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Universal Coal Plc(Registration number 4482856)
Consolidated Unaudited Half Year Financial Statementsfor the six months ended 31 December 2016
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Universal Coal Plc(Registration number 4482856)Consolidated Unaudited Half Year Financial Statements for the six months ended 31 December 2016
Corporate directory
Directors John Hopkins OAM Non-executive Chairman
Hendrik Bonsma Non-executive Director
Anton Weber Executive Director and ChiefExecutive Officer
Shammy Luvhengo Executive Director
David Twist Non-executive Director
Carlo Baravalle Non-executive Director
Nonkululeko Nyembezi-Heita Non-executive Director
Andries Engelbrecht Non-executive Director
Company secretary
ASX Liaison and local agent
Benjamin Harber (United Kingdom)of Shakespeare Martineau LLP
Emma Lawler (Australia) of Company Matters Proprietary Limited
United Kingdom registered office 6th Floor
60 Gracechurch Street
London EC3V 0HR
United KingdomTelephone: +44 20 7264 4444Facsimile: +44 20 7264 4440
Australian registered office Level 12
680 George Street
Sydney, NSW, 2000
AustraliaTelephone: +61 28 280 7355
Operational office 467 Fehrsen Street
Brooklyn, 0182, Pretoria
South Africa
Telephone: +27 12 460 0805Facsimile: +27 12 460 2417
Auditors BDO LLP
55 Baker StreetLondon W1U 7EUUnited Kingdom
Stock exchange listing Australian Securities Exchange(Share code: UNV)
Share registrars Computershare Investor Services Proprietary LimitedLevel 2, 45 St. Georges TerracePerth WA 6000, AustraliaTelephone: +61 89 323 2000
Computershare Investor Services PlcThe Pavilions, Bridgewater RoadBristol BS99 6ZYUnited KingdomTelephone: +44 87 070 2003
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Universal Coal Plc(Registration number 4482856)Consolidated Unaudited Half Year Financial Statements for the six months ended 31 December 2016
Corporate directory
Bankers HSBC Bank Australia Limited
Level 1, 190 St Georges TerracePerth WA 6000, Australia
HSBC Bank PlcCoventry DSC, Harry Weston RoadBinleyWest Midlands CV3 2TQUnited Kingdom
Investec Bank Limited100 Grayston DriveSandown, Sandton, 2146South AfricaTel: +27 11 286 7000
First National Bank4 First Place, 3rd Floor, BankcityJohannesburg, 2000South AfricaTel: +27 11 352 5601
Solicitors Mayer Brown International LLP201 Bishopgate LondonLondon EC2M EUGUnited Kingdom
Webber Wentzel Attorneys10 Fricker RoadIllovo BoulevardIllovo, Johannesburg, 2196South Africa
Website www.universalcoal.com
Company registration number 4482856
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Universal Coal Plc(Registration number 4482856)Consolidated Unaudited Half Year Financial Statements for the six months ended 31 December 2016
Index
The reports and statements set out below comprise the consolidated unaudited half year financial statements presented to theshareholders:
Index Page
Summary Results 4 - 5
Directors' Report 6 - 9
Directors' Declaration 10
Condensed Consolidated Statement of Financial Position 11
Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income 12
Condensed Consolidated Statement of Cash Flows 13
Condensed Consolidated Statement of Changes in Equity 14
Notes to the Condensed Consolidated Financial Statements 15 - 37
Independent Review Report 38 - 39
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Universal Coal Plc(Registration number 4482856)Consolidated Unaudited Half Year Financial Statements for the six months ended 31 December 2016
Summary Results
1. Review of financial results and activities
All figures are stated in Australian Dollars Six monthsended
31 Dec 2016A$'000
Six monthsended
31 Dec 2015A$'000
Movement%
Revenue 61 067 50 331 21Operating (loss) / profit (4 491) 6 628 (168)(Loss) / profit for the period before taxation (2 424) 18 899 (113)Taxation 675 (1 259) 154(Loss) / profit for the period (1 749) 17 640 (110)Total comprehensive income/(loss) for the periodattributable to equity shareholders 10 047 (4 532) 322
Explanation of above results
Universal Coal generated a loss after taxation for the period of A$1.7 million (31 December 2015: profit of A$17.6 million).Included in the loss after taxation figure for the period is a loss on the sale of assets of A$9.7 million arising on the sale ofunderground mining assets. An underground contract miner was appointed at New Clydesdale Colliery (NCC) and hassupplied new equipment tailored to the current underground conditions. Elimination of the loss on sale of assets(including related deferred tax effects of A$2.7 million) would have resulted in a profit after taxation of A$5.3 million(31 December 2015: profit of A$5.3 million after elimination of the effect of the gain on bargain purchase ofA$14.3 million and related deferred tax of A$2 million. Refer to note 3.
The operating loss of A$4.5 million (31 December 2015: profit of A$6.6 million) is 168% down on the prior period due tothe loss on sale of fixed assets mentioned above, the introduction of the higher cost of underground mining operations atNCC, increased depreciation at Kangala through recovery on a unit of production basis and a reduced product yield at theKangala Colliery. We are expecting a reversal of the product yield trend for the 2017 financial year results as we progressnorthwards toward the better quality coal in the Kangala openpit and through the ability at NCC owing to export andEskom contracts, to now sell both higher and lower quality coal into the export and domestic market respectively.
After translating foreign operations and accounting for the effects of exchange rate differences, the Company hasreflected a comprehensive profit of A$10.0 million for the half-year ended 31 December 2016 (31 December 2015: loss ofA$4.5 million). This is after posting a positive effect of translation of foreign operations of A$11.8 million(31 December 2015: loss of A$22.2 million) as a result of a 9.8% appreciation in the South African Rand which is thefunctional currency of the underlying business subsidiaries.
2. Dividends
There were no dividends declared or paid during the period (31 December 2015: A$nil) and the Directors do notrecommend that any dividend be paid.
3. Net tangible assets per security
Six monthsended
31 Dec 2016
Six monthsended
31 Dec 2015Net tangible assets per security* (cents per share) 12.04 9.69
* calculated as total assets, less intangible assets and total liabilities divided by total shares outstanding at the periodend.
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Universal Coal Plc(Registration number 4482856)Consolidated Unaudited Half Year Financial Statements for the six months ended 31 December 2016
Summary Results (continued)
4. Earnings result
The total comprehensive profit of Universal Coal Plc for the six months ended 31 December 2016 after providing for taxwas A$10.0 million (31 December 2015: loss of A$4.5 million).
Six monthsended
31 Dec 2016
Six monthsended
31 Dec 2015Basic and diluted earnings per share (cents per share) 0.14 1.61Weighted average number of ordinary shares used in the calculation of basic anddiluted EPS
515 694 759 505 810 447
The amount used as the numerator in calculating basic earnings per share is the same as the profit attributable to theowners of the parent in the consolidated statement of profit or loss and other comprehensive income.
5. Date of authorisation for issue of financial statements
The consolidated unaudited half year financial statements have been authorised for issue by the directors on 13 March2017. No authority was given to anyone to amend the consolidated unaudited half year financial statements after the dateof issue.
ON BEHALF OF THE BOARD:
MR JOHN HOPKINS OAMNon-executive Chairman13 March 2017
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Universal Coal Plc (Registration number 4482856) Consolidated Unaudited Half Year Financial Statements for the six months ended 31 December 2016
Directors’ Report
1. Results
Over the past six-months through to 31 December 2016, Universal Coal has achieved a significant, long-term milestone: becoming a multi-mine coal producer generating positive operating cashflows.
Our ultimate objective remains unchanged, and we are making great strides towards becoming a mid-tier, multi-mine coal operator. In the meantime, we are very well positioned to continue to grow, assisted by improving market conditions that have been absent within the coal sector for several years.
Our next key milestone will be to bring our second operation, the New Clydesdale Colliery (NCC), completely to steady state. At present, NCC's underground operations have achieved steady state; and opencast boxcut development has recently commenced, and continues to ramp up. Key to our ongoing success is our recent execution of two offtake contracts at NCC providing a substantial platform to boost Group production, earnings and cashflow for years to come.
With forecasted Group ROM production at over 6Mtpa (million tonnes per annum) and coal sales estimated at over 4Mtpa (million tonnes per annum) across two operating collieries, we continue to execute our strategy to achieve mid-tier status.
Universal Coal generated a loss after taxation for the period of A$1.7 million (31 December 2015: profit of A$17.6 million). The result for 31 December 2016 included a charge for a loss on sale of assets, which if eliminated (including related deferred tax effects of A$2.7 million), would have resulted in a profit after taxation of A$5.3 million (31 December 2015: profit of A$5.3 million after elimination of the effect of the prior period gain on bargain purchase (A$14.3 million) and related deferred tax (A$2 million)).
The operating loss of A$4.5 million (31 December 2015: profit of A$6.6) is 168% down on the prior period due to the loss on sale of fixed assets mentioned above, the introduction of the higher cost of underground mining operations at NCC, increased depreciation at Kangala through recovery on a unit of production basis, and a reduced product yield at the Kangala Colliery. We are expecting a reversal of the product yield trend for the 2017 financial year results as we progress northwards toward the better quality coal in the Kangala openpit, and through the capability at NCC to now sell both higher and lower quality coal into the export and domestic markets respectively.
Finance income increased from A$1.9 million in the six months to 31 December 2016 to A$5.2 million. Finance expenditure increased from A$1.8 million in the six months to 31 December 2016 to A$4.3 million. The significant movement in both expenditure and income related to unwinding of rehabilitation provisions resulting in a charge of A$2.5 million and change in estimates in relation to the acquired NCC rehabilitation provision resulting in a credit of A$3.2 million. Further details of these provisions are given in note 14 to these financial statements.
After translating foreign operations and accounting for the effects of exchange rate differences, the Company has reflected a comprehensive profit of A$10 million for the half-year ended 31 December 2016 (31 December 2015: loss after tax of A$4.5 million). This is after posting a positive effect of translation of foreign operations of A$11.8 million (31 December 2015: loss of A$22.2 million) as a result of a 9.8% appreciation of the South African Rand which is the functional currency of the underlying business subsidiaries.
