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HWA
HWHWA
HWA - Hwange Colliery Company - The Company`s Audited Results For The
Financial Year Ended 30 December 2006
HWANGE COLLIERY COMPANY LIMITED
(Incorporated in Zimbabwe)
Code: HWA & ZW0009011934
THE COMPANY`S AUDITED RESULTS FOR THE FINANCIAL YEAR ENDED 3O DECEMBER 2006
INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2007
INFLATION ADJUSTED
2007 2006
$ $
Revenue 22 149 079 823 045 20 536 443 540 468
Cost of sales (15 076 507 621 551) (10 518 687 257 664)
Gross profit 7 072 572 201 494 10 017 756 282 804
Investment revenue 4 060 340 591 915 4 178 808 266 729
Other gains and 5 252 051 553 818 6 203 800 009 489
losses
Marketing costs (485 095 710 847) (206 583 374 629)
Administrative costs (14 775 503 912 603) (6 148 377 487 545)
(Loss)/gain on net (2 410 299 667 352) 13 559 709 470 910
monetary position
(Loss)/profit from (1 285 934 943 575) 27 605 113 167 758
operations
Finance cost (2 650 590 100 322) (1 307 266 643 223)
Impairment 202 612 896 489 (202 612 896 489)
reversal/(loss)
(Loss)/profit before (3 733 912 147 408) 26 095 233 628 046
taxation
Taxation (1 435 076 042 592) (606 588 406 195)
(Loss)/profit after (5 168 988 190 000) 25 488 645 221 851
taxation
Attributable (28 370) 143 360
(loss)/earnings per
share
- basic
- diluted (28 370) 143 360
Headline (29 721) 143 429
(loss)/earnings per
share
- basic
- diluted (29 721) 143 429
HISTORICAL COST
2007 2006
$ $
Revenue 1 645 362 456 374 13 258 615 530
Cost of sales (1 203 287 719 120) (6 280 319 545)
Gross profit 442 074 737 254 6 978 295 985
Investment revenue 1 182 532 008 158 1 921 294 085
Other gains and 17 141 071 266 459 11 087 502 907
losses
Marketing costs (43 719 213 159) ( 179 067 423)
Administrative costs (1 428 793 166 493) (5 375 134 818)
(Loss)/gain on net - -
monetary position
(Loss)/profit from 17 293 165 632 219 14 432 890 736
operations
Finance cost (361 667 888 759) ( 852 087 770)
Impairment - -
reversal/(loss)
(Loss)/profit before 16 931 497 743 460 13 580 802 966
taxation
Taxation (3 513 881 658 707) (3 475 201 955)
(Loss)/profit after 13 417 616 084 753 10 105 601 011
taxation
Attributable 73 642 57
(loss)/earnings per
share
- basic
- diluted 73 642 57
Headline 73 636 56
(loss)/earnings per
share
- basic
- diluted 73 636 56
BALANCE SHEET AT 31 DECEMBER 2007
INFLATION ADJUSTED
2007 2006
$ $
ASSETS
Non Current Assets
Property, plant and 377 989 579 982 962 25 328 428 852 988
equipment
Investment property 14 349 000 000 000 7 692 226 800 000
Investments in 10 350 024 10 350 024
associates
Investments in - 100 795
subsidiaries
392 338 590 332 986 33 020 666 103 807
Current Assets
Pre-stripped 14 521 998 918 742 12 038 323 668 246
overburden
Inventory 1 724 996 562 964 19 033 533 200 676
Recoverable foreign - 3 023 888 890 105
loans
Receivables and 344 399 699 304 3 322 197 255 714
prepayments
Short term loans - 15 148 382
receivable
Other financial 3 688 272 000 000 -
assets
Bank and cash 198 466 473 382 276 482 119 672
balances
20 478 133 654 392 37 694 440 282 795
Total assets 412 816 723 987 378 70 715 106 386 602
EQUITY AND
LIABILITIES
Capital and reserves
Share capital 33 775 150 872 449 33 775 150 745 822
Capital reserves 279 018 934 955 243 17 116 615 828 688
Retained (3 654 429 286 367) 1 514 558 903 633
(loss)/profit
309 139 656 541 325 52 406 325 478 143
Non current
liabilities
Loans payable - 34 274 495 666
Foreign lease - 454 786 875 236
liability
Deferred taxation 101 029 735 445 587 8 767 372 790 066
101 029 735 445 587 9 256 434 160 968
Current liabilities
Loans payable 200 000 000 000 107 483 418 101
