| Fri 1 Oct 2010, 7:05 | | CZA - Coal of Africa Limited - Annual financial statements |
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CZA
CZA
CZA - Coal of Africa Limited - Annual financial statements
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")
ANNUAL FINANCIAL STATEMENTS
Coal, the coal mining and development company operating in South
Africa and listed on the ASX, AIM and JSE (ticker: CZA), provides a
copy of its Annual Financial Statements for the full year ended 30
June 2010. A financial summary and commentary on those results is
provided below.
The consolidated operating result for the Group was a loss totalling
$101.4 million, of which $88.7 million is represented by
depreciation, amortisation, impairment, interest and tax, leaving an
EBITDA loss of approximately $12.7 million.
Key components of the above mentioned EBITDA included the Mooiplaats
Colliery, generating a small EBITDA profit of $3.3 million on sales
of $24.2 million, and the recently acquired Woestalleen Colliery
(and associated mines) contributing an EBITDA profit of
approximately $10.4 million (6 months of operations) on total sales
of approximately $66.1 million.
WOESTALLEEN COLLIERY
In October 2009, CoAL agreed to acquire 100% of NuCoal Mining (Pty)
Ltd ("Woestalleen Colliery"), a thermal coal producer situated in
the Witbank coal field, which includes two beneficiation plants with
a total name plate capacity of 350,000 run of mine ("ROM") feed
tonnes per month, the Zonnebloem, Hartogshoop and Klipbank open cast
coal mines and the Opgoedenhoop and Klipfontein coal projects.
In January 2010, all outstanding suspensive conditions for the
acquisition were fulfilled, resulting in the Company acquiring the
Woestalleen Colliery effective from 1 January 2010, which, exclusive
of acquisition entries on acquisition, produced a six month EBITDA
of $10.4 million on sales of $66.1 million.
The 6 month performance of the Woestalleen Colliery included the
following highlights:
Zonnebloem producing 1,542,868 ROM tonnes;
Hartogshoop producing 449,451 ROM tonnes;
Klipbank producing 154,730 ROM tonnes;
Total ROM sales of 516,457 tonnes;
Total A Grade coal sales of 790,540 tonnes;
Total B, C, & D Grade coals sales to domestic customers, including
Eskom, of 224,486 tonnes;
Record railings in March 2010 in excess of 170,000 tonnes; and
Closing saleable inventory at Woestalleen was 183,889 tonnes.
Although the costs per tonne and ROM coal production numbers were
largely
in-line with expectations, total revenue and profit generated were
lower
than expected due to the following:
Issues with the newly commissioned Fraser Alexander plant has
restricted available washing capacity to less than the 350,000
tonnes per month name
plate;
Transnet Freight Rail ("TFR") rail strike in May 2010; and
Total tonnes railed against the lowest price off-take agreement were
higher than forecast.
MOOIPLAATS COLLIERY
Although the Mooiplaats Colliery managed to deliver a small EBITDA
profit of approximately $3.3 million on the back of sales of $24.2
million, the overall performance of the mine continued to suffer
from adverse underground conditions, which resulted in a revision to
the mine layout and an assessment of the project for possible
impairment. The mine layout review was completed early in the period
and required the Company to mine through low volatile ("lean") coal
to reach the export quality bituminous ("thermal") coal. The
assessment resulted in a $52.8 million impairment of the project,
which was recognised in June.
Mining in the first section reached the export quality thermal coal
in early 2010 and by the end of June, the Colliery had three
underground sections producing high quality thermal coal. The
transition from lean to bituminous
coal is associated with marked improvements in roof and floor
conditions and a reduction in mining costs.
In the first half of 2010, the colliery commenced processing ROM
coal purchased from a neighbouring coal operation, ensuring the
spare processing capacity available at the plant during the ramp-up
phase was utilised. The purchasing of ROM coal from third parties is
expected to continue until the end of the calendar year, when the
ramp-up phase is expected to be complete, resulting in five sections
producing 190,000 to 200,000 tonnes per month of ROM coal.
The highlights of the Mooiplaats operations were as follows:
Total ROM production of 400,995 from 3 sections;
Total processed tonnes of 659,853, included approximately 260,000
ROM tonnes acquired;
Total export sales via the port of Maputo were 271,269 tonnes,
including some coal railed from Woestalleen Colliery;
Total middlings produced of 95,426 tonnes; and
Closing inventory of export quality coal at the end of June 2010
amounted to 28,794 tonnes at the Mooiplaats Colliery, 20,952 at the
Umlabo siding and 55,559 tonnes at the Matola Terminal in
Mozambique.
