 years).
Performance Rights Plan
The Performance Rights factor in a hurdle rate based on the
compound annual growth rate of total shareholder return across the
period from the grant date. The Performance Rights were valued
using a hybrid employee share option pricing model to simulate the
total shareholder return of MC Mining at the expiry date using a
Monte-Carlo model.
On 24 November 2017, 1,722,383 Performance Rights were issued to
senior management.
Inputs into the model for the current financial year were as
follows:
Performance rights
Spot 5 day VWAP ZAR8.8
Exercise price Nil
Expiry date 23 November 2020
Performance period 3.00
Risk free interest rate 8.09%
The total share based payment expense recognised in relation to
the Performance Rights in the current financial year is $0.5
million.
In the prior period, 1,770,470 (post consolidation 35,409,403)
Performance Rights were issued to senior management.
Inputs into the model for the prior financial year were as
follows:
Performance rights
Spot 5 day VWAP ZAR12.6 (post share
consolidation)
Exercise price Nil
Expiry date 29 November 2019
Performance period 3.00
Risk free interest rate 8.24%
33. SHARE-BASED PAYMENTS (CONTINUED)
The total share based payment expense recognised in relation to
the performance rights in the prior financial year is $0.4
million.
Movement in Performance Rights (post consolidation)
Year ended Year ended
30 June 2018 30 June
2017
---------------- ----------------------
Performance rights outstanding at beginning
of year 2,781,767 1,770,481
Performance rights forfeited (1,066,545) (661,170)
Performance rights granted 2,117,245 1,672,456
Performance rights outstanding at end
of year 3,832,467 2,781,767
---------------- ----------------------
34. NON-CONTROLLING INTEREST
Non-controlling interests comprise the following:
Freewheel Trade and Invest 37 Proprietary
Limited 575 575
Baobab non-controlling interest (181) (16)
394 559
---------- ---------
35. FINANCIAL INSTRUMENTS
35.1. Capital management
The Group manages its capital to ensure that entities in the
Group will be able to continue as a going concern while maximising
the return to stakeholders through the optimisation of the debt and
equity balance. The Group's overall strategy remains unchanged.
The capital structure of the Group consists of net debt
(borrowings as detailed in note 25) and equity of the Group
(comprising issued capital, reserves, retained earnings and
non-controlling interests as detailed in notes 30 to 32).
The Group is not subject to any externally imposed capital
requirements.
The Group's risk management committee reviews the capital
structure of the Group on a semi-annual basis. As part of this
review, the committee considers the cost of capital and the risks
associated with each class of capital. The Group revised its target
gearing ratio, determined as the proportion of net debt to equity,
from 0% to 15%. This was to enable the Company to raise the loan
from the IDC.
Debt (1) 12,208 9,271
Equity (2) 170,732 272,874
Debt to equity ratio 0.07 0.03
1. Debt is defined as long-term and short-term borrowings as described in note 25.
2. Equity includes all capital and reserves of the Group that are managed as capital
35. FINANCIAL INSTRUMENTS (CONTINUED)
35.2. Categories of financial instruments
The accounting policies for financial instruments have been
applied to the line items below:
Year ended Year ended
30 June 2018 30 June
2017
$'000 $'000
------------------ ------ ---------------
Financial assets
Other receivables 226 237
Trade and other receivables 5,496 6,107
Cash and cash equivalents 10,931 9,624
Restricted cash 84 52
Loan receivable 7,236 -
Other Financial Assets 4,328 9,176
------------------ ---------------
Total financial assets 28,301 25,196
------------------ ---------------
Financial liabilities
Deferred consideration 2,017 1,916
Borrowings 10,191 8,197
Trade and other payables 6,845 4,224
------------------ ---------------
Total financial liabilities 19,053 14,337
------------------ ---------------
Fair value of financial assets and liabilities
The fair value of a financial asset or a financial liability is
the amount at which the asset could be exchanged or liability
settled in a current transaction between willing parties in an
arm's length transaction. The fair values of the Group's financial
assets and liabilities approximate their carrying values, as a
result of their short maturity or because they carry floating rates
of interest.