Foreign lease 145 298 451 760 547 257 945 903
liability
Foreign loans payable 694 158 674 794 3 031 993 235 914
Payables 1 603 932 096 497 5 286 180 053 844
Overdrafts 3 940 474 956 78 374 462 941
Current tax liability 2 302 459 1 057 630 788
2 647 332 000 466 9 052 346 747 491
Total equity and 412 816 723 987 378 70 715 106 386 602
liabilities
HISTORICAL COST
2007 2006
$ $
ASSETS
Non Current
Assets
Property, plant 370 470 406 405 048 2 409 350 295
and equipment
Investment 14 349 000 000 000 11 600 000 000
property
Investments in 15 608 15 608
associates
Investments in - 152
subsidiaries
384 819 406 420 656 14 009 366 055
Current Assets
Pre-stripped 388 283 684 703 1 986 000 645
overburden
Inventory 583 792 306 364 2 382 220 896
Recoverable - 4 560 072 400
foreign loans
Receivables and 344 399 699 304 5 009 926 146
prepayments
Short term loans - 22 844
receivable
Other financial 3 688 272 000 000 -
assets
Bank and cash 198 466 473 382 416 939 421
balances
5 203 214 163 753 14 355 182 352
Total assets 390 022 620 584 409 28 364 548 407
EQUITY AND
LIABILITIES
Share capital 182 200 177 795
Capital reserves 275 044 163 659 692 5 694 147
Retained 13 428 039 082 918 10 422 998 165
(loss)/profit
288 472 202 924 810 10 428 870 107
Non current
liabilities
Loans payable - 51 686 483
Foreign lease - 685 825 820
liability
Deferred taxation 98 903 085 659 133 3 547 083 547
98 903 085 659 133 4 284 595 850
Current
liabilities
Loans payable 200 000 000 000 162 086 699
Foreign lease 145 298 451 760 825 273 661
liability
Foreign loans 694 158 674 794 4 572 293 882
payable
Payables 1 603 932 096 497 7 971 643 351
Overdrafts 3 940 474 956 118 189 933
Current tax 2 302 459 1 594 924
liability
2 647 332 000 466 13 651 082 450
Total equity and 390 022 620 584 409 28 364 548 407
liabilities
CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2007
INFLATION ADJUSTED
2007 2006
$ $
CASH FLOWS FROM
OPERATING
ACTIVITIES
(Loss)/Profit from (1 285 934 943 575) 27 605 113 167 758
operations
Adjustment for non-
cash items
- Depreciation 1 827 918 048 652 1 250 669 695 300
- Impairment 202 612 896 489
reversal
- Fair value (3 674 896 568 895) -
adjustment on other
financial assets
- Investment in 100 795 -
subsidiaries -
write -off
Operating cash flow (9 587 073 666 534) 21 751 801 883 632
before changes in
working capital
Decrease/(increase) 17 308 536 637 712 (15 794 568 956 943)
in inventory
(Increase)/decrease (2 483 675 250 496) (3 488 950 929 833)
in pre-strip
overburden
Decrease/(increase) 3 023 888 890 105 6 130 593 571 777
in recoverable
foreign loans
Decrease/(increase) 2 977 797 556 410 970 548 985 244
in receivables
Decrease in short 15 148 382 -
term loan
receivables
(Decrease)/increase (3 682 247 957 347) 1 693 559 837 552
in payables
Cash flow utilised 7 557 241 358 232 11 262 984 391 429
in operations
Finance cost (2 650 590 100 322) (1 307 266 643 223)
Income tax paid (1 055 328 329) (88 253 970 453)
CASH FLOWS FROM
INVESTING
ACTIVITIES
Increase in other (13 375 431 105) 115 402 970 760
financial assets
Purchase of (1 761 742 526 473) (3 820 590 431 002)
Property, plant and
equipment
Net cash flows from (1 775 117 957 578) (3 705 187 460 242)
investing
activities
CASH FLOWS FROM
FINANCING
ACTIVITIES
Shares issued 126 627 -
Increase/(decrease) 2 279 087 331 -
in share premium
(Decrease)/increase (3 136 338 844 266) (6 142 206 335 598)
in loans
Net cash flows from (3 134 059 630 308) (6 142 206 335 598)
financing
activities
(Decrease)/increase (3 581 658 305) 20 069 981 913
in cash and cash
equivalents
Represented by:
Cash and cash 198 107 656 731 178 037 674 818
equivalents at
beginning of the
