| Wed 11 Mar 2009, 9:00 | | CZA - CoAL - Half Year Financial Report: 31 December 2008 |
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CZA
CZA
CZA - CoAL - Half Year Financial Report: 31 December 2008
Coal of Africa Limited
(previously, "GVM Metals Limited")
(Incorporated and registered in Australia)
(Registration number ABN 008 905 388)
Share code on the JSE Limited: CZA
ISIN AU000000CZA6
Share code on the Australian Stock Exchange Limited: CZA
ISIN AU000000CZA6
(`CoAL` or `the Company`)
11 March 2009
HALF YEAR FINANCIAL REPORT: 31 DECEMBER 2008
Coal of Africa Limited ("CoAL" or "Company"), the AIM/ASX/JSE listed coal
development company operating in South Africa (ticker: CZA), herewith lodges its
results for the six month period ended 31 December 2008 ("Half Year Accounts"),
indicating that progress on the Company`s coal projects continues according to
schedule, with sales of export thermal coal expected early in the next financial
year.
As previously announced, the Company has secured port allocations at both the
Richards Bay Dry Bulk Terminal and the Matola Terminal in Maputo, Mozambique.
The port allocations, together with rail allocation from Transnet Freight Rail,
ensure that the Company will be able to deliver mined product to its export
customers as planned.
The Half Year Accounts reflect a loss for the six months of A$1.3 million, which
included write downs of investments and a downward revaluation of nickel assets
totalling approx A$4 million, and therefore an otherwise good result in what
has proven to be an extraordinary period of global economic turbulence.
CoAL had a cash balance of A$204 million and no debt as at 31 December 2008,
ensuring the Company has sufficient resources for the exploration and
development of its projects.
Yours sincerely
SIMON J FARRELL
Managing Director
For more information contact:
Simon Farrell, Managing Director
CZA
+61 417 985 383 or +61 8 9322 6776
Peter Bacchus/ Alastair Cochran
Morgan Stanley
+44(0) 20 7425 8000
Simon Edwards/ Chris Sim
Evolution Securities
+44(0) 20 7071 4300
Jos Simson/ Gareth Tredway
Conduit PR
+44(0) 20 7429 6603
About CoAL:
Coal of Africa Limited ("CoAL") is primarily focused on the acquisition,
exploration and development of thermal and metallurgical coal projects. The
Company`s key projects, along with its leading metals processing company NiMag
Group (Pty) Ltd are in South Africa. The Company was incorporated in Western
Australia and listed in 1980. Since 2005, the Company has also listed on both
the AIM and JSE markets, allowing further growth in the Company`s coal assets.
HALF-YEAR FINANCIAL REPORT
31 DECEMBER 2008
The directors present their report together with the consolidated financial
report for the half-year ended 31 December 2008 and the auditor`s review report
thereon:
Directors
The directors of the Company in office during or since the end of the half-year
are:
Name Period of directorship
Richard Linnell Appointed 1 August 2001
Chairman
Simon J Farrell Appointed 21 December 2000
Managing Director
Blair Sergeant Appointed 30 June 2004
Finance Director
Peter G Cordin Appointed 1 December 1997
Non-Executive Director
Steve Bywater Appointed 8 February 2007
Non-Executive Director
Pierre Leonard Appointed 11 November 2008
Non- Executive Director
Professor Alfred Nevhutanda Appointed 6 February 2009
Executive Director
Shannon Coates Appointed 14 December 2007
Company Secretary
Results
For the half year ended 31 December 2008, the consolidated entity reported an
after tax loss of A$1,294,334 (2007: loss of A$2,237,709) which included
interest earned of A$8,947,176 (2007: A$1,157,778), a loss of A$2,106,820 (2007:
profit of A$350,746) due to the revaluation of nickel inventory held by Nimag
and a loss of A$1,993,855 on the write-down of the value of shares held in
listed investments.
The cash balance at the end of December 2008 was A$204,681,789.
Review of Activities
Highlights
* Resource upgrade on Makhado hard coking coal project ("Makhado Project")
from 713 million to 1.335 billion gross in situ tonnes.
* Resource upgrade on Vele coking coal project ("Vele Project") from 441
million to 721 million gross in situ tonnes.
* Company`s coal resources totalled 2.2 billion gross in situ tonnes at the
end of December 2008, with approximately 95% of the resources located in
the higher value coking coal projects.
* Delivery and commissioning of the first two continuous miners at the
Mooiplaats thermal coal project ("Mooiplaats Project"), with development of
the associated infrastructure on schedule.
* Production of first run of mine coal at the Mooiplaats Project.
* Completion of negotiations with Transnet Freight Rail ("TFR") securing rail
allocation for the transport of coal from the Company`s Mooiplaats Project.