Net debt for the period has reduced 18% to A$14.7 million from A$18 million in the prior period, reflecting Universal’s continued commitment and ability to reduce debt levels in the project finance facility and the Converting Notes. At the current rate of conversion, it is anticipated that this debt will be extinguished within the next financial year.
Our focus is to maintain production levels at Kangala and the NCC underground operations whilst completing the boxcut development and ramping up production at the NCC openpit. Steady state mining at NCC openpit is anticipated to be achieved in mid-2017 and we look forward to reporting further improved earnings performance going forward.
2. Review of operations
Coal assets
The Company's coal assets are all located in South Africa, primarily in the Witbank coalfields in the Mpumalanga Province.
As part of our growth strategy, our assets are at varying phases of development. The Kangala Colliery and the New Clydesdale Colliery (underground) are already operating, while the NCC opencast operation has commenced development, Brakfontein has been awarded its final licence and is ready for development and Arnot South is a targeted exploration asset, awaiting regulatory transfer.
Outside of the Witbank area, we also hold the Berenice-Cygnus coking coal project, located within the Limpopo Province, which, subject to securing a funding partner, is due to enter the pre-feasibility phase and awaits a decision on the granting of a Mining Licence.
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Universal Coal Plc (Registration number 4482856) Consolidated Unaudited Half Year Financial Statements for the six months ended 31 December 2016
Directors’ Report
Thermal coal operating assets
Kangala Colliery
Kangala was officially completed in October 2014, and ramped up to achieve steady state production by December 2014. The mine is a predominantly domestic thermal coal operation supplying coal to Eskom, the major energy provider in South Africa.
New Clydesdale Colliery (NCC)
NCC is located centrally on the southern margin of the Witbank coalfield, 30km south of Middelburg and 70km east of Universal Coal’s Kangala Mine.
Operating results
For the period under review, the Kangala Colliery produced 1 971 655 run-of-mine (ROM) tonnes and fed 1 853 887 tonnes to the Coal Handling and Preparation Plant (CHPP) at an average yield of 61%. This resulted in sales of 1 145 897 product tonnes being supplied domestically to Eskom.
For the period under review, NCC produced 354 463 ROM tonnes, being a culmination of underground ROM production, existing surface low grade stockpiles at NCC and some third party toll material being processed and fed 396 049 tonnes to the Coal Handling and Preparation Plant (CHPP) at an average yield of 33%. This resulted in sales of 107 570 product tonnes being supplied to the export markets.
Sales
For the period under review, domestic product sales were 1 145 897 tonnes (31 December 2015: 952 416 tonnes), 20% above the corresponding period last year. Sales were higher owing to improved ROM tonnes from the Kangala Colliery resulting from the pit redesign activities undertaken in the prior year.
Export sales were 107 570 tonnes for the period (31 December 2015: 38 897 tonnes). Production and sales of export quality coal were 175% higher due to the incremental production from NCC.
The operational performance of the Universal Coal Group is tabulated below:
Operational Performance (tonnes) Total Year To
Date %
Change Prior Year To
Date Previous
Year Total from
Start Of Production
31-Dec-16 31-Dec-15 30-Jun-16
Run-of-mine (ROM)
Kangala Colliery 1 971 655 36% 1,453,422 3 269 212 8 346 483
New Clydesdale Colliery 354 463 - 0 0 354 463
Total ROM 2 326 118 60% 1,453,422 3 269 212 8 700 946
Feed to plant
Kangala Colliery 1 853 887 33% 1,391,374 3 124 199 8 009 482
New Clydesdale Colliery 396 049 - 0 0 396 049
Total feed to plant 2 249 936 62% 1,391,374 3 124 199 8 405 531
Plant Yields
Kangala Colliery 61% (9%) 70% 65% 66%
New Clydesdale Colliery 33% - - 0% 0%
Domestic sales 1 145 897 20% 952,416 1 959 234 5 107 546
Export sales 107 080 175% 38,897 78 156 238 886
Total sales 1 252 977 26% 991,313 2 037 390 5 346 432
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Universal Coal Plc (Registration number 4482856) Consolidated Unaudited Half Year Financial Statements for the six months ended 31 December 2016
Directors’ Report
Group revenue for the period was up 21% resulting in an operating loss of 7% (31 December 2015: profit of 13%) of turnover or A$4.5 million (31 December 2015: profit of A$6.6 million) and a positive Group Earnings Before Interest, Taxation, Depreciation and Amortisation (EBITDA) of A$11.3 million (31 December 2015: A$10.2 million).
Cost of sales for the period were 32% higher than the prior reporting period as a result of increased depreciation charges within cost of sales which is recovered on a unit of production basis i.e. ROM tonnes, the cessation of capitalising deferred stripping costs thereby recognising all mining costs within profit and loss and the introduction of higher underground mining costs at NCC. The average cost of sales is expected to decline going forward as openpit operations at NCC ramp up, contributing low cost tonnages to Group production.
Local economic development and sustainability initiatives
As a Company, Universal believes that the benefits from our operations and projects should also flow through to local communities.
In early 2016, we established an operator skills training programme in collaboration with a Mining Qualification Authority (MQA) certified training institute for residents of the Victor Khanye local municipality. The purpose was to equip operators with a MQA, thereby enabling them to find employment throughout the mining sector. As a result, over one hundred local residents have been trained as qualified heavy mining machinery operators. In addition, the programme has provided several new employees with employment at Kangala, establishing 5 production teams from graduates and employing another 40 operators as Articulate Dump Truck operators. The skills training programme has been completed and the Kangala Colliery is currently considering further training options for the community in this regard.
Three small medium enterprise development agreements have been concluded with the local community to handle trucking of coal to various Power Stations, operating of the laundry facility and for a convenience shop at the Kangala Colliery.
Construction of the Further Education Training (FET College) within the local municipality area has been completed and is due to be handed over to the project to the beneficiary, being The Department of Higher Education. The initiative is a joint venture with Exxaro’s Leeuwpan Coal Mine, the Department of Education and the Local Municipality. Enrolments for the first class of students are expected to commence shortly.
Universal has agreed to sponsor three students from the local area that have been offered a four year degree bursary to study Mining, Civil Engineering and Accounting. Our plan is to sponsor and fund at least seven additional students intending to further their academic qualifications in the field of Mine artisans.
Thermal Coal Development Assets
New Clydesdale Colliery (opencast operations)
In addition to the seven year 1.2Mtpa Eskom offtake agreement, Universal Coal has secured a five year 0.65Mtpa export contract providing additional security for the NCC debt facility and enabling commencement of opencast operations.
The opencast operation represents the second phase of the planned 3.3 Mtpa ROM NCC development, following the commencement of underground operations in September 2016:
• The underground operation is planned to deliver primarily 6000Kcal thermal coal, focused on the export markets, fromthe Diepspruit shaft, and is set to achieve nameplate annualised tonnage rates of 900,000 tpa ROM(1) by the end of thecurrent quarter.
• Opencast operations are planned to deliver a further 2.4 Mtpa ROM premium quality domestic thermal and low phosmetallurgical coal from the adjacent Roodekop pit once steady state is achieved in mid-2017, translating to contractedsales tonnes of 1.2 Mtpa to ESKOM and 0.1 – 0.2 Mtpa of low phos metallurgical coal sales(1).
At present, two of the three CHPP are operating, with the third CHPP set to be operational by the end of the third quarter of FY2017.
Opencast mining has commenced with the stripping of overburden in lieu of the boxcut development and the mine site has been fully established by the nominated contractor.
The export offtake contract for 0.65 Mtpa is for a typical RB1 (6000Kcal) quality thermal coal which will be delivered on a Free on Rail (FOR) basis over a five-year period. The selling price will be based on the monthly API4 Richards Bay index and typical industry pricing adjustments for logistics, port, quality and weight will apply.
The export offtake contract is in addition to the long-term coal sales agreement (CSA) that Universal entered into with South African electricity utility Eskom in November 2016(2). The CSA is for a seven year period with first coal delivery having commenced on 9 March 2017.
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Universal Coal Plc (Registration number 4482856) Consolidated Unaudited Half Year Financial Statements for the six months ended 31 December 2016
Directors’ Report
Finalisation of the A$22 million (ZAR215 million) debt financing facility will allow timeous drawdown to fund the balance of capital development activities at NCC which incorporate open pit development, additional infrastructure requirements, CHPP capacity expansion and general owners costs.
Trollope Mining Services (Pty) Ltd (opencast mining), Ingwenya Mineral Processing (Pty) Ltd (Coal Handling and Processing Plant) and Frazer Alexander (Discard Handling) have all been nominated as the preferred contractors following the conclusion of a competitive tender process.
Thermal Coal Exploration Assets
Brakfontein
Located less than 25 km by sealed road from Kangala, Brakfontein is pegged to become our third project for development. This project contains a JORC compliant coal resource of 75.8 million tonnes and has been granted the final water use licence allowing the Company to commence with mine development.
Arnot South
In September 2016, the company announced a binding sale of Prospecting Right Agreement with Exxaro to acquire the Arnot South project, located near NCC in the Witbank coalfield. The prospect spans some 15,212 hectares, and has been subject to several drilling campaigns by major mining companies including Goldfields and Exxaro. We await the regulatory approvals and satisfaction of the conditions precedent to the acquisition agreement prior to assuming ownership.
Coking Coal Assets
Berenice-Cygnus
The Berenice-Cygnus project hosts a JORC-compliant 1.35 billion tonnes resource, primarily of semi-soft coking coal.
On the back of recent interest from new investors in the region, we are investigating potential funding partners to progress the completion of a pre-feasibility study and to complete the necessary technical work. A Mining Right application has been submitted to the authorities and we await the outcome of that process.
3. Corporate
On 18 July 2016, the cash and scrip Offer by Coal of Africa (ASX: CZA) to acquire the entire share capital of Universal Coal lapsed, after CZA first announced its intentions in November 2015. Whilst there were several shareholders disappointed by these proceedings across both companies, we have buckled down as a stand-alone coal company to bring our second operation on stream within the following months. We have also had the good fortune of having substantially improved export thermal coal prices, coinciding with NCC's underground operations delivering export quality thermal coal.
As a result, the Company is very well positioned to continue to grow going forward. Universal Coal is working towards mid-tier status and is now a multi mine operator generating positive cash flows with a strengthening balance sheet and reduced debt levels paving the way for the board to consider distributions to our long-standing and patient shareholder base.