All financial assets and liabilities recorded in the
consolidated financial statements approximate their respective fair
values.
The following table provides an analysis of financial
instruments that are measured subsequent to initial recognition at
fair value, grouped into Level 1 to 3, based on the degree to which
the fair value is observable.
Level 1 fair value measurements are those derived from quoted
prices in active markets for identical assets or liabilities. The
balances classed here are financial assets comprising deposits and
listed securities (note 19).
Level 2 fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or
indirectly. The financial assets classed as Level 2 comprise of
investments with investment firms. These investments serve as
collateral for rehabilitation guarantees. The fair value has been
determined by the investment firms' fund statement (note 19).
Level 3 fair value measurements are those derived from valuation
techniques that include inputs for the asset or liability that are
not based on observable market data.
There were no assets reclassified into / out of FVTPL during the
year nor were any assets transferred between levels.
As at 30 June Level 1 Level Level 3 Total
2018 2
------------------ ----------- ------ -------- ------
Financial assets
at FVTPL 5 3,901 - 3,906
------------------ ----------- ------ -------- ------
As at 30 June Level 1 Level Level 3 Total
2017 2
------------------ ----------- ------ -------- ------
Financial assets
at FVTPL 5 7,508 - 7,513
35. FINANCIAL INSTRUMENTS (CONTINUED)
35.3. Financial risk management objectives
The Group's Corporate Treasury function provides services to the
business, co-ordinates access to domestic and international
financial markets, monitors and manages the financial risks
relating to the operations of the Group through internal risk
reports which analyse exposures by degree and magnitude of risks.
These risks include market risk (including currency risk, fair
value interest rate risk and price risk), credit risk, liquidity
risk and cash flow interest rate risk.
The Corporate Treasury function reports quarterly to the Group's
risk management committee, an independent body that monitors risks
and policies implemented to mitigate risk exposures.
35.4. Market risk
Foreign exchange risk
The Group operates internationally and is exposed to foreign
exchange risk arising from various currency exposures, primarily
with respect to the Australian dollar and the US dollar. Foreign
exchange risk arises from future commitments, assets and
liabilities that are denominated in a currency that is not the
functional currency. Most of the Company's purchases are
denominated in SA rand. However, certain items during the
exploration, development and plant construction phase as well as
long lead-capital items are denominated in US dollars, Euros or
Australian dollars. These have to be acquired by the South African
operating company due to the South African Reserve Bank's Foreign
Exchange Control Rulings. This exposes the South African subsidiary
companies to changes in the foreign exchange rates.
The Group's cash deposits are largely denominated in US dollar
and SA rand. A foreign exchange risk arises from the funds
deposited in US dollar which will have to be exchanged into the
functional currency for working capital purposes.
The Group generally does not enter into forward sales,
derivatives or other hedging arrangements to manage this risk.
At financial period end, the financial instruments exposed to
foreign currency risk movements are as follows:
Held in Held in Held in Held in Total
Balances at 30 ZAR GBP AUD USD $'000
June 2018 $'000 $'000 $'000 $'000
-------------------------- -------- -------- -------- -------- -------
Financial assets
Other receivables 236 - - - 236
Trade and other
receivables 5,502 - - - 5,502
Cash and cash
equivalents (1) 8,571 - 58 2,386 11,015
-------- -------- -------- -------- -------
Total financial
assets 14,309 - 58 2,386 16,753
-------- -------- -------- -------- -------
(1) Cash includes
restricted cash
Financial liabilities
Deferred consideration 2,017 - - - 2,017
Borrowings 10,191 - - - 10,191
Trade and other
payables 6,832 1 12 - 6,845
Total financial
liabilities 19,040 1 12 - 19,053
-------- -------- -------- -------- -------
35. FINANCIAL INSTRUMENTS (CONTINUED)
Held in Held in Held in Held in Total
Balances at 30 ZAR GBP AUD USD $'000
June 2017 $'000 $'000 $'000 $'000
-------------------------- -------- -------- -------- ---------- -------
Financial assets
Other receivables 237 - - - 237
Trade and other
receivables 6,107 - - - 6,107
Cash and cash
equivalents (1) 5,698 559 21 3,398 9,676
-------- -------- -------- ---------- -------
Total financial
assets 12,042 559 21 3,398 16,020
-------- -------- -------- ---------- -------
(1) Cash includes
restricted cash
Financial liabilities
Deferred consideration 1,916 - - - 1,916
Borrowings 8,197 - - 8,197
Trade and other
payables 3,475 9 40 700 4,224
Total financial
liabilities 13,588 9 40 700 14,337
-------- -------- -------- ---------- -------
Balances classified as held for sale are not included in the
above tables, or discussed in the subsequent narrative.