* Lodging of a New Order Mining Right ("NOMR") Application with the
Department of Minerals and Energy ("DME") for the Vele Project.
* Revision of the Vele Project mining plan to include open cast as well as
underground sections thereby improving the coking coal yield, significantly
reducing mining costs and extending the life of the mine.
* Memorandum of Understanding signed by CoAL and Rio Tinto to swap certain
prospecting rights and enter into a Joint Venture on other prospecting
rights, all located in and around CoAL`s Makhado Project.
* Long term port allocation secured at the Richards Bay and Maputo ports for
the export of coal.
* Tenders submitted jointly with Independent Power Producers ("IPP") for the
base load power supply programme for both the Vele and Makhado Projects,
were unconditionally pre-qualified by Eskom.
* Approval from the Australian Foreign Investment Review Board granted to the
Company`s Black Economic Empowerment ("BEE") partner to increase its stake
beyond 15% to 17.3%, raising an additional GBP15.6 million.
* Extension of BEE agreement to 30 April 2009 ensuring the Company complies
with South African legislative requirements for mining companies.
Post period highlights
* Appointment of Morgan Stanley & Co. International Limited and Evolution
Securities Limited as Joint Brokers to the Company. Evolution Securities
also appointed as Nominated Advisor to CoAL.
* Agreement reached with TFR to transport 1 million tonnes per annum ("mtpa")
to the Matola dry bulk terminal in Maputo, Mozambique ("Matola Terminal").
* Agreement to provide funding to expand the Matola Terminal, securing an
additional 2 mtpa port allocation with an anticipated completion date of 1
August 2010.
* Appointment of Professor Ntshengedzeni Alfred Nevhutanda as Executive
Director of CoAL.
* Selection of MCC Contracts ("MCC"), a division of Eqstra Holdings Limited
as preferred partner for the Vele Project opencast mining operations.
The Company announced that its first mine will produce saleable export quality
thermal coal in the new financial year and plans to have a second coking coal
project in production by the end of the year are progressing according to
schedule. The Company has secured sufficient port and rail allocation,
guaranteeing its ability to transport and export its mined product thereby
removing the significant infrastructure challenges faced by emerging bulk
commodity mining companies. Despite tough global conditions, CoAL continues to
have a low cost base and is well positioned to develop its current projects, as
well as being able to take advantage of potential future prospects that may
arise.
Discussion of the Results
Rail and Port Allocation
The Company has secured long term port allocation for the export of coal mined
at the Mooiplaats Project through the Richards Bay dry bulk terminal operated by
Grindrod Limited ("Grindrod"). The throughput agreement provides CoAL with an
allocation of 900,000 tonnes of coal per annum commencing in 2009 and includes
the potential to increase its export capacity to 3 mtpa once the terminal
expansion is complete. In return, CoAL will participate in the funding of the
expansion.
Included in the agreement signed with Grindrod, CoAL has secured long term port
allocation through the Matola Terminal. The agreement provides for an allocation
of 1 mtpa through the Matola Terminal commencing in 2009. Under the agreement,
CoAL has secured the rights to up to 100% of any increased capacity at the
Matola dry bulk terminal in return for the Company participating in the funding
of the expansion. The first phase of Grindrod`s intended two phase expansion of
the terminal will increase CoAL`s export capacity to 3 mtpa and on completion of
the second phase of expansion; CoAL will have a total capacity of 13 mtpa of the
terminal`s annual 16 mtpa capacity.
Negotiations with TFR for rail services for the transport of coal to the
Richards Bay dry bulk terminal are complete and the Company has secured a five
year rail agreement for the movement of coal from its Mooiplaats Project to the
terminal. TFR has allocated CoAL the current empty wagons returning from
ArcelorMittal`s Vanderbijl Park steel works, ensuring the Company will be able
to satisfy its initial 900,000 tonne dry bulk terminal port allocation.
Extension of BEE Agreement
The agreement with Coal Investments Limited ("CIL") whereby CIL would subscribe
for CoAL shares and be granted an option which, if exercised, would result in
CIL, African Global Capital I, L.P. ("AGC") and their affiliates holding in
excess of 26% of the Company`s shares, was extended to 30 April 2009. AGC is a
private equity initiative involving Mvelphanda Holdings (Pty) Ltd, OZ management
LP (an operating entity of Och-Ziff Capital Management LLC (NYSE: OZM)) and
Palladino Holdings Ltd.
When implemented, the agreement will ensure that CoAL is fully compliant with
South African legislation requiring black empowered groups ("BEE Groups") to
hold more than 26% of a mining company`s equity by 2014. CIL, AGC and their
affiliates agreed to use commercially reasonable endeavours to transfer their
holdings in the Company to a BEE Group by the end of April.