Tony Weber Chief Executive Officer 13 March 2016
(1) Production schedule/plan and tonnages stated in Presentation released to the ASX market on 9 August 2016. (2) Conclusion of the Eskom coal sales agreement released to the market in ASX announcement titled “UNV finalises long term coal
supply agreement with Eskom”, dated 8 November 2016.
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Universal Coal Plc(Registration number 4482856)Consolidated Unaudited Half Year Financial Statements for the six months ended 31 December 2016
Directors' Declaration
In the opinion of the Directors:
a. The financial statements and notes set out on pages 11 - 37:
(i) Comply with IAS 34: Interim Financial Reporting; and
(ii) Give a true and fair view of the consolidated entity’s financial position as at 31 December 2016 and of its performance for the half year ended on that date.
b. There are reasonable grounds to believe that Universal Coal Plc will be able to pay its debts as and when they becomedue and payable.
This declaration is made in accordance with a resolution of directors.
ON BEHALF OF THE BOARD
MR JOHN HOPKINS OAMCHAIRMAN
13 March 2017
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Universal Coal Plc(Registration number 4482856)
Condensed Consolidated Statement of Financial Position at 31 December2016
Reviewed31 December
2016
Audited30 June
2016
Reviewed31 December
2015Note A$ '000 A$ '000 A$ '000
Assets
Non-Current Assets
Property, plant and equipment 3 103 580 104 733 104 677
Intangible assets 4 54 910 49 362 50 139
Investments in associated undertakings 17 6 14
Loan receivable 5 8 623 6 475 2 792
167 130 160 576 157 622
Current Assets
Inventories 6 6 311 3 118 4 526
Trade and other receivables 7 13 590 10 782 11 739
Cash and cash equivalents (including restricted amounts) 8 6 427 7 575 8 604
26 328 21 475 24 869
Total Assets 193 458 182 051 182 491
Equity and Liabilities
Equity
Equity Attributable to Equity Holders of Parent
Share capital 9 44 466 43 374 43 093
Share premium 9 53 592 52 941 52 701
Reserves (3 442) (12 170) (16 132)
Accumulated loss (9 963) (10 678) (11 082)Attributable to Equity Holders of Parent
84 653 73 467 68 580
Non-controlling interest 33 140 32 536 30 660
Total Equity 117 793 106 003 99 240
Liabilities
Non-Current Liabilities
Borrowings 11 17 876 19 096 20 663
Converting notes 12 3 273 4 891 5 974
Derivative financial liability 13 507 1 658 3 548
Deferred tax 9 401 9 267 8 201
Provisions 14 27 431 25 798 31 385
58 488 60 710 69 771
Current Liabilities
Borrowings 5 781 5 215 5 391
Trade and other payables 15 11 396 10 123 8 089
17 177 15 338 13 480
Total Liabilities 75 665 76 048 83 251
Total Equity and Liabilities 193 458 182 051 182 491
The notes on pages 15 to 37 form part of the consolidated unaudited half year financial statements.
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Universal Coal Plc(Registration number 4482856)
Condensed Consolidated Statement of Profit or Loss and OtherComprehensive Income for the six months ended 31 December 2016
Reviewedhalf year to
31 December2016
Reviewedhalf year to
31 December2015
Note A$ '000 A$ '000
Revenue 61 067 50 331
Cost of sales (49 345) (37 276)
Gross profit 11 722 13 055
Operating expenses (6 486) (6 427)
Operating profit before loss on sale of fixed assets 5 236 6 628
Loss on sale of fixed assets (9 727) -
Operating (loss) / profit (4 491) 6 628
Finance income 16 5 246 1 943
Finance expenses 17 (4 322) (1 813)
Derivative financial liability 13 1 151 (2 173)
Foreign exchange loss (8) (22)
Gain on bargain purchase - 14 336
(Loss)/profit before taxation (2 424) 18 899
Taxation 675 (1 259)
(Loss)/profit for the period (1 749) 17 640
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translating foreign operations 11 796 (22 172)
Other comprehensive (loss) for the period net of taxation 11 796 (22 172)
Total comprehensive profit/(loss) for the period 10 047 (4 532)
(Loss) / profit attributable to:
Owners of the parent 715 8 152
Non-controlling interest (2 464) 9 488
(1 749) 17 640
Total comprehensive profit / (loss) attributable to:
Owners of the parent 9 443 (9 106)
Non-controlling interest 604 4 574
10 047 (4 532)
Earnings per share
Per share information
Basic earnings per share (c) 22 0.14 1.61
Diluted earnings per share (c) 22 0.14 1.61
The notes on pages 15 to 37 form part of the consolidated unaudited half year financial statements.
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Universal Coal Plc(Registration number 4482856)
Condensed Consolidated Statement of Cash Flows for the six monthsended 31 December 2016
Reviewedhalf year to
31December
2016
Reviewedhalf year to
31December
2015Note A$ '000 A$ '000
Cash flows from operating activities
Cash generated from operations 18 8 482 4 576
Cash flows from investing activities
Acquisition of property, plant and equipment 3 (5 408) (8 663)
Acquisition of other intangible assets 4 (210) (15)
Consideration paid on business combination - (7 454)
Loans to related parties 342 -
Investment in associated undertakings (11) (2)
Transfer (to) / from restricted cash (189) 12 440
Finance income 169 611
Net cash used in investing activities (5 307) (3 083)
Cash flows used in financing activities
Proceeds from share issues, net of share issue expenses 9 - 200
Repayment of converting notes - (172)
Repayment and settlement of RMB finance facilities - (32 338)
Shareholder loan repayment (330) (1 170)
Repayment of Investec finance facilities (3 997) (2 205)
Proceeds from Investec finance facilities - 30 913
Finance costs (276) (379)
Net cash used in financing activities (4 603) (5 151)
Total cash movement for the six months (1 428) (3 658)
Unrestricted cash at the beginning of the period 7 048 6 691
Effect of exchange rate movement on cash balances 92 (1 837)
Total cash and cash equivalents 8 5 712 1 196
Restricted cash 8 715 7 408
Total cash and cash equivalents (including restricted cash) 8 6 427 8 604
The notes on pages 17 to 37 form an part of the consolidated unaudited half year financial statements.
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Universal Coal Plc(Registration number 4482856)
Condensed Consolidated Statement of Changes in Equity for the six months ended 31 December 2016
Sharecapital
Sharepremium
Totalshare
capital
Foreigncurrency
translationreserve
Convertibleinstrument
reserve
Share basedpaymentreserve
Totalreserves
Accumulatedloss
Totalattributable toequity holders
of the groupNon-
controllinginterest
Totalequity
A$ '000 A$ '000 A$ '000 A$ '000 A$ '000 A$ '000 A$ '000 A$ '000 A$ '000 A$ '000 A$ '000
Balance at 1 July 2015 42 989 52 605 95 594 (2 800) 2 053 4 709 3 962 (22 070) 77 486 26 086 103 572
Profit for the six months - - - - - - - 8 152 8 152 9 488 17 640Other comprehensive income - - - (17 258) - - (17 258) - (17 258) (4 914) (22 172)
Total comprehensive loss forthe six months
- - - (17 258) - - (17 258) 8 152 (9 106) 4 574 (4 532)
Transactions with ownersConversion of options 104 96 200 - - (163) (163) 163 200 - 200Transfer between reserves - - - - - (2 673) (2 673) 2 673 - - -
Other movements withinequity
104 96 200 - - (2 836) (2 836) 2 836 200 - 200
Unaudited balance at 31December 2015
43 093 52 701 95 794 (20 058) 2 053 1 873 (16 132) (11 082) 68 580 30 660 99 240
Balance at 1 July 2016 43 374 52 941 96 315 (16 096) 2 053 1 873 (12 170) (10 678) 73 467 32 536 106 003
Loss for the six months - - - - - - - 715 715 (2 464) (1 749)Other comprehensive income - - - 8 728 - - 8 728 - 8 728 3 068 11 796
Total comprehensive loss forthe six months
- - - 8 728 - - 8 728 715 9 443 604 10 047
Transactions with ownersConversion of loan notes 1 092 651 1 743 - - - - - 1 743 - 1 743
Other movements withinequity
1 092 651 1 743 - - - - - 1 743 - 1 743
Unaudited balance at 31December 2016
44 466 53 592 98 058 (7 368) 2 053 1 873 (3 442) (9 963) 84 653 33 140 117 793
Note 9 9 9 10 The notes on pages 15 to 37 form part of the financial statements
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Universal Coal Plc(Registration number 4482856)
Notes to the Condensed Consolidated Financial Statements for the sixmonths ended 31 December 2016
1. Significant accounting policies
General Information
The Company is domiciled in the UK. The address of the registered office is 60 Gracechurch Street, London, EC3V0HR. The registered number of the company is 4482856.
Presentation of the Consolidated Unaudited Half Year Financial Statements
The consolidated unaudited half year financial statements have been prepared in accordance with InternationalFinancial Reporting Standards as adopted by the European Union, and the presentation and disclosure requirementsof IAS 34: Interim Financial Reporting. This condensed consolidated half year financial report does not include allnotes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunctionwith the annual report for the year ended 30 June 2016 and any public announcements by Universal Coal Plc. Thefinancial statements have been prepared on the historical cost basis, except for those items held at fair value andincorporate the principal accounting policies set out below.
The accounting policies and methods of computation applied in these condensed consolidated half year financialstatements are the same as those applied in the Group's consolidated financial statements as at and for the yearended 30 June 2016, except for the new accounting policy related to revenue recognition from services rendereddetailed below, and are expected to be applied in the financial statements for the year ended 30 June 2017.
Revenue from services rendered
The Company is involved in tolling services where third party coal is washed and treated to increase the value of thecoal and to separate the different grades of coal. The Company recognises revenue from the rendering of services inproportion of the coal washed and treated at reporting date.
