| Tue 16 Mar 2010, 7:16 | | CZA - Coal of Africa Limited - Consolidated financial report for the half-year |
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CZA
CZA
CZA - Coal of Africa Limited - Consolidated financial report for the half-year
ended 31 December 2009
Coal of Africa Limited
(previously, "GVM Metals Limited")
(Incorporated and registered in Australia)
(Registration number ABN 98 008 905 388)
JSE Share code: CZA
ASX Share code: CZA
ISIN AU000000CZA6
("CoAL" or the "Company")
CONSOLIDATED FINANCIAL REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2009
The Directors of CoAL present their report together with the consolidated
financial report for the half-year ended 31 December 2009 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 (Chairman) Appointed 1 August 2001
Simon J Farrell (Managing Director) Appointed 21 December 2000
Blair Sergeant (Finance Director) Appointed 30 June 2004
Peter Cordin (Non-Executive Director) Appointed 1 December 1997
Steve Bywater (Non-Executive Director) Appointed 8 February 2007
Professor Alfred Nevhutanda (Executive Appointed 6 February 2009
Director)
Pierre Leonard (Non-Executive Director) Resigned 27 August 2009
Kobus Verster (Non-Executive Director) Appointed 27 August 2009
Shannon Coates (Company Secretary) Appointed 14 December 2007
Results
For the half-year ended 31 December 2009, the consolidated entity reported an
after tax loss of A$35,183,457 (2008: loss of A$1,294,334) which included an
impairment to the Holfontein thermal coal project ("Holfontein Project") of
A$8,692,665 (2008: A$0). Other financial investments were impaired by
A$6,223,000 (2008: A$1,993,855) primarily attributable to the A$5,000,000 (2008:
A$0) revaluation of the Company`s Zimbabwean investment. The depreciation charge
for the period was A$6,917,706 (2008: A$124,676) and the Company also incurred
Take or Pay obligations of A$3,392,587 (2008: A$0) at the Matola Terminal in
Maputo, Mozambique ("Matola Terminal"). Foreign exchange losses totalled
A$3,615,491.
The cash balance at the end of December 2009 was A$94,042,058.
Review of Activities
Highlights
* Placement of 59,867,731 ordinary shares on 29 October 2009 at 95 pence per
share raising approximately GBP56.9 million, to fund the acquisition of
Nucoal Mining (Pty) Limited ("NuCoal"), with the remainder being applied
for, amongst other things, accelerated capital expenditure at CoAL`s Vele
coking coal project ("Vele Project") and general working capital
requirements.
* Execution of an agreement with subsidiaries of the Rio Tinto Group to
formalise the Farm Swap Memorandum of Understanding, as announced on 29
October 2009.
* Execution of formal agreements with Broad Based Black Economic Empowerment
("BBBEE") partners as part of commitments to ensure compliance with South
African legislative requirements for empowerment groups to hold at least
26% of mining companies by 2014, as announced on 11 December 2009.
* Completion of the acquisition of a further 6% interest in Limpopo Coal
Company (Pty) Limited ("Limpopo Coal"), the owner of the Vele Project, as
announced on 23 October 2009, and extension of the agreement to acquire the
remaining 20% of Limpopo Coal.
* Completion of construction of the Company`s laboratory in Polokwane,
expected to reduce time delays for thermal and coking coal sample analysis.
* Receipt of a New Order Prospecting Right ("NOPR") for coal bed methane over
an area measuring 564 km2 in the Limpopo Province which includes the
Makhado coking coal project ("Makhado Project") as well as neighbouring
areas.
* Appointment of Hendrik ("Kobus") Verster to the CoAL Board of Directors as
ArcelorMittal South Africa Limited`s ("ArcelorMittal") nominee non-
executive Director and renewal of the employment contracts of the Managing
Director and Finance Director.
* Announcement of intention to de-list from AIM and the ASX and to seek
admission to the Official List of the Financial Services Authority and to
trade on the Main Market of the London Stock Exchange.
* Cash balance at the end of the period of A$94 million - the Company had no
debt as at balance date.
Post-Period Highlights
* Completion of the acquisition of NuCoal for ZAR467million, following the
fulfillment of the suspensive conditions of the Share Sale Agreement signed
in October 2009. The NuCoal assets and liabilities will be consolidated as
part of the CoAL Group from 1 January 2010 and do not form part of the
balances included in this report.
* In February 2010, the Company was granted an unconditional New Order Mining
Right ("NOMR") for the Vele Project. The NOMR granted for the Holfontein
Project is conditional upon the Company delivering certain documents to the
South African Department of Mineral Resources ("DMR").
* The granting of the Vele Project NOMR satisfied the remaining suspensive
condition for the acquisition of 20% of Limpopo Coal and the Company issued
5,625,750 ordinary shares as consideration.
The six months ended 31 December 2009 marked the transformation of the Company
into a multiple product mining company. The progress of the Mooiplaats Project,
acquisition of NuCoal and the recent granting of the Vele NOMR in early 2010
will result in the Company producing significant amounts of blending coking coal
and thermal coal for the international and domestic markets. CoAL`s mining
assets and guaranteed access to long term port infrastructure ensure the Company
is ideally positioned to take advantage of expected rising international coal
prices.