The coal from the Mooiplaats and Woestalleen Collieries due be sold
internationally was railed to the Matola Terminal, the Richards Bay
Coal Terminal ("RBCT") or the Richards Bay Dry Bulk Terminal
("RBDBT"). During three weeks in May 2010, no coal was railed to
RBCT, RBDBT or the Matola Terminal as a result of strike action at
TFR. At the end of the strike, re-commencement of rail transport was
further adversely affected by the limited availability of TFR
rolling stock and strike related delays to the TFR occupation
schedule.
The total loss may be reconstructed as follows:
Profit/ (loss) after tax for the year (101,441,293)
Add backs:
Depreciation & Amortisation 15,985,617
Impairment of investments 10,465,095
Impairment of assets available for sale 8,386,435
Impairment of Mooiplaats Colliery 52,779,745
Amortisation of mining assets 12,786,703
Amortisation of logistics assets 2,208,375
Tax (12,350,743)
Interest paid 1,216,008
Interest received (2,776,708)
Adjusted EBITDA (loss) (12,740,766)
The adjusted EBITDA includes the following:
Mooiplaats EBITDA 3,333,734
Woestalleen six month EBITDA 10,359,301
NiMag EBITDA 3,553,261
17,246,296
Sub-total (29,987,062)
The sub-total includes the following items:
Options granted 1,995,871
Currency adjustment (3,343,210)
Employee expenses(1) 9,687,884
Rental expenses 1,142,067
London main board expenses 3,267,880
Take or Pay Obligations 3,625,644
Other corporate expenses 13,610,926
29,987,062
1 Employee expenses net of expenses recorded on issue of options.
Operational Expenses
Of the total $30 million incurred as operational expenses, a number
of non-recurring cost were incurred including $3.6 million in take
or pay obligations at the port of Matola and $3.3 million incurred
in professional fees regarding the proposed Main Board Listing on
the London Stock Exchange. Other material expenses included $9.7
million in employee costs, $1.1 million in rental expenses, $6.7
million on professional, investment banking, advisory, marketing and
promotion expenses, $753,000 on travel expenses and $479,000 on the
Company`s laboratory.
Yours sincerely
JOHN WALLINGTON
Chief Executive Officer
For more information contact:
John Wallington / Blair Sergeant
CoAL +27 (0) 11 575 4363
Simon Edwards / Chris Sim
Evolution Securities +44 (0) 20 7071 4300
Jos Simson / Leesa Peters
Conduit PR +44 (0) 20 7429 6603
Melanie de Nysschen/ Annerie Britz
Macquarie First South Advisers +27 (0) 11 583 2000
www.coalofafrica.com
About CoAL
CoAL is an AIM/ASX/JSE listed coal mining and development company
operating in South Africa. CoAL`s key projects include the
Woestalleen Colliery, the Mooiplaats thermal coal mine, the Vele
coking coal project and the Makhado coking coal project.
The Mooiplaats coal mine commenced production in 2008 and is
currently ramping up to produce 2 million tonnes per annum ("Mtpa").
CoAL`s Makhado coking coal project is expected to start production
in 2012 and timing for Vele to reach production is still to be
confirmed. These operations are targeted to collectively produce an
initial 2 Mtpa ramping up to a combined annual output of 10 Mtpa of
coking coal.
In 2010, CoAL completed the ZAR467m acquisition of NuCoal Mining
(Pty) Limited ("NuCoal"), a thermal coal producer with assets in
South Africa in close proximity to CoAL`s Mooiplaats mine. NuCoal
owns the Woestalleen Colliery, which has a number of off-take
contracts in place and processes approximately 2.5Mtpa of saleable
coal for domestic and export markets. NuCoal also owns two
beneficiation plants, one fully operational mine producing
approximately 300kt per month of ROM coal and has recently commenced
production at a second mine.
CoAL currently has 1 Mtpa export capacity at the Matola Terminal in
Maputo, Mozambique, increasing to 3 Mtpa on completion of the next
phase of expansion at the terminal. CoAL also has the option to
participate in further expansion at the Matola Terminal, which is
expected to increase the capacity at the terminal by an additional
10 Mtpa
CONSOLIDATED FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2010
The Directors of CoAL present their report together with the
consolidated financial report for the year ended 30 June 2010 and
the auditor`s report thereon:
RESOURCE ESTIMATION
The information in this report that relates to exploration results,
mineral resources or ore reserves is based on information compiled
by the following persons:
In respect of the Mooiplaats Colliery, Vele Colliery and Makhado
coking coal project, Mr Mark Craig Stewardson, who is registered as
a Professional Natural Scientist (Pr Sci Nat, Reg. No. 400119/93)
with the South African Council for Natural Scientific Professions
("SACNASP"), which is a Recognised Overseas Professional
Organisation ("ROPO") in terms of the Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore Reserves
(the
"JORC Code"). Mr Mark Craig Stewardson is employed by Mineral
Corporation Consultancy.