year
Cash and cash 194 525 998 426 198 107 656 731
equivalents at end
of the year
(Decrease)/increase (3 581 658 305) 20 069 981 913
in cash and cash
equivalents
HISTORICAL COST
2007 2006
$ $
CASH FLOWS FROM
OPERATING
ACTIVITIES
(Loss)/Profit from 17 293 165 632 219 14 432 890 736
operations
Adjustment for non-
cash items
- Depreciation 287 360 972 100 447 189
- Impairment
reversal
- Fair value (14 337 400 000 000) (11 599 982 120)
adjustment on
investment property
- Fair value (3 687 918 540 600) -
adjustment on other
financial assets
- Investment in 152 -
subsidiaries -
write -off
Operating cash flow (731 865 547 257) 2 933 355 805
before changes in
working capital
Decrease/(increase) (581 410 085 468) (2 225 370 972)
in inventory
(Increase)/decrease (386 297 684 058) (1 813 624 867)
in pre-strip
overburden
Decrease/(increase) 4 560 072 400 (3 560 509 100)
in recoverable
foreign loans
Decrease/(increase) (339 389 773 158) (4 541 229 239)
in receivables
Decrease in short 22 844 -
term loan
receivables
(Decrease)/increase 1 595 960 453 146 7 580 635 873
in payables
Cash flow utilised (438 442 541 551) (1 626 742 500)
in operations
Finance cost (361 667 888 759) (852 087 770)
Income tax paid 684 691 (9 421 844)
Cash flows utilised (800 109 745 619) (2 488 252 114)
from operating
activities
CASH FLOWS FROM
INVESTING
ACTIVITIES
Increase in other (353 459 400) -
financial assets
Purchase of (38 548 816 196) (2 402 998 421)
Property, plant and
equipment
Net cash flows from (839 012 021 215) (4 891 250 535)
investing
activities
CASH FLOWS FROM
FINANCING
ACTIVITIES
Shares issued 4 405 -
Increase/(decrease) 79 282 895 -
in share premium
(Decrease)/increase 1 033 159 960 009 5 170 560 374
in loans
Net cash flows from 1 033 239 270 153 5 170 560 374
financing
activities
(Decrease)/increase 194 227 248 938 279 309 839
in cash and cash
equivalents
Represented by:
Cash and cash 298 749 488 19 439 649
equivalents at
beginning of the
year
Cash and cash 194 525 998 426 298 749 488
equivalents at end
of the year
(Decrease)/increase 194 227 248 938 279 309 839
in cash and cash
equivalents
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2007
INFLATION ADJUSTED
Share Capital Retained Total
Capital Reserves (loss)/profits $
$ $ $
Balance at 33 775 150 745 17 116 615 828 (23 974 086 26 917 680 256
1 January 825 688 318 218) 295
2006
Profit for - - 25 488 645 221 25 488 645 221
the year 851 851
Balance at 33 775 150 745 17 116 615 828 1 514 558 903 52 406 325 478
31 December 825 688 633 146
2006
Balance at 33 775 150 745 17 116 615 828 1 514 558 903 52 406 325 478
1 January 825 688 633 146
2007
Loss for - - (5 168 988 190 (5 168 988 190
the year 000) 000)
Revaluation 352 727 326 - 352 727 326
- 652 153 652 153
Issue of
share
capital
under
share 126 627 2 279 087 331 - 2 279 213 958
option
scheme
Transfer to - (90 827 286 - (90 827 286
deferred 612 930) 612 930)
tax
Balance at 33 775 150 872 279 018 934 (3 654 429 286 309 139 656
31 December 452 955 243 367) 541 328
2007
HISTORICAL COST
Share Capital Retained Total
Capital Reserves Earnings $
$ $ $
Balance at 177 795 5 694 147 317 397 154 323 269 096
1 January
2006
Profit for - - 10 105 601 10 105 601
the year 011 011
Balance at 177 795 5 694 147 10 422 998 10 428 870
31 December 165 107
2006
Balance at 177 795 5 694 147 10 422 998 10 428 870
1 January 165 107
2007
Profit for - - 13 417 616 13 417 616
the year 084 753 084 753
Revaluation - 370 429 735 - 370 429 735
599 529 599 529
Issue of
share
capital
under
share 4 405 79 282 895 - 79 287 300
option
scheme
Transfer to - (95 385 656 - (95 385 656
deferred 916 879) 916 879)
