| Mon 19 Sep 2011, 8:00 | | CZA - Coal of Africa Limited - Annual financial statements commentary and |
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CZA
CZA
CZA - Coal of Africa Limited - Annual financial statements commentary and
project update
Coal of Africa Limited
(Incorporated and registered in Australia)
(Registration number ABN 008 905 388)
JSE Share code: CZA
ASX Share code: CZA
AIM Share code: CZA
ISIN AU000000CZA6
("CoAL" or the "Company")
ANNUAL FINANCIAL STATEMENTS COMMENTARY AND PROJECT UPDATE
CoAL the coal exploration, development and mining company operating in South
Africa and listed on the ASX, AIM and JSE, is pleased to provide a copy of
its Annual Financial Statements for the year ended 30 June 2011 which are
available on the Company`s website on www.coalofafrica.com. The financial
summary and commentary on the results are provided below.
Operational highlights
- 4.409 million run of mine ("ROM") tonnes (FY2010: 2.515 million tonnes)
of thermal coal produced from the Woestalleen and Mooiplaats Collieries,
up 75% year on year.
- 4.997 million ROM tonnes (FY2010: 2.317 million tonnes) of thermal coal
processed, including 0.472 million ROM tonnes (FY2010: 0.262 million
tonnes) of purchased coal.
- 3.316 million saleable tonnes (FY2010: 1.308 million tonnes), up 154%
year on year representing an overall yield of 66.4% (FY2010: 56.4%), up
10.0% year on year.
- Phase 3 expansion of the Matola Terminal in Maputo, Mozambique ("Matola
Terminal"), completed in March 2011, increasing CoAL`s effective
throughput allocation from 1.0 million tonnes per annum ("mtpa") to 3.0
mtpa.
- 100 additional wagons (total of 850 wagons) utilised by Transnet Freight
Rail ("TFR") on the Maputo corridor to meet increased port allocation
and a reduction in turnaround times from eight days to four days.
- Environmental authorisation received for the Vele coking coal colliery
("Vele Colliery"), paving the way for operations to resume. The
Integrated Water Use Licence ("IWUL") for the project was granted in
April 2011 but was automatically suspended by operation of law following
an appeal by non-governmental organisations ("NGOs"). CoAL has
petitioned the Minister for Environment and Water Affairs ("the
Minister"), who has the power and authority to do so, to lift the
suspension of the IWUL. Activities which do not require Vele Colliery
to engage in water uses requiring authorisation under the IWUL restarted
at the Vele Colliery on 5 August 2011.
- Definitive Feasibility Study ("DFS") for the Makhado coking coal project
("Makhado Project") in the final stages with the infrastructure design
substantially complete. Product trials at ArcelorMittal South Africa
Limited ("AMSA") nearing completion, leading to further discussions to
convert the signed letter of intent between CoAL and AMSA, into a
commercial off-take agreement for coking coal.
Post year-end operational events:
- Memorandum of Agreement ("MOA") signed with Department of Environmental
Affairs ("DEA"), South African National Parks ("SANParks") and CoAL,
paving the way for collaborative and responsible mine development in the
Limpopo Province. The MOA is pursuant to conditions set out as part of
the Vele Colliery environmental authorisation and seeks to ensure the
conservation and integrity of the globally significant natural and
cultural Heritage Site and to maintain and strengthen co-operation
between CoAL, DEA and SANParks.
- Progress with Rio Tinto Minerals Development Limited ("Rio Tinto")
towards conclusion of the Rio Tinto/Chapudi transaction.
- Successful transition from contract miner to owner-operator at the
Mooiplaats thermal coal colliery ("Mooiplaats Colliery").
- Complete Independent Technical Statement on all assets by Venmyn Rand
(Pty) Ltd ("Venmyn").
Financial highlights (all amounts stated in United States Dollars)
- Change in presentation currency from the Australian Dollar to the United
States Dollar.
- US$261.4 million (FY2010: US$98.4 million) in revenue generated, up 166%
year on year, with US$229.2 million (FY2010: US$75.9 million) from
thermal coal sales and US$32.2 million (FY2010: US$20.3 million)
generated by the NiMag business from alloy sales, development and other
revenue.