In respect of the Zonnebloem, Hartogshoop, Klipbank and Opgoedenhoop
Collieries, Dr. Philip John Hancox , who is a member of the SACNASP
(SACNASP No. 400224/04), which is a ROPO in terms of the JORC Code.
Dr. Philip John Hancox is employed by Caracle Creek International
(Pty) Limited.
Mr Mark Craig Stewardson and Dr. Philip John Hancox have sufficient
experience that is relevant to the style of mineralisation and type
of deposit under consideration and to the activity which they are
undertaking to qualify as Competent Persons as defined in the 2004
Edition of the JORC Code. Mr Mark Craig Stewardson and Dr. Philip
John Hancox consent to the inclusion in this announcement of the
matters based on their information in the form and context in which
it appears
CHAIRMAN`S LETTER
"QOUTE
The past year witnessed the transformation of CoAL from an
exploration and development company into a mining company. The
strategic port and rail logistics plans previously undertaken ensure
the Company is positioned to access the domestic South African and
international coal markets. Furthermore, the Company will benefit
from expansion at the Matola Terminal in Maputo, Mozambique,
aligning its growing thermal and coking coal production with
increased export capacity.
Safety remains a priority for CoAL and is the number one concern on
my agenda. The Company has undertaken various initiatives to improve
safety for our employees and contractors and we remain intent on
operating without any injuries.
The change from a development company to a fully operational mining
company requires additional skills and it is with this in mind that
CoAL is pleased to have secured the appointment of John Wallington
as Chief Executive Officer and Executive Director. John brings
extensive coal mining experience to the Company and Simon Farrell
has taken up the position as Executive Deputy Chairman where he will
continue to perform a vital strategic role, maintaining the
entrepreneurial momentum that has driven CoAL`s exponential growth
over the
last five years.
Despite experiencing more resistance to the Vele Colliery from
environmentalists than envisaged, CoAL aspires to be a good
corporate citizen, mining in terms of global best practice and
making all possible efforts to comply with all necessary
legislation. I remain confident the Vele Colliery will be a success
both for the shareholders and its neighbours in the environment.
The development of the Company into an operating entity is the
culmination of several years of hard work. I would like to thank
Simon and his team for their efforts and have no doubt that CoAL
will continue to grow and become a significant coking and thermal
coal producer.
Richard Linnell
Chairman
UNQOUTE"
DIRECTORS REPORT
Directors
The names of Directors in office at the date of this report, or
during the reporting period are as follows. Unless otherwise stated,
Directors held office for the entire reporting period.
Richard Linnell (Non-Executive Chairman)
Mr Linnell has been active in the resources and metals fields for
over forty years and has significant global experience in the
development and marketing of resources and commodities. He was the
originator of the Bakubang Initiative, a forum designed to revive
the South African mining industry and which led to the establishment
of the New Africa Mining Fund, of which he is Chairman of Trustees.
He holds a number of other Directorships. Mr Linnell will be
retiring and seeking re-election by shareholders at the Company`s
2010 Annual General Meeting.
Simon Farrell (Executive Deputy Chairman)
Mr Farrell has a Bachelor of Commerce from the University of Western
Australia and an MBA from the Wharton School of the University of
Pennsylvania. He is a Fellow of the Australian Society of CPA`s and
the Institute of Company Directors. He has held a number of senior
management and Board positions, principally in the resources sector
over the last twenty years. He is currently a Director of London
Stock Exchange listed Kenmare Resources plc and Bellzone Mining plc.
Mr Farrell will be retiring and seeking re-election by shareholders
at the Company`s 2010 Annual General Meeting.
John Wallington (appointed 15 June 2010) (Chief Executive Officer
("CEO") and Executive Director)
Mr Wallington holds a BSc in Mining Engineering from the
Witwatersrand University in Johannesburg, South Africa and has
participated in executive programmes with both the London Business
School and the Harvard Business School. He joined Anglo American in
1981 and was CEO of the South African Region before being appointed
as CEO of Anglo Coal globally. Mr. Wallington held the position of
CEO for the Anglo Coal Division between 2005 and 2008 and has 30
years experience in the coal exploration and mining industry.
Blair Sergeant (Finance Director)
Mr Sergeant graduated with a Bachelor of Business and a Post
Graduate Diploma in Corporate Administration, both from Curtin
University, Western Australia. He is a member of the Chartered
Institute of Company Secretaries and an Associate of the Australian
Society of Certified Practising Accountants. Mr Sergeant`s
experience includes senior management and executive positions with
numerous listed public companies across a broad spectrum of industry
internationally.
