Coal of Africa Ltd (CZA) - Annual Consolidated Financial Statements RNS Number : 5483N Coal of Africa Limited 01 October 2012 COAL OF AFRICA LIMITED ANNUAL CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2012 (Expressed in United States dollars unless otherwise stated) Page Directors' Report 2 Auditor's Independence Declaration 21 Corporate Governance Statement 22 Directors' Declaration 31 Consolidated Statement of Comprehensive Income 32 Consolidated Statement of Financial Position 33 Consolidated Statement of Changes in Equity 34 Consolidated Statement of Cash Flows 35 Notes to the Consolidated Financial Statements 36 Independent Auditor's Report 104 The directors of Coal of Africa Limited ("CoAL" or "the Company") submit herewith the annual report of the company and the entities controlled by the Company (its subsidiaries), collectively referred to as "the Group" or "the Consolidated Entity", for the financial year ended 30 June 2012. In order to comply with the provisions of the Corporations Act 2001, the directors report as follows: Information about the directors and senior management The names and particulars of the directors of the company during or since the end of the financial year are set out below. Unless otherwise stated, the directors held office during the whole of the financial year: David Brown Independent Mr Brown joins Coal of Africa Non-Executive following a tenure of 13 years at Chairman Impala Platinum Holdings Limited (Implats). He joined the Impala (appointed 6 Group in 1999 and served as chief August 2012) financial officer and financial director of Impala Platinum Holdings Ltd before being appointed chief executive officer in 2006. He is currently an independent non-executive director of Vodacom Group Limited and has in the past served as a non-executive director of Simmer & Jack Limited. Mr Brown is a Chartered Accountant and completed his articles with Ernst & Young, graduating from the University of Cape Town. John Nicholas Chief Executive Mr Wallington holds a BSc in Mining Wallington Officer Engineering from the University of the Witwatersrand in Johannesburg, Executive Director South Africa and has participated in executive programmes with both the London Business School and the Harvard Business School. He joined the Coal Division of Anglo American in 1981 and was CEO of the South African Region before being appointed as CEO of Anglo Coal globally. Mr Wallington held the position of CEO for the Anglo Coal Division between 2005 and 2008 and has 30 years experience in the coal exploration and mining industry. Wayne Gregory Koonin Financial Director Over the past 13 years, Mr Koonin has gained extensive international experience working in senior financial roles for Canadian, South African, British and Swiss based exploration, development and operating mining companies, covering a variety of commodities, including coal. As a result, he has had exposure to various international accounting standards, taxation and regulatory environments, as well as responsibility for entities listed on the JSE Limited ("JSE"), Australian Securities Exchange ("ASX"), AIM market of the London Stock Exchange ("AIM") and National Association of Securities Dealers Automated Quotations ("NASDAQ"). Professor Ntshengedzeni Executive Director Professor Alfred Nevhutanda has two Alfred Nevhutanda PhD's (in Education Environment and Arts Culture), a diploma in Management Studies and an MBA, has been involved in a number of diversified businesses and served as a leader in various academic fields, as well as held various political appointments. He has acted as an advisor to the King of the Vhavenda, Ministers and Members of the Executive Council of the ruling party. Dave John Keir Murray Independent Mr Murray has held a number of Non-Executive senior positions in the global coal Director industry, including Managing Director of Ingwe Coal Corporation (formerly Trans-Natal Coal Corporation Limited), Chief Executive of BHP Billiton Mitsubishi Alliance and President of Energy Coal Sector Group at BHP Billiton Limited, a position he held until December 2009. Mr Murray holds a Bachelor of Science Degree (Civil Engineering) from the University of KwaZulu-Natal and a Post Graduate Diploma in Mining Engineering from the University of Pretoria. He has also completed the Advanced Executive Program from the University of South Africa. Bernard Robert Pryor Independent Mr Pryor was until recently chief Non-Executive executive of Q Resources plc and is Director a non-executive director of African Minerals Limited. Between 2006 and (appointed 6 2010 he held senior executive August 2012) positions within Anglo American Plc as head of business development, and CEO of Anglo Ferrous Brazil Inc. Peter George Cordin Independent Mr Cordin has a Bachelor of Non-Executive Engineering from the