Discussion of the Results
Mooiplaats Thermal Coal Project - Ermelo Coalfield (100%)
During the early part of the period, the Company undertook and finalised an
extensive reassessment of the Mooiplaats thermal coal project ("Mooiplaats
Project") mine plan and prevailing geological conditions. The re-assessment
process resulted in a revised mining layout and the completion of vertical as
well as horizontal drilling programmes to re-affirm the amended mine layout.
This did not result in any material amendments to the anticipated tonnage
schedules of the Mooiplaats Project`s life of mine. The Company is reviewing
the run of mine ("ROM") schedule for the Mooiplaats Project and will inform the
market of any amendments.
During the 6 month reporting period, the remaining road and conveyor
infrastructure development of the Mooiplaats Project`s north shaft was completed
and the lease of the Umlabo siding was finalised from where the coal will be
railed to the Matola Terminal.
Mining operations at the Mooiplaats Project commenced with approximately 30,000
ROM tonnes per month of a high calorific value (>27MJ/kg), mid volatile "lean"
coal. In September 2009, the Company commenced trucking the coal from the
Mooiplaats Project to the Umlabo siding, with the first train loaded and railed
to the Matola Terminal on 11 September 2009.
Following the reconfiguration of the mining layout as a result of geological
conditions, the Company is still on track to commence production of export
quality coal from the Mooiplaats Project towards the end of Q1 2010. The second
module of the wash plant was commissioned during the period allowing for the
processing of 200 tonnes per hour of ROM coal. As at 31 December 2009, over
47,000 tonnes of lean coal had been railed from the Umlabo siding to the Matola
Terminal, with the first shipment of lean coal departing at the end of January
2010.
The Company has signed off-take agreements with Traxys Europe SA, a global
mineral marketing company, and with Macquarie Bank Limited, each of whom will
be entitled to market or acquire 35% of the export quality thermal coal mined
at the Mooiplaats Project. The terms of these agreements offer upside over what
CoAL considers standard terms in the industry. The Company will dispose of the
remaining 30% of coal produced at the Mooiplaats Project on the international
spot coal markets.
An application (together with an Environmental Management Plan ("EMP")) to
extend the current NOMR to include the farms Klipbank and Adrianople was lodged
with the DMR during the period. The extension will enable the development of the
south decline shaft. The DMR is currently processing the application and the
Company expects approval in Q2 2010.
Vele Coking Coal Project - Tuli Coalfield (80%as at 31 December 2009, increased
to 100% in February 2010)
CoAL has determined that it will develop its Vele Project in two phases. Phase
1 will initially comprise the establishment of a modular coal treatment plant
with the ability to deliver an estimated 1 million saleable tonnes (yield
dependant) of coking coal per annum and expects to attain this annualised
production target rate within 7 months of execution of the NOMR. The Company
undertook a significant amount of preparation in anticipation of the granting
of a NOMR and is ready to launch Phase 1 of the Vele Project immediately upon
execution of the NOMR (which was unconditionally granted by the DMR subsequent
to the reporting period in February 2010).
The preparation already completed for Phase 1 will allow for production of
saleable coal within 4 months of execution of the NOMR. Wet and dry
commissioning of the modular plant has been concluded and work on the supporting
infrastructure is progressing according to schedule. Pending the execution of
the NOMR by the DMR, it is expected the wash plant and associated infrastructure
will be commissioned in Q2 of 2010. Work has commenced on the upgrading of the
rail siding in Musina and is expected to be concluded by the end of Q1 of 2010.
The total capital expenditure to complete Phase 1 of the Vele Project is
estimated at ZAR350 million, of which over ZAR210 million has been spent by the
end of the period, with a further ZAR200 million required to double the Phase 1
capacity. An additional ZAR2.65 billion will be required to complete Phase 2 of
the Vele Project, which is expected to deliver 5 million tonnes per annum
("mtpa") of saleable coking coal. The implementation of Phase 2 will be dictated
by market conditions. The Letter of Intent signed with ArcelorMittal in
principle provides for the potential off-take from the Company`s coking coal
properties priced at free on rail delivery in return for a free on board indexed
price.
Initial mining will utilise opencast methods, which will contribute to lower
initial mine establishment costs. A Memorandum of Understanding for the mining
contract was previously signed with MCC Contracts, the appointed open-cast
mining contractor, and discussions between the two parties continued during the
current period. The mining contract is expected to be signed in Q2 2010.
During the period, a further 63 exploration holes, totaling over 5,200 metres,
were drilled on the mine area. The exploration holes improved the drilling
density and results thereof will be used to confirm the structure and
composition of the coal. All cores have been geophysically logged and core
samples sent to the Company`s laboratory in Polokwane for analysis. The updated
results of this exploration work will be released to the market in due course.