IPP Submissions Pre-Qualified by Eskom
Both of CoAL`s independent base load generation tenders submitted as part of
independant IPP consortiums, whereby the IPP will supply Eskom with base load
power, have been unconditionally pre-qualified by Eskom. The submission to
supply coal to the proposed IPP located close to the Vele Project was made
jointly with Mulilo Energy (Pty) Ltd and China Railway Construction Corporation
and, with AES Energy Developments for an IPP in the proximity of the Makhado
Project. In both cases, the coal supplied would be a "middlings" product, a
lower quality coal produced additional to the coking coal. The economics of
neither the Vele nor Makhado Projects is reliant on the sale of the middlings
fraction but if successful, this would provide substantial upside to the
Projects.
Mooiplaats Thermal Coal Project (100%)
The rehabilitation of the decline shaft and preparation of the surrounding areas
for mining activity allowed for the production of the first run of mine coal in
October. Development of the box-cut and surface infrastructure continued,
enabling the contractors to sink to coal and concrete the mine floor.
Stabilisation of the decline ramp floor and side walls is complete and over 150
metres of the incline conveyor belt structure has been installed, with
commissioning due in the March quarter. Negotiations with the contract miner
have been concluded and the supply of mining equipment, infrastructure and wash
plant secured with delivery of two continuous mining machines producing the
first run of mine coal.
The development of the underground mining portals is at an advanced stage with
production from these due to commence by the end of the March quarter, followed
by the first coal sales in the June quarter. Surface infrastructure
establishment is progressing according to plan and the first wash plant modules
are scheduled for commissioning during the March quarter.
Additional production related drilling as well as drilling to identify the site
for the second decline shaft commenced on the neighbouring farms, Klipbank and
Adrianople. Exploration on other neighbouring farms has begun, allowing for
further expansion of the Mooiplaats project mining area.
Discussions are continuing with various parties regarding long term off-take
agreements for the export of thermal coal mined at Mooiplaats, together with the
short and long term lean coal production. In addition, the initial letter of
offer for the sale of lower quality thermal coal has been submitted to Eskom
with discussions expected to be concluded by the time export sales commence in
the June quarter.
Vele Coking Coal Project (74%)
Exploration on the Vele Project resulted in a resource upgrade from 441mt to 721
million gross in situ opencastable tones, including 158 million tonnes in the
`Measured` and 324 million tonnes in the `Indicated` categories. Drilling on the
three bulk sample drill sites has been completed and the washability tests on
the core samples finalised with further detailed analysis underway. Large
diameter drill ("LDD") cores have been submitted for detailed laboratory
analysis and initial results indicate a significant improvement in both coking
coal qualities and yield when compared to historical results. Indications are
that the resource contains prime coking coal with phosphorous levels below
0.01%, rather than the semi-soft coking coal as previously reported.
Detailed studies have been undertaken and the NOMR Application and the
Environmental Scoping Report have been submitted. Specialist studies for the
Environmental Impact Assessment and Environmental Management Plan are almost
complete and are due for submission in early 2009. Furthermore, an application
to amend the Vele Project New Order Prospecting Right was submitted to the DME
so as to facilitate the extraction of a bulk sample of 5,000 tonnes of coal from
a box-cut for extensive testing and analysis by ArcelorMittal.
During November, the preliminary Vele Project mine production schedule was
revised to include both underground and open cast sections. The revised schedule
will potentially deliver significantly improved coking coal yields with
substantially reduced mining costs and an extended mine life to beyond 2040. The
current drilling programme will better define the site of the proposed bulk
sample box-cut with the remaining 12 holes due to be completed early in 2009.
This work, over and above improving the drilling density and resource modelling,
will assist in assessing the roof stability, presence of faulting and continuity
of the select mining horizon.
Initial marketing of the coking coal fraction will be finalised on completion of
a formal off-take agreement with ArcelorMittal who have indicated that they will
purchase between 2.5 and 5 million tonnes FOR Musina at a price benchmarked
against the FOB Kestrel (east coast of Australia) coking coal prices. Other
major consumers have already expressed strong interest in securing a supply of
coking coal from the Vele and Makhado Projects and discussions in this respect
are ongoing.
As noted above, the Company has entered into an agreement with an IPP to supply
base load electricity to Eskom which, if successful, will improve the economics
of the Vele Project significantly.
The tender procedure for opencast mining contractors commenced in November with
the appointment of MCC in February 2009. During the period under review, the
Company initiated processes to identify suitable bulk sample as well as
underground mining contractors.
Negotiations with surface rights owners on the Vele Project have been finalised
allowing for the development of the required infrastructure and bulk sample box-
cut once legislative approval for the sample has been granted.