University of Director Western Australia and is well experienced in the evaluation, development and operation of resource projects within Australia and overseas. He is the Chairman of ASX listed Dragon Mining Limited and non-executive director of Vital Metals Limited. Khomotso Brian Mosehla Non-Executive After serving articles at KPMG, Mr Director Mosehla worked for five years at African Merchant Bank Limited, where he gained a broad range of experience, including Management Buy-Out ('MBO'), Leveraged Buy-Out ('LBO') and capital restructuring/raising transactions. In 2003, he established Mvelaphanda Corporate Finance, for the development of Mvelaphanda's mining and non-mining interests. Mr Mosehla served as a director on the boards of several companies, including Mvelaphanda Resources Limited, and he is currently the Chief Executive Officer of Mosomo Investment Holdings Proprietary Limited. Rudolph Henry Non-Executive Mr Torlage is a Chartered Accountant and Torlage Director has over twenty years' experience with ArcelorMittal South Africa. He is currently Executive Director Finance and a Board member of various unlisted ArcelorMittal Group companies. Richard John Independent Mr Linnell has been active in the Linnell Non-Executive resources and metals fields for over forty Chairman years and has significant global experience in the development and (resigned 6 August marketing of resources and commodities. He 2012) was the originator of the Bakubang Initiative, a forum designed to revive the South African mining industry and which led to the establishment of the New Africa Mining Fund, of which he is Chairman of Trustees. He holds a number of other Directorships. Simon James Independent Mr Farrell has a Bachelor of Commerce from Farrell Executive the University of Western Australia and an MBA from the Wharton School of the Deputy Chairman University of Pennsylvania. He is a Fellow of the Australian Society of CPA's and the (resigned 6 August Institute of Company Directors. He has 2012) held a number of senior management and Board positions, principally in the resources sector over the last twenty years. He is currently a Director of London Stock Exchange listed Kenmare Resources plc. Stephen Bywater Independent Mr Bywater has a distinguished career in Non-Executive the resources industry, developing and Director operating a total of 14 large-scale open pit and underground mining operations and (resigned 6 August their associated services, logistics and 2012) infrastructure. When working for Rio Tinto Coal Australia, he was Chief Operating Officer, and in this position oversaw seven mining operations, producing 60 million tonnes of saleable coal a year. Mr Bywater has a B.Sc. in Engineering Geology and Geotechnics from Portsmouth University and a M.Sc. in Rock Mechanics and Excavation Engineering from Newcastle-upon-Tyne. Mikki Sivuyile Non-Executive Mr Xayiya has served in various capacities Macmillan Xayiya Director in the African National Congress since 1977. In 1995, he was appointed as a (resigned 6 August Policy Advisor - Office of the Premier, 2012) Gauteng Provincial Government. He left public office and joined Mawenzi Asset Managers as Managing Director. In 1998 he co-founded Mvelaphanda Holdings. Mr Xayiya was appointed as Executive Chairman of Mvelaphanda Holdings with effect from 9 June 2009. Directorships of other listed companies Directorships of other listed companies held by the directors in the 3 years immediately before the end of the financial year are as follows: Director Company Period of directorship Richard Linnell GRD Minproc Ltd 2004 - 2009 Chrome Corporation Limited 2005 - 2009 GMA Resources plc 2003 - 2009 SacOil Holdings Limited 2008 - Present Maghreb Minerals plc 2010 - Present IPSA Group plc 2007 - 2009 Brinkley Mining plc 2002 - Present Mag Industries Corp 2009 - 2011 Incorporated 2010 - Present Rockwell Diamonds Incorporated Bernard Pryor African Minerals Limited 2011 - Present Adastra Minerals Inc. 2000 - 2006 David Brown Vodacom Group Limited 2012 - Present Zimplats Holdings Limited 2010 - 2012 Impala Platinum Holdings 1999 - 2012 Limited Simon Farrell Kenmare Resources plc 2002 - Present Bellzone Mining plc 2010 - 2011 John Wallington Firestone Resources Limited 2009 - Present Keaton Energy Limited 2008 - 2010 Wayne Gregory Koonin Platmin Limited 2009 - 2011 Professor Alfred none none Nevhutanda Peter Cordin Dragon Mining Limited 2006 - Present Vital Metals Limited 2009 - Present Stephen Bywater GCM Resources plc 2006 - 2012 Caledon Resources plc 2006 - 2011 Dave Murray Meridien Resources Limited 2012 - Present 1999 - 2001 Billiton Coal 2001 - 2004 BHP Billiton Coal Mitsubishi Alliance 2005 - 2008 BHP Billiton Metallurgical 2008 - 2009 Coal BHP Billiton Energy Coal Khomotso Mosehla none none Mikki Xayiya Avusa Limited 2008 - Present