As part of its NOMR application, CoAL submitted comprehensive EMP and
Environmental Impact Assessment ("EIA") documents to the DMR in which the
Company committed itself to the highest level of environmental and social
performance. Dust monitors have been erected on the Vele Project area, as well
as on neighbouring farms, and the water monitoring boreholes have been drilled
for the Integrated Water and Waste Management Plan for the Vele Project, which
is being compiled by independent consulting engineers.
In October 2009, 1,990,000 fully paid ordinary CoAL shares were issued for 6%
of Limpopo Coal and in February 2010, the Company issued a further 5,625,750
new fully paid ordinary shares in CoAL to acquire the remaining 20% interest
in the Vele Project. The Company now holds a 100% interest in the Vele Project.
Makhado Coking Coal Project - Soutpansberg coal field (100%)
During the period, the Company completed an additional 65 exploration holes
bringing the total drilled on the Makhado coking coal project ("Makhado
Project") to over 9,000 metres. The exploration boreholes of the large diameter
drilling programme provided additional cores for bulk sample analysis and
assisted in delineating the southern and northern limits of the coal. The
boreholes also provided additional information for the revised geological model,
which will include both sedimentology as well as geological structure and will
be used to update the mine model. A high level study on the processing plant
required for the project has commenced and a modular wash plant similar to that
built for the Vele Project is being considered.
The Company has prepared the documentation required for the NOMR application for
submission to the DMR, based on the planned 5 mtpa production profile of the
Makhado Project. This application will be submitted once section 102 approval in
terms of the South African Minerals and Petroleum Resources Development Act,
2002, has been granted by the DMR for the exchange of NOPR with Rio Tinto ("Farm
Swap"). The Farm Swap involves the cession of ownership of certain Rio Tinto
controlled NOPR that are contiguous to the Makhado Project to CoAL. In return,
the Company will cede certain NOPR and interests therein to Rio Tinto controlled
entities and, on satisfaction of all conditions precedent, CoAL will pay a
premium of ZAR12.5million.
In July 2009, the Company submitted an application to the DMR for the extraction
of a bulk sample from the Makhado Project. Approval of the application was
received from the DMR in March 2010 and the sample extracted will yield 1,000
tonnes of coal for analysis by ArcelorMittal in their coking ovens. The Company
expects to commence extraction of the bulk sample in Q2 of 2010.
During March 2009, CoAL reached agreement with Exxaro Coal (Pty) Limited a
wholly owned subsidiary of Exxaro Resources Limited ("Exxaro"), whereby the
Company granted Exxaro an option subject to certain conditions, to acquire up to
30% of the Makhado Project for cash consideration equal to the net present value
of the Makhado Project less a 20% discount. Exxaro is South Africa`s largest
black-controlled, diversified mining company and the fourth largest South
African coal producer. At the end of December 2009, Exxaro retained its option
to participate in the Makhado Project.
Holfontein Thermal Coal Project (100%)
A NOMR for the Holfontein Project was granted in February 2010, conditional upon
the delivery of certain documents to the DMR. The Company continues to classify
the Holfontein Project as an asset held for sale and intends to pursue a sale
process on receipt of the unconditional NOMR. During the period, the Company
obtained an independent valuation of the Holfontein Project which resulted in an
A$8,692,665 impairment.
Nimag Group of Companies (100%)
The combined effect of cost cutting measures, an improvement in nickel prices,
together with increased demand for the Nimag Group`s products resulted in a net
profit after tax of A$747,283 for the six months compared to a loss of
A$2.4million for the same period last year. In August 2009, Paul Holmes was
appointed Managing Director of the Nimag Group and has been tasked with growing
the Group via the acquisition of companies with similar production profiles and
the identification of new clients and products.
Acquisition of NuCoal (100%)
During October 2009, CoAL agreed to acquire 100% of NuCoal, a thermal coal
producer in close proximity to CoAL`s Mooiplaats Project for ZAR650 million,
subject to adjustment on completion of the acquisition. On 26 January 2010, the
acquisition was completed with a final adjusted price of ZAR467m. A retention of
ZAR65m is currently withheld in relation to certain warranties and in accordance
with the terms of the NuCoal acquisition agreement. NuCoal`s Woestalleen
Colliery, which is forecast to produce 2.5 mtpa of saleable coal for domestic
and export markets, has a number of off-take contracts in place. At the time the
acquisition was entered into, NuCoal had two beneficiation plants, and one fully
operational mine producing 350,000 tonnes per month of ROM coal and in November
2009 it commenced production at a second mine. NuCoal also owns the Woestalleen
Colliery which is in close proximity to Eskom`s Camden power station, to which
it supplies 360,000 mtpa.
NuCoal has secured a general freight rail siding used to supply its allocation
at the Richards Bay Coal Terminal. The acquisition of NuCoal will realise rail
and port synergies in the export of NuCoal product whilst utilising CoAL`s
existing port and logistic arrangements at the Matola Terminal. In addition,
NuCoal has a number of other development projects which CoAL will evaluate in
the context of the Company`s overall corporate strategy.
The acquisition of NuCoal was funded using part of the proceeds of the share
placement completed at the end of October 2009, which raised GBP56.9 million
(ZAR731 million) and will be consolidated as part of the Company from 1 January
2010.