Makhado Coking Coal Project (100%)
CoAL and Rio Tinto entered into a joint venture and farm swap agreement relating
to the New Order Prospecting Rights forming part of Rio Tinto`s Chapudi and
CoAL`s Makhado Project. The rationalisation of the prospecting rights held by
CoAL and Chapudi provides significant benefits to both companies in terms of
improving economics and bringing the projects into commercial production.
Digitisation of the exploration data acquired from Exxaro Limited was finalised
and this, together with results of exploration work previously undertaken,
resulted in the creation of geological models included in the updated resource
statement released in July, increasing the resource base to 1.335 billion
tonnes. These models have been submitted to independent mine planners who are in
the process of generating life-of-mine schedules which will be used in the NOMR
Application.
Exploration drilling totalling over 3,400 metres was completed on the Makhado
Project during the six months resulting in the design and commencement of two
large diameter drilling programmes ("LDD"). The first LDD programme comprised 40
holes and yielded bulk samples for detailed coking coal analysis while the
second 20 hole LDD programme focused on three sites and by the end of December
2008, 12 holes had been completed. Results of core analysed by laboratories
yielded good quality hard coking coal and full results of this programme are
expected in the June quarter.
The NOMR Application is almost complete and significant progress is being made
on the Environmental Scoping Report, the Environmental Impact Assessment and
Environmental Management Plan, all of which will be submitted to the DME once
Section 11 approval has been received for the Rio Tinto farm swap. Negotiations
with surface rights owners have commenced and will be finalised pending the
approval of the farm swap.
The NOMR Application to be submitted will include Rio Tinto`s coal prospect
areas that are contiguous with CoAL`s Fripp and Tanga farms. Detailed studies
have been completed and the life of mine is expected to be in excess of 20 years
yielding a saleable coking coal as well as a percentage of middlings suitable
for power generation. The Company has entered into a supply agreement with a
global IPP who has submitted a bid in the recent Eskom tender for base load
power.
Holfontein Thermal Coal Project (100%)
CoAL previously reached agreement to sell 100% of the Holfontein coal project
("Holfontein Ptroject") to Lachlan Star Limited ("Lachlan Star") for A$25
million, payable in a mix of cash and shares on the satisfaction of certain
conditions. In late December, the Company agreed to terminate the agreement
whereby Lachlan Star would acquire 100% of the Holfontein Project as Lachlan
Star failed to acquire the necessary shareholder approval. A NOMR Application
for the Holfontein Project has been submitted to the DME and CoAL will continue
to add value to the Project.
Nimag Group of Companies (100%)
The nickel magnesium business continued to experience tougher trading conditions
in the form of thinner margins and increased working capital requirements due to
depressed global demand for its alloys and recording a loss of A$2.1 million
(December 2007: profit of A$350,746) primarily due to the revaluation of nickel
inventory. The Nimag Group is considered a non-core asset and CoAL continues to
review its strategy in relation to this asset.
Auditor`s Independence Declaration
A copy of the auditor`s independence declaration as required under Section 307C
of the Corporations Act 2001 is set out on page 18.
Signed in accordance with a resolution of the directors:
S.J. Farrell
Director
Dated at Perth, Western Australia, this 11th day of March 2009.
Resource Estimation:
Resource estimations in this Half Year Financial Report have been compiled by Mr
John Sparrow (Member of the South African Council of Natural Science Professions
SACNASP) 400109/03, an independent geological and technical consultant with 26
years experience in the Southern African and Australian regions. Mr Sparrow has
sufficient experience relevant to the assessment of this style of mineralization
to qualify as a Competent Person as defined in the Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore Reserves - the JORC
Code - and has compiled a number of Competent Person`s reports for various
organizations for the JSE, ASX and TSE. Mr Sparrow consents to the inclusion of
the information in this report in the form and context in which it appears.
CONSOLIDATED INCOME STATEMENT
FOR THE HALF-YEAR ENDED 31 DECEMBER 2008
Consolidated Consolidated
Note 31.12.2008 31.12.2007
A$ A$
Sale of goods 14,880,476 23,874,760
Interest earned 8,947,176 1,157,778
Other 136,756 100,675
Total revenue 23,964,408 25,133,213
Changes in inventory, raw (12,831,516) (20,463,808)
materials and consumables used
Consulting, accounting & (701,786) (285,763)
professional expenses
Employee expenses (3,487,980) (2,169,059)
Depreciation and amortisation (124,676) (83,570)
expenses
Loss on disposal of asset held for - (7,919)
sale
Diminution in investments (1,993,855) -
Office rent and outgoings (538,074) (150,980)
Borrowing costs (93,566) (87,216)
Nickel inventory revaluation (2,106,820) 350,746
Other expenses from ordinary (3,380,469) (4,228,877)
activities
Profit / (Loss) from continuing
operations before income tax (1,294,334) (1,993,233)
Income tax expense - (244,476)
(2,237,709)
Profit / (Loss) after income tax (1,294,334)
for the half year
Profit attributable to minority - -
equity interest
Net profit / (loss) attributable
to members of the parent entity (1,294,334) (2,237,709)
(0.75) cents
Basic earnings/ (loss) per share (0.32) cents
for Coal of Africa Limited
Diluted earnings/ (loss) per share
(0.32) cents (0.70) cents
(0.75) cents
Headline earnings/ (loss) per (0.32) cents
share
There are no dilutive potential
ordinary shares therefore diluted
earnings or loss per share has not
been calculated or disclosed.