The following table details the Group's sensitivity to a 10%
increase and decrease in the US dollar against the relevant foreign
currencies. 10% is the sensitivity rate used when reporting foreign
currency risk internally to key management personnel and represents
management's assessment of the reasonably possible change in
foreign exchange rates. The sensitivity analysis includes only
outstanding foreign currency denominated monetary items and adjusts
their translation at the year-end for a 10% change in foreign
currency rates. The sensitivity analysis includes external loans as
well as loans to foreign operations within the Group where the
denomination of the loan is in a currency other than the functional
currency of the lender or the borrower. A positive number below
indicates an increase in profit or equity where the US dollar
strengthens 10% against the relevant currency. For a 10% weakening
of the US dollar against the relevant currency, there would be a
comparable impact on the profit or equity, and the balances below
would be negative.
Impact on profit / (loss)
Year ended Year ended
30 June 2018 30 June
2017
$'000 $'000
------------------ ------ ---------------
Judgements on reasonable possible movements
USD/ZAR increase by 10% (8,237) (2,000)
USD/ZAR decrease by 10% 8,237 2,000
35.5. Interest rate risk management
The Group's interest rate risk arises mainly from short-term
borrowings, cash and bank balances and restricted cash. The Group
has variable interest rate borrowings. Variable rate borrowings
expose the Group to cash flow interest rate risk.
The Group has not entered into any agreements, such as hedging,
to manage this risk.
The following table summarises the sensitivity of the financial
instruments held at the reporting date, following a movement in
variable interest rates, with all other variables held constant.
The sensitivities are based on reasonably possible changes over a
financial period, using the observed range of actual historical
rates.
35. FINANCIAL INSTRUMENTS (CONTINUED)
Impact on profit / (loss)
Year ended Year ended
30 June 2018 30 June
2017
$'000 $'000
------------------ ------ ---------------
Judgements on reasonable possible movements
Increase of 0.2% in LIBOR 26 24
Decrease of 0.2% in LIBOR (26) (24)
Increase of 1.0% in JIBAR 130 121
Decrease of 1.0% in JIBAR (130) (121)
The impact is calculated on the net financial instruments
exposed to variable interest rates as at reporting date and does
not take into account any repayments of short-term borrowings.
35.6. Credit risk
Credit risk is the risk that a contracting entity will not
complete its obligation under a financial instrument that will
result in a financial loss to the Group. The carrying amount of
financial assets represents the maximum credit exposure. Receivable
balances are monitored on an ongoing basis with the result that the
Group's exposure to bad debts is not significant.
At year end there is no significant concentration of credit risk
represented in the cash and cash equivalents, restricted cash and
trade accounts receivables balance. The Group manages its credit
risk by predominantly dealing with counterparties with a positive
credit rating.
The credit risk on liquid funds and derivative financial
instruments is limited because the counterparties are banks with
high credit-ratings assigned by international credit-rating
agencies.
35.7 Liquidity risk
The liquidity position of the Group is managed to ensure
sufficient liquid funds are available to meet financial commitments
in a timely and cost effective manner. The Group's Executive
continually reviews the liquidity position including cash flow
forecasts to determine the forecast liquidity position and maintain
appropriate liquidity levels.