Basis of preparation
The financial statements have been prepared on the going concern basis. At the period-end the Group hadA$5.7 million (31 December 2015: A$1.2 million) of unrestricted cash reserves. The Group's cash flow projectionsshow that in order for the Group to meet its known commitments, debt repayment schedules and operating cash flowrequirements, the Group is reliant on the Kangala Colliery (openpit) and the New Clydesdale Colliery (underground)continuing to operate in line with forecasts. Furthermore, the Group has finalised commercial offtake agreements atthe New Clydesdale Colliery (NCC) for both domestic and export quality coal and is currently in the process of openpitboxcut development with a view to intersecting first coal from the openpit before the end of March 2017. A project debtfacility of A$22 million, subject to limited conditions precedent, to drawdown currently being advanced and theDirectors are comfortable that the timeous satisfaction thereof will be within the debt drawdown requirements. There isno evidence to suggest that the forecast at Kangala or NCC will not occur and the Directors are confident that theGroup will continue to meet its obligations under the Eskom offtake and export agreements. The Directors aretherefore satisfied that the half year financial statements should be prepared on a going concern basis.
The condensed half year financial information for the period 1 July 2016 to 31 December 2016 is unaudited. In theopinion of the Directors, the condensed half year financial information for the period presents the financial position,result from operations, changes in equity and cash flows for the period in conformity to IAS 34 'Interim FinancialReporting' consistently applied. The condensed half year financial information incorporates comparative figures for theperiods to 30 June 2016 and 31 December 2015 for the consolidated statement of financial position, the half yearperiod from 1 July 2015 to 31 December 2015 for the consolidated statement of profit or loss and othercomprehensive income and the consolidated statement of cash flows and the half year period from 1 July 2015 to31 December 2015 for the consolidated statement of changes in equity. The financial information for the year ended30 June 2016 contained in this half year report does not constitute statutory accounts as defined by section 435 of theCompanies Act, 2006. A copy of the statutory accounts for that year has been delivered to the Registrar ofCompanies. The auditors’ report on those accounts was unqualified and did not contain a statement under section498(2) or (3) of the Companies Act, 2006.
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Universal Coal Plc(Registration number 4482856)
Notes to the Condensed Consolidated Financial Statements for the sixmonths ended 31 December 2016 (continued)
1. Significant accounting policies (continued)
Functional and presentation currency
Items included in the consolidated half year financial statements of each of the Group entities are measured using thecurrency of the primary economic environment in which the entity operates (functional currency). The functionalcurrency of the South African business operations is South African Rand (ZAR).
The Parent company's functional currency is Australian Dollar (“A$”). The consolidated half year financial statementsare presented in Australian Dollar (“A$”), which is the Group’s presentation currency. Further details are provided onthe foreign currency accounting policy in the year ended 30 June 2016 Financial Statements.
Judgements made in applying accounting policies and key sources of estimation uncertainty
No material changes have been made to the estimates and judgements applied since the year ended 30 June 2016Financial Statements.
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Universal Coal Plc(Registration number 4482856)
Notes to the Condensed Consolidated Financial Statements for the sixmonths ended 31 December 2016 (continued)
2. Segmental reporting
All investments in associates and subsidiaries operate in one geographical location being South Africa, and areorganised into four business units from which the Group’s expenses are incurred and revenues are earned, being(1) mining and sale of coal: New Clydesdale Colliery; (2) mining and sale of coal: Kangala Colliery; (3) exploration anddevelopment of coal and (4) corporate activities. The reporting on these investments to the Chief Operating DecisionMakers, the Board of Directors, focuses on the key performance indicators that the Directors monitor on a regularbasis which are: Run-of-Mine (ROM) tonnages, processing plant yields and sales tonnages Revenue per tonne Cash cost per run-of-mine tonne (ROMt) Gross margin in percentage and gross margin per sales tonne Management of liquid resources through regular analysis of working capital requirements, bank balances, stay in
business capital requirements, cash flow forecasts, accounts receivable and accounts payable ageing metrics.
The New Clydesdale Colliery (NCC) mining operations effectively commenced during the period, thus the mining andsale of coals: New Clydesdale represents a new operating segment in the period.
The non-current assets relating to the capitalisation expenditure associated with the coal projects are located in SouthAfrica. All corporate expenditure, assets and liabilities relate to incidental operations carried out in the UnitedKingdom, Australia and South Africa.
For the half year to31 December 2016
Mining andsale of coal:
NewClydesdale
Colliery
Mining andsale of coal:
KangalaColliery
Explorationand
developmentof coal
Corporate(Unallocated) Total
A$'000 A$'000 A$'000 A$'000 A$'000
Revenue 4 824 56 243 - - 61 067
Cost of sales (3 905) (45 440) - - (49 345)Cost of sales -depreciation (369) (5 579) - - (5 948)Cost of sales excludingdepreciation (3 536) (39 861) - - (43 397)
Gross profit 919 10 803 - - 11 722
Operating expenses (281) (3 053) (639) (2 513) (6 486)Loss on sale of fixedassets (9 727) - - - (9 727)Foreign exchange loss - - - (8) (8)Net finance cost 1 124 (1 778) - 1 578 924Derivative financialliability - - - 1 151 1 151
(Loss) / profit beforetaxation (7 965) 5 972 (639) 208 (2 424)Taxation 2 161 (1 486) - - 675
(Loss) / profit aftertaxation (5 804) 4 486 (639) 208 (1 749)
Total non-current assets 52 014 45 270 61 119 8 727 167 130
Total capital expenditure 4 650 753 210 5 5 618
Total assets 56 166 64 177 61 211 11 904 193 458
Total liabilities (30 327) (40 947) (367) (4 024) (75 665)
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Universal Coal Plc(Registration number 4482856)
Notes to the Condensed Consolidated Financial Statements for the sixmonths ended 31 December 2016 (continued)
2. Segmental reporting (continued)
For the half year to31 December 2015
Mining andsale of coal:
NewClydesdale
Colliery
Mining andsale of coal:
KangalaColliery
Explorationand
developmentof coal
Corporate(Unallocated) Total
A$'000 A$'000 A$'000 A$'000 A$'000
Revenue - 48 792 1 539 - 50 331
Cost of sales - (36 464) (812) - (37 276)Cost of sales - depreciation - (1 766) - - (1 766)Cost of sales excludingdepreciation
- (34 698) (812) - (35 510)
Gross profit - 12 328 727 - 13 055
Operating expenses (excludingshare based payments)
- (2 011) (294) (4 122) (6 427)
Foreign exchange loss - - - (22) (22)Net finance cost - (1 228) 104 1 254 130Derivative financial liability - - - (2 173) (2 173)Bargain purchase gain - - 14 336 - 14 336
Profit / (loss) before taxation - 9 089 14 873 (5 063) 18 899Taxation - (1 259) - - (1 259)
Profit / (loss) after taxation - 7 830 14 873 (5 063) 17 640
Total non-current assets - 47 832 106 751 3 039 157 622
Total capital expenditure - 8 649 57 570 14 66 233
Total assets - 59 421 118 334 4 736 182 491
Total liabilities - (49 464) (23 556) (10 231) (83 251)
3. Property, plant and equipment
31 December 2016 30 June 2016
CostA$'000
Accumulateddepreciation
A$'000
Carryingvalue
A$'000Cost
A$'000
Accumulateddepreciation
A$'000
Carryingvalue
A$'000
Mineral properties 26 326 (4 773) 21 553 24 142 (3 113) 21 029Mine development costs 37 730 (10 342) 27 388 31 336 (6 889) 24 447Mine plant facilities andequipment
42 656 (5 137) 37 519 49 396 (3 226) 46 170
Other assets 9 987 (292) 9 695 5 975 (220) 5 755Deferred stripping costs 9 051 (1 626) 7 425 8 165 (833) 7 332
Total 125 750 (22 170) 103 580 119 014 (14 281) 104 733
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Universal Coal Plc(Registration number 4482856)
Notes to the Condensed Consolidated Financial Statements for the sixmonths ended 31 December 2016 (continued)
3. Property, plant and equipment (continued)
Reconciliation of property, plant and equipment - 31 December 2016
Mineralproperties
A$'000
Minedevelopment
costsA$'000
Mine plantfacilities and
equipmentA$'000
Other assetsA$'000
Deferredstripping
costsA$'000
TotalA$'000
Opening balanceCost 24 142 31 336 49 396 5 975 8 165 119 014Accumulated depreciation (3 113) (6 889) (3 226) (220) (833) (14 281)
Net book value at 01 July2016
21 029 24 447 46 170 5 755 7 332 104 733
Additions - 2 065 - 3 343 - 5 408Foreign exchange movementson cost opening balances
2 619 4 329 4 474 669 886 12 977
Disposals - cost * (435) - (11 214) - - (11 649)Net depreciation (1 660) (3 453) (1 911) (72) (793) (7 889)Depreciation (1 314) (2 688) (1 247) (45) (698) (5 992)Foreign exchange movements (346) (765) (664) (27) (95) (1 897)
Net book value at 31December 2016
21 553 27 388 37 519 9 695 7 425 103 580
Made up as follows:Cost 26 326 37 730 42 656 9 987 9 051 125 750Accumulated depreciation (4 773) (10 342) (5 137) (292) (1 626) (22 170)
Carrying value 21 553 27 388 37 519 9 695 7 425 103 580
* The disposals during the period relate to underground mining assets sold from NCC. An underground contract minerwas appointed at NCC and has supplied new equipment tailored to the current underground conditions.