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2008
Consolidated Consolidated
Note 31 December 30 June 2008
2008 A$
A$
CURRENT ASSETS
Cash assets 204,681,789 252,004,859
Receivables 22,358,770 11,751,597
Inventory 2,860,280 4,885,106
Total Current Assets 229,900,839 268,641,562
NON CURRENT ASSETS
Assets held for sale 25,571,252 25,207,997
Intangibles 5,075,909 3,169,660
Mineral interests 174,414,817 174,932,316
Exploration Expenditure 23,375,255 18,203,831
Other financial assets 15,512,967 8,099,845
Property, plant and equipment 39,558,049 3,075,970
Logistics assets 23,296,447 -
Deferred tax 122,762 187,475
Total Non Current Assets 306,927,458 232,877,094
TOTAL ASSETS 536,828,297 501,518,656
CURRENT LIABILITIES
Payables 2,778,881 6,179,806
Provisions 146,924 111,738
Current tax liability 91,185 581,338
Total Current Liabilities 3,016,990 6,872,882
NON CURRENT LIABILITIES
Interest bearing liabilities 252,192 187,626
TOTAL NON CURRENT LIABILITIES 252,192 187,626
TOTAL LIABILITIES 3,269,182 7,060,508
CONSOLIDATED CASH FLOW STATEMENT
FOR THE HALF-YEAR ENDED 31 DECEMBER 2008
533,559,115 494,458,148
NET ASSETS
EQUITY
Contributed equity 2 568,346,774 533,053,005
Reserves 9,371,692 4,270,160
Accumulated losses (47,230,601) (45,936,267)
TOTAL PARENT EQUITY INTEREST 530,487,865 491,386,898
Minority Equity Interests 3,071,250 3,071,250
TOTAL EQUITY 533,559,115 494,458,148
The accompanying notes form part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR
THE HALF YEAR ENDED 31 DECEMBER 2008
A$ A$ A$ A$
Ordinary Capital Foreign Share
Share Profit Currency Options
Capital Reserves Translation Reserve
Reserves
Balance at 533,053,006 136,445 (5,390,389) 9,524,104
1.7.2008
Shares issued 36,000,000
during the
period
Options 1,469,752 (552,709)
exercised
during the
period
Share based 1,125,000 273,729
payments
Options issued 165,000
for capital
raising
Share issue (3,465,984)
costs
Profit/ (Loss)
attributable to
members of
parent entity
Foreign 5,380,512
currency
translation
adjustments
attributable to
members of
parent entity
Balance at 568,346,774 136,445 (9,877) 9,245,124
31.12.2008
(Continued)
A$ A$ A$
Retained Minority Total
profits/ Equity
(losses) Interests
Balance at (45,936,267) 3,071,250 494,458,148
1.7.2008
Shares issued 36,000,000
during the
period
Options 917,043
exercised
during the
period
Share based 1,398,729
payments
Options issued 165,000
for capital
raising
Share issue (3,465,984)
costs
Profit/ (Loss) (1,294,334) (1,294,334)
attributable to
members of
parent entity
Foreign 5,380,512
currency
translation
adjustments
attributable to
members of
parent entity
Balance at (47,230,601) 3,071,250 533,559,115
31.12.2008
A$ A$ A$ A$
Ordinary Capital Foreign Share
Share Profit Currency Options
Capital Reserves Translation Reserve
Reserves
Balance at 177,189,359 136,445 (2,705,466) 7,879,673
1.7.2007
Shares issued 121,763,054
during the
period
Options 741,960 (270,839)
exercised
during the
period
Share based 12,126,257
payments
Options issued (1,607,675) 1,607,675
for capital
raising
Share issue (5,295,206)
costs
Profit/ (Loss)
attributable to
members of
parent entity
Foreign 438,551
currency
translation
adjustments
attributable to
members of
parent entity
Balance at 304,917,749 136,445 (2,266,915) 9,216,509
31.12.2007
(Continued)
A$ A$ A$
Retained Minority Total
profits/ Equity
(losses) Interests
Balance at (34,692,704) 3,071,250 150,878,557
1.7.2007
Shares issued 121,763,054
during the
period
Options 471,121
exercised
during the
period
Share based 12,126,257
payments
Options issued -
for capital
raising
Share issue (5,295,206)
costs
Profit/ (Loss) (2,237,709) (2,237,709)
attributable to
members of
parent entity
Foreign 438,551
currency
translation
adjustments
attributable to
members of
parent entity
Balance at (36,930,413) 3,071,250 278,144,625
31.12.2007
Consolidated Consolidated
31.12.2008 31.12.2007
A$ A$
Cash Flows used in Operating
Activities
Cash receipts in the course 16,194,689 21,280,449
of operations
Interest received 9,015,723 1,123,623
Cash payments in the course (29,482,253) (30,539,045)
of operations
Interest paid (93,566) (74,993)
Tax paid (513,484) (12,512)
Net cash generated by/(used (4,878,891) (8,222,478)
in) operating activities
Cash Flows used in Investing
Activities
Deposits paid on investments (5,824,112) -
Proceeds from sale of equity - 496,618
investments
Exploration expenditure (5,171,424) (10,086,067)
Payments for investments (27,893,308) (46,505,343)