Mvelaphanda Group Limited 2005 - Present Mvelaphanda Resources Limited 2001 - Present Northam Platinum Limited 2009 - Present Ophir Energy plc 2006 - Present Rudolph Torlage ArcelorMittal South Africa Ltd 2010 - Present Directors' shareholdings The following table sets out each director's relevant interest in shares or options in shares or debentures of the Company as at the date of this report. Director Ordinary shares Listed options Unlisted options D Brown^(1) - - - J Wallington^(2) 250,000 - - W Koonin^(3) 230,000 - - A Nevhutanda ^(4) 55,000 - - D Murray ^(5) - - - B Pryor^(6) - - - P Cordin ^(7) 871,059 - - K Mosehla - - - R Torlage - - - R Linnell ^(8) 1,704,125 - 2,000,000 S Farrell ^(9) 4,704,941 - 8,000,000 S Bywater - - - M Xayiya - - - 7,815,125 - 10,000,000 1. Pending shareholder approval, Mr Brown will be issued with 2,500,000 share options with an exercise price of GBP0.25 and expiring 3 years from date of issue, vesting immediately and a further 2,500,000 share options with an exercise price GBP0.375 and expiring 3 years from date of issue, to be issued on 6 August 2015. 2. All shares are held by Mr Wallington directly. 3. All shares are held by Mr Koonin directly. 4. All shares are held by Professor Nevhutanda directly. 5. Mr Murray was issued a total of 2,500,000 options in the prior year (each option having an exercise price equal to the volume weighted average price of the Company's Shares 10 trading days prior to the issue date and an expiry date 5 years from the issue date, 1,000,000 of which will vest 12 months after the date of issue, 750,000 of which will vest 24 months after the date of issue and the remaining 750,000 vesting 36 months from the date of issue). 6. Pending shareholder approval, Mr Pryor will be issued with 1,000,000 share options with an exercise price of GBP0.25 and expiring 3 years from date of issue, vesting immediately and a further 1,000,000 share options with an exercise price GBP0.375, and expiring 3 years from date of issue, to be issued on 6 August 2015. 7. 415,759 shares are held by Cordin Pty Ltd <No 1 Account> and 458,300 shares are held by Cordin Pty Ltd as trustee for the Cordin Superannuation Fund. Mr Cordin is a director of Cordin Pty Ltd and a beneficiary of the trust and Superannuation Fund 8. As at date of resignation, 751,550 shares held by Terra Africa Investments Limited of which Mr Linnell is a beneficiary. The remaining 952,575 shares and the 2,000,000 options are held by Mr Linnell directly. 9. As at date of resignation, 4,704,941 shares are held by Newcove International Inc of which Mr Farrell is a director and shareholder. The 8,000,000 options are held by Mr Farrell directly. Remuneration of directors and senior management Information about the remuneration of directors and senior management is set out in the remuneration report of this directors' report, on pages 13 to 19. Share options granted to directors and senior management During and since the end of the financial year, an aggregate 7,572,000 share options were granted to the following directors and senior management of the Company as part of their remuneration: Directors and senior Number of options Issuing entity Number of ordinary management shares under option S Farrell - Coal of Africa - Limited R Linnell - Coal of Africa - Limited P Cordin - Coal of Africa - Limited S Bywater - Coal of Africa - Limited A Nevhutanda - Coal of Africa - Limited J Wallington - Coal of Africa - Limited D Murray - Coal of Africa - Limited K Mosehla - Coal of Africa - Limited M Xayiya - Coal of Africa - Limited R Torlage - Coal of Africa - Limited W Koonin - Coal of Africa - Limited D Brown^(1) 5,000,000 Coal of Africa 5,000,000 Limited B Pryor^(2) 2,000,000 Coal of Africa 2,000,000 Limited R van der Merwe 286,000 Coal of Africa 286,000 Limited W Hattingh 286,000 Coal of Africa 286,000 Limited (1) The options granted to Mr Brown on 6 August 2012 are subject to shareholder approval. (2) The options granted to Mr Pryor on 6 August 2012 are subject to shareholder approval. Company secretary Ms Shannon Coates held the position of Company Secretary for the financial year and is a qualified lawyer with over 19 years of experience in corporate law and compliance. Principal activities Coal of Africa Limited ('CoAL' or 'the Company') is a limited company incorporated in Australia. Its common shares are listed on the Australian Securities Exchange ('ASX'), the AIM Market of the London Stock Exchange ("AIM") and the Johannesburg Securities Exchange ('JSE'). The principal activities of the Company and its subsidiaries ('the Group' or 'the Consolidated Entity') are the acquisition, exploration, development and operation of thermal and metallurgical coal projects in South Africa. Changes in state of affairs During the year the Company: Operational highlights · Greatly improved safety