Professor Alfred Nevhutanda (Executive Director)
Professor Alfred Nevhutanda has two PhD`s (in Education Environment
and Arts Culture), a diploma in Management Studies and an MBA, has
been involved in a number of diversified businesses and served as a
leader in various academic fields, as well as held various political
appointments. He has acted as an advisor to the King of the
Vhavenda, Ministers and Members of the Executive Council of the
ruling party.
Peter Cordin (Non-Executive Director)
Mr Cordin has a Bachelor of Engineering from the University of
Western Australia and is well experienced in the evaluation,
development and operation of resource projects within Australia and
overseas. He is the Managing Director of ASX listed Dragon Mining
Limited and non-executive director of Vital Metals Limited.
Steve Bywater (Non-Executive Director)
Mr Bywater has a distinguished career in the resources industry,
developing and operating a total of 14 large-scale open pit and
underground mining operations and their associated services,
logistics and infrastructure. When working for Rio Tinto Coal
Australia, he was Chief Operating Officer, and in this position
oversaw seven mining operations, producing 60 million tonnes of
saleable coal a year. Mr Bywater has a B.Sc. in Engineering Geology
and Geotechnics from Portsmouth University and a M.Sc. in Rock
Mechanics and Excavation Engineering from Newcastle-upon-Tyne. He is
also Chief Executive of GCM Resources plc.
David Murray (appointed 8 September 2010) (Senior Independent Non-
Executive Director)
Mr Murray has held a number of senior positions in the global coal
industry, including Managing Director of Ingwe Coal Corporation
(formerly Trans-Natal Coal Corporation Limited), Chief Executive of
BHP Billiton Mitsubishi Alliance and President of Energy Coal Sector
Group at BHP Billiton Limited, a position he held until December
2009. Mr Murray holds a Bachelor of Science Degree (Civil
Engineering) from the University of KwaZulu-Natal and a Post
Graduate Diploma in Mining Engineering from the University of
Pretoria. He has also completed the Advanced Executive Program from
the University of South Africa. Mr Murray will be retiring and
seeking re-election by shareholders at the Company`s 2010 Annual
General Meeting.
Pierre Leonard (resigned 27 August 2009) (Non-Executive Director)
Mr Leonard has a PhD in Industrial Engineering from the University
of Pretoria in South Africa and over 13 years of experience in the
metals and mining industry. He has held key positions in strategy
and business development and currently holds the title of General
Manager, Mergers and Acquisitions for ArcelorMittal as well as a
number of Directorships in unlisted subsidiaries of ArcelorMittal.
Hendrik ("Kobus") Verster (appointed 27 August 2009, resigned 13
August 2010) (Non-Executive Director)
Mr Verster has 15 years finance experience within the ArcelorMittal
Group. He was Executive Director Finance for ArcelorMittal South
Africa and a Board member of various unlisted ArcelorMittal Group
companies. Mr Verster is also a Director of the National Business
Initiative in South Africa, a regional partner to the World Business
Council for Sustainable Development, a volunteer group of leading
national and multi-national companies which work together towards
sustainable growth and development through partnerships, practical
programmes and policy engagement.
Shannon Coates (Company Secretary)
Ms Coates held the position of Company Secretary for the financial
year and is a qualified lawyer with over 17 years of experience in
corporate law and compliance.