Payments for property, plant (37,406,098) (667,834)
and equipment
Net cash provided by (76,294,942) (56,762,626)
investing activities
Cash Flows from Financing
Activities
Proceeds from issues of 116,938,970
shares and options 34,003,641
Repayment of borrowings - (100,152)
Net cash provided by 34,003,641 116,838,818
financing activities
NET INCREASE/ (DECREASE) IN (47,170,192) 51,853,714
CASH HELD
Cash at the beginning of the 252,004,859 61,530,490
half-year
Exchange rate adjustment (152,878) 202,997
Cash at the end of the half- 204,681,789 113,587,201
year
The accompanying notes form part of these financial statements.
NOTE 1
Basis of preparation of Half Year Report
The half-year consolidated financial statements are a general purpose financial
report prepared in accordance with the requirements of the Corporations Act
2001, Accounting Standard AASB 134: Interim Financial Reporting, and other
authoritative pronouncements of the Australian Accounting Standards Board.
This half-year financial report does not include all the notes of the type
normally included in an annual financial report. It is recommended that this
half-year financial report be read in conjunction with the 30 June 2008 annual
financial report and any public announcements made by the company and its
controlled entities during the half-year in accordance with any continuous
disclosure obligations arising under the Corporations Act 2001.
These half year consolidated financial statements were approved by the Board of
Directors on 9th March 2008.
These consolidated half-year financial statements have been prepared using the
same accounting policies as used in the annual financial statements for the year
ended 30 June 2008, except for the adoption of amending mandatory standards for
annual reporting periods beginning on or after 1 January 2009, as described in
Note 1(d).
Principles of consolidation
The consolidated half year financial statements comprise the financial
statements of Coal of Africa Limited and its controlled entities.
A controlled entity is any entity controlled by Coal of Africa Limited. Control
exists where Coal of Africa Limited has the capacity to dominate the decision-
making in relation to the financial and operating policies of another entity so
that the other entity operates with Coal of Africa Limited to achieve the
objectives of Coal of Africa Limited.
All intercompany balances and transactions between entities in the economic
entity, including any unrealised profits have been eliminated on consolidation.
Where a controlled entity has entered or left the economic entity during the
year its operating results have been included from the date control was obtained
or until the date control ceases.
Dividends
No dividend has been paid or is proposed in respect of the half-year ended 31
December 2008 (2007: None).
Changes in accounting policies
New/revised standards and interpretations applicable for the years commencing 1
July 2008 have been reviewed and it was determined that changes were not
required to the existing accounting policies adopted by Coal of Africa Limited.
Certain Australian Accounting Standards have recently been issued or amended but
are not yet effective and have not been adopted by the group for the interim
reporting period. The directors have not yet assessed the impact of these new or
amended standards (to the extent relevant to the group) and interpretations.
Consolidated
31 Dec 2008
A$
2. CONTRIBUTED EQUITY
411,375,378 (30.6.2008: 398,254,492) 568,346,774
fully paid ordinary shares
Movements in contributed equity
Opening balance at beginning of the 533,053,006
half-year
- 690,886 options exercised on 3 July 1,469,752
2008
- 12,000,000 ordinary shares issued 36,000,000
on 4 Aug 2008
- 375,000 ordinary shares issued on 4 1,125,000
Aug 2008 in lieu of Put option
55,000 ordinary shares issued on 4 Aug 165,000
2008 in lieu of professional fees
Less: share issue costs (3,465,984)
Total equity at the end of the half- 568,346,774
year
Options
The following options to subscribe for ordinary fully paid shares are
outstanding at balance date:
Number Number Exercise Expiry Date
Issued Quoted Price
9,250,000 - A$0.50 30 September 2011
250,000 - A$2.05 1 May 2012
196,688 - GBP0.34 17 May 2009
7,000,000 - A$1.25 30 September 2012
934,114 - GBP0.65 30 November 2009
1,000,000 - A$1.90 30 September 2012
600,000 - A$1.25 1 May 2012
1,650,000 - A$3.25 31 July 2012
690,886 options at GBP0.65 each were exercised during the six months under
review.