- US$37.9 million (FY2010: US$27.1 million) in gross profit, up 40% year
on year.
- Operating costs, non-capitalised overheads and other items amounts to
US$49.3 million (FY2010: US$49.6 million), marginally lower year on
year.
- Adjusted loss before tax (excluding certain non-cash items and foreign
exchange gains and losses) of US$11.4 million (2010: US$22.5 million),
down 49% year on year.
- Foreign exchange losses of US$29.9 million (FY2010: US$3.0 million net
gain) of which US$29.3 million (US$2.7m loss) was unrealised and non-
cash related.
- Significant non-cash charges of US$176.9 million (FY2010: US$159.2
million) including:
- impairment losses of US$97.4 million (FY2010: US$54.0 million);
- depreciation and amortisation of US$79.5 million (FY2010: US$26.7
million);
- BBBEE share-based payment expenses (option) US$nil (FY2010:US$78.5
million).
- Net loss after tax for the year, including non-cash items and foreign
exchange losses, of US$219.0 million (FY2010: US$167.8 million).
- Total unrestricted cash balances and undrawn Deutsche Bank facilities of
US$40.3 million at year-end.
John Wallington, CEO, commented:
"Over the past year, the Company has undergone a substantial transformation
from a junior explorer to one that is developing the necessary structures,
processes and resources required to become a significant developer of large-
scale mining projects and operations. In 2010, the Directors identified the
need to transform the organisation, which resulted in my appointment in mid-
June 2010 and the more recent appointment of Wayne Koonin as Financial
Director. The new management team has made significant progress in a number
of key areas, most importantly improving relationships with key stakeholders,
including the Government, in order for the Company to meet its vision of
adding substantial value for shareholders and all other stakeholders
associated with its projects.
"In particular, we are committed to raising the profile and reputation of the
Company as we move forward with the future development of the business. The
recent MOA signed with the DEA and SANParks is a landmark event in the
Company`s development, and underscores our commitment to undertake the
advancement of our mining projects in a socially and environmentally
responsible manner. The Company has made considerable progress towards
restarting delayed development activities at the Vele Colliery and will fully
restart should the lifting of the suspension of the IWUL occur. We have also
made substantial progress on the Makhado Project over the last year and the
prospects remain very encouraging, including the potential to produce semi-
hard coking coal with several excellent parameters."
OPERATIONAL REVIEW
Woestalleen Complex
The Woestalleen Complex comprises three open cast thermal coal pits, namely
Vuna (also known as Zonnebloem), Hartogshoop and Klipbank open cast mines,
and three beneficiation plants with the capacity to process 350,000 ROM feed
tonnes per month. Following the completion of the NuCoal acquisition
effective 1 January 2010, the FY2010 CoAL financial statements include six
months of production figures for Woestalleen. The FY2011 financial statements
include production for the full year. During that year, the Klipbank and
Hartogshoop Collieries were mined out and production was increased at the
Vuna Colliery. The remaining life of mine ("LOM") at Vuna is estimated at
approximately two years and management continues to evaluate alternative
options to secure additional coal rights in the vicinity, in order to ensure
the ongoing utilisation of the beneficiation plant.
Operational Statistics (all Total Total Unit %
amounts in tonnes unless FY2011 FY2010(1) Variance Variance
stated otherwise)
ROM production 3,525,906 2,114,101 1,411,805 67%
Total coal feed to plant 3,530,664 1,657,118 1,873,546 113%
Overall yield (percentage) 65.9% 61.6% 4.3% 7%
Saleable coal produced 2,324,972 1,020,140 1,304,832 128%
Export coal 2,021,770 867,761 1,154,009 133%
Middlings coal 303,202 152,379 150,823 99%
Total coal sales 1,920,175 965,623 954,552 99%
Export quality Domestic FOR2 1,607,014 811,892 795,122 98%
Eskom 313,161 153,731 159,430 104%
1. Production for the six months starting 1 January 2010
The volumes (tonnes) reported in the table are post production and
reclassification adjustments.
Arising out of the NuCoal acquisition, Woestalleen had a number of historical
export and domestic coal supply agreements in place at the date of its
acquisition by the Company. As at December 2010, the majority of these
agreements had expired, allowing for an increase in saleable coal to be
railed to the Matola Terminal for sale on the international markets.