Directorships in other listed entities
Directorships of other listed entities held by Directors of the
Company during the last three years immediately before the end of
the year are as follows:
Director Company Period of directorship
From To
Mr Richard Namakwa Diamond Company NL 2003 2008
Linnell
GRD Minproc Ltd 2004 2009
Chrome Corporation Limited 2005 2009
GMA Resources plc 2003 2009
Falkland Gold and Minerals plc 2004 2008
SacOil Holdings Limited 2002 Present
(previously SA Mineral
Corporation Limited)
Maghreb Minerals plc 2008 Present
IPSA Group plc 2010 Present
Brinkley Mining plc 2007 2009
Mag Industries Corp 2002 Present
Incorporated
Rockwell Diamonds Incorporated 2009 Present
Mr Simon Farrell Kenmare Resources plc 2002 Present
Bellzone Mining plc 2010 Present
Mr John Firestone Resources Limited 2009 Present
Wallington
Keaton Energy Limited 2008 2010
Mr Blair Sergeant Vmoto Limited 2004 2009
Millepede International Limited 2002 2008
Ram Resources Limited 2008 2010
Prof Alfred - - -
Nevhutanda
Mr Peter Cordin Dragon Mining Limited 2006 Present
Vital Metals Limited 2009 Present
Mr Steve Bywater GCM Resources plc 2006 Present
Regent Pacific Group 2007 Present
Mr Pierre Leonard - - -
Mr Hendrik ArcelorMittal South Africa 2006 2010
Verster Limited
Mr David Murray - - -
Meetings of Directors
The following table sets out the number of meetings of the Company`s
Directors held during the year ended 30 June 2010 that each Director
was eligible to attend and the number of meetings attended by each
Director:
Board Meetings
Director Held Attended
Mr R Linnell 10 9
Mr S Farrell 10 10
Mr J Wallington - -
Mr B Sergeant 10 9
Mr P Cordin 10 10
Mr S Bywater 10 10
Mr P Leonard 1 1
Prof A Nevhutanda 10 8
Mr H Verster 9 6
Principal Activities
The principal activity of the Consolidated Entity is the
exploration, development and mining of its coal interests in South
Africa. During the 2010 financial year, the Company commenced
production of export quality thermal coal from its Mooiplaats
Colliery in Mpumalanga, South Africa. The Company also completed the
acquisition of the NuCoal group of companies which includes the
Woestalleen, Klipbank and Zonnebloem collieries, as well as several
other prospects. CoAL commenced exporting coal from the Matola
Terminal in Maputo, Mozambique, and the development of the port will
ensure the Company has sufficient export capacity to overcome one of
the significant infrastructure constraints faced by most bulk
commodity miners.
During the year, the Company:
- Obtained a New Order Mining Right ("NOMR") for the Vele coking
coal project ("Vele Colliery");
- Acquired NuCoal Mining (Pty) Ltd ("NuCoal") comprising the
Woestalleen processing facility, the Zonnebloem, Klipbank and
Hartogshoop coal mines ("Woestalleen Colliery") and the
Opgoedenhoop and Klipfontein coal projects;
- Executed an Exchange of Prospecting Rights Agreement ("Rio Farm
Swap Agreement") with subsidiaries of the Rio Tinto Group to
formalise the farm swap of properties proximate to the Makhado
coking coal project ("Makhado Project");
- Completed the acquisition of the remaining 26% interest in
Limpopo Coal Company (Pty) Limited ("Limpopo Coal"), the owner
of the Vele Colliery;
- Completed construction of the Company`s laboratory in
Polokwane, which is expected to reduce time delays for thermal
and coking coal sample analysis;
- Received a New Order Prospecting Right ("NOPR") for coal bed
methane over an area measuring 564 km2 in the Limpopo Province
which includes the Makhado Project as well as neighbouring
areas;
- Received approval from the South African Department of Mineral
Resources ("DMR") for the extraction of a bulk sample from the
Makhado Project for delivery to ArcelorMittal South Africa
Limited ("ArcelorMittal SA");
- Was granted a conditional NOMR for the Holfontein coal project
("Holfontein Project") near Secunda in the Mpumalanga Province;
- Raised over $200 million via share placements to fund the
acquisition of NuCoal, development of the Vele Colliery and
Mooiplaats Colliery, and other general working capital
requirements;
- Appointed Mr John Wallington as Chief Executive Officer ("CEO")
and Executive Director;
- Achieved run of mine ("ROM") production for the year of
1,876,619 tonnes;
- Achieved 1,000 fatality free production shifts at the
Zonnebloem open cast mine; and
- Made first sales of coal from Mooiplaats Colliery including
maiden export coal and lower grade middlings coal to Eskom.
Results
The loss of the Consolidated Entity for the 2010 financial year
after income tax and minority interests was $101,441,293 (2009: loss
of $14,519,976). The cash balance at the end of the year was $101
million.
Dividends Paid or Recommended
No amounts were paid or declared by way of dividend by the Company.
The Directors do not recommend payment of a dividend in respect of
the financial year ended 30 June 2010.
Share Issues
The Company raised over $200 million during the year through share
placements. The proceeds of the issues were used to fund the
acquisition of NuCoal, development of the Vele Colliery and the
Mooiplaats Colliery, as well as general working capital. 1,990,000
shares were issued for the acquisition of 6% of Limpopo Coal Company
(Pty) Ltd, the Company that owns the Vele Colliery. A further
5,625,000 shares were issued for the remaining 20% of the Vele
Colliery.
Recognition of the Holfontein Project
The Holfontein Project continues to be recognised as a non-current
investment held for sale and the Company expects to enter a formal
sale process in the second half of 2010.
Disposal of Interest in Subsidiaries
During the year, the Company did not dispose of any subsidiary or
associate companies.