performance - 6 lost time injuries ("LTI's") recorded during the year compared to 15 in FY2011. · 4.930 million run of mine ("ROM") tonnes (FY2011: 4.409 million ROM tonnes) of coal produced from the Vuna, Mooiplaats and Vele collieries, up 12% year on year. · 4.906 million ROM tonnes (FY2011: 4.997 million ROM tonnes) processed, producing 3.128 million saleable tonnes (FY2011: 3.316 million saleable tonnes) of saleable thermal coal at an overall average yield of 63.8% (FY2011: 66.4%). · The start of mining operations in October 2011 and plant operations in February 2012 at the Vele coking coal colliery ("Vele Colliery") with the extraction of 161,107 tonnes of ROM coal during the build-up phase, producing 46,066 tonnes of export quality thermal coal to be railed from the Musina siding for export via the Matola Terminal in Maputo, Mozambique ("Matola Terminal"). · Transfer of mining operations from a contract mining to owner management basis at the Mooiplaats thermal coal colliery ("Mooiplaats Colliery") and the commissioning of a fifth underground section resulted in improved production yielding 1.226 million tonnes of ROM coal, up 39% from 0.883 million tonnes during the previous financial year. · Granting of an Integrated Water Use Licence ("IWUL") for the North Block of the Vuna colliery ("Vuna") and the start of mining operations in the new pit resulted in 3.543 million tonnes of ROM coal (FY 2011: 3.526 million tonnes). · Total group coal sales decreased by 2% year on year from 3,448,563 tonnes in FY2011 to 3,373,780 tonnes in FY2012, due primarily to the reduction of third party ROM and saleable coal available for purchase in the second half of the financial year, which augmented the prior year sales volumes. · Memorandum of Agreement ("MOA") signed with the South African Department of Environmental Affairs ("DEA") and South African National Parks ("SANParks") to ensure the conservation and integrity of the globally significant natural and cultural Mapungubwe National Park and World Heritage Site("Mapungubwe"), and to maintain and strengthen co-operation between the parties at the Vele Colliery. · Memorandum of Understanding ("MOU") signed with the Save Mapungubwe Coalition ("the Coalition"), committing the parties to work together and strengthen co-operation, ensuring the sustainable development of the Mapungubwe cultural landscape. · Preliminary review of the Makhado coking coal project ("Makhado Project") Definitive Feasibility Study ("DFS") conducted by the CoAL board of directors ("Coal Board") resulting in submission thereof to Exxaro Coal Proprietary Limited ("Exxaro") allowing it to begin its evaluation process. · Completion of the full battery of independent tests commissioned by the Company, including full scale coking tests at ArcelorMittal South Africa's ("AMSA") local facilities, confirming the quality and technical feasibility for AMSA (and potentially other customers) of the hard coking coal to be produced at the Makhado Project. · Gross tonnes in situ in the Greater Soutpansberg area increased by 429% from 1.5 billion tonnes to 8.0 billion tonnes. Regulatory highlights · Vele Colliery began full operations in October 2011, following the granting of the Environmental Authorisation ("EA") and lifting of the suspension of the IWUL. · Effective implementation of the Environmental Management Committee ("EMC") chaired by SANParks to monitor environmental compliance at the Vele Colliery. · Successful elections held for the appointment of the Makhado Colliery Community Consultative Forum ("MCCCF") in June 2012, enabling finalisation of the public consultations required for the New Order Mining Right ("NOMR") application process. · Section 11 consent received in terms of the Mineral & Petroleum Resources Development Act ("MPRDA") for the acquisition by Keynote Trading & Investment 108 Proprietary Limited ("Keynote") of the entire issued share capital of Chapudi Coal Proprietary Limited ("Chapudi") and Kwezi Mining Exploration Proprietary Limited ("KME") from Rio Tinto Minerals Development Limited ("RTMD")and Kwezi Mining Proprietary Limited ("Kwezi"). · Approval for the substitution of creditor (CoAL for RTMD) in relation to the shareholder claims closing in respect of the acquisition of claims in Chapudi and KME by CoAL on 27 September 2012. Funding highlights · US$159.5 million new equity capital raised, including US$106.0 million during the financial year and US$53.5 million subsequent to year-end. · Discussions ongoing regarding restructuring of debt facility with Deutsche Bank and potential discussions with other financial institutions on additional debt facilities. · Completion of the disposal of the non-core NiMag Proprietary Limited and Metalloy Resources Investments Proprietary Limited (together "the NiMag Group") by way of a Management Buy Out ("MBO") for ZAR54.0 million (approximately US$6.5 million). · Ongoing review of levels of expenditures, active management of working capital requirements and options to restructure or disposal of other interests, specifically the thermal coal assets. Other than the above, there was no significant change in the state of affairs of the Consolidated Entity during the financial year. Subsequent events Post year end, the following significant operational events took place: · Entering into a financing package with Investec Bank Limited ('Investec'), pursuant to which Investec will make approximately US$58.7 million available to CoAL through a combination of debt and equity funding to replace the existing US$40.0 million J.P. Morgan 364 day loan facility. Under the equity funding arrangement, Investec subscribed for a total of 19,148,408 million CoAL shares, 16,850,599 shares at a subscription price of GBP0.29 per share and 2,297,809 shares at A$0.437 per share raising approximately US$8.7 million. · The Company will also have a right, for a 12 month period, to require Investec to subscribe for additional CoAL shares in tranches, in each case at a time and in an amount to be agreed between CoAL and Investec, at a 5% discount to the closing price of a CoAL share on the trading day prior to the issue of a subscription notice by Investec. · Appointment of Mr David Brown as Chairman and Mr Bernard Pryor as an Independent Non-Executive Director on 6 August 2012. · Resignation of Mr Richard Linnell as Non-Executive Chairman and Mr Simon Farrell as Executive Deputy Chairman on 6 August 2012. · Mr Steve Bywater and Mr Mikki Xayiya, both Non-Executive Directors of the Company, resigned on 6 August 2012. · Placement of 115,478,798 new shares with institutional investors at a price of GBP0.25 per share to raise gross proceeds of US$44.8 million. 80,570,166 were firmly placed 34,908,632 shares conditionally placed requiring CoAL shareholder approval which was received at a Shareholder General Meeting in September 2012. There have been no other events between 30 June 2012 and the date of this report which necessitate adjustment to the statements of comprehensive income or statements of financial position at that date. Financial review · US$243.8 million (FY2011: US$261.4 million) in revenue generated for the year. Revenue from coal sales of US$242.5 million (FY2011: US$229.2 million) was 6% higher year on year. With the disposal of the NiMag operation during the year, US$nil million (FY2011: US$31.2 million) was reported in the current year and the profit on disposal of US$1.1 million is reported as part of Other Income. · Sales of thermal coal decreased by 2% from 3,448,563 tonnes in FY2011 to 3,373,781 in FY2012 and included a change in the sales mix. The variation in sales mix resulted in revenue increasing by 6% and was offset by a 27% decline in export coal spot prices from approximately US$119 per tonne in June 2011, to approximately US$87 per tonne in June 2012. · Total gross profit for the year of US$33.4 million (FY2011: US$37.9 million) and the gross margin percentage of 14% (FY2011: 14.5%) was lower year on year due to: o the gross margin from coal sales increasing by 4% to US$33.6 million (FY2011: US$32.4 million) as a result of the change in sales prices and mix, offset by higher logistics costs; o the exclusion of the NiMag profit margin in the current financial year US$nil (FY2011: US$5.7 million) following the disposal of this non-core asset. · Once off costs of $5.7 million (FY2011: US$nil) in the current year relating to additional legal, technical and regulatory work associated with the equity placement undertaken in November 2011. · Non-cash charges of US$116.0 million (FY2011: US$208.7 million) including: o depreciation and amortisation of US$70.0 million (FY2011: US$79.5 million); o unrealised foreign exchange losses of US$47.0 million (FY2011: US$28.8 million); o share based payment expense of US$5.0 million (FY2011: US$3.0 million); o goodwill written off of US$1.2 million (FY2011: US$nil) o other income of US$6.9 million (FY2011: US$nil) relating to the reversal of warranty and other provisions in respect of the NuCoal acquisition; and o net reversal of impairment losses of US$0.3 million (FY2011: US$97.4 million impairment loss). Impairment losses on assets held for sale totaled US$11.6 million in the current year. This was off-set by a partial reversal of US$11.9 million of the impairment loss recognized on mining assets in the prior year resulting in a net reversal of US$0.3 million. · Net loss after tax for the year, including non-cash items, of US$138.9 million (FY2011: US$219.0 million) was US$80.1 million lower largely due to no impairment of assets in FY2012 compared to US$97.4 million in the prior year. Environmental regulations The Consolidated Entity's