3. SEGMENT INFORMATION
Segment results, assets and liabilities include items directly attributable to a
segment as well as those that can be allocated on a reasonable basis.
Unallocated items mainly comprise interest or dividend-earning assets and
revenue, interest bearing loans, borrowings and expenses, and corporate assets
and expenses.
Business segments
The consolidated entity comprises the following main business segments:
Manufacturing Mineral processing by Nimag in South
Africa
Investing Equity and fixed income instrument investments in South Africa,
Australia and United Kingdom
Coal Exploration Coal projects in South Africa
31 December 2008
Primary reporting Manufacturing Investing Coal Consolidated
industry Exploration
A$ A$ A$ A$
Revenue
Total segment 14,880,476 - - 14,880,476
revenue
Unallocated 95,863 8,790,291 207,778 9,083,932
revenue
Total revenue 23,964,408
Results
Segment results (2,435,424) 3,882,377 (2,741,287) (1,294,334)
Net profit/ (1,294,334)
(loss) before
income tax
Depreciation and 30,129 5,629 88,918 124,676
amortisation
Assets
Segment assets 11,792,557 287,687,6 237,348,122 536,828,297
18
Consolidated 536,828,297
total assets
Liabilities
Segment 2,306,535 181,370 781,277 3,269,182
liabilities
Consolidated 3,269,182
total liabilities
4. SHARE BASED PAYMENTS
Shareholders, at the Annual General Meeting held on 27 November 2008, approved
the grant of 1,650,000 Class I options to the Company`s Chief Operating Officer.
The options are exercisable at a price of $3.25 on or before 31 July 2012 and
vest subject to the attainment of certain performance conditions.
The terms and conditions of the grants made during the six months ended 31
December 2008 are as follows:
Grant Date No. of Vesting Conditions Maturity Date
Options
1 Dec 2008 1,650,000 * 560,000 vest immediately 31 July 2012
upon issue;
* 500,000 vest 12 months
from issue date;
* 590,000 vest 24 months
from issue date
The fair value of the options and assumptions for the six months ended 31
December 2008:
Value of option at grant date $0.4888 (using Binomial Option
Valuation methodology)
Share price $1.18
Exercise Price $3.25
Expected volatility 100%
Option life 3.67 years
Expected dividends Nil
Risk-free interest rate 4%
The basis of measuring fair value is consistent with that disclosed in the 30
June 2008 Annual Report. The fair value will be amortised and brought to
account over the vesting period of the options. During the period ended 31
December 2008, the expense recognized for options issued to employees was
A$273,728.
On 4 August 2008, the Company issued 55,000 ordinary shares for nil
consideration to an unrelated consultant in lieu of professional fees. The fair
value per share at time of issue was $3.00. During the period ended 31 December
2008, professional fees expense of A$165,000 has been recognized in the Income
Statement.
5. BUSINESS COMBINATION (ACQUISITION OF CONTROLLED ENTITIES)
The consolidated entity did not acquire control over any entities during the
period ended 31 December 2008.
6. DISPOSAL OF CONTROLLED ENTITIES
The consolidated entity did not lose control over any entities during the half
year period or the half year ended 31 December 2008.
7. CONTINGENT LIABILITIES
In accordance with normal industry practice the Company has agreed to provide
financial support to its 100% controlled entities. There are no other contingent
liabilities as at 31 December 2008.
8. EVENTS SUBSEQUENT TO REPORTING DATE
* On 28 January 2009, the Company announced that it had reached agreement
with TFR for the rail allocation of 1 mtpa to the Matola Terminal in
Maputo, Mozambique. The rail allocation ensures that CoAL will be able to
utilise the Company`s 1 mtpa port allocation for the export of coal.
Although neither the Vele nor Makhado Projects located in the Limpopo
province are in production, the Company has successfully railed third party
coal to the Matola Terminal, generating income from the allocation and
ensuring the practical viability of the rail and port infrastructure.
* On 28 January 2009, CoAL announced that it has reached agreement whereby it
will loan the funds for the 2 mtpa expansion of the Matola Terminal. The
Company has the right to participate in up to 100% of any increased
capacity at the Matola Terminal, consequently increasing CoAL`s annual
allocation to 3 mtpa from an expected date of 1 August 2010.
There are no other matters or events which have arisen since the end of the
financial period which have significantly affected or may significantly affect
the operations of the consolidated entity, the results of those operations or
the state of affairs of the consolidated entity in subsequent financial years.