Black Empowerment Transaction
During the period the Company reached agreement with its BBBEE partners,
ensuring CoAL takes a significant step towards compliance with South African
Black Economic Empowerment ("BEE") legislation. The arrangement replaces the
previous agreement, announced on 13 June 2008, with Coal Investments Limited
("CIL") pursuant to which CIL subscribed for shares and was granted an option to
subscribe for 50 million CoAL shares.
The BBBEE consortium is led by Firefly Investments 163 (Pty) Limited ("Firefly")
which is wholly owned and controlled by historically disadvantaged South
Africans. Under the transaction, CoAL is to issue an option to Firefly to
subscribe for a total of 50 million shares at 60 pence per share, representing
approximately 9.53% of the Company`s issued capital, exercisable between 1
November 2010 and 1 November 2014. Any shares issued on exercise of the option
will be subject to a 12 month "lock-in period".
Firefly will undertake to, within a period of three months, distribute the
rights under the agreement to subscribe for shares to the King of the VhaVenda,
His Majesty Khosi Khulu Toni Mphephu Ramabulana, representing his constituents
of the Mudimeli, Musekwa, Makushu-Musholombi and Tshivhula communities, relevant
female empowerment and youth groups as well as a special purpose vehicle to
promote and develop entrepreneurs and other specific community groups in the
Limpopo province.
The agreement with Firefly is subject to certain regulatory approvals, including
consent of the Australian Foreign Investments Review. Firefly also has the right
to nominate two persons to the CoAL Board. To facilitate the BBBEE transaction,
the Company`s second largest shareholder, African Global Capital I, L.P., an
entity associated with Mvelaphanda Holdings (Pty) Limited, Palladino Holdings
Limited and OZ Management LP, and its affiliate CIL, which currently own in the
aggregate 15.03% of the issued share capital of CoAL, have entered into an
agreement with Firefly in terms of which amongst other provisions, they will
cede their voting rights over their ordinary shares in CoAL to Firefly for a
period of time.
Construction of Polokwane Analytical Laboratory
The construction of a world class analytical laboratory in Polokwane in the
Limpopo Province was completed during the half year. Since coming on line, the
facility has performed petrographic and thermal coal tests on samples from the
Company`s Vele and Makhado Projects.
By the end of the period, the Company had invested over ZAR 19 million into the
Coal of Africa & ArcelorMittal Analytical Laboratory (Pty) Limited, the
incorporated 50:50 laboratory joint venture with ArcelorMittal. CoAL and
ArcelorMittal have reached in principle agreement regarding the joint venture
and expect to conclude formal contracts in early 2010.
Safety
The Company has expended significant effort in developing and implementing an
extensive and comprehensive safety and worksafe environment at all of its
workplaces.
Safety management is a key focus at CoAL`s projects but sadly, in July 2009, two
employees of a contractor to CoAL were fatally injured in an accident resulting
from the unlawful access to and use of a vehicle by an unlicensed contractor.
Immediately following the accident, operations were halted for three days whilst
investigations were conducted by inspectors and mine officials of the DMR. The
results of the official inquiry indicated no material breaches by the Company,
but suggested legal prosecution of the driver and several of the contractors`
officials.
Take or Pay obligations
The Company`s contractually agreed annual export allocation of 1 mtpa at the
Matola Terminal is on a Take or Pay basis. As a result of the early difficulties
experienced in establishing the mining operations at the Mooiplaats Project,
CoAL did not meet the terms of the agreement resulting in an expense of
A$3,392,587 (2008:A$0). The Company commenced meeting its Take or Pay
obligations during Q1 2010.
Corporate Activity
During the period, the Company announced its intention to transfer its London
listing from the AIM market to a primary listing on the Main Market. Advisers
have been appointed in this regard and a further announcement will be made in
due course. CoAL will look to have in place an appropriate mix of debt and
equity to accelerate the development of the Company`s coal and infrastructure
projects. As such, the Company is currently reviewing several secured and
unsecured debt opportunities.
Auditor`s Independence Declaration
A copy of the auditor`s independence declaration as required under Section 307C
of the Corporations Act 2001 is set out below.
Signed in accordance with a resolution of the Directors:
S.J. Farrell
Managing Director
Dated at Perth, Western Australia, this 15th day of March 2010.