In FY2011, ROM production was 3.5Mt (FY2010: 2.1Mt) realizing 2.3Mt (FY2010:
1.0Mt) of saleable coal at an overall yield of 65.9% (FY2010: 61.6%). For
FY2012 ROM production is targeted at 3.4Mt. The Woestalleen Complex generated
revenue of US$115.2 million (FY2010: US$56.2 million) based on 1.9Mt sold.
Based on an assessment of the Vuna Colliery`s LOM by independent mineral
evaluation experts Venmyn, a US$5.1 million (FY2010: US$ nil) non-cash
impairment charge was recorded.
Mooiplaats Colliery
During FY2011, the Mooiplaats Colliery expanded its operations to four
underground sections, using continuous miners. The fourth underground section
was commissioned in November 2010 and development of the fifth underground
section continued as planned, with the acquisition of a fifth continuous
miner. Production from the fifth section is planned to start in October 2011,
with the ramp-up to full production expected to take place by the end of
calendar year 2011.
In FY2011, ROM production was 0.9Mt (FY2010: 0.4Mt) and 0.5Mt (FY2010: 0.3Mt)
of ROM coal was purchased as additional plant feed. Based on 1.5Mt (FY2010:
0.7Mt) ROM feed to the plant, 1.0Mt (FY2010: 0.3Mt) of saleable coal was
produced at an overall yield of 67.6% (FY2010: 43.6%) which was considerably
higher than in the previous year and production transitioned from lean coal
to higher quality export coal. For FY2012 ROM production is targeted at
1.7Mt. The Mooiplaats Colliery generated revenue of US$114.0 million (FY2010:
US$21.9 million) in FY2011 based on sales of 1.5Mt (FY2010: 0.3Mt).
In FY2011, Mooiplaats used a contract miner to operate the four underground
mining sections equipped with continuous miners. Although ROM production
continued to increase during the ramp-up phase, the contract miner was unable
to meet the required production targets and the contract was terminated by
mutual agreement with effect from 30 June 2011. From 1 July 2011, the Company
assumed direct control of mining operations and as part of the transition
process, all employees previously employed by the contractor were employed
directly by Mooiplaats. With the employment of existing staff and as a result
of the underground mining equipment being owned by the mine, the transitional
process took place with minimal disruption to operations.
During the past two-and-a-half months since the transition took place,
Mooiplaats has continued to show a steady improvement in both yield and
production output, with several new production records being achieved during
this period. Having taken direct control of the mining operations, the
Company believes that it is well positioned to continue to achieve an
improvement in operational performance with the resultant cost benefits
expected during FY2012. With the transition to an owner-managed operation,
and with the ramp-up from the fifth section, the mine is targeting average
production of 1.67 million ROM tonnes in FY2012.
Operational Statistics (all Total Total Variance %
amounts in tonnes unless FY2011 FY2010 Variance
stated otherwise)
ROM production 883,036 400,995 482,041 120%
ROM coal purchased 471,824 262,248 209,576 80%
Total coal feed to plant 1,466,136 659,853 806,283 122%
Overall yield (percentage) 67.6% 43.6% 24.0% 55%
Saleable coal produced 991,237 287,688 703,549 245%
Export coal 738,503 192,262 546,241 284%
Middlings coal 252,734 95,426 157,308 165%
Saleable coal purchased 40,298 - 40,298 100%
Total coal sales 1,528,388 323,178 1,205,210 373%
Export quality Matola Terminal 1,069,163 271,269 797,894 294%
Export quality Domestic FOR 195,817 - 195,817 100%
Eskom 263,408 51,909 211,499 407%
The volume (tonnes) reported in the table are post production and
reclassification adjustments.
As part of the financial year-end reporting process, the Mooiplaats Colliery
was independently valued by Venmyn, resulting in the requirement for a non-
cash impairment charge of US$88.5 million (FY2010: US$46.7 million). The
reduction in the net present value is primarily attributable to:
- overall lower production tonnages than historically predicted, reducing
from 2.28 - 3.36 mtpa to a revised level of 1.18 - 1.70 mtpa;
- re-evaluation of the coal qualities in the transition zone from the
north to south section of the mine;
- an increase in the mining horizon cut-off from 1.4 metres to 1.6 metres,
resulting in a reduction in the mining resource from 41.8 million ROM
tonnes to 32.0 million ROM tonnes; and
- significantly higher rail and port costs than originally projected from
the asset.