Operations
During the year, the operations of the Consolidated Entity included:
- Mooiplaats Colliery, based in the Mpumalanga Province;
- Woestalleen Colliery (incorporating the NuCoal Group), based in
the Mpumalanga Province;
- Vele Colliery, based in the Limpopo Province;
- Makhado Project, based in the Limpopo Province;
- Holfontein Project, based in the Mpumalanga Province (classified
as held for sale);
- Pan Africa Drilling, a drilling company based in Madagascar;
- Coal of Madagascar, coal project located in Madagascar;
- Polokwane Coal Laboratory, located in the Limpopo Province;
- NiMag Group, manufacturing and distribution of nickel and
magnesium alloys.
Review of Financial Position
Liquidity and funding
The net assets of the Consolidated Entity increased from $523
million in June 2009 to over $620 million in June 2010. This was
primarily due to increases in property, plant and equipment at
yearend of $182.9 million (2009: $99 million) and a $26 million
increase in development assets. During the year, the Group impaired
investments where the facts and circumstances suggested that the
carrying amount exceeded the recoverable amount.
Operating Profit Reconstruction 2010 2009
$ $
Profit/ (loss) after tax for the year (101,441,293) (14,519,976)
Tax (12,350,743) 316,075
Interest paid 1,216,008 127,427
Interest received (2,776,708) (12,650,896)
EBIT/ (LBIT) (115,352,736) (26,730,370)
`Non-ordinary` items recognised
Options granted 1,995,871 273,728
Currency adjustment (3,343,210) (1,702,260)
Nickel revaluation (225,979) 1,697,664
Depreciation & Amortisation 15,985,617 3,982,844
Impairment of investments 10,465,095 3,457,074
Impairment of assets available for 8,386,435 -
sale
Impairment of Mooiplaats Colliery 52,779,745 -
Amortisation of mining assets 12,786,703
Amortisation of logistics assets 2,208,375 -
Take or Pay Obligations 3,625,644 3,945,804
`Operating` profit/ (loss) (10,688,440) (15,075,515)
Included in the taxation movement for the year is income tax on
profits from NiMag and the Woestalleen Colliery, a deferred tax
asset movement of $12 million attributable to differences between
accounting treatment and revenue authority rates of depreciation on
mining related assets in South Africa and, the creation of a $34
million deferred tax liability as a result of the acquisition of the
Woestalleen Colliery. This deferred tax liability will be amortised
over the expected remaining life of the asset.
The $10 million decline in the interest revenue accounts for the
significant reduction in passive revenue and is a direct result of
reduced cash holdings during the year. Cash was utilised to fund the
development of the Mooiplaats and Vele Collieries and the
acquisition of the Woestalleen Colliery. Depreciation for the year
increased significantly as the Mooiplaats Colliery commenced
producing export quality thermal coal resulting in full depreciation
charges during the year.
The impairment of investments included a charge of $10.4 million
which largely relates to fair value adjustments to listed and
unlisted investments.
During the period, the Directors assessed the carrying value of the
investment in the Holfontein Project resulting in an $8,386,435
impairment to the project. The Mooiplaats Colliery was impaired by
$52.7 million also as a result of an independent assessment of the
project. CoAL`s investment in the Mooiplaats Colliery includes the
investment cost price of $128 million, fixed assets of $97 million
and other capital expenditure of $57 million.
Logistics assets have been amortised over the remaining term of use
and take or pay obligations are expected to be eradicated from 2010
as CoAL increased production from the Mooiplaats and Woestalleen
Collieries.
The Group raised over $200 million during the year via share
placements. The funds raised were used to fund the acquisition of
NuCoal, the development of the Vele and Mooiplaats Collieries,
exploration and general working capital requirements.
Impact of legislation and other external requirements
During the period, there were no changes in environmental or other
legislative requirements during the year that have significantly
impacted the results or operations of the Consolidated Entity.
Future Developments, Prospects and Business Strategies
Strategic direction
CoAL is primarily focused on the acquisition, exploration,
development and mining of thermal and coking coal projects. The
Company currently has two operating thermal coal collieries as well
as coking coal projects in various stages of exploration and
development, as well as the NiMag Group, which manufactures nickel
magnesium alloys.
The expansion of the Mooiplaats and Woestalleen Collieries, as well
as the development of the Vele Colliery and the Makhado Project, is
expected to ensure that CoAL will qualify as a significant coal
producer, supplying thermal and metallurgical coal annually to South
African and export customers.
The Company`s coking coal projects located in the Limpopo Province -
the Makhado Project and the Vele Colliery - yielded significant coal
resources. Resource updates reflected coal resources on the Makhado
Project of 947 million gross tonnes in situ and over 813 million
gross tonnes in situ of coal at the Vele Colliery. Construction of
the Company`s coal analytical laboratory has resulted in accelerated
analysis of coal samples, reducing one of the significant delays
facing coal exploration and mining companies.