tax
Balance at 182 200 275 044 163 13 428 039 383 857 859
31 December 659 692 082 918 841 689
2007
CHAIRMAN`S STATEMENT
It is my pleasure to present the Company results for the financial year ended
31 December 2007.
There were challenges in the operating environment as a result of the
prevailing hyperinflation and unfavourable product prices for the greater part
of the year. Foreign currency shortages negatively affected the Company`s
recapitalisation and plant and equipment maintenance programmes.
The interest rates on the open market were high during the period under review
thus rendering local borrowings unfavourable.
The demand for coal and coke products remained high during the year, coupled
with the increases in prices of commodities on the international markets.
OPERATIONS
The Company`s mining operations were concentrated mainly on the JKL Opencast
and 3 Main Underground Mines. The Chaba Opencast Mine was maintained as a
strategic pit.
A Load Haul and Dump (LHD) truck was imported during the year for use at the
underground mine. The company carried out refurbishment of the caterpillar
equipment and the coal-handling systems with limited assistance of both foreign
and local companies. However, intermittent breakdowns of the aged equipment
constrained the Company`s operations.
The Company experienced skills losses, mainly to neighbouring countries.
Hwange Colliery Company entered into a medium-term contract mining arrangement
with Clidder Minerals (Private) Limited to boost production capacity, while the
long-term recapitalisation efforts are pursued.
TRADING PERFORMANCE
Total coal and coke sales for the year amounted to 2 071 526 tonnes and
compared favourably with the 2 070 358 tonnes achieved the previous year.
The Hwange Coking Coal (HCC) and Hwange Industrial Coal (HIC) sales amounted to
541 357 tonnes and were slightly below the tonnage of 566 976 tonnes achieved
the previous year.
HPS coal delivered to Zimbabwe Power Company (ZPC)`s Hwange Power Station
amounted to 1 315 799 tonnes compared to 1 330 553 tonnes delivered in 2006.
Coke oven gas supply to Hwange Power Station was
7 152 650 Nm3 compared to 17 662 576 Nm3 supplied the previous year. The gas
pipeline was on major breakdown for the greater part of the year.
Coke sales of 213 370 tonnes were well above the 173 831 tonnes achieved the
previous year. Coke sales accounted for 42% of annual turnover.
Export sales amounted to 147 284 tonnes as compared to 115 301 tonnes for the
previous year, representing a 28% increase. The bulk of the coke and coal
exports were dispatched to the Zambian and Democratic Republic of Congo
markets.
FINANCIAL RESULTS
The Company complied with the International Accounting Standard (IAS) 29
(Financial Reporting in Hyper Inflationary Economies). The financial statements
and corresponding figures for the previous period have been restated to take
account of changes in the purchasing power of the Zimbabwean dollar.
(i) Historical Cost Accounting Results
The Company made a turnover of $1.645 trillion and this was above the previous
year`s turnover of $13 billion.
The attributable profits were $13.4 trillion, as compared to the previous
year`s $10.1 billion.
There was a fair value adjustment of $14.3 trillion, arising from the
revaluation of investment properties in Harare and Bulawayo. There was another
fair value adjustment on the shares held in First Mutual Life, amounting to
$3.6 trillion.
The property, plant and equipment increased from $2.4 billion in 2006 to $370
trillion, as a result of the revaluation exercise undertaken by CB Richard
Ellis Valuers.