Resource Estimation:
Resource estimations in this Half Year Financial Report have been compiled by Mr
John Sparrow (Member of the South African Council of Natural Science Professions
SACNASP) 400109/03, an independent geological and technical consultant with 26
years experience in the Southern African and Australian regions. Mr Sparrow has
sufficient experience relevant to the assessment of this style of mineralization
to qualify as a Competent Person as defined in the Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore Reserves - the JORC
Code - and has compiled a number of Competent Person`s reports for various
organizations for the JSE, ASX and TSE. Mr Sparrow consents to the inclusion of
the information in this report in the form and context in which it appears.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE HALF-YEAR ENDED 31
DECEMBER 2009
Consolidated Consolidated
31.12.2009 31.12.2008
A$ A$
Sale of goods 11,276,036 14,880,476
Interest earned 1,828,547 8,947,176
Other 308,276 136,756
Total revenue 13,412,859 23,964,408
Changes in inventory, raw materials and
consumables used (8,696,137) (12,831,516)
Consulting, accounting & professional
expenses (1,798,522) (701,786)
Employee expenses (4,459,662) (3,487,980)
Depreciation and amortisation expenses (6,917,706) (124,676)
Foreign exchange losses (3,615,491) -
Diminution in investments (6,223,000) (1,993,855)
Diminution in value of asset held for
sale (8,692,665) -
Office rent and outgoings (495,041) (538,074)
Borrowing costs (185,001) (93,566)
Take or Pay obligations (3,392,587) -
Nickel inventory revaluation 130,253 (2,106,820)
Other expenses from ordinary activities (7,727,176) (3,380,469)
Profit / (Loss) from continuing (38,659,876) (1,294,334)
operations before income tax
Income tax (expense)/revenue 3,476,419 -
(1,294,334)
Profit / (Loss) after income tax for
the half year (35,183,457)
Profit attributable to non-controlling
interest - -
Net profit / (loss) attributable to (35,183,457) (1,294,334)
members of the parent entity
Other Comprehensive Income
Foreign currency translation (6,237,649) 5,380,512
differences
Total comprehensive income/(loss) for
the period (41,421,106) 4,086,178
Basic earnings/ (loss) per share for
Coal of Africa Limited (8.13) cents (0.32) cents
Diluted earnings/ (loss) per share (8.13) cents (0.32) cents
Headline earnings/ (loss) per share (4.48) cents (0.32) cents
Headline Earnings Reconciliation
Profit / (Loss) after income tax for
the half year attributable to ordinary (35,183,457) (1,294,334)
shareholders
Diminution in value of assets and
investments 15,773,641 -
Headline Profit / (Loss) after income
tax for the half year attributable to
ordinary shareholders (19,409,816) (1,294,334)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2009
Consolidated Consolidated
Note 31 December 30 June 2009
2009 A$
A$
CURRENT ASSETS
Cash assets 94,042,058 87,032,875
Receivables 11,710,081 21,525,145
Inventory 5,974,519 8,614,773
Deposits 15,423,674 4,423,964
Total Current Assets 127,150,332 121,596,757
NON CURRENT ASSETS
Assets held for sale 16,754,601 25,540,957
Intangibles 3,487,023 3,706,781
Mineral interests 195,594,166 186,120,103
Exploration Expenditure 20,184,499 15,540,310
Other financial assets 20,226,689 23,598,640
Property, plant and equipment 134,267,786 98,894,360
Development Expenditure 41,620,663 19,432,007
Logistics assets 21,665,696 23,296,448
Long term receivables 17,918,500 19,887,993
Deferred tax 3,164,823 53,526
Total Non Current Assets 474,884,446 416,071,125
TOTAL ASSETS 602,034,778 537,667,882
CURRENT LIABILITIES
Payables 12,159,043 11,031,549
Provisions 275,849 262,081
Current tax liability 330,924 350,416
0
Total Current Liabilities 12,765,816 11,644,046
NON CURRENT LIABILITIES
Provisions 2,972,807 2,383,801
TOTAL NON CURRENT LIABILITIES 2,972,807 2,383,801
TOTAL LIABILITIES 15,738,623 14,027,847
NET ASSETS 586,296,155 523,640,035
EQUITY
Contributed equity 2 673,877,166 569,267,119
Reserves 442,642 7,189,525
Accumulated losses (95,639,700) (60,456,243)
TOTAL PARENT EQUITY INTEREST 578,680,108 516,000,401
Non Controlling Interests 7,616,047 7,639,634
TOTAL EQUITY 586,296,155 523,640,035
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE HALF YEAR ENDED 31 DECEMBER
2009
A$ A$ A$ A$
Ordinary Capital Foreign Share
Share Profit Currency Options
Capital Reserves Translation Reserve
Reserves
Balance at 1.7.2009 569,267,119 136,445 (1,823,690) 8,876,771
Options exercised during
the period 1,255,747 (509,235)
Capital raising 102,601,864
Share based payments 4,139,200
Share issue costs (3,386,764)
Profit/ (Loss) attributable
to members of parent entity
Minority interests in
investments
Foreign currency
translation adjustments of
foreign controlled
operations (6,237,649)
Balance at 31.12.2009 673,877,166 136,445 (8,061,339) 8,367,536
A$ A$ A$
Retained Non Total
profits/ controlling
(losses) Interests
Balance at 1.7.2009 (60,456,243) 7,639,634 523,640,036
Options exercised during the
period 746,512
Capital raising 102,601,864
Share based payments 4,139,200
Share issue costs (3,386,764)
Profit/ (Loss) attributable to
members of parent entity (35,183,457) (35,183,457)
Minority interests in
investments (23,587) (23,587)
Foreign currency translation
adjustments of foreign
controlled operations (6,237,649)
Balance at 31.12.2009 (95,639,700) 7,616,047 586,296,155
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 1.7.2008 533,053,006 136,445 (5,390,389) 9,524,104
Shares issued during the
period 36,000,000
Options exercised during
the period 1,469,752 (552,709)
Share based payments 1,125,000 273,729
Options issued for capital
raising 165,000
Share issue costs (3,465,984)