CoAL is currently utilising its 1 million tonnes per annum ("mtpa")
export capacity at the Matola Terminal in Mozambique. The Company
has exercised its option to participate in 100% of the Phase 3
expansion at the Matola Terminal and expects the additional 2mtpa of
export capacity to be available by the end of 2010. The results of
the feasibility study to increase the annual capacity at the Matola
Terminal by a further 10mtpa is also expected by the end of 2010.
Changes in State of Affairs
Significant changes in the state of affairs of the Consolidated
Entity during the financial year were as follows:
Shares:
Date Number of Purpose Issued shares
shares issued
1 July 2009 Opening balance 411,919,636
1 October 2009 465,239 Exercise of Class E 412,384,875
options at GBP0.65 per
share
23 October 1,990,000 Issue of shares to 414,374,875
2009 acquire 6% of the Vele
Colliery
3 November 59,867,731 Issue of shares to raise 474,242,606
2009 capital
13 November 79,488 Exercise of Class E 474,322,094
2009 options at GBP0.65 per
share
26 November 91,817 Exercise of Class E 474,413,911
2009 options at GBP0.65 per
share
19 January 125,002 Exercise of Class A 474,538,913
2010 options at 50 cents per
share
25 February 350,000 Issue of shares in lieu 474,888,913
2010 of professional fees
25 February 5,625,750 Issue of shares to 480,514,663
2010 acquire 20% of the Vele
Colliery
17 June 2010 50,000,000 Issue of shares to raise 530,514,663
capital
The proceeds of the shares issued were used to fund the acquisition
of NuCoal and the development of the Vele and Mooiplaats Collieries,
exploration and for general working capital requirements.
Options issued:
Date Purpose Issued Expiry date Exercise
price
8 December Granted to Simon Farrell 5,000,00 30 November $2.74
2009 as Managing Director 0 2014
(now Executive Deputy
Chairman) and Blair
Sergeant as Finance
Director as approved by
shareholders on 30
November 2009
25 Granted to staff as part 912,500 30 June $1.90
February of staff incentive 2014
2010 scheme approved by
shareholders at the
November 2009 Annual
General Meeting
Likely Developments
CoAL will continue to expand its coal interests in Southern Africa.
It has established its first operating coal mine in South Africa,
namely the Mooiplaats Colliery, acquired the Woestalleen thermal
coal operations and processing plant and expects to commence mining
at the Vele Colliery once all required regulatory approvals have
been obtained. The Company intends lodging the Makhado Project NOMR
application once the relevant approvals have been obtained for the
transfer of the NOPR from Rio Tinto. The Company will also pursue
potential investment opportunities in the mining and metal
processing industries during the forthcoming year.
Events Subsequent to Balance Date
Pre-Compliance Notices regarding the Vele Colliery
During August, CoAL responded to a press article published by
Reuters on 30 July 2010 regarding comments made by the South African
Minister of Water and Environmental Affairs, Ms Buyelwa Sonjica,
relating to its Vele Colliery.
On 2 August 2010, the Company stated that all activities undertaken
at the Vele Colliery had been carried out in accordance with the
NOMR granted for the Vele Colliery and the Company had not
undertaken any activities for which authorisation had not been
given. The NOMR, which was executed on 19 March 2010, together with
the approved Environmental Management Plan in respect of the Vele
Colliery, as well as the rights afforded the Company under the South
African Mineral and Petroleum Resources Development Act ("MPRDA")
permitted it to start development activities on site.
The Company acknowledged that on 7 April 2010, the South African
Department of Environmental Affairs ("DEA") refused CoAL
authorisation to build an access road on one of the CoAL owned Vele
farms, Erfrust 123 MS, adjoining the Vele Colliery mining right area
and to construct above ground bulk fuel storage facilities. CoAL has
appealed these decisions and clarified that it has not and will not
start construction of this access road on Erfrust or storage
facilities until the required approvals have been received. Although
the proposed access road does not prevent the Vele Colliery from
operating, it would considerably shorten the distance from the mine
site to the main road.
CoAL sought these additional authorisations in accordance with the
requirements of the South African National Environmental Management
Act, Act No. 107 of 1998 ("NEMA"). The requirement to approve these
additional activities are listed under NEMA, but not directly
related to the authorised mining operations. The Company has been
served with two pre-compliance notices ("Compliance Notice") from
the DEA alleging various matters, including that the Vele Colliery
has proceeded with the construction of the access road and storage
facilities.