The concentration of cash balances on hand in geographical areas
was as follows:
United Kingdom Australia South Total
Balances at 30 June 2018 $'000 $'000 Africa $'000
$'000
---------------------------- --------------- ---------- -------- -------
Cash and cash equivalents
and restricted cash 2,386 58 8,571 11,015
--------------- ---------- -------- -------
2,386 58 8,571 11,015
--------------- ---------- -------- -------
United Kingdom Australia South Total
Balances at 30 June 2017 $'000 $'000 Africa $'000
$'000
---------------------------- --------------- ---------- -------- -------
Cash and cash equivalents
and restricted cash 3,967 21 5,688 9,676
--------------- ---------- -------- -------
3,967 21 5,688 9,676
--------------- ---------- -------- -------
35. FINANCIAL INSTRUMENTS (CONTINUED)
The contractual maturities of the Group's financial assets and
liabilities at the reporting date were as follows:
Less than Between Greater than Total
6 months 6 - 12 months 12 months
Balances at 30 June $'000 $'000 $'000 $'000
2018
----------------------------- ------------- ---------------- --------------- ----------
Deferred consideration
(1) - 2,017 - 2,017
Borrowings (1) - - 10,191 10,191
Trade and other payables 6,845 - - 6,845
------------- ---------------- --------------- ----------
6,845 2,017 10,191 19,053
------------- ---------------- --------------- ----------
Less than Between Greater than Total
6 months 6 - 12 months 12 months
Balances at 30 June $'000 $'000 $'000 $'000
2018
----------------------------- ------------- ---------------- --------------- ----------
Other Receivables - - 226 226
Loan receivables 1,645 1,645 3,946 7,236
Trade and Other Receivables 5,502 - - 5,502
Cash and Cash Equivalents 10,931 - - 10,931
Restricted Cash - - 84 84
Other financial assets 4 - 5,453 5,457
----------------------------- ------------- ---------------- --------------- ----------
18,082 1,645 9,709 29,436
----------------------------- ------------- ---------------- --------------- ----------
1. Interest bearing at rates between
10.25 % and 22.2 %
Less than Between Greater Total
6 months 6 - 12 months than 12
Balances at 30 June $'000 $'000 months $'000
2017 $'000
--------------------------------- ---------- --------------- ---------- ---------------
Deferred consideration
(1) - - 1,916 1,916
Borrowings (1) - - 8,197 8,197
Trade and other payables 4,224 - - 4,224
--------------------------------- ---------- --------------- ---------- ---------------
4,224 - 10,113 14,337
--------------------------------- ---------- --------------- ---------- ---------------
Less than Between Greater Total
6 months 6 - 12 months than 12
Balances at 30 June $'000 $'000 months $'000
2017 $'000
--------------------------------- ---------- --------------- ---------- ---------------
Other Receivables - 237 237
Trade and Other Receivables 6,107 - - 6,107
Cash and Cash Equivalents 9,624 - - 9,624
Restricted Cash 52 - - 52
Other financial assets 5 - 9,170 9,175
--------------------------------- ---------- --------------- ---------- ---------------
15,788 - 9,407 25,195
--------------------------------- ---------- --------------- ---------- ---------------
1. Interest bearing between 10% and 22.2%
36. NOTES TO THE STATEMENT OF CASH FLOWS
Reconciliation of cash
For the purposes of the consolidated statement of cash flows,
cash and cash equivalents include cash on hand and in banks, net of
outstanding bank overdrafts. Cash and cash equivalents at the end
of the reporting period as shown in the consolidated statement of
cash flows can be reconciled to the related items in the
consolidated statement of financial position as follows:
Cash and bank balances 22 10,931 9,646
Reconciliation of loss before tax to net cash used in
operations
Loss before tax (continuing and discontinuing
operations) (94,858) (15,847)
Add back:
Depreciation 1,504 354
Net impairment expense 84,355 7,602
Share-based payment 1,343 272
Bad debt written off 59
Employee incentive 1,289 -
Re-valuation of investments (294) (526)
Movement in provisions (105) 326
Finance costs (net) 2,394 503
Disposal of assets (10) (1)
Foreign exchange loss/(gains) on operating
activities 2,211 (1,971)
Changes in working capital:
Increase in inventories 938 (287)
Decrease in trade and other receivables 728 2,057
Decrease in trade and other payables 2,448 (2,706)
------------- -------------
Cash used in operations 2,002 (10,224)
------------- -------------
37. CONTINGENCIES AND COMMITMENTS
Contingent liabilities
The Group has no significant contingent liabilities at the
reporting date.