There are a number of initiatives in place aimed at improving the longer-term
viability of the mine by reducing overall logistic costs and sourcing
additional ROM feed for the plant. The improvement in performance following
the change from a contract mining operation provides further confidence that
the recent initiatives at the mine are having a positive impact.
Export sales
Coal from the Mooiplaats and Woestalleen Collieries sold on the export market
was railed to the Matola Terminal, with a small amount also being transported
to the Richards Bay Coal Terminal. At the end of March 2011, the Phase 3
expansion of the Matola Terminal was completed, resulting in an increase in
the total port capacity from 4 mtpa to 6 mtpa. As a result of this expansion
the Company`s allocation has increased to 3 mtpa.
Following the completion of the Phase 3 expansion, TFR increased the rail
capacity on the Maputo rail corridor by adding an additional 100 wagons
resulting in a total of 850 wagons operating on the line. The additional
capacity and joint operational initiatives to improve the operational
performance on the line by TFR and the port operator resulted in a reduction
in turnaround times from approximately eight days to approximately four days.
This resulted in an increase in the delivered export coal through the Matola
Terminal.
The Company is presently engaging with TFR to resolve issues relating to
current rail tariffs and to discuss potential opportunities to meet the
increased throughput capacity requirement with the development of Phase 4 at
Matola.
Vele Colliery
Following the lifting of the Compliance Notice on 5 July 2011 and the
subsequent automatic suspension by operation of law of the IWUL on 29 July
2011 as a result of an appeal being lodged by the NGOs, limited work
restarted at the Vele Colliery on 5 August 2011. The Company has implemented
a concentrated work programme in respect of aspects not requiring the Company
to engage in a water use which requires authorisation in terms of the IWUL.
This included an assessment of repairs required to the plant while it
remained idle during the past year as well as completion of the remaining
construction of the plant and certain earthworks.
A petition was submitted by the Company to the Minister on 8 August 2011,
requesting her to lift the suspension on the IWUL. The Minister has the power
and authority to do so. Further representations were filed by the NGOs on 7
September 2011 in relation to the Company`s petition. CoAL currently awaits
the outcome of the Minister`s decision and following this, will update the
markets accordingly. Once in operation, Vele is targeting production of 2.7
million ROM tonnes per annum and 1.0 mtpa of saleable coking coal during the
initial phase of the mining operation.
On 1 September 2011, a MOA was signed between the DEA, SANParks and the
Company. This historic agreement in respect of the Mapungubwe Cultural
Landscape World Heritage Site paves the way for a new approach to working
with the Government in this sensitive area. The MOA seeks to ensure the
conservation and integrity of the globally significant natural and cultural
heritage site and to maintain and strengthen co-operation between the DEA,
SANParks and the Company.
With the help of the DEA and SANParks, the Company is seeking to establish an
appropriate balance between conservation and economic development. CoAL
recognises its responsibility to protect the natural and cultural abundance
of the heritage site, while substantially increasing the size of the local
economy and creating desperately needed jobs in the vicinity.
The potential value for Vele remains significant, based on the substantial
resource base that has the capability to produce both semi-soft coking and
thermal coal.
Makhado Project
Progress continues to be made on the Makhado Project with the DFS in the
final stages of preparation. Management is currently assessing optimisation
studies prior to finalisation of the project for presentation to the Board of
Directors of CoAL ("Board"). The Company expects to submit the DFS to the
Board before the end of the 2011 calendar year.
The application for the New Order Mining Right was submitted in January 2011.
The consultation process with interested and affected parties and all
detailed technical studies needed for the submission of the Environmental
Management Programme and IWUL are progressing well. These processes have been
extensive and demonstrate CoAL`s further commitment to conduct its affairs to
the highest standards.