Profit/ (Loss)
attributable to members of
parent entity
Foreign currency
translation adjustments
attributable to members of
parent entity 5,380,512
Balance at 31.12.2008 568,346,774 136,445 (9,877) 9,245,124
A$ A$ A$
Retained Minority Total
profits/ Equity
(losses) Interests
Balance at 1.7.2008 (45,936,267) 3,071,250 494,458,148
Shares issued during the period 36,000,000
Options exercised during the
period 917,043
Share based payments 1,398,729
Options issued for capital raising 165,000
Share issue costs (3,465,984)
Profit/ (Loss) attributable to
members of parent entity (1,294,334) (1,294,334)
Foreign currency translation
adjustments attributable to
members of parent entity 5,380,512
Balance at 31.12.2008 (47,230,601) 3,071,250 533,559,115
CONSOLIDATED CASH FLOW STATEMENT FOR THE HALF YEAR ENDED 31 DECEMBER 2009
Consolidated Consolidated
31.12.2009 31.12.2008
A$ A$
Cash Flows used in Operating Activities
Cash receipts in the course of operations 11,234,131
16,194,689
Interest received 1,828,547 9,015,723
Cash payments in the course of operations (11,419,938)
(29,482,253)
Interest paid (185,001) (93,566)
Tax paid (19,492) (513,484)
Net cash generated by/(used in) operating 1,438,247 (4,878,891)
activities
Cash Flows used in Investing Activities
Deposits paid on investments (11,802,283) (5,824,112)
Proceeds from sale of equity investments 1,446,416 -
Exploration expenditure (4,644,188) (5,171,424)
Payments for investments (10,271,719) (27,893,308)
Payments for property, plant and
equipment (68,059,625) (37,406,098)
Net cash provided by investing activities (93,331,399) 76,294,942)
Cash Flows from Financing Activities
Proceeds from issues of shares and 99,961,612 34,003,641
options (net of transaction costs)
Net cash provided by financing activities 99,961,612 34,003,641
NET INCREASE/ (DECREASE) IN CASH HELD 8,068,460 (47,170,192)
Cash at the beginning of the half-year 87,032,875 252,004,859
Exchange rate adjustment (1,059,277 ) (152,878)
Cash at the end of the half-year 94,042,058 204,681,789
The accompanying notes form part of these financial statements.
NOTES TO THE HALF YEAR REPORT ENDED 31 DECEMBER 2009
NOTE 1
(A) 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 2009 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 15th March 2010.
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 2009, except for the adoption of the following new and revised
Accounting Standards.
Accounting Standards not Previously Applied
The Group has adopted the following new and revised Australian Accounting
Standards issued by the AASB which are mandatory to apply to the current interim
period. Disclosures required by these Standards that are deemed material have
been included in this financial report on the basis that they represent a
significant change in information from that previously made available.
Presentation of Financial Statements
AASB 101 prescribes the contents and structure of the financial statements.
Changes reflected in this financial report include:
* the replacement of Income Statement with Statement of Comprehensive Income.
Items of income and expense not recognised in profit or loss are now
disclosed as components of `other comprehensive income`;
* the adoption of the single income statement approach to the presentation of
the Statement of Comprehensive Income; and
* other financial statements are renamed in accordance with the Standard
Operating Segments
From 1 January 2009, operating segments are identified and segment information
disclosed on the basis of internal reports that are regularly provided to, or
reviewed by the Board of Directors. In this regard, such information is provided
using different measures to those used in preparing the Statement of
Comprehensive Income and Statement of Financial Position. Reconciliations of
such management information to the statutory information contained in the
interim financial report have been included.
As a result of the adoption of the revised AASB 8, certain cash generating units
have been redefined having regard to the requirements in AASB 136: Impairment of
Assets.
Business Combinations and Consolidation Procedures
Revised AASB 3 is applicable prospectively from 1 July 2009. Changes introduced
by this Standard, or as a consequence of amendments to other Standards relating
to business combinations which are expected to affect the Group, include the
following:
* All business combinations, including those involving entities under common
control, are accounted for by applying the acquisition method which
prohibits the recognition of contingent liabilities of the acquiree at
acquisition date that do not meet the definition of a liability. Costs
incurred that relate to the business combination are expensed instead of
comprising part of the goodwill acquired on consolidation. Changes in the
fair value of contingent consideration payable are not regarded as
measurement period adjustments and are recognised through profit or loss
unless the change relates to circumstances which existed at acquisition
date.
* Unrecognised deferred tax assets of the acquiree may be subsequently
realised within 12 months of acquisition date on the basis of facts and
circumstances existing at acquisition date with a consequential reduction
in goodwill. All other deferred tax assets subsequently recognised are
accounted for through profit or loss.
* The proportionate interest in losses attributable to non-controlling
interests is assigned to non-controlling interests irrespective of whether
this results in a deficit balance. Previously, losses causing a deficit to
non-controlling interests were allocated to the parent entity.