Commitments
In addition to the commitments of the parent entity as disclosed
under note 42, subsidiary companies have typical financial
commitments associated with their NOMR's granted by the South
African DMR.
38. RELATED PARTY DISCLOSURES
The aggregate compensation made to directors and other members
of key management personnel of the Company and the Group is set out
below:
Short-term employee benefits 1,308 1,557
Post-employment benefits 4 7
Termination benefits 178 -
Share-based payments 273 254
1,763 1,818
---------- ----------
The Group has not provided any of its key management personnel
with loans.
Balances and transactions between the Company and its
subsidiaries, which are related parties of the Company, have been
eliminated on consolidation and are not disclosed in this note.
39. BUSINESS COMBINATIONS
Subsidiaries acquired
During the prior period, the Company entered into a sale of
shares and claims agreement ("the Agreement") with Pan African to
acquire 100% of the shares in and claims against PAR Coal for a
purchase price of $21.1 million (ZAR275 million). PAR Coal holds a
91% shareholding in Uitkomst Colliery with the remaining 9% held by
broad-based trusts (including employees and communities) and a
strategic entrepreneur's trust.
Uitkomst is a high grade thermal export quality coal deposit
with metallurgical applications, which is situated in the Utrecht
coal fields in KwaZulu Natal, South Africa. Uitkomst consists of an
existing underground coal mine (Uitkomst-South mine) and a planned
life of mine extension into the northern area (Klipspruit-North
mine). The South mine is an easily accessible and well established
operating mine. Existing infrastructure such as power supply, water
supply, buildings, workshops, weighbridge, water storage and
management facilities are all in place. Uitkomst currently employs
approximately 556 employees (including contractors).
The acquisition was effective on 30 June 2017.
Consideration transferred
In terms of the Agreement, the acquisition price was settled as
follows:
-- $9.4 million (ZAR125 million) paid in cash;
-- $1.9 million (ZAR25 million) deferred consideration. The
deferred consideration can be paid by MC Mining at any time prior
to the 24 month anniversary of the effective date of acquisition.
The deferred consideration bears interest at the South African
prime rate and shall be paid on the second anniversary of the
effective date. MC Mining is entitled to prepay any amounts in
respect of the deferred consideration. If it is not settled after
24 months, the balance outstanding can be settled through the issue
of new MC Mining shares at the 30 day volume weighted average price
as traded on the JSE (MC Mining "VWAP") on the date immediately
prior to the date on which Pan African gives its election. To the
extent that certain coal buy in opportunities are not secured by or
with the assistance of Pan African, within 2 years from the
effective date, which could result in MC Mining suffering a lower
economic benefit, the deferred consideration can be reduced by such
value, subject to a maximum of $1.3 million (ZAR15 million);
and
-- MC Mining issued 261,287,625 new shares (equivalent to $9.4 million (ZAR125 million))
Acquisition related costs amounting to $0.2 million, have been
excluded from the consideration transferred and have been
recognised as an expense in profit or loss in the current year,
within the "other expenses" line item.
39. BUSINESS COMBINATIONS (CONTINUED)
Assets acquired and liabilities recognised at the date of
acquisition
The following summarises the amounts of assets acquired and
liabilities recognised at the acquisition date:
Carrying Fair value
value '000's
'000's
Non-current assets
Development, exploration and evaluation
expenditure 249 249
Property, plant and equipment 13,666 23,087
Other financial assets 19 19
Current assets
Inventories 1,383 1,383
Trade and other receivables 4,851 4,851
Cash and cash equivalents 999 999
Tax receivable 326 326
Assets classified as held for sale 101 101
Non-current liabilities
Provisions (888) (888)
Deferred tax liability (3,449) (6,087)
Current liabilities
Trade and other payables (2,989) (2,989)
------------ ---------------
Total identifiable net assets 14,268 21,051
------------ ---------------
Non-controlling interests
There was no non-controlling interest recognised on acquisition
as the trusts that own shares in Uitkomst are effectively
controlled by Uitkomst and the "N" shares held by the trust do not
rank equally to the ordinary shares and therefore the trust do not
participate in the profits and losses of Uitkomst.