As stated above, the Company has not undertaken any activities for
which authority has not been granted.
The Company still awaits approval of its application for an
Integrated Water Use Licence ("IWUL") for the Vele Colliery which
was submitted to the South African Department of Water Affairs
("DWAF") on 10 November 2009. CoAL is liaising with the relevant
authorities on an ongoing basis to enable the granting of the IWUL,
which is required before the Company can commence any mining or
processing activities at the Vele Colliery. However the IWUL is not
required for the development activities which have been carried out
to date.
On 1 September 2010 the Company disclosed that it had held several
constructive meetings with the DEA, including the Director General.
CoAL has adhered to the Compliance Notice issued by the DEA and is
in the process of submitting rectification applications in terms of
section 24G of NEMA to continue with the activities. The Company has
also applied to the Minister for the suspension of the Compliance
Notice during this process.
The Company has also applied to DWAF regarding the directive
requesting the cessation of related specific activities pending the
issue of the IWUL. As required in the directive, an Independent
Environmental Assessment Practitioner has been appointed to assess
the current and proposed activities in conjunction with the IWUL
process with respect to the impact on the risks to the water source.
CoAL has made significant progress in satisfying the technical
requirements raised by the Department and the Company is confident
that with continued liaison between itself, the DEA and DWAF, the
issues will be satisfactorily resolved. The timelines required to
complete the processes have resulted in
the Company having no choice but to reduce the workforce at the Vele
Colliery
by 596 people. The Company expects to re-commence production in late
2010.
Appointment of a Senior Independent Non-Executive Director
On 8 September 2010, the Company announced that it has appointed
Mr David Murray as Senior Independent Non-Executive Director of the
Company, effective immediately. Mr Murray has held a number of
senior positions in the global coal industry, including Managing
Director of Ingwe Coal Corporation (formerly Trans-Natal Coal
Corporation Limited), Chief Executive of BHP
Billiton Mitsubishi Alliance and President of Energy Coal Sector
Group at
BHP Billiton Limited, a position he held until December 2009.
Mr Murray holds a Bachelor of Science Degree (Civil Engineering)
from the University of KwaZulu-Natal and a Post Graduate Diploma in
Mining Engineering from the University of Pretoria. He has also
completed the Advanced Executive Program from the University of
South Africa.
Approval received for the Rio Tinto Farm Swap
As announced on 13 September 2010, CoAL received confirmation from
the DMR that the application for Ministerial consent in terms of the
MPRDA to effect the Rio Farm Swap Agreement with Kwezi Mining and
Exploration (Proprietary) Limited ("Kwezi") and Chapudi Coal
(Proprietary) Limited ("Chapudi"), joint venture companies held by
the Rio Tinto Group and the Kwezi Group of South Africa had been
granted by the DMR.
This rationalisation of the farms owned by Chapudi, Kwezi and CoAL
provides significant benefits to all parties in terms of creating
numerous contiguous, well defined and economic coal projects and
allows CoAL to lodge a NOMR application for the Company`s flagship
Makhado Project. The NOMR application is expected to be lodged
before the end of the calendar year, followed closely by an
application for an IWUL and further relevant approvals, as required.
The Rio Farm Swap Agreement creates another three significant coal
projects around the Makhado Project, namely the Mount Stuart coking
coal project, the Voorburg coking coal project and the Jutland
coking coal project, together with an additional two farms which
will form a natural extension to Makhado.
Mount Stuart coking coal project
This project comprises the farms Mount Stuart, Ter Blanche,
Septimus, Schuitdrift, Riet, Stayt and Nakab and was subject to an
intensive drilling program by Iscor in the early 1980`s with some
318 boreholes drilled on the three farms, Mount Stuart, Ter Blanche
and Septimus; and 13 boreholes on the remaining farms. The
historical borehole information is currently undergoing a validation
process with the information having been sourced from the South
African Council for Geoscience. This compares to the 351 boreholes
that were drilled by Iscor on the seven Makhado farms, including the
two farm extension to the east.
The historical data indicates that there is a substantial area of
open-castable coal with a general dip at less than 8? to the North,
North-West and of a size and quality similar to that at Makhado.
Interestingly, the yields of coking coal appear to be significantly
higher than those at Makhado, thereby providing an exciting
opportunity to create a meaningful addition to CoAL`s coking coal
portfolio. The Company intends on undertaking an extensive drilling
program in order to validate the historical borehole information and
in the process, generate a Australasian Joint Ore Reserves Committee
("JORC")/ South African Code for Reporting of Exploration Results,
Mineral Resources and Mineral Reserves ("SAMREC") compliant
resource.
Voorburg coking coal project
The project com