Following the extraction of the bulk sample, detailed tests have confirmed
that the Makhado Project will be capable of producing a semi-hard coking coal
with several excellent parameters. In accordance with the memorandum of
understanding entered into between the Company and AMSA, samples have been
provided to AMSA for testing purposes. In addition, the Company has
commissioned an independent study by international coking coal experts to
assist in the evaluation of the coking coal properties. This will determine
the potential value of the product and ultimately dictate its market value.
Upon finalisation thereof, discussions will take place with Exxaro Resources
Limited regarding the exercise of its option to acquire up to a 30% interest
in the Makhado Project.
The co-operation of the regulatory authorities and local communities has been
encouraging and the Company remains confident about the prospects for the
Makhado Project.
Rio Tinto/Chapudi transaction
After the end of FY2011, further progress has been made on the Rio
Tinto/Chapudi transaction announced in November 2010. On 15 August 2011, CoAL
announced that the various commercial conditions precedent required from the
shareholders had been fulfilled and that the date for fulfillment of the
outstanding regulatory approvals has been extended to 30 April 2012.
Of the original purchase consideration of US$75 million, US$73 million
remains payable in two separate tranches of US$43 million and US$30 million.
Subject to timing of the remaining regulatory approvals, these amounts are
anticipated to be paid by early 2012 and by mid-2013 respectively.
The Company is in the process of mobilising the exploration programme on the
various properties, which will further increase the resource base and unlock
the potential value from these assets.
The transaction consolidates various tenements and will make CoAL a
substantial holder of coking coal New Order Prospecting Rights in the
Soutpansberg Coalfield (located in the Limpopo Province) when completed. With
the scale and contiguous nature of these ore bodies, the Company continues to
work towards becoming the primary South African coking coal exporting
company.
Resource Statement
At the request of the Board, an Independent Technical Statement has been
compiled by Venmyn to provide a summary of the principal coal assets of CoAL
with particular reference to declared coal resources and reserves. Set out
below is a summary of CoAL`s reserves and resources, which has been extracted
without adjustment from the Independent Technical Statement. For full details
on CoAL`s reserves and resource estimates, and the basis on which those
estimates were prepared, refer to the full Independent Technical Statement,
which can be found on the Company`s website www.coalofafrica.com
Coal Reserves of CoAL`s Principal Mineral Assets
PROJECT MINEABLE RoM SALEABLE SALEABLE COAL
NAME TONNES IN TONNAGE (t) PRIMARY SECONDARY ATTRIBUTABL
SITU (MTIS) PRODUCT (t) PRODUCT (t) E %
Mooiplaa 31,590,200 18,656,800 9,433,300 779,900 100%
ts
Vuna 6,155,700 6,547,400 3,381,600 2,101,200 *100%
Vele 332,709,000 299,391,000 92,387,000 0 100%
Total 370,454,900 324,595,200 105,201,900 2,881,100 100%
* CoAL has a 49% legal interest but a 100% economic interest in Vuna.
Coal Resources of CoAL`s Principal Mineral Assets (Inclusive of Reserves)
PROJECT GROSS TONNES TOTAL TONNES MINEABLE COAL
NAME IN SITU (GTIS) IN SITU (TTIS) TONNES IN SITU ATTRIBUTABLE
(MTIS) %
Mooiplaats 92,322,689 85,619,262 50,760,100 100%
Vuna 6,820,858 6,479,815 6,155,700 *100%
Vele 803,820,826 680,202,877 369,629,400 100%
Makhado 879,734,822 764,699,202 411,156,500 100%
Voorburg 217,778,959 188,929,976 181,811,100 100%
Mount 407,162,828 325,730,262 55,460,000 100%
Stuart
Total 2,407,640,982 2,051,661,394 1,074,972,800 100%
* CoAL has a 49% legal interest but a 100% economic interest in Vuna.
Source: Venmyn Rand (Pty) Ltd - Independent Technical Statement for Coal of
Africa as at 18 September 2011.