Reconciliation of property, plant and equipment - 30 June 2016
Opening balanceCost 18 702 29 309 15 719 3 021 1 935 68 686Accumulated depreciation (1 856) (3 960) (1 669) (167) (82) (7 734)
Net book value at 01 July2015
16 846 25 349 14 050 2 854 1 853 60 952
Additions - 492 274 4 150 6 505 11 421Additions through businesscombinations
9 463 7 431 40 676 - - 57 570
Foreign exchange movementson cost opening balances
(3 834) (5 096) (7 273) (1 196) (275) (17 674)
Disposals - cost (189) (800) - - - (989)Net depreciation (1 257) (2 929) (1 557) (53) (751) (6 547)Depreciation (1 311) (3 449) (1 712) (73) (758) (7 303)Foreign exchange movements 54 520 155 20 7 756
Net book value at 30 June2016
21 029 24 447 46 170 5 755 7 332 104 733
Made up as follows:Cost 24 142 31 336 49 396 5 975 8 165 119 014Accumulated depreciation (3 113) (6 889) (3 226) (220) (833) (14 281)
Carrying value 21 029 24 447 46 170 5 755 7 332 104 733
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Universal Coal Plc(Registration number 4482856)
Notes to the Condensed Consolidated Financial Statements for the six months ended 31 December 2016(continued)
4. Intangible assets
31 December 2016 30 June 2016
ProjectCost
A$'000
Accumulatedamortisation
A$'000
Carryingvalue
A$'000Cost
A$'000
Accumulatedamortisation
andimpairment
A$'000
Carryingvalue
A$'000
Mining and Prospecting Rights (held by:)Universal Coal Development I (Pty) Ltd Kangala 919 - 919 828 - 828Universal Coal Development II (Pty) Ltd Berenice 30 919 - 30 919 30 337 (2 634) 27 703Universal Coal Development III (Pty) Ltd Brakfontein 10 256 - 10 256 9 250 - 9 250Universal Coal Development IV (Pty) Ltd Roodekop 9 044 - 9 044 8 159 - 8 159Universal Coal Development V (Pty) Ltd Cygnus 3 707 - 3 707 3 344 - 3 344
Other Intangible AssetsComputer software 445 (380) 65 401 (323) 78
Total 55 290 (380) 54 910 52 319 (2 957) 49 362
Reconciliation of intangible assets - 31 December 2016
Project
Openingbalance
A$'000Additions
A$'000
Foreignexchange
movementsA$'000
Amortisationand
impairmentA$'000
TotalA$'000
Universal Coal Development I (Pty) Ltd Kangala 828 - 91 - 919Universal Coal Development II (Pty) Ltd Berenice 27 703 208 3 008 - 30 919Universal Coal Development III (Pty) Ltd Brakfontein 9 250 2 1 004 - 10 256Universal Coal Development IV (Pty) Ltd Roodekop 8 159 - 885 - 9 044Universal Coal Development V (Pty) Ltd Cygnus 3 344 - 363 - 3 707Computer software 78 - 44 (57) 65
49 362 210 5 395 (57) 54 910
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Universal Coal Plc(Registration number 4482856)
Notes to the Condensed Consolidated Financial Statements for the six months ended 31 December 2016(continued)
4. Intangible assets (continued)
Reconciliation of intangible assets - 30 June 2016
Project
Openingbalance
A$'000Additions
A$'000
Foreignexchange
movementsA$'000
Amortisationand
impairmentA$'000
TotalA$'000
Universal Coal Development I (Pty) Ltd Kangala 965 - (137) - 828Universal Coal Development II (Pty) Ltd Berenice 35 237 116 (5 016) (2 634) 27 703Universal Coal Development III (Pty) Ltd Brakfontein 10 745 34 (1 529) - 9 250Universal Coal Development IV (Pty) Ltd Roodekop 9 513 - (1 354) - 8 159Universal Coal Development V (Pty) Ltd Cygnus 3 886 119 (661) - 3 344Computer software 214 13 (65) (84) 78
60 560 282 (8 762) (2 718) 49 362
Supplementary information on intangible assets
The following detailed schedule provides additional information pertaining specifically to the interests held by Universal Coal Plc in the identifiable Mining Rights (MR) andProspecting Rights (PR) as at 31 December 2016:
Project Entity Location Property Size(hectare)
Permit type &Number
Expiry date Comment %Interest
Kangala Universal Coal Development I(Pty) Ltd
Delmas, MpumalangaProvince, South Africa
Wolvenfontein 244IR: Portion 1and RE of Portion 2
951 Mining right:MP30/5/1/2/2/429MR
02/05/2032 Security has beenprovided overmining rights forfinancing facility
%70.50
Kangala Universal Coal Development I(Pty) Ltd
Delmas,Mpumalanga Province,South Africa
Middelbult 235IR:Portions 40 and 82
942 ProspectingRight:MP30/5/1/1/2/641PRMining rightapplication inprogress
25/07/2017 MPRDA Section102 application toamalgamateMiddlebult PR andWolvenfonteinMR in progress
%70.50
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Universal Coal Plc(Registration number 4482856)
Notes to the Condensed Consolidated Financial Statements for the six months ended 31 December 2016(continued)
4. Intangible assets (continued)
Kangala Universal Coal Development I(Pty) Ltd
Delmas, MpumalangaProvince, South Africa
Modderfontein 236IR:Portion 1
127 ProspectingRight:MP30/5/1/1/2/639PRMining rightapplication inprogress
25/07/2017 - %70.50
Berenice Universal Coal Development II(Pty) Ltd
Waterpoort,LimpopoProvince,South Africa
Berenice 548 MS;Celine 547 MS;Doornvaart 355 MS;Portion 1 Gezelschap 395 MS;Longford 354 MS;Matsuri 358 MS
7 761 ProspectingRight:LP30/5/1/1/2/376PR
Mining right:LP30/5/1/2/2/10121MR
19/03/2016
Notapplicable
Prospecting rightelapsed in March2016Mining rightapplication underreview by the DMR
%50.00
Brakfontein Universal Coal Development III(Pty) Ltd
Delmas,MpumalangaProvince,South Africa
Brakfontein 264IR :Portions 6, 8, 9, 10, 20,26, 30 and RemainingExtent
879 Mining Right:MP30/5/1/2/2/10027MR
Notapplicable
Mining right hasbeen executed
%50.29
Roodekop Universal Coal Development IV(Pty) Ltd
Kriel,MpumalangaProvince,South Africa
Roodekop 63IS 860 Mining Right:MP30/5/1/1/2/492MR
05/02/2034 Section 102 tocombine UCDIVand UCDVIIIMining rights underreview by theDepartment ofMineral Resources
%49.00
Cygnus Universal Coal Development V(Pty) Ltd
All Days,LimpopoProvince,South Africa
Cygnus 543MS and adjacentfarms
12 299 ProspectingRight:LP30/5/1/1/2/1276PR
31/03/2019 Prospecting rightrenewal executedon 29 June 2016
%50.00
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Universal Coal Plc(Registration number 4482856)
Notes to the Condensed Consolidated Financial Statements for the six months ended 31 December 2016(continued)
4. Intangible assets (continued)
NewClydesdaleColliery
Universal Coal DevelopmentVIII (Pty) Ltd
Kriel, MpumalangaProvince , South Africa
Middeldrift 42 IS (portion 4),Diepspruit 41 IS (RE, RE ofportions 1, 2, 3, portions 7, 8, 9,10), Rietfontein 43 IS (RE, RE ofportion 1, portion 3, M/A 2, 3, 4 ofRE portion 1), Vaalkrans 29 IS(portions 4, 6, 8, 9, 11, 12, 13, 14,16, RE of portion 16, M/A 2 ofportion 6), Clydesdale 483 IS,Lourens 472 IS, Enkelbosch 20 IS(M/A 4 and 5) and Haasfontein 28IS (portion 1, M/a 6 and 7 ofportion 7)
4 125 Mining right:MP30/5/1/2/2/148MR
05/12/2019 Section 102 tocombine UCDIVand UCDVIIIMining rights underreview byDepartment ofMineral Resources
%49.00
Episolve Episolve (Pty) Ltd Delmas, MpumalangaProvince , South Africa
Goedgedacht 228IR, Portion 14(remaining) and Portion of portion26
216 Prospecting right:MP30/5/1/1/2/4842PR
08/02/2017 - %74.00
Bold Moves Bold Moves 1765 (Pty) Ltd Witbank, MpumalangaProvince , South Africa
Langsloot 99IS, portion 3, 4, 8,13,14, 15 and 16
1 647 Prospecting right:MP30/5/1/1/2/4966PR
14/12/2020 PR executed.Registration withMPTRO in progress
%74.00
On review during the period, the Directors have not noted any circumstances which would suggest that at this time any impairment is necessary given the preliminary results onsurveys obtained to date. The situation will be closely monitored and adjustments made in future periods if there are indications that the assets held are not recoverable.
It was noted that a number of licences had expired but that renewal was in process with the DMR and no issues were expected with this process.
The situation will be closely monitored and adjustments made in future periods if there are indications that the assets held are not recoverable.
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Universal Coal Plc(Registration number 4482856)
Notes to the Condensed Consolidated Financial Statements for the six monthsended 31 December 2016 (continued)
Reviewed31 December
2016
Audited30 June
2016
Reviewed31 December
2015A$ '000 A$ '000 A$ '000
5. Loan receivable
Loans and receivablesNdalamo Resources Proprietary Limited 8 623 6 475 2 792
The loan is secured against a share pledge of Ndalamo's shares in UCD VIII and UCD IV, bears interest at prime plus7.5% per annum and is fully repayable by 30 June 2020 in varying capital installments. The balance above representsa nett amount of A$4.7 million (30 June 2016:A$4.6 million; 31 December 2015: A$1.3 million) and accumulatedinterest of A$3.9 million (30 June 2016: A$1.9 million; 31 December 2015: A$1.5 million). To date a gross capitalamount of A$15.1 million (30 June 2016: A$13.5 million; 31 December 2015: A$11.5 million) has been loaned toNdalamo Resources of which A$10.4 million (30 June 2016: A$8.9 million; 31 December 2015: A$10.2 million) hasbeen on lent to UCD IV and UCD VIII. On consolidation this amount is offset against the gross loan balance due tooffsetting rights included in the agreements. The balance of A$4.7 million has been utilised to subscribe for shares inUCDIV.
6. Inventories
Run-of-mine(ROM) stockpiles 4 162 2 191 1 233Coal product stockpiles 1 428 294 225Diesel on hand 49 72 40Consumable stores 672 561 3 028
6 311 3 118 4 526
7. Trade and other receivables
Trade and other receivables 9 938 7 374 9 659
Financial assets 9 938 7 374 9 659VAT 1 705 1 457 625Prepayments 1 947 1 951 1 455
13 590 10 782 11 739
Prepayments: Universal Coal Development VII (Pty) Ltd
On 19 April 2012, Universal Coal & Energy Holdings South Africa Proprietary Limited acquired 1 (one) ordinary share(50%) of Universal Coal Development VII Proprietary Limited, a special purpose entity formed with the intention ofacquiring additional prospecting rights in South Africa. The contribution of A$1.4 million (30 June 2016: A$1.6 million;31 December 2015: A$1.4 million) continues to be treated as a prepayment as certain conditions precedent still have tobe concluded.