* Where control of a subsidiary is lost, the balance of the remaining
investment account shall be re-measured to fair value at the date that
control is lost.
Revenue Recognition
Dividends received from a subsidiary, joint venture or associate shall be
recognised as dividend revenue in the profit or loss irrespective of whether
such dividends may have been paid out of pre-acquisition profits. Previously,
such dividends were treated as a return of capital invested. Such dividends may
be an indicator of impairment where the carrying amount of the investment
exceeds the consolidated net assets relating to that investment or where the
dividend exceeds the total comprehensive income of the respective investee in
the period the dividend is declared.
(B) 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.
Copyright Dividends
No dividend has been paid or is proposed in respect of the half-year ended
31 December 2009 (2008: None).
Consolidated
31 Dec 2009
A$
2. CONTRIBUTED EQUITY
474,413,911 (30.6.2009: 411,919,636) fully paid 673,877,166
ordinary shares
Movements in contributed equity
Opening balance at beginning of the half-year 569,267,119
- 465,239 options exercised on 1 October 2009 923,912
-1,990,000 ordinary shares issued on 23 October
2009 for acquisition of 6% of the Vele Project 4,139,200
- 59,867,731 ordinary shares issued on 30 October 102,601,864
2009
- 79,488 options exercised on 13 November 2009 156,267
- 91,817 options exercised on 26 November 2009 175,568
Less: share issue costs (3,386,764)
Total equity at the end of the half-year 673,877,166
Options
The following options to subscribe for ordinary fully paid shares are
outstanding at balance date:
Number Number Exercise Expiry Date
Issued Quoted Price
9,200,000 - A$0.50 30 September 2011
250,000 - A$2.05 1 May 2012
7,000,000 - A$1.25 30 September 2012
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
5,000,000 - A$2.74 30 November 2014
636,544 options were exercised at GBP0.65 during the six months under review.
3. SEGMENT INFORMATION
Segment results, assets and liabilities include items directly attributable to a
segment as well as those that can be allocated on a reasonable basis.
Unallocated items mainly comprise interest or dividend-earning assets and
revenue, interest bearing loans, borrowings and expenses, and corporate assets
and expenses.
Business segments
The consolidated entity comprises the following main business segments:
Coal exploration and mining - Mining of coal at the Mooiplaats Project and
exploration activities across other coal related interests
Manufacturing - Mineral processing by the Nimag Group in South Africa
Investing - Equity investments in South Africa, Australia and United Kingdom
Segment performance for the six months ended
31 December 2009
Primary reporting Coal Manufactur Investing Consolidated
industry Mining & ing
Exploratio
n
A$ A$ A$ A$
Revenue
External sales - 1,276,036 - 11,276,036
Interest revenue 57,465 10,923 1,760,159 1,828,547
Unallocated revenue - 34,563 273,713 308,276
Total group revenue 57,465 11,321,522 2,033,872 13,412,859
Segment net profit/
(loss) before income (8,678,084 1,111,879 (5,644,809) (13,211,014)
tax )
Amounts not included in segment result but
reviewed by the board
Impairment of
financial assets - - (6,223,000) (6,223,000)
Depreciation and
amortisation (5,168,159) (116,535) (1,633,012) (6,917,706)
Foreign exchange (212,648) (248,061) (3,154,782) (3,615,491)
losses
Impairment of assets
held for sale - - (8,692,665) (8,692,665)
Net profit/ (loss) (14,058,891 747,283 (25,348,268) (38,659,876)
before tax from )
continuing operations
Assets as at 31 December
2009
Segment assets 377,248,489 6,524,572 211,609,87 595,382,932
1
Segment asset increases
for the period:
Capital expenditure 68,059,625 - - 68,059,625
Acquisitions 6,256,613 - 4,006,106 10,262,719
74,316,238 - 4,006,106 78,322,344
Reconciliation of segment
assets to group assets
Unallocated assets:
Deferred tax assets 3,164,823
Intangibles 3,487,023
Total assets from
continuing operations 602,034,778
Assets as at 30 June 2009
Segment assets 311,172,800 6,446,064 216,288,71 533,907,575
1
Segment asset increases
for the period:
Capital expenditure 92,436,383 - - 92,436,383
Acquisitions 7,743,534 - 11,704,052 19,447,586
100,179,917 - 11,704,052 111,883,969
Reconciliation of segment
assets to group assets:
Unallocated assets:
Coal Mining Manufactu Investing Consolidate
& ring d
Exploration
A$ A$ A$ A$
Deferred tax assets 53,526
Intangibles 3,706,781
Total assets from
continuing operations 537,667,882
Segment liabilities
Segment liabilities as at 11,105,047 1,671,936 2,961,640 15,738,623
31 December 2009
Reconciliation of segment liabilities
to group liabilities
Unallocated liabilities:
Deferred tax liabilities -
Other liabilities -
Total liabilities from
continuing operations 15,738,623
Segment liabilities
Segment liabilities as at
30 June 2009 7,289,273 2,152,484 4,586,091 14,027,848
Reconciliation of segment
liabilities to group
liabilities
Unallocated liabilities:
Deferred tax liabilities -
Other liabilities -
Total liabilities from
continuing operations 14,027,848
Revenue by geographical region
Revenue attributable to external customers is disclosed below, based
on the location of the external customer.