Fair value
Fair value was estimated by an income-based valuation approach.
The following were the key model inputs used in determining the
fair value:
-- Calculated cost of equity for Uitkomst discount rate 10.3%
-- Average saleable production of 328,347 tonnes per annum
-- Average selling price of ZAR957 per tonne
At the time the financial statements were authorised for issue,
the fair values of the assets and liabilities disclosed above have
only been determined provisionally as the independent valuations
have not been finalised.
Goodwill
No goodwill arose on acquisition.
Net cash outflow on acquisition of subsidiaries
Development, exploration and evaluation
expenditure 9,393
Property, plant and equipment (999)
----------
Other financial assets 8,394
----------
Impact of acquisition on the results of the Group
Had this business combination been effected for the year ended
30 June 2017, the revenue of the Group from continuing operations
would have been $31.8 million and the loss for the year from
continuing operations would have been $13 million. The directors
consider these "pro-forma" numbers to represent an approximate
measure of theperformance of the combined group on an annualised
basis and to provide a reference point for comparison in future
periods.
39. BUSINESS COMBINATIONS (CONTINUED)
In determining the "pro-forma" revenue and profit of the Group
had Uitkomst been acquired at the beginning of the current year,
the directors have:
-- Calculated depreciation of the mining asset on the basis of
the fair value arising in the initial accounting of the business
combination rather than the carrying amounts recognised in the
pre-acquisition financial statement.
40. CONTROLLED ENTITIES
Particulars in relation to controlled entities.
Year Year
ended ended
30 June 30 June
2018 2017
Country
of incorporation % %
Bakstaan Boerdery Proprietary Limited * South Africa 100 100
Baobab Mining & Exploration Proprietary
Limited**
Chapudi Coal Proprietary Limited ***
Coal of Africa & ArcelorMittal Analytical
Laboratories Proprietary Limited
Cove Mining NL
Freewheel Trade and Invest 37 Proprietary
Limited
Fumaria Property Holdings Proprietary
Limited
Golden Valley Services Proprietary Limited South Africa 95 95
GVM Metals Administration (South Africa) South Africa 74 74
Proprietary Limited South Africa 50 50
Harrisia Investments Holdings Proprietary Australia 100 100
Limited South Africa 74 74
Holfontein Investments Proprietary Limited South Africa 100 100
Kwezi Mining Exploration Proprietary Limited Australia 100 100
*** South Africa 100 100
Langcarel Proprietary Limited **** South Africa 100 100
Limpopo Coal Company Proprietary Limited South Africa - -
MbeuYahsu Proprietary Limited South Africa 74 74
Mooiplaats Mining Limited ***** South Africa - 74
Pan African Resources Coal Holdings Proprietary South Africa 100 100
Limited South Africa 74 74
Regulus Investment Holdings Proprietary South Africa - 74
Limited South Africa 100 100
Silkwood Trading 14 Proprietary Limited South Africa 100 100
Tshikunda Mining Proprietary Limited South Africa 100 100
Tshipise Energy Investments Proprietary South Africa 60 60
Limited South Africa 50 50
Uitkomst Colliery Proprietary Limited South Africa 100 100
----------------------------------------------------- ----------------------- --------- -----------
* Subsidiary company of Fumaria Property Holdings
Proprietary Limited
** 69% on completion of the Makhado Project BBBEE transactions
*** Subsidiary companies of MbeuYashu Proprietary Limited
**** Subsidiary company of Mooiplaats Mining Limited
***** Sold during the year together with its subsidiary
Langcarel Proprietary Limited
41. EVENTS AFTER THE REPORTING PERIOD
Khethekile Mining (Pty) Ltd
The Company purchased the business operations of Khethekile
Mining (Pty) Ltd (Khethekile), the independent mining contractor at
the Uitkomst Colliery. The transaction resulted in Uitkomst
acquiring all of Khethekile's mining equipment (including conveyor
systems and coal mining and transportation equipment) and taking
transfer, in accordance with section 197 of the Labour Relations
Act of South Africa, of some 340 Khethekile employees. The
acquisition of Khethekile's mining assets cost $4.9 million (R65
million) and all regulatory approvals and conditions precedent were
met satisfied and the transaction closed on 1 August 2018.