8. Cash and cash equivalents
Cash and cash equivalents consist of:
Bank balances 2 160 7 048 833Fixed term deposits 3 552 - 363Restricted cash 715 527 7 408
6 427 7 575 8 604
Restricted cash and cash equivalents
Restricted cash and cash equivalents consists of security for financial guarantees provided by financial institutions onbehalf of the Group.
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Universal Coal Plc(Registration number 4482856)
Notes to the Condensed Consolidated Financial Statements for the six monthsended 31 December 2016 (continued)
Reviewed31 December
2016
Audited30 June
2016
Reviewed31 December
2015A$ '000 A$ '000 A$ '000
8. Cash and cash equivalents (continued)
Cash security in respect of financial guarantees - - 6 914Guarantee account 715 527 494
715 527 7 408
Financial guarantees
Certain financial guarantees have been entered into by Universal Coal and Energy Holdings South Africa ProprietaryLimited in relation to rehabilitation guarantees in favour of the Department of Minerals Resources and were securedagainst a cash at bank balance of A$nil million (30 June 2016: A$nil million; 31 December 2015: A$6.9 million).During the prior financial year, the Group restructured these rehabilitation guarantees through another serviceprovider and released the restricted cash amounts to unrestricted cash.
Supplier guarantees
Supplier guarantees have been provided to certain suppliers of Universal Coal Development I (Pty) Ltd and UniversalCoal Development VIII (Pty) Ltd and have been fully secured by a cash balance of A$0.7 million (30 June 2016: A$0.5million (ZAR5.6 million)).
9. Share capitalAllotted, issued and fully paid522 471 758 (2015: 506 685 447) Ordinary shares of £0.05 44 466 43 374 43 093Share premium 53 592 52 941 52 701
98 058 96 315 95 794
Reconciliation of number of shares issued:Reported as at beginning of period 43 374 42 989 42 989Issue of ordinary shares - 6 481 6 481Conversion of preferred shares - (6 481) (6 481)Exercise of share options - 104 104Conversion of convertible notes 1 092 281 -
Balance at end of period 44 466 43 374 43 093
Reconciliation of share premium:Reported as at beginning of period 52 941 52 605 52 605Issue of ordinary shares - 6 339 6 339Conversion of preferred shares - (6 339) (6 339)Exercise of share options - 96 96Conversion of convertible notes 651 240 -
Balance at end of period 53 592 52 941 52 701
Significant changes in the share capital of the Group for the half year ended 31 December 2016 were as follows:
Ordinary shares Date of issue Number ofshares issued
Cumulativeshares issued
Opening balance - 509 516 787Conversion of convertible notes 7 July 2016 2 007 774 511 524 561Conversion of convertible notes 8 August 2016 1 486 242 513 010 803Conversion of convertible notes 9 September 2016 1 494 694 514 505 497Conversion of convertible notes 10 October 2016 2 770 923 517 276 420Conversion of convertible notes 14 November 2016 2 537 077 519 813 497Conversion of convertible notes 12 December 2016 2 658 261 522 471 758
Closing balance 522 471 758
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Universal Coal Plc(Registration number 4482856)
Notes to the Condensed Consolidated Financial Statements for the sixmonths ended 31 December 2016 (continued)
9. Share capital (continued)
Significant changes in the share capital of the Group for the financial year ended 30 June 2016 were as follows:
Ordinary shares Date ofissue
Number ofshares issued
Cumulativeshares issued
Opening balance - 434 465 447Conversion of preferred shares 14 August 2015 71 220 000 505 685 447Exercise of share options 8 December 2015 1 000 000 506 685 447Conversion of convertible notes 19 May 2016 1 876 340 508 561 787Conversion of convertible notes 15 June 2016 955 000 509 516 787
Closing balance 509 516 787
Preferred shares Date ofissue
Number ofshares issued
Cumulativeshares issued
Opening balance - 71 220 000Conversion to ordinary shares 14 August 2015 (71 220 000) -
-
Holders of ordinary shares are entitled to dividends as declared from time to time and are entitled to one vote pershare at general meetings of the Company.
10. Share based payments
Share Options
The Company has share based payment arrangements relating to share options granted, which are as below:
31 December 2016Grant date Expiry Date Exercise Price Number issued Outstanding04/06/2012 04/06/2017 A$ 0.26 16 855 736 16 855 73604/06/2012 04/06/2017 A$ 0.28 5 618 579 5 618 57901/04/2013 01/04/2018 A$ 0.26 3 300 001 3 300 001
25 774 316 25 774 316
31 December 2015Grant date Expiry Date Exercise Price Number issued Outstanding04/06/2012 03/06/2017 A$ 0.26 16 855 736 16 855 73604/06/2012 03/06/2017 A$ 0.28 5 618 579 5 618 57901/04/2013 01/04/2018 A$ 0.26 3 300 001 3 300 001
25 774 316 25 774 316
The fair value of the share-based payment is based upon the Black-Scholes formula, a commonly used option pricingmodel. The calculation of volatility used in the model is based upon an average of market prices against currentmarket prices of listed companies operating in the mining industry.
All options are equity settled and it has been assumed that all options will vest.
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Universal Coal Plc(Registration number 4482856)
Notes to the Condensed Consolidated Financial Statements for the sixmonths ended 31 December 2016 (continued)
10. Share based payments (continued)
Warrants
The company has unlisted warrants in issue in favour of certain shareholders as set out below:
31 December 2016Grant date Expiry date Exercise price Number issued Outstanding16/10/2014 16/04/2016 A$ 0.36 71 220 000 -
31 December 2015Grant Expiry date Exercise price Number issued Outstanding27/01/2014 31/12/2015 A$ 0.23 19 500 000 -16/10/2014 16/04/2016 A$ 0.36 71 220 000 71 220 000
90 720 000 71 220 000
Warrants issued to Coal Development Holding B.V. (CDH)
On 27 January 2014, 19 500 000 warrants to subscribe for Ordinary Shares at A$ 0.23 were issued to Coal DevelopmentHolding B.V.
On 16 October 2014, 71 220 000 warrants to subscribe for ordinary shares at A$0.36 were issued to IchorCoal N.V. On31 December 2015 and 16 April 2016, 19 500 000 and 71 220 000 warrants expired respectively.
Reviewed31 December
2016
Audited30 June
2016
Reviewed31 December
2015A$ '000 A$ '000 A$ '000
11. Borrowings
Non-current liabilitiesShareholder's loans 1 907 2 252 2 705Investec Kangala Project Finance Facility 15 969 16 844 17 958
17 876 19 096 20 663
Current liabilitiesCurrent portion of Investec Kangala Project Finance Facility 5 781 5 215 5 039Investec Short term loan - - 352
5 781 5 215 5 391
Shareholder's loanMountain Rush Trading 6 Proprietary Limited 1 907 2 252 2 705
The above loan is unsecured, interest free and has no specified terms of repayment. In accordance with IAS 39, thepresent value of the loan has been calculated at the prime rate of interest in South Africa plus two percent over1.5 years (31 December 2015: 2.5 years), with the present value of the equity component being recognised in aconvertible instrument reserve.
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Universal Coal Plc(Registration number 4482856)
Notes to the Condensed Consolidated Financial Statements for the six monthsended 31 December 2016 (continued)
Reviewed31 December
2016
Audited30 June
2016
Reviewed31 December
2015A$ '000 A$ '000 A$ '000
11. Borrowings (continued)
Finance facilities
Investec Kangala Project Finance Facility 21 750 22 059 22 997Investec Short term loan - - 352
21 750 22 059 23 349
Investec Kangala Project Finance Facility
On 31 July 2015 Universal Coal entered into new financing agreements with Investec Bank Limited (Investec), actingthrough its Corporate and Institutional Banking division, replacing the existing banking facilities with Rand MerchantBank, a division of FirstRand Bank Limited.
Funds from the Investec facility are available as follows: Tranche A: Settlement of the Kangala project finance facility of A$29 million (ZAR285 million plus ZAR5 million
for fees). Tranche A: A Working Capital Facility: A$2.5 million (ZAR25 million) facility for working capital for the Kangala
Colliery. Tranche B: A$22 million (ZAR215 million) facility to fund the balance of capital development activities at NCC
(undrawn).
Interest rates over the new facilities will be reduced after the completion of the NCC project to three-month JIBAR plusa margin of 3.5% p.a.. Prior to completion, interest will be levied by Investec at three-month JIBAR plus a margin of4% p.a..
Repayment of Tranche A will follow a quarterly cycle over 20 repayment periods, with interest being servicedsimultaneously. The revolving working capital facility has a tenure of five years and must be repaid at the end of theperiod. Repayment of Tranche B will benefit from a repayment holiday for the first 12 months, and sixteen quarterlyrepayments will be made thereafter. Interest on this second tranche will be serviced quarterly following drawdown.
Security over the debt facilities are standard for a facility of this nature, and involve first ranking security over assets,including bonds over movable, immovable, mining and surface rights. A project completion guarantee for NCC wasprovided from the parent company; Universal Coal plc.
Transaction costs (debt issuance costs) of ZAR6.5 million (A$0.7 million) have been settled by utilising the financefacility. Debt issuance costs are recorded as a deferred charge and amortised over the term of the debt using theeffective interest method.
Investec Short term loan
A short-term uncommitted revolving working capital facility of A$2.5 million (ZAR25 million) has been provided to theKangala Colliery by Investec Bank Limited which is secured in line with the security package for the project financingfacility. Interest on the daily outstanding balance is levied at JIBAR plus 4% per annum.
At the end of 31 December 2016 the full working capital facility was undrawn and available for draw down as required.
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Universal Coal Plc(Registration number 4482856)
Notes to the Condensed Consolidated Financial Statements for the six monthsended 31 December 2016 (continued)
Reviewed31 December
2016
Audited30 June
2016
Reviewed31 December
2015A$ '000 A$ '000 A$ '000
12. Converting notes
Held at amortised costSusquehanna Pacific Proprietary Limited 3 273 4 891 5 974
Converting notes and options issued to Susquehanna Pacific (Pty) Ltd
There have been no amendments to the Convertible Note Agreement since the 30 June 2016 annual financialstatements. Reference can be made to the 30 June annual financial statements for the specific terms and conditionsof the Converting Notes.
On 3 December 2015 a conversion notice for 171 500 notes was received from Susquehanna Limited and UniversalCoal elected to settle this notice in cash.