Receivables and prepayments increased from $5 billion in 2006 to $344.4
billion. The Zimbabwe Iron and Steel Company and Zimbabwe Power Company debts
of $175 billion and $148 billion comprised 51% and 43% of receivables,
respectively.
The current liabilities increased from $13.7 billion to $2.6 trillion, mainly
due to the revaluation of the loans from Commonwealth Development Bank (CDC)
and West LB and finance facilities from China North Industries Corporation and
Atlas Copco. Payables accumulated to $1.6 trillion by year end compared to $8
billion payable as at end of last year. A loan facility of $200 billion was
accessed through the Reserve Bank of Zimbabwe for working capital.
The Company continued to seek funding for the recapitalisation programme, which
is meant to boost production capacity.
There were cash flow problems during the year due to low product prices,
excessively high costs of inputs as well as late payments by major customers.
(ii) Inflation-Adjusted Accounting Results.
The Company`s inflation-adjusted revenue increased from $20.5 trillion in 2006
to $22 trillion in 2007. The Company made an operating loss of $1.3 trillion as
compared to an operating profit of $27.6 trillion for the same period the
previous year.
The Company recorded a net loss after tax of $5.2 trillion, compared to a net
profit of $25.5 trillion, realised for the same period the previous year.
DIVIDEND
The Board has resolved not to consider payment of a dividend, in view of the
challenges in the operating environment and the ongoing recapitalisation
programme being pursued by the Company.
QUALITY, SAFETY, HEALTH AND ENVIRONMENT
The Company successfully went through two (2) ISO 9001:2000 Quality Management
System surveillance audits during the year.
The zero tolerance safety ensured an accident- free working environment. The
Company had no fatality during the year. The quality of ground water and
surface water in public streams remained good throughout the year. Incidents of
pollution by Company activities were not experienced for the period under
review.
The HIV and AIDS education campaigns targeted at the workforce and the
community were done to raise the level of awareness and good moral and safe
behaviour.
OUTLOOK
Acquisition of mining equipment and refurbishment of major machinery will be
undertaken during 2008 and this will boost production.
The procurement of the coal fines recovery plant is in progress. This plant
will significantly improve coking coal availability to the market.
Contract mining will continue as a short-term strategy to ensure coal
availability while concluding recapitalisation programmes.
The demand for both coal and coke is expected to remain firm in both the
domestic and export markets. The northern market is expected to remain buoyant
and with opportunity for growth. The Company is pushing for an export drive in
order to improve foreign currency inflows and debt service capacity.
The Company is implementing a new information technology system that will aid
management in efficient and effective decision making.
The Board and management of Hwange Colliery Company is positive that the
current recapitalisation initiatives will yield improved and sustainable coal
and coke availability to the domestic and international markets. The
fundamental guiding principle in all Company activities is the optimisation of
shareholders` value.
DIRECTORATE
Mr T. Kwashirai resigned from the Board on 29 June 2007. On behalf of the
Company, I would like to thank
Mr Kwashirai for his valuable contributions to Hwange Colliery Company Limited.
Mr A. M. Ngapo was appointed non- executive director of the Company with effect
from 01 July 2007and Mr F. Moyo was appointed Managing Director on 11 July
2007. I welcome the new directors on board.
APPRECIATION
I would like to express sincere appreciation to my fellow Directors who,
throughout the year, worked tirelessly to ensure the Company tackles its
challenges and set Hwange Colliery Company on the growth path.
The Board, management and staff demonstrated commitment, despite a number of
challenges in the operating environment.
T. Savanhu
CHAIRMAN
19 March 2008
BASIC EARNINGS PER SHARE (HISTORICAL COST)
The calculations of basic earnings per share is based on profit after taxation
of $13.4 trillion ($10.1 trillion in 2006) and on 182 199 850 (177 795 000 in
2006) weighted average ordinary shares in issue during the year.
ANNUAL REPORT AND ACCOUNTS AND NOTICE OF GENERAL MEETING
The annual reports and accounts for the year ended 31 December 2007 will be
distributed to members on or before 31 Mach 2008 and the Annual General Meeting
will be held on Friday, 27 June 2008.