Mooiplaats Colliery S102
The S102 application to, amongst other things, incorporate
certain prospecting rights into Mooiplaats Colliery's mining right
was approved by the Department of Mineral Resources ("DMR") in
August 2018. The timing of the ten quarterly payments to settle the
remaining balance of R112.9 million of the purchase price was
dependent on the S102 approval. The first quarterly payment of
R11.3 million was received in August 2018.
Makhado Project Regulatory Progress
In Sepember 2018 the DMR approved the Environmental
Authorisation for the Makhado project.
There have been no other events between 30 June 2018 and the
date of this report which necessitate adjustment to the
consolidated statements of comprehensive income, consolidated
statements of financial position, consolidated statements of
changes in equity and the consolidated statements of cash flows at
that date.
42. PARENT ENTITY FINANCIAL INFORMATION
Parent entity
Year ended Year ended
30 June 30 June
2018 2017
$'000 $'000
Summary financial information
Non-current assets 171,397 273,541
Current assets 2,051 4,058
------------ ------------
Total assets 173,448 277,599
------------ ------------
Non-current liabilities 2,017 1,916
Current liabilities 697 2,809
------------ ------------
Total liabilities 2,714 4,725
------------ ------------
Net assets 170,734 272,874
------------ ------------
Shareholders' Equity
Issued capital 1,040,950 1,040,950
Accumulated deficit (1,052,843) (1,026,378)
Reserves 182,627 258,302
------------ ------------
170,734 272,874
------------ ------------
Loss for the year (26,465) (74,318)
------------ ------------
Total comprehensive loss (26,465) (74,318)
------------ ------------
42. PARENT ENTITY FINANCIAL INFORMATION (CONTINUED)
Contingencies and commitments
-- MC Mining has subordinated all loans to subsidiary companies
-- MC Mining has entered into a guarantee for the IDC borrowing
facility entered into by Baobab (refer note 25)
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Tower 2, Brookfield Place
123 St Georges Terrace
Perth WA 6000
GPO Box A46
Perth WA 6837 Australia
Tel: +61 8 9365 7000
Fax: +61 8 9365 7001
www.deloitte.com.au
Independent Auditor's Report to the members of MC Mining Limited
(formerly Coal of Africa Limited)
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of MC Mining Limited (the
"Company") and its subsidiaries (the "Group") which comprises the
consolidated statement of financial position as at 30 June 2018,
the consolidated statement of profit or loss and other
comprehensive income, the consolidated statement of changes in
equity, and the consolidated statement of cash flows for the year
then ended, and notes to the financial statements, including a
summary of significant accounting policies and other explanatory
information, and the directors' declaration.
In our opinion, the accompanying financial report of the Group
is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the Group's financial
position as at 30 June 2018 and of its financial performance for
the year then ended; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing
Standards. Our responsibilities under those standards are further
described in the Auditor's Responsibilities for the Audit of the
Financial Report section of our report. We are independent of the
Group in accordance with the auditor independence requirements of
the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board's APES 110 Code
of Ethics for Professional Accountants (the Code) that are relevant
to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the
Code.
We confirm that the independence declaration required by the
Corporations Act 2001, which has been given to the directors of the
Company, would be in the same terms if given to the directors as at
the time of this auditor's report.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
COAL OF AFRICA LIMITED
AUDIT OPINION
Key Audit Matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
report for the current period. These matters were addressed in the
context of our audit of the financial report as a whole, and in
forming our opinion thereon, and we do not provide a separate
opinion on these matters.