Differences between resource estimates
The estimates prepared by Venmyn for the Mooiplaats and Woestalleen
Collieries are broadly in line with the resource estimates for this
collieries prepared during 2010 by The Mineral Corporation ("TMC") and
Caracle Creek International Consulting (Pty) Ltd ("CCIC"), taking into
account mining depletion and additional drilling during the intervening
period. However, it should be noted that:
- the Venmyn MTIS estimate for the Vele Colliery 369.6 million tonnes
("Mt") is significantly lower than the corresponding TMC estimate from
2010 (690.6Mt), principally as a result of the application of a minimum
and maximum mining height of 1.4 metres and 4.5 metres respectively, and
consideration of only the Bottom Lower Seam for underground mining; and
- both the Venmyn GTIS and MTIS estimates for the Makhado Project (879.7Mt
and 411.2Mt respectively) are significantly higher than the
corresponding TMC estimates (323.6Mt and 289.0Mt respectively),
principally because, in the case of the GTIS estimates, TMC only
considered opencastable resources to a depth of 140 metres whereas the
Venmyn estimate was based on all coal greater than 0.5 metres in
thickness and, in the case of the MTIS estimates, Venmyn considered all
coal to a maximum depth of 200 metres and applied a different approach
to discounting the GTIS estimates.
For a more detailed explanation of the differences between the Venmyn
estimates and the TMC and CCIC estimates, see the Independent Technical
Statement.
On completion of the Rio Tinto/Chapudi transaction CoAL will acquire the
Chapudi Project, as well as prospecting rights for various other project
areas within the Soutpansberg Coalfield. Although the Independent Technical
Statement does not include an estimate of coal resources or reserves for
these projects, as previously announced in November 2010 upon signature of
the agreement with Rio Tinto, the Chapudi Project has estimated coal
resources of 1.040 billion tonnes.
Financial review
During the year, the Company changed its presentation currency from the
Australian Dollar to the United States Dollar as the Board considers that the
latter more appropriately reflects the results of operations and the
financial position of CoAL and its subsidiaries on the basis that the
underlying commodities from its operating coal mines are principally sold in
that currency. Accordingly, the FY2010 prior year comparatives have been
retrospectively adjusted to reflect this change.
With the acquisition of NuCoal with effect from 1 January 2010, Woestalleen`s
FY2010 results are based on six months production compared to a full year in
FY2011. Production at Mooiplaats started in late 2008 and was in a ramp-up
phase with three underground sections in operation by 30 June 2010. The ramp
up continued in FY2011 increasing from three to four underground sections by
30 June 2011. As a result, the production and financial results from both
thermal coal mines in FY2010 and FY2011 are not directly comparable.
On 31 March 2011, an operating subsidiary of the Company entered into a US$50
million revolving loan facility with Deutsche Bank AG (Amsterdam) and
simultaneously repaid the JP Morgan Cazenove US$20 million loan which was
then in place. As at 30 June 2011, the Company had drawn down US$32.5 million
against the US$50 million facility. Total unrestricted cash and cash
equivalents and available Deutsche Bank facility at year-end was US$40.261
million (FY2010: US$72.054 million), including US$17.500 million (FY2010:
nil) which is undrawn against the Deutsche Bank facility. The facility is
repayable by 23 September 2012.
The following is a summary of the key financial results for FY2011:
- US$261.4 million (FY2010: US$98.4 million) in revenue generated, up 166%
year on year, with US$229.2 million (FY2010: US$75.9 million) from
thermal coal sales and US$32.2 million (FY2010: US$20.3 million)
generated by the NiMag business from alloy sales, development and other
revenue;
- US$37.9 million (FY2010: US$27.1 million) in gross profit, up 40% year
on year;
- operating costs, non-capitalised overheads and other items amounts to
US$49.3 million (FY2010: US$49.6 million), marginally lower year on year
with the inclusion of Woestalleen for a full 12 months in the current
financial year (FY2010: 6 months) and generally higher overhead costs
not capitalised as the Company continued to increase the portfolio of
exploration and development stage projects during FY2011;.
- adjusted loss before tax (excluding certain non-cash items and foreign
exchange gains and losses) of US$11.4 million (FY2010: US$22.5 million),
down 49% year on year;
- foreign exchange losses of US$29.9 million (FY2010: US$3.0 million net
gain) of which US$29.3 million (US$2.7m loss) was unrealised and non-
cash related.