Since the 30 June 2016 annual financial statements, all conversion notices received from Susquehanna Limited havebeen settled via the conversion into ordinary shares by Universal Coal (refer to note 9).
13. Derivative financial liability
Opening balances 1 658 1 375 1 375Movements in the period (1 151) 283 2 173
Closing balance 507 1 658 3 548
Contained within the Susquehanna Pacific Proprietary Limited converting notes is an acceleration option which in theevent that the Universal Coal Plc share price is equal to or above the Conversion Price on or after 30 November 2015,there is an option to convert all outstanding loan notes. This is considered to be an embedded derivative (“ConvertingOption”) contained within the Converting notes.
The Conversion Price is A$ 0.25696 per share, calculated as 110% of the lower of A$ 0.2336 and A$ 0.25.
The fair value of the Converting Option has been determined by using the Black Scholes option pricing model, acommonly used option pricing model.
The following key inputs were used in the valuation of the Derivative Financial Liability:
Share price A$0.14 A$0.20 A$0.21Strike price A$0.25696 A$0.25696 A$0.25696Volatility 67.3% 67.3% 96%Risk free rate 1.82% 1.82% 2.06%Time to maturity 2.41 years 2.92 years 3.41 years
The fair value of the Converting Option at 31 December 2016 is A$0.0336 (30 June 2016: A$0.0758;31 December 2015: A$0.1335) per option.
There are still 3 878 000 loan notes (with a face value of A$1 each) in issue which are convertible at a price ofA$0.25696. On exercise, this would result in the issue of the total of 15 091 843 new shares. The total fair value of theConverting Option over these new shares is A$0.5 million (30 June 2016: A$1.7 million;31 December 2015: A$3.5 million).
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Universal Coal Plc(Registration number 4482856)
Notes to the Condensed Consolidated Financial Statements for the sixmonths ended 31 December 2016 (continued)
14. Provisions
Reconciliation of provisions - 31 December 2016
Openingbalance
A$'000
Decrease inprovision -change in
estimateA$'000
Unwinding ofprovision
A$'000
Foreignexchange
movementA$'000
TotalA$'000
Environmental rehabilitation - Kangala 3 934 (435) 390 427 4 316Environmental rehabilitation - NCC 21 864 (3 289) 2 167 2 373 23 115
25 798 (3 724) 2 557 2 800 27 431
Reconciliation of provisions - 30 June 2016
Openingbalance
A$'000
Decrease inprovision -change in
estimateA$'000
Business acquisition
A$'000
Unwinding ofprovision
A$'000
Foreignexchange
movementA$'000
TotalA$'000
Environmentalrehabilitation - Kangala 4 446 (188) - 320 (644) 3 934Environmentalrehabilitation - NCC - (6 656) 30 331 2 217 (4 028) 21 864
4 446 (6 844) 30 331 2 537 (4 672) 25 798
The rehabilitation provision relates to the estimated costs of correcting any disturbance relating to mining activitiesand those incidental thereto for the Kangala and New Clydesdale Colliery ("NCC"). The level of provision iscommensurate with work completed to date.
The cost of rehabilitation of the Kangala Colliery was estimated at A$5.1 million (ZAR50.9 million)(30 June 2016: A$4.6 million (ZAR50.9 million)). The future value of the Kangala provision was calculated byescalating estimated costs at an average CPI of 5.2% over the life of the mine of 7 years. This amount is discountedat the 10 year South African Government Bond Rate of 8.94% to arrive at a carrying value of A$4.3 million(30 June 2016: A$3.9 million).
The cost of rehabilitation of NCC was estimated at A$29.2 million (ZAR289.7 million) (30 June 2016: A$30.3 million(ZAR289.7 million)). The future value of the NCC provision was calculated by escalating estimated costs at anaverage CPI 5.1% over the life of the mine of 10 years. This amount is discounted at the 10 year South AfricanGovernment Bond Rate of 8.94% to arrive at a carrying value of A$23.1 million (30 June 2016: A$21.9 million). Duringthe period both the inflation rate and discount rate were updated. These resulted in a A$3.2 million reduction in theprovision which has been presented in finance income.
Reviewed31 December
2016
Audited30 June
2016
Reviewed31 December
2015A$ '000 A$ '000 A$ '000
15. Trade and other payables
Trade payables 10 006 8 821 6 844Accrued expenses 1 390 1 302 1 245
Financial liabilities 11 396 10 123 8 089
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Universal Coal Plc(Registration number 4482856)
Notes to the Condensed Consolidated Financial Statements for the sixmonths ended 31 December 2016 (continued)
Reviewed31 December
2016
Reviewed31 December
2015A$ '000 A$ '000
16. Finance income
Interest revenueBank and fixed deposit interest 169 611Ndlamo loan interest 1 788 1 332Decrease in rehabilitation provision estimate 3 289 -
Total interest income 5 246 1 943
17. Finance expenses
Interest on Investec Project Finance Facility 1 256 1 409Reverse accretion of transaction cost included in interest in prior periods - (510)Interest on RMB Project Finance Facility - 273Interest on converting notes 262 495Accretion of deferred transaction costs 247 -Unwinding of discount on provisions and other liabilities 2 557 146
Total finance costs 4 322 1 813
18. Cash generated from operations
(Loss) / profit before taxation (2 424) 18 899Adjustments for:Depreciation and amortisation 6 016 1 850Gain on bargain purchase - (14 336)Foreign exchange loss 8 -Finance income (5 246) (1 943)Finance expenses 4 322 1 813Derivative financial liability (1 151) 2 173Loss on sale of fixed assets 9 727 -Changes in working capital:Increase in inventories (2 836) (1 041)(Decrease) / increase in trade and other receivables 83 (3 112)(Decrease) / increase trade and other payables (17) 273
8 482 4 576
19. Significant non-cash transactions
Operating activitiesLoss on sale of assets 9 727 -Depreciation and amortisation 6 016 1 850Gain on bargain purchase - (14 336)Finance income (decrease in rehabilitation provision estimate) (3 289) -
12 454 (12 486)
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Universal Coal Plc(Registration number 4482856)
Notes to the Condensed Consolidated Financial Statements for the sixmonths ended 31 December 2016 (continued)
20. Related parties
`
RelationshipsHolding company Universal Coal and Energy Holdings South Africa
Proprietary Limited (UCEHSA)Subsidiaries Universal Coal Development I (Pty) Ltd
Universal Coal Development II (Pty) LtdUniversal Coal Development III (Pty) LtdUniversal Coal Development IV (Pty) LtdUniversal Coal Development V (Pty) LtdUniversal Coal Development VII (Pty) LtdUniversal Coal Development VIII (Pty) LtdTwin Cities Trading 374 (Pty) LtdEpsimax (Pty) LtdEpisolve (Pty) LtdBold Moves 1765 (Pty) LtdUniversal Coal Power Generation (Pty) Ltd
Associated undertakings Universal Coal Development VI (Pty) LtdUniversal Coal Logistics (Pty) Ltd
Black Empowerment Economic Partners Unity Rocks Mining (Pty) LtdMountain Rush Trading 6 (Pty) LtdSolar Spectrum Trading 365 (Pty) LtdProper Health (Pty) LtdPacific Breeze Trading 725 (Pty) LtdAzaramix Investments (Pty) LtdIdentity Coal (Pty) LtdNdalamo Resources (Pty) LtdBono Lithihi Investments Group (Pty) Ltd
Other related parties and connected persons KEE Enterprises (Pty) LtdHendrik BonsmaCoal Development Holding B.VOfhani PhaswanaAfrican Minerals Exploration and Development GPSARLIchorCoal N.V.Bonsma Enterprises (Pty) Ltd
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Universal Coal Plc(Registration number 4482856)
Notes to the Condensed Consolidated Financial Statements for the sixmonths ended 31 December 2016 (continued)
20. Related parties (continued)
Reviewed31 December
2016
Audited30 June
2016
Reviewed31 December
2015A$ '000 A$ '000 A$ '000
Related party balances
Loan from related partiesMountain Rush Trading 6 (Pty) Ltd 1 907 2 252 2 705
Loan to related partiesNdalamo Resources (Pty) Ltd 8 623 6 475 2 792
Related party transactions
Consulting fees paid to related partiesAfrican Minerals Exploration and Development GP 80 160 80IchorCoal N.V. 80 160 80Mountain Rush Trading 6 (Pty) Ltd 3 332 5 621 2 853
Goods sold to related partiesBonsma Enterprises (Pty) Ltd - 152 142
Rent paid to related partiesKEE Enterprises (Pty) Ltd 47 91 52
Shareholder loan repaymentMountain Rush Trading 6 (Pty) Ltd 330 1 463 1 170
Universal Coal Development I (Pty) Ltd secured a portion of the 100% Kangala equity funding requirement ofA$16.9 million (ZAR160 million) through a shareholders loan of A$4.30 million (ZAR47.2 million) from Black EconomicEmpowerment partner Mountain Rush Trading 6 (Pty) Ltd. A shareholder loan repayment of A$0.3 million(ZAR3.4 million) was made during the period (30 June 2016: A$1.5 million (ZAR16.1 million); 31 December 2015:A$1.2 million (ZAR11.5 million)).
On 12 August 2014, a financing term sheet was entered into between Universal Coal and Energy Holdings SouthAfrica (Pty) Ltd and Ndalamo Resources (Pty) Ltd for the financing of the NCC Roodekop project. The loan is securedagainst a share pledge, bears interest at prime plus 7.5% per annum and is fully repayable by 30 June 2020 in varyingcapital installments. The balance above represents a net amount of A$4.7 million (30 June 2016: A$4.6 million;31 December 2015: A$1.3 million) and accumulated interest of A$3.9 million (30 June 2016: A$1.9 million;31 December 2015: A$1.5 million). To date a gross capital amount of A$15.1 million ((30 June 2016: A$13.5 million;31 December 2015: A$11.5 million) has been loaned to Ndalamo Resources of which A$10.4 million(30 June 2016: A$8.9 million; 31 December 2015: A$10.2 million) has been onlent to UCD IV and UCD VIII. Onconsolidation this amount is offset against the gross loan balance due to offsetting rights included in the agreements.The balance of A$4.7 million has been utilised to subscribe for shares in UCDIV.