By Order of the Board
T.K. Ncube
SECRETARY
19 March 2008
STATEMENT OF ACCOUNTING POLICIES FOR THE YEAR ENDED 31 DECEMBER 2007
1. ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of
these financial statements are set out below.
These policies have been consistently applied to all the years
presented, unless otherwise stated.
1.1-ACCOUNTING POLICIES
The financial statements are presented in Zimbabwe dollars and
are prepared in accordance with and comply with International
Financial Reporting Standards. They are based on the historical cost and are
restated to take account of the effects of inflation in accordance with the
International Accounting Standard (IAS) 29:
Financial reporting in Hyperinflationary Economies.
The existence of certain hyperinflationary conditions as identified by IAS 29
was formally identified by Public Accountants and Auditors board in November
1999. The application of IAS 29 was made effective for the financial periods
beginning on or after 1 January 2000.
International Accounting Standard (IAS) 29, "Financial Reporting in
Hyperinflationary Economies" requires that the financial statements prepared in
the currency of the hyperinflationary economy be stated in terms of the
measuring unit current at the balance sheet date, and that corresponding
figures for the previous period be restated in the same
terms. One characteristic that necessitates the application of IAS 29 is a
cumulative three-year inflation rate approaching or exceeding 100%.
The inflation adjusted results were calculated by means of conversion factors
derived from the Zimbabwe consumer price index (cpi) given below:
Dates Indices Conversion Factors
31 December 2007 441 490 130.8 1.0000
31 December 2006 665 774.1 663.1230
31 December 2005 48 205.6 9158.4822
The main procedures applied for the above mentioned restatement are as follows:
Financial statements prepared in the currency of a
hyperinflationary economy are stated in terms of the measuring unit current at
the balance sheet date, and corresponding figures for the previous period are
restated in the same terms. Monetary assets and liabilities that are carried at
the balance sheet date are not restated because they are already expressed in
terms of the monetary unit current at the balance sheet date. Non-monetary
assets and liabilities that are
not carried at amounts current at the balance sheet date and components of
shareholders` equity are restated by applying the relevant monthly conversion
factors. Additions to equipment in the year of acquisition are restated using
the relevant monthly conversion factors. Comparative financial
statements are restated using general inflation indices in terms of the
measuring unit current at the latest balance sheet date. All items in the
income statement are restated by applying the relevant monthly, or year-end
conversion factors.
1.2 INVESTMENT IN ASSOCIATES
Associates are all entities over which the Company has significant influence
but not control, generally accompanying a shareholding of between 20% and 50%
of the voting rights. Investments in associates are accounted for using the
equity method of accounting and are initially recorded at cost. The Company`s
investment in associates includes goodwill identified on acquisition, net of
any accumulated impairment loss.
The Company`s share of its associates post acquisition profits or loses is
recognised in the income statement, and its share of post acquisition movements
in reserves is recognised in reserves and the cumulative post acquisition
movements are adjusted against the carrying amount of the investment. When
the Company`s share of loses in an associate equals or exceeds its interest in
the associate, including any other unsecured receivables, the Company does not
recognise further loses, unless it has incurred obligations or made payments
on behalf of the associate.
Unrealised gains on transaction between the Company and its associates are
eliminated to the extent of the Company`s interest in the associates.
Unrealised losses are also eliminated unless the transaction provides evidence
of an impairment of the asset transferred. Accounting policies of the
associates have been changed where necessary to ensure consistence with the
policies adopted
by the Company.Dilution gains and loses arising in investments in associates
are recognised in the income statement.
1.3 REVENUE RECOGNITION
Revenue is measured at the fair value of the consideration received or
receivable.
Revenue is reduced for customer returns and Value Added Tax and discounts.
1.3.1 Sale of goods
Revenue from the sale of goods is recognised when all the following conditions
are satisfied:
-the Company has transferred to the buyer the significant risks and rewards of
ownership of the goods;
-the Company 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 entity; and
-the costs incurred or to be incurred in respect of the transaction can be
measured reliably.
1.3.2 Dividend income
Dividend revenue from investments is recognised when the shareholder`s right to
receive payment has been established.
1.3.3 Interest income
Interest revenue is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate
that exactly discounts estimated future cash receipts through the expected life
of the financial asset to that asset`s net carrying amount.