- significant non-cash charges of US$176.9 million (FY2010: US$159.2
million) include:
- impairment losses of US$97.4 million (FY2010: US$54.0 million);
- depreciation and amortisation of US$79.5 million (FY2010: US$26.7
million);
- BBBEE share-based payment expenses (option) US$nil (FY2010: US$78.5
million);
- loss before tax for the year, including non-cash items, of US$218.1
million was US$39.4 million higher than in FY2010 of US$178.7 million
principally as a result of the higher impairment charges in the current
year;
- income tax charge for the year of US$0.9 million (FY2010: US$10.9
million credit) differs from the prior year and was due to the net
effect of various reversals of deferred tax relating to the impairment
charges in the current and prior year;
- net loss after tax for the year, including non-cash items, of US$219.0
million (FY2010: US$167.8 million);
- Total unrestricted cash balances and undrawn Deutsche Bank facilities of
US$40.3 million at year-end.
Impairment losses of US$97.4 million (FY2010: US$54.0 million) relate to the
re-assessment of the carrying value of Mooiplaats and Woestalleen totaling
US$92.3 million (FY2010: US$46.6 million) and assets held for sale totaling
US$5.1 million (FY2010: US$7.4 million).
Depreciation and amortisation relate to the mining assets, plant and
equipment increased from US$26.7 million in FY2010 to US$79.5 million in
FY2011. The increase in the depreciation charge year on year was due to a
reduction in the remaining life and resource at Woestalleen coupled with a
twelve month charge in FY2011 compared to a six month charge in FY2010, since
Woestalleen was only acquired effective 1 January 2010. The re-assessment of
the remaining life of mine at Mooiplaats, also resulted in an increase in
this charge year on year.
The foreign exchange losses of US$29.9 million, of which US$29.3 million is
non-cash and unrealised, is principally as a result of the translation of
inter-company loan balances, the majority of which are denominated in
Australian Dollars or South African Rands, into US Dollars at financial year-
end. The Australian/US Dollar closing exchange rate at financial year-end was
23.7% higher than the previous year and the average rate was 12.1% higher
year on year. Similarly, the South African Rand/US Dollar closing and average
exchange rates strengthened year on year by 10.4% and 7.7% respectively.
The share-based payment expense of US$78.5 million in FY2010 relates to the
fair value adjustment for the option issued to Firefly to acquire 50 million
ordinary shares at 60 pence per share (exercisable between 1 November 2010
and 1 November 2014). There is no corresponding charge in FY2011.
Corporate review
"The Company underwent a significant internal restructuring during FY2011 and
has refocused the business into three core areas, namely exploration,
development and mining. This is in line with the objective to advance the
various exploration and development projects which the Board believes will
provide the greatest potential growth in the business and creation of
additional value for CoAL`s shareholders.
As part of the independent valuation of the Mooiplaats and Woestalleen assets
by Venmyn, further impairment charges were required in FY2011. Management are
confident that the various issues highlighted over the past year have been
adequately addressed, allowing for greater focus on the future operation of
the Company`s assets with the objective of improving performance and
enhancing value.
The progress made at the Vele Colliery is encouraging and we await the
decision by the Minister regarding our petition to lift the suspension of the
IWUL to enable the Company to re-start operations. The Makhado Project
continues to be a key focus area as the next development for the Company with
further updates to be reported in due course. Management is evaluating the
Company`s various other projects in order to prioritise the next development
after the Makhado Project.
To support these various changes, additional management has been employed and
the underlying business systems have been replaced to support the future
growth of the business. After the 2011 financial year-end, the first phase of
the implementation of a unified Enterprise Resource Planning (ERP) financial
and operating system was successfully completed. Once fully operational, the
new system will further strengthen the operational and financial controls
required to manage the various development projects and operating mines.
To conclude, I wish to reiterate the commitment of the Company and myself to
meeting our goals that are captured in the spirit of the MOA with the DEA and
SANParks. We believe that we have put the foundation and building blocks in
place to meet these objectives and in this regard are fortunate to have a
competent, dedicated and loyal team in place that have the desire to see CoAL
succeed."