On 5 December 2012, the Company entered into a private placement agreement with Coal Development Holding B.V.(CDH) a wholly owned investment vehicle of African Minerals Exploration and Development GP SARL for theacquisition of 29.99% of the issued share capital of Universal Coal Plc. One of the key terms of the placement wasthat CDH has the right to nominate two Non-Executive Directors to the Company’s Board. Following Shareholderapproval at the Company’s Annual General Meeting on 21 December 2012, the Board of Universal Coal Plc approvedthe appointment of Mr David Twist and Mr Carlo Baravalle as Non-Executive Directors effective from 7 January 2013.Monthly fees of A$0.01 million are payable to African Minerals Exploration and Development GP SARL.
Fees paid to Mountain Rush Trading 6 (Pty) Ltd relate to facilitation and service fees permitted in the Facilitation andService Fee Agreement entered into on 6 May 2013 between Mountain Rush Trading 6 (Pty) Ltd, Universal CoalDevelopment I (Pty) Ltd and Universal Coal and Energy Holdings South Africa (Pty) Ltd. The transaction is consideredto be at “arms-length”.
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Universal Coal Plc(Registration number 4482856)
Notes to the Condensed Consolidated Financial Statements for the sixmonths ended 31 December 2016 (continued)
20. Related parties (continued)
On 1 September 2014, Universal Coal Plc entered into a Subscription Agreement with IchorCoal N.V. for the strategicinvestment of A$24.5 million and furthermore entered into a Warrant Instrument with IchorCoal N.V. wherebyIchorCoal N.V. would subscribe for 71 220 000 Warrants, exercisable for a period of 18 months at a strike price ofA$0.36. As part of the investment and effective from 16 October 2014, Messrs Nonkululeko Nyembezi-Heita andAndries Engelbrecht were appointed to the Board of Universal Coal as nominee directors of IchorCoal N.V. Monthlyfees of A$13.3 thousand are payable to IchorCoal N.V.
A lease agreement was entered into with KEE Enterprises on 1 June 2014 for office rental in South Africa. Thecontrolling shareholder of KEE Enterprises (Pty) Ltd, Hendrik Bonsma is also a non-executive director of UniversalCoal Plc. The period of the lease is for 5 years at a market related rental of A$7 600 per month with an annualescalation clause of 8% per annum.
During the prior financial year Bonsma Enterprises (Pty) Limited ("Bonsma Enterprises") bought certain of the assetsof the NCC. These assets were made available on bid offer to the public. The controlling shareholder of BonsmaEnterprises, Hendrik Bonsma is also a non-executive director of Universal Coal Plc.
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Universal Coal Plc(Registration number 4482856)
Notes to the Condensed Consolidated Financial Statements for the sixmonths ended 31 December 2016 (continued)
21. Risk management
Financial risk management
A. Accounting Classifications and Fair values
The Group’s activities expose it to a variety of financial risks: in particular market risk (including currency risk, fair valueand interest rate risk) and liquidity risk. The Group’s overall risk management programme focuses on theunpredictability of financial markets and seeks to minimise the potential adverse effects on the Group’s performance.The Board on behalf of the members carries out risk management.
Loans and receivables Financial LiabilitiesThe financial instrumentsof the Group are:
31 December 2016
Note Fair valuehierarchy
CarryingamountA$'000
Fair value
A$'000
CarryingamountA$'000
Fair value
A$'000
Financial assetsTrade and other receivables 1 7 Level 3 9 938 9 938 - -Unrestricted cash 1 8 Level 1 5 712 5 712 - -Restricted cash 1 8 Level 1 715 715 - -Loan receivable 1 5 Level 3 8 623 8 623 - -
24 988 24 988 - -Financial liabilitiesShareholder's loan 2 11 Level 3 - - 1 907 1 907Trade payables 1 15 Level 3 - - 11 396 11 396Derivative financial liability 3 13 Level 3 - - 507 507Borrowings 2 11 Level 3 - - 21 750 21 750Converting notes 2 12 Level 3 - - 3 273 3 273
24 988 24 988 38 833 38 833
Loans and receivables Financial LiabilitiesThe financial instrumentsof the Group are:
30 June 2016
Note Fair valuehierarchy
CarryingamountA$'000
Fair value
A$'000
CarryingamountA$'000
Fair value
A$'000
Financial assetsTrade and other receivables 1 7 Level 3 7 374 7 374 - -Unrestricted cash 1 8 Level 1 7 048 7 048 - -Restricted cash 1 8 Level 1 527 527 - -Loan receivable 1 5 Level 3 6 475 6 475 - -
21 424 21 424 - -Financial liabilitiesShareholder's loan 2 11 Level 3 - - 2 252 2 252Trade payables 1 15 Level 3 - - 10 123 10 123Derivative financial liability 3 13 Level 3 - - 1 658 1 658Borrowings 2 11 Level 3 - - 22 059 22 059Converting notes 2 12 Level 3 - - 4 891 4 891
21 424 21 424 40 983 40 983
1 The carrying amount of these financial assets and liabilities are a reasonable approximation of their fair values2 Financial liabilities recognised as at amortised cost3 Financial liabilities designated as at fair value through profit or loss
Value Added Taxation and prepayments of A$3.7 million (30 June 2016: A$3.4 million) and provisions and deferred taxof A$36.8 million (30 June 2016: A$35.1 million) have been excluded as these do not meet the definition of a financialasset or financial liability as defined in IAS 32 Financial Instruments: Presentation.
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Universal Coal Plc(Registration number 4482856)
Notes to the Condensed Consolidated Financial Statements for the sixmonths ended 31 December 2016 (continued)
21. Risk management (continued)
B. Valuation Techniques and significant unobservable inputs
The Group has assessed the different levels in the fair value hierarchy, for its financial instruments, based on theinputs used in the valuation techniques.
The following tables show the valuation techniques used in measuring level 3 fair values, as well as the significantunobservable inputs used.
Financial instruments measured at Fair Value
Type Valuation TechniqueSignificantunobservable input
Inter-relationshipbetween significantunobservable inputsand fair valuemeasurement
Derivative financial liabilities(derivative component)
Black-Scholes optionpricing model Share price volatility
Refer to the sensitivityanalysis table below
Financial instruments not measured at Fair Value
Type Valuation Technique Significant unobservable input
Shareholder Loan, Borrowings Amortised cost whichapproximates fair value
Not applicable
Level 3 Fair Values
The following table shows a reconciliation from the opening balances to the closing balances for level 3 fair values:
Note Derivativefinancial
liabilityA$'000
Balance at 1 July 2016 13 1 658Gain or loss included in profit and loss (1 151)Converted and settled in cash -Converting notes converted to equity -
Balance at 31 December 2016 507
Sensitivity of Level 3 financial assets and liabilities
The carrying amount of financial assets and liabilities that are valued using inputs other than observable market dataare calculated using appropriate valuation models, including discounted cash flow modelling, with inputs such as termof instruments, risk free interest rate, volatility and consumer price index. The potential effect of using reasonablypossible alternative assumptions in these models, based on change in the most significant input by 10 percent whileholding all other variables constant would have the following effects:
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Universal Coal Plc(Registration number 4482856)
Notes to the Condensed Consolidated Financial Statements for the sixmonths ended 31 December 2016 (continued)
21. Risk management (continued)
31 December 2016 CarryingamountA$'000
10% increasein input
10% decreasein input
Derivative financial liability 507 595 419Converting notes 3 273 3 600 2 946
3 780 4 195 3 365
30 June 2016 CarryingamountA$'000
10% increasein input
10% decreasein input
Derivative financial liability 1 658 1 952 1 378Converting notes 4 891 5 380 4 402
6 549 7 332 5 780
Reviewed31 December
2016
Reviewed31 December
2015
22. Earnings Per Share
NumeratorEarnings used in basic earnings per share (A$) 715 023 8 151 599
Earnings used in basic and diluted earnings per share (A$) 715 023 8 151 599
DenominatorWeighted average number of shares used in basic and diluted earnings per share 515 694 759 505 810 447
Convertible loan notes, share options and warrants have not been included in the calculation of diluted earnings pershare because they are out of the money. The total number of options and warrants issued is disclosed in note 10.
23. Events after the reporting period
The directors are not aware of any material events which occurred after the reporting date and up to the date of thisreport, which would have an impact on the financial statements.
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Independent Reviewer Report
Independent Review Report to Universal Coal Plc
Introduction
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financialreport for the six months ended 31 December 2016 which comprises the condensed consolidated statement of profit or lossand other comprehensive income, the condensed consolidated statement of financial position, the condensed consolidatedstatement of changes in equity, the condensed consolidated statement of cash flows and the related explanatory notes.
We have read the other information contained in the half-yearly financial report and considered whether it contains anyapparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
Directors' responsibilities
The half-yearly report, including the financial information contained therein, is the responsibility of and has been approved bythe directors. The directors are responsible for preparing the half-yearly report in accordance with the rules of the AustralianStock Exchange. As disclosed in note one, the annual financial statements of the group are prepared in accordance withInternational Financial Reporting Standards (IFRSs) as adopted by the European Union. The condensed set of financialstatements included in this half-yearly financial report has been prepared in accordance with International AccountingStandard 34, ‘‘Interim Financial Reporting’’, as adopted by the European Union.
Our responsibilities
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearlyfinancial report based on our review.
Our report has been prepared in accordance with the terms of our engagement to assist the company in meeting itsresponsibilities in respect of half-yearly financial reporting in accordance with the requirements of the rules of the AustralianStock Exchange and for no other purpose. No person is entitled to rely on this report unless such a person is a personentitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expresslyauthorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any otherperson or for any other purpose and we hereby expressly disclaim any and all such liability.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410,‘‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’’, issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries,primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. Areview is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UKand Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significantmatters that might be identified in an audit. Accordingly, we do not express an audit opinion.
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Independent Reviewer's Report (continued)
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financialstatements in the half-yearly financial report for the six months ended 31 December 2016 is not prepared, in all materialrespects, in accordance with the rules of the Australian Stock Exchange and International Accounting Standard 34 ‘InterimFinancial Reporting’ as adopted by the European Union.
__________________________________BDO LLPChartered Accountants55 Baker StreetLondon W1U 7EUUnited Kingdom13 March 2017
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127)
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