1.4 PROPERTY, PLANT AND EQUIPMENT
Freehold land and buildings comprise mainly staff houses and offices. Freehold
land and buildings are shown at fair value, based on periodic, but at least
annually, valuations by external independent valuers, less subsequent
depreciation for buildings. All other property, plant and equipment is stated
at historical
cost/valuation less depreciation and impairment losses. Historical cost
includes expenditure that is directly attributable to the acquisition of the
items.
Subsequent costs are included in the asset`s carrying amount or recognised as a
separate asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the group and the cost of the
item
can be measured reliably. The carrying amount of the replaced part is
derecognised.
All other repairs and maintenance are charged to the income statement during
the financial period in which they are incurred.
Increases in the carrying amount arising on revaluation of land and buildings
are credited to capital reserves in shareholders` equity. Decreases that offset
previous
increases of the same asset are charged against capital reserves directly in
equity;
all other decreases are charged to the income statement. Each year the
difference between depreciation based on the revalued carrying amount of the
asset charged to the income statement and depreciation based on the asset`s
original cost is
transferred from `capital reserves` to `retained earnings`.
Depreciation Land, capital work in progress and pre-stripped overburden are not
depreciated.
All other property, plant and equipment are depreciated on a straight line
basis or amortised at rates estimated to write-off the cost or valuation of
such assets over their expected useful lives.
The expected useful lives are as follows
Buildings 6 to 40 years
Permanent works 7 to 40 years
Plant, machinery and movable equipment 5 to 30 years
Motor vehicles 5 years
Plant, machinery and permanent works used for opencast mining written off on
the basis of tonnages mined.
Opencast pre-stripped overburden costs written off on the basis of tonnages
Mined.
Coal mining and other rights amortised over the estimated life of coal
reserves.
Gains and losses on disposal of property, plant and equipment are determined by
reference to their carrying amount and are taken into account in determining
operating profit. On disposal of revalued assets, amounts in capital reserves
relating to that asset are transferred to retained earnings.
Interest costs on borrowings to finance the construction of property, plant and
equipment are capitalised during the period of time that is required to
complete and prepare the property for its intended use, as part of the cost of
the asset.
1.5 IMPAIRMENT OF NON-FINANCIAL ASSETS
Assets that have an indefinite useful life, for example goodwill, are not
subject to amortisation and are tested annually for impairment. Assets that are
subject to amortisation are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable.
An impairment loss is recognised for the amount by which the asset`s carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of
an asset`s fair value less costs to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash flows (cash-generating units). Non-financial
assets other than goodwill that
suffered an impairment are reviewed for possible reversal of the impairment at
each reporting date.
1.6 INVESTMENT PROPERTIES
Investment property, which is property held to earn rentals and/or for capital
appreciation, is measured initially at its cost, including transaction costs.
Subsequent to initial recognition, investment property is measured at fair
value determined by external independent valuers. Gains and losses arising from
changes in the fair value of investment property are included in profit or loss
in the period in which they arise.
On disposal of an investment property, the difference between the net disposal
proceeds and the carrying amount is charged or credited to the income
statement; any amounts on capital reserves relating to that investment property
are transferred to retained earnings.
1.7 FINANCIAL INSTRUMENTS
Financial instruments are initially recognised using trade date accounting
method.
Financial instruments are initially measured at cost, which includes
transaction costs. Subsequent to initial recognition these instruments are
measured as set out below:
1.7.1 Investments
Marketable securities are carried at market value, which is calculated by
reference to quoted selling prices at the date of business on the balance sheet
date. Other investments are shown at fair value. Fair value adjustments are
recognised in the income statement. Changes in fair value of investments
designated as available for sale are recognised directly in equity.
1.7.2 Loans and receivables
Trade receivables are carried at anticipated realisable value. An estimate is
made for doubtful receivables based on a review of all outstanding amounts at
the year end. Bad debts are written off during the year in which they are
identified.
1.7.3 Cash and cash equivalents. For the purposes of the cash flow statement,
cash and cash equivalents comprise cash on hand, deposits held on call with
banks, and investments in money market instruments, net of bank overdrafts. In
the balance sheet, bank overdrafts are included in borrowings and current
liabilities.