Key Audit Matter How the scope of our audit responded
to the Key Audit Matter
Carrying value of the Vele
Colliery Development Assets In conjunction with our valuation
As a result of the decision to prioritise the Makahdo Project, and consequently to experts, our procedures included,
delay the but were not limited to:
redevelopment of the Vele Colliery, the recoverable value of the Vele Colliery was * evaluating management's assessment as to whether an
assessed impairment indicator existed;
using a life of mine discounted cash flow model, resulting in an impairment charge
being recognised
of $87.5 million for the year ended 30 June 2018. * testing the mathematical accuracy of the impairment
model and the carrying value of the Vele Colliery;
The assessment of the recoverable value of the Vele Colliery requires management
to exercise
significant judgement, including the application of the following key assumptions * assessing key macroeconomic and corporate tax
within the assumptions with reference to external evidence
impairment model: including: long-term coal prices, long-term exchang
* long-term coal prices; e
rates, and corporate tax rates;
* long-term exchange rates;
* assessing the reasonableness of management's
underlying mine plan including the forecast
* forecast capital expenditure; production, forecast operating costs and forecast
capital expenditures;
* forecast operating costs;
* assessing the reasonableness of the discount rate
applied; and
* forecast production quantities;
* performing sensitivity analysis of the recoverable
* discount rate; and value of the Vele Colliery to changes in key
assumptions.
* corporate tax rate.
We also assessed the appropriateness
of the disclosures in Note 15
to the financial statements.
----------------------------------------------------------------
Other Information
The directors are responsible for the other information. The
other information comprises the information included in the Group's
annual report for the year ended 30 June 2018, but does not include
the financial report and our auditor's report thereon.
Our opinion on the financial report does not cover the other
information and we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial report, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit,
or otherwise appears to be materially misstated. If, based on the
work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation
of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the
Corporations Act 2001 and for such internal control as the
directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from
material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible
for assessing the ability of the Group to continue as a going
concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial
Report
Our objectives are to obtain reasonable assurance about whether
the financial report as a whole is free from material misstatement,
whether due to fraud or error, and to issue an auditor's report
that includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in
accordance with the Australian Auditing Standards will always
detect a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of
this financial report.
As part of an audit in accordance with the Australian Auditing
Standards, we exercise professional judgement and maintain
professional scepticism throughout the audit. We also:
-- Identify and assess the risks of material misstatement of the
financial report, whether due to fraud or error, design and perform
audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for
our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
-- Obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Group's internal control.
-- Evaluate the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related disclosures
made by the directors.
-- Conclude on the appropriateness of the director's use of the
going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Group's
ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in
our auditor's report to the related disclosures in the financial
report or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained
up to the date of our auditor's report. However, future events or
conditions may cause the Group to cease to continue as a going
concern.
-- Evaluate the overall presentation, structure and content of
the financial report, including the disclosures, and whether the
financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
-- Obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business activities within
the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the
Group's audit. We remain solely responsible for our audit
opinion.
We communicate with the directors regarding, among other
matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide the directors with a statement that we have
complied with relevant ethical requirements regarding independence,
and to communicate with them all relationships and other matters
that may reasonably be thought to bear on our independence, and
where applicable, related safeguards.
From the matters communicated with the directors, we determine
those matters that were of most significance in the audit of the
financial report of the current period and are therefore the key
audit matters. We describe these matters in our auditor's report
unless law or regulation precludes public disclosure about the
matter or when, in extremely rare circumstances, we determine that
a matter should not be communicated in our report because the
adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 12 to
20 of the Director's Report for the year ended 30 June 2018.
In our opinion, the Remuneration Report of the Company, for the
year ended 30 June 2018, complies with section 300A of the
Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation
and presentation of the Remuneration Report in accordance with
section 300A of the Corporations Act 2001. Our responsibility is to
express an opinion on the Remuneration Report, based on our audit
conducted in accordance with Australian Auditing Standards.
DELOITTE TOUCHE TOHMATSU
David Newman
Partner
Chartered Accountants
Perth, 27 September 2018
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR GLGDCCXDBGIR
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