For the six months For the six months
ended 31 December ended 31 December
2009 2008
A$ A$
North America 3,833,852 2,227,616
Europe 3,721,092 6,682,848
South East Asia and Australasia 1,691,405 3,898,328
Africa and other areas 2,029,687 2,071,684
Total revenue 11,276,036 14,880,476
4. BUSINESS COMBINATION (ACQUISITION OF CONTROLLED ENTITIES)
The consolidated entity acquired control over the following South African
entities during the period ended 31 December 2009:
1. Acquisition of 100% Silkwood Trading (Pty) Limited which holds the NOPR
to the 850 hectare farm Alyth located on the western border of the
Company`s Vele Project.
Cash consideration paid A$6,256,613
2. Acquisition of 74% of a shelf company Freewheel Trade & Invest 34 (Pty)
Limited which owns the exploration rights for coal bed methane for a
564km2 area in and around CoAL`s Makhado Project.
Cash consideration paid A$1,950,078
5. 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 2009.
6 CONTINGENT LIABILITIES
In accordance with normal industry practice, the Company has agreed to provide
financial support to its controlled entities. There are no other contingent
liabilities as at 31 December 2009.
7 EVENTS SUBSEQUENT TO REPORTING DATE
* Completion of the Acquisition of NuCoal Mining (Pty) Limited
At the end of January 2010, following the fulfillment of the suspensive
conditions to the SSA signed in October 2009, the Company acquired 100% of
NuCoal for ZAR467million after a 10% reduction to reflect the working
capital position at 31 December 2009. A retention of ZAR65 million was
withheld in relation to certain warranties and in accordance with the terms
of the NuCoal acquisition agreement.
The acquisition was funded by proceeds of the share placement completed in
October which raised GBP56.9million (ZAR731million). In accordance with the
terms of the SSA, CoAL`s economic interest in NuCoal commenced on 1 January
2010.
* Granting of NOMR for Vele and Holfontein
In early February 2009 the Company announced the granting of an
unconditional NOMR for its Vele Project and a conditional granting of a
NOMR for the Holfontein Project. The Holfontein Project NOMR is conditional
upon the Company delivering certain documents to the DMR.
* Acquisition of remaining 20% of Limpopo Coal
The granting of the Vele NOMR satisfied the remaining suspensive condition
for the acquisition of 20% of the Vele Project. During February 2009, the
Company issued 5,625,750 ordinary shares as consideration for the 20% of
Limpopo Coal.
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.
DIRECTOR`S DECLARATION
In the opinion of the Directors,
1 The financial statements and notes of the consolidated entity are in
accordance with the Corporations Act 2001, including:
A complying with Accounting Standard AASB 134: Interim Financial Reporting
and the Corporations Regulations 2001; and
B giving a true and fair view of the consolidated entity`s financial position
as at 31 December 2009 and of its performance for the half year ended on
that date.
2 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.
Signed
S. J. Farrell
Director
Dated at Perth, Western Australia, this 15th day of March 2010.
"Moore Stephens
AUDITOR`S INDEPENDENCE DECLARATION
TO THE DIRECTORS OF COALOF AFRICA LIMITED
As lead auditor for the review of Coal of Africa Limited and its controlled
entities for the half year ended 31 December 2009, 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.
Signed
Moore Stephens
Chartered Accountants
INDEPENDENT AUDITOR`S 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 controlled entities (the consolidated entity) which comprises the
consolidated statement of financial position as at 31 December 2009, the
consolidated statement of comprehensive income, the consolidated statement of
changes in equity, the consolidated statement of cash flows for the half-year
ended on that date, the accounting policies and other selected explanatory notes
and the directors` declaration.
Directors` Responsibility for the Half-Year Financial Report
The directors of Coal of Africa Limited 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
establishing 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 2009 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.
Matters Relating to the Electronic Presentation of the Audited Financial Report
This review report relates to the financial report of the consolidated entity
for the half-year ended 31 December 2009 included on the website of Coal of
Africa Limited. The directors of the company are responsible for the integrity
of the website and we have not been engaged to report on its integrity. This
review report refers only to the half-year financial report identified above and
it does not provide an opinion on any other information which may have been
hyperlinked to or from the financial report. If users of this report are
concerned with the inherent risks arising from electronic data communications,
they are advised to refer to the hard copy of the reviewed financial report to
confirm the information included in the reviewed financial report presented on
the company`s website
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:
(I) giving a true and fair view of the consolidated entity`s financial
position as at 31 December 2009 and of its performance for the half-
year ended on that date; and
(II) complying with Accounting Standard AASB 134: "Interim Financial
Reporting" and the Corporations Regulations 2001.
Moore Stephens
Chartered Accountants
Dated in Perth, this 15th day of March 2010."
Sponsor
Macquarie First South Advisers (Pty) Limited
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