1.8 FOREIGN CURRENCY TRANSACTIONS AND TRANSLATIONS
Foreign currency transactions are translated into the functional currency using
the exchange rates prevailing at the dates of the transactions. Foreign
exchange gains and losses resulting from the settlement of such transactions
and from the translation at year-end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in the income
statement.
1.9 OPENCAST PRE-STRIPPED OVERBURDEN
Pre-stripped overburden represents the cost of overburden removed to expose
coal and is capitalised during the course of development. The portion relating
to reserves expected to be mined in the next twelve months is transferred to
current assets and is charged to production as the coal is mined.
1.10 INVENTORIES
Inventories are stated at the lower of cost and net realisable value. The cost
of consumable stores is determined using the weighted average cost method. The
cost of finished goods is determined on an average cost of production basis.
Net realisable value is the estimated selling price in the ordinary course of
business, less applicable variable selling expenses.
1.11 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. 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 income statement within `selling and
marketing costs`. 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 against `selling and marketing
costs` in the income statement.
1.12 TAXATION
Income tax expense represents the sum of the tax currently payable and deferred
tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from profit as reported in the consolidated income statement
because it excludes items of income or expense that are taxable or deductible
in other years and it further excludes 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 by the balance sheet date.
Deferred tax
Deferred income tax is provided, using the liability method, for all temporary
differences arising between the tax bases of assets and liabilities and their
carrying values for financial reporting purposes. Currently enacted tax rates
are used to determine deferred income tax.
The principal temporary differences arise from depreciation on property, plant
and equipment, revaluations of certain non-current assets and tax losses
carried forward. Deferred tax assets relating to the carry forward of unused
tax losses are recognised to the extent that it is probable that future taxable
profit will be available against which the unused tax losses can be utilised.
1.13 LEASES
Leases of property, plant and equipment where the Company assumes substantially
all the benefits and risks of ownership are classified as finance leases.
Finance leases are capitalised at the estimated present value of the underlying
lease payments. Each lease payment is allocated between the liability and
finance charges so as to achieve a constant rate on the finance balance
outstanding. The corresponding rental obligations, net of finance charges, are
included in other long-term payables. The interest element of the finance
charge is charged to the income statement over the lease period. The property,
plant and equipment acquired under finance leasing contracts is depreciated
over the useful life of the asset.
Leases of assets under which all the risks and rewards of ownership are
effectively retained by the lessor are classified as operating leases. Payments
made under operating leases are charged to the income statement on a straight-
line basis over the period of the lease.
When an operating lease is terminated before the lease period has expired, any
payment required to be made to the lessor by way of penalty is recognised as an
expense in the period in which termination takes place.
1.14 EMPLOYEE BENEFITS
Pension and retirement schemes
The Company is a member of the Mining Industry Pension Fund which is
independently administered as a defined contribution scheme. All full time
permanent employees are members and the scheme provides for contributions by
both employer and employee. The Company`s contributions to the defined
contribution pension plans are charged to the income statement in the year to
which they relate. The Company and all employees must contribute to the
National Social Security Authority statutory pension and benefits scheme, which
is a defined contribution scheme.
Equity compensation benefits
The stock option programme allows employees to acquire shares of the Company.
The option exercise price equals the market price of the underlying shares at
the date of the grant and consequently no compensation cost or obligation is
recognised. When the options are exercised equity is increased by the amount of
the proceeds received.
1.15 TRADE PAYABLE
Trade payables are recognised initially at fair value and subsequently measured
at amortised cost using the effective interest method.
1.16 PROVISIONS
Provisions are recognised when the Company has a present legal or constructive
obligation as a result of past events, it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligations, and a reliable estimate of the amount of the obligations can be
made.
Employee entitlements to annual leave and long service leave are recognised
when they accrue to employees. A provision is made for the estimated liability
for annual leave and long service leave as a result of services rendered by
employees up to balance sheet date.
Sponsor
Sasfin Capital
A division of Sasfin Bank Limited
Johannesburg
31 March 2008
Date: 31/03/2008 17:59:46 Produced by the JSE SENS Department.
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