JOHN WALLINGTON
Chief Executive Officer
A copy of the full Annual Financial Statements for CoAL is available on the
company`s website hosted at www.coalofafrica.com
Bryanston
19 September 2011
JSE Sponsor
Macquarie First South Capital (Pty) Ltd
For more information contact:
John Wallington
Chief Executive Officer
Coal of Africa
+27 11 575 7423
Wayne Koonin
Finance Director
Coal of Africa
+27 11 575 4363
Shannon Coates
Company Secretary
Coal of Africa
+61 893 226 776
Chris Sim/Romil Patel
Nominated Adviser
Evolution Securities
+44 20 7071 4300
Jos Simson/Emily Fenton
Financial PR
Tavistock
+44 207 920 3150
Melanie de Nysschen/
Annerie Britz/
Yvette Labuschagne
JSE Sponsor
Macquarie
+27 11 583 2000
Charmane Russell/James Duncan
Financial PR S.Africa
Russell & Associates
+27 11 880 3924
+27 82 372 5816
www.coalofafrica.com
About CoAL:
CoAL is an AIM/ASX/JSE listed coal exploration, development and mining
company operating in South Africa. CoAL`s key projects include the Vele
Colliery (coking and thermal coal), the Makhado Project (coking coal) and the
Mooiplaats and Woestalleen Collieries (both thermal coal).
The Mooiplaats Colliery commenced production in 2008 and is currently ramping
up to produce 2 Mtpa. The Woestalleen Colliery, acquired through the
acquisition of NuCoal Mining (Pty) Limited in January 2010, currently
processes approximately 2.5Mtpa of saleable coal for domestic and export
markets. The Woestalleen Complex also incorporates three beneficiation plants
with a total processing capacity of 350,000 run of mine feed tonnes per
month.
CoAL`s Vele Colliery is expected to start production in the first half of
2012. During the initial phase, the operation is targeting 2.7 Mtpa ROM
production to produce 1.0Mtpa saleable coking coal.. The Makhado Project,
CoAL`s flagship project in the Soutpansberg coalfield, is well into the
feasibility stage, with a Definitive Feasibility Study nearing completion.
An application for a New Order Mining Right for the Makhado Project was
submitted in January 2011.
In November 2010, CoAL agreed to acquire the Chapudi coal project and several
other coal exploration properties in the Soutpansberg coal basin in South
Africa from the previous owners, including Rio Tinto. Upon completion, the
acquisition of these projects will significantly extend the scale and scope
of certain of CoAL`s existing projects in the region and will more than
double the resource of the existing Makhado Project.
Competent Persons
The information in this announcement that relates to mineral resources or ore
reserves has been compiled by Ms C Telfer (B.Sc. Hons. (Geol.), (DMS) Dip Bus
Man Pr. Sci. Nat., FGSSA, MAusIMM, M.Inst.D) and Mr G Njowa (M.Sc. (Min.
Eng), MRM, B.Sc.Hons. (Min. Eng), Grad CIS, MSAIMM, Pr Eng, MIAS), of Venmyn
Rand (Pty) Ltd, who both have relevant and appropriate experience and
independence to appraise the coal assets. Both Ms C Telfer and Mr G Njowa are
considered "Competent Persons", and each have more than five years relevant
experience in the assessment and evaluation of the types of coal exploration
and mining properties presented in this announcement. Both Ms C Telfer and
Mr G Njowa consent to the inclusion of the resource information in this
announcement in the form and context in which it appears.
Forward looking statements
Certain statements in this announcement are or may constitute `"forward
looking statements". Forward-looking statements can be identified by words
such as "plans", "expects", "intends", "estimates", "will", "may",
"continue", "should" and similar expressions. Such forward-looking statements
are based on numerous assumptions regarding CoAL`s present and future
business strategies and the environment in which CoAL will operate in the
future. By their nature, forward-looking statements involve a number of
risks, uncertainties and assumptions that could cause actual results or
events to differ materially from those expressed or implied by the forward-
looking statements. These risks, uncertainties and assumptions could
adversely affect the outcome and financial effects of the plans and events
described herein. Past performance is not an indication of future results and
past performance should not be taken as a representation that trends or
activities underlying past performance will continue in the future. All views
expressed are based on financial, economic, and other conditions as of the
date hereof and CoAL disclaims any obligation to update any forecast, opinion
or expectation, or other forward looking statement, to reflect events that
occur or circumstances that arise after the date hereof.
Date: 19/09/2011 08:00:07 Produced by the JSE SENS Department.
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