COAL OF AFRICA LIMITED
DIRECTORS` DECLARATION
In the opinion of the directors,
The financial statements and notes of the consolidated entity are in accordance
with the Corporations Act 2001, including:
complying with Accounting Standard AASB 134: Interim Financial Reporting and the
Corporations Regulations 2001; and
giving a true and fair view of the consolidated entity`s financial position as
at 31 December 2008 and of its performance for the half year ended on that date.
There are reasonable grounds to believe that the company will be able to pay its
debts as and when they become due and payable.
This declaration is made in accordance with a resolution of the Board of
directors.
S. J. Farrell
Director
Dated at Perth, Western Australia, this 11th day of March 2009.
MOORE STEPHENS
Partners
Syd Jenkins
Neil Pace
Ray Simpson
Suan-Lee Tan
Ennio Tavani
Dino Travaglini
AUDITOR`S INDEPENDENCE DECLARATION TO THE DIRECTORS OF COAL OF AFRICA LIMITED
As lead auditor for the review of Coal of Africa Limited and its controlled
entities for the half year ended 31 December 2008, I declare that, to the best
of my knowledge and belief, there have been:
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the review, and
no contraventions of any applicable code of professional conduct in relation to
the review.
This declaration is in respect of Coal of Africa Limited and its controlled
entities during the period.
Neil Pace Moore Stephens
Partner Chartered Accountants
Dated in Perth, this 11th day of March 2009.
MOORE STEPHENS
INDEPENDENT REVIEW REPORT TO THE MEMBERS OF COAL OF AFRICA LIMITED
Report on the Half-Year Financial Report
We have reviewed the accompanying half-year financial report of Coal of Africa
Limited and its controlled entities ("the consolidated entity"), which comprises
the balance sheet as at 31 December 2008, and the income statement, statement of
changes in equity and the cash flow statement for the half-year ended on that
date, a summary of significant accounting policies, other selected explanatory
notes and the directors` declaration of the consolidated entity comprising the
company and the entities it controlled at half year`s end or from time to time
during the half year.
Directors` Responsibility for the Half-Year Financial Report
The directors of the consolidated entity are responsible for the preparation and
fair presentation of the half-year financial report in accordance with
Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Act 2001. This responsibility includes
designing, implementing and maintaining internal control relevant to the
preparation and fair presentation of the half-year financial report that it is
free from material misstatement, whether due to fraud or error; selecting and
applying appropriate accounting policies; and making accounting estimates that
are reasonable in the circumstances.
Auditor`s Responsibility
Our responsibility is to express a conclusion on the half-year financial report
based on our review. We conducted our review in accordance with Auditing
Standard on Review Engagements ASRE 2410: "Review of an Interim Financial Report
Performed by the Independent Auditor of the Entity", in order to state whether,
on the basis of the procedures described, we have become aware of any matter
that makes us believe that the financial report is not in accordance with the
Corporation Act 2001 including: giving a true and fair view of the consolidated
entity`s financial position as at 31 December 2008 and its performance for the
half-year ended on that date; and complying with Accounting Standard AASB 134:
"Interim Financial Reporting" and the Corporations Regulations 2001. As the
auditor of Coal of Africa Limited and its controlled entities, ASRE 2410
requires that we comply with the ethical requirements relevant to the audit of
the financial report.
A review of the half-year financial report consists of making enquiries,
primarily of persons responsible for the financial and accounting matters, and
applying analytical and other review procedures. A review is substantially less
in scope than an audit conducted in accordance with Australian Auditing
Standards and consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
Independence
In conducting our review, we have complied with the applicable independence
requirements of the Corporations Act 2001.
Conclusion
Based on our review, which is not an audit, we have not become aware of any
matter that makes us believe that the half-year financial report of Coal of
Africa Limited and its controlled entities is not in accordance with the
Corporations Act 2001, including:
giving a true and fair view of the consolidated entity`s financial position as
at 31 December 2008 and of its performance for the half-year ended on that date;
and
complying with Accounting Standard AASB 134: "Interim Financial Reporting" and
the Corporations Regulations 2001.
Neil Pace Moore Stephens
Partner Chartered Accountants
Dated in Perth, this 11th day of March 2009.
Moore Stephens ABN 75 368 525 284
Level 3, 12 St Georges Terrace, Perth, Western Australia, 6000
Telephone: +61 8 9225 5355 Facsimile: +61 8 9225 6181
Email: perth@moorestephens.com.au Web: www.moorestephens.com.au
A member of Moore Stephens International Limited Group of Independent Firms
Liability limited by a scheme approved under Professional Standards Legislation
Sponsor
PricewaterhouseCoopers Corporate Finance (Pty) Ltd
Date: 11/03/2009 09:00:01 Produced by the JSE SENS Department.
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