operations are not subject to any significant environmental regulations under either Commonwealth or State legislation and there has consequently been no breach. The Group is subject to numerous environmental regulations in South Africa, including the Atmospheric Pollution Prevention Act (No. 45 of 1965), Environment Conservation Act (No. 73 of 1989), National Water Act (No. 45 of 1965), National Environmental Management Act (No. 107 of 1998), the National Environmental Management Air Quality Act (No. 39 of 2004) and the environmental provisions in the Mineral and Petroleum Resources Development Act (No 28 of 2002). There is uncertainty regarding the interrelationship between these statutes in the mining context and as such complete compliance with all simultaneously is often difficult. The Board believes that the Consolidated Entity has adequate systems in place for the management of its environmental impacts but from time to time statutory non-compliances may occur. The Board takes these seriously and the Board has undertaken a thorough review of all its activities to seek to bring them into compliance. Dividends No dividend has been paid or proposed for the financial year ended 30 June 2012 (2011 - none). Shares under option or issued on exercise of options Details of unissued shares under option as at the date of this report are: Number of shares Class of Exercise Expiry date under option shares price Class D Unlisted 7,000,000 Ordinary A$1.25 30 September Options 2012 Class G Unlisted 1,000,000 Ordinary A$1.90 30 September Options 2012 Class I Unlisted 1,650,000 Ordinary A$3.25 31 July 2012 Options Class J Unlisted 5,000,000 Ordinary A$2.74 30 November Options 2014 Class K Unlisted 818,500 Ordinary A$1.90 30 June 2014 Options Class C Unlisted 2,500,000 Ordinary A$1.20 9 November Options 2015 1 Option^(1) 50,000,000 Ordinary GBP0.60 1 November 2014 ESOP Unlisted 1,441,061 Ordinary A$1.40 30 September Options 2015 ESOP Unlisted 2,670,000 Ordinary ZAR7.60 14 February Options 2017 1. Option to subscribe for 50 million ordinary shares for GBP0.60 each between 1 November 2010 and 1 November 2014, as approved by shareholders on 22 April 2010, and granted to Firefly Investments Proprietary Limited, a Broad Based Black Economic Empowerment ("BBBEE") entity. The holders of these options do not have the right, by virtue of the option, to participate in any share issue of the Company or of any other body corporate or registered scheme. Details of shares or interests issued during or since the end of the financial year as a result of exercise of an option are: Number of Class of Exercise Amount paid upon Expiry date shares under shares price exercise of options option Exercise of 1,000,000 Ordinary A$0.50 A$500,000 30 September Class A 2011 options Indemnification of officers and auditors During the financial year, the Company paid a premium of $76,881 (2011 - 35,292) in respect of a contract insuring the directors of the Company as named above, the company secretary, and all executive officers of the Company and of any related body corporate against a liability incurred by such a director, secretary or executive officer to the extent permitted by the Corporations Act 2001. The Company has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred by such an officer or auditor. Directors' meetings The following table sets out the number of directors' meetings (including meetings of committees of directors) held during the financial year and the number of meetings attended by each director (while they were a director or committee member). During the financial year, a total of 8 board meetings were held, 5 scheduled and 3 unscheduled, 4 placing committee meetings, 2 nomination and remuneration committee meeting, 3 audit committee meetings and 2 safety and health committee meeting were held. Board Placing Audit Nomination Safety, Meetings Committee Committee and Health and Meetings Meetings Remuneration Environment Committee Committee Meetings Meetings Director Held Attended Held Attended Held Attended Held Attended Held Attended R Linnell 8 8 4 4 - - - - - 1^1 S Farrell 8 7 - - - - - - - - J 8 8 4 4 - 1^1 - 1^1 - 2^1 Wallington W Koonin 8 8 4 4 - 1^1 - 1^1 - - ANevhutanda 8 8 - - - - - - - - D Murray 8 8 - - - - 2 2 2 2 S Bywater 8 7 - - 3 3 2 2 - - K Mosehla 8 6 - - 3 1 - - 2 1 M Xayiya 8 5 - - - - 2 1 - - R Torlage 8 8 - - 3 3 - - - - P Cordin 8 8 - - - - - - 2 2 D Brown - - - - - - - - - - ^(2) B Pryor - - - - - - - - - - ^(2) 1. Attended by invitation only 2. Appointed on 6 August 2012 Non-audit services Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in note 7 to the consolidated financial statements. The directors are satisfied that the provision of non-audit services, during the year, by the auditor (or by another person or firm on the auditor's behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are of the opinion that the services as disclosed in note 7 to the consolidated financial statements do not compromise the external auditor's independence, based on advice received from the Audit Committee, for the following reasons: · all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor, and · none of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES 110 'Code of Ethics for Professional Accountants' issued by the Accounting Professional & Ethical Standards Board, including reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards. Auditor's independence declaration The auditor's independence declaration is included on page 21 of these consolidated financial statements. Remuneration report (Audited) This remuneration report, which forms part of the directors' report, sets out information about the remuneration of Coal of Africa Limited's directors and its senior management for the financial year ended 30 June 2012. The prescribed details for each person covered by this report are detailed below under the following headings: · director and senior management details · remuneration policy · relationship between the remuneration policy and company performance · remuneration of directors and senior management · key terms of employment contracts The Board is responsible for establishing remuneration packages applicable to the Board members of the Company. The policy adopted by the Board is to ensure that remuneration properly reflects an individual's duties and responsibilities and that remuneration is competitive in attracting, retaining and motivating people of the highest calibre. Directors' remuneration packages are also assessed in the light of the condition of markets within which the Company operates, the Company's financial condition and the individual's contribution to the achievement of corporate objectives. Executive Directors are remunerated by way of a salary or consultancy fees, commensurate with their required level of service. Total remuneration for all Non-Executive Directors, excluding share-based payments, as approved by shareholders at the November 2010 General Meeting, is not to exceed A$1,000,000 per annum (US$1,015,900). The Board has nominated a Nomination and Remuneration Committee which, during the year and to 6 August was made up as follows: Mr Steve Bywater (Chairman), Mr Mikki Xayiya and Mr Dave Murray. The Company does not have any scheme relating to retirement benefits for Non-Executive Directors. Mr Steve Bywater and Mr Mikki Xayiya resigned as directors on 6 August 2012 and were replaced on the Committee by Mr Bernard Pryor (Chairman) and Mr David Brown. Director and senior management details The following persons acted as directors of the Company during or since the end of the financial year: · D Brown - Independent Non-Executive Chairman, appointed 6 August 2012 · J Wallington - Chief Executive Officer · W Koonin - Financial Director · Professor A Nevhutanda - Executive Director · D Murray - Senior Independent Non-Executive Director, · P Cordin - Independent Non-Executive Director · K Mosehla - Non-Executive Director · R Torlage - Non-Executive Director · B Pryor - Independent Non-Executive Director, appointed 6 August 2012 · R Linnell - Non-Executive Chairman, resigned 6 August 2012 · S Farrell - Executive Deputy Chairman, resigned 6 August 2012 · S Bywater - Non-Executive Director, resigned 6 August 2012 · M Xayiya - Non-Executive Director, resigned 6 August 2012 The term 'key management' is used in this remuneration report to refer to the following persons. Except as noted, the named persons held their current position for the whole of the financial year and since the end of the financial year: · R van der Merwe - Chief Operating Officer · W Hattingh - General Manager: Commercial Remuneration policy The remuneration policy of CoAL has been designed to align key management personnel objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives based on key performance areas affecting the consolidated group's financial results. The Board of CoAL believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best key management personnel to run and manage the consolidated group, as well as create goal congruence between Directors, key management and shareholders. The Board's policy for determining the nature and amount of remuneration for key management personnel of the consolidated group is as follows: · The remuneration structure is developed by the Nomination and Remuneration Committee and approved by the Board after professional advice is periodically sought from independent external consultants. · All key management personnel receive a base salary (based on factors such as length of service and experience), options and performance incentives. · Incentives paid in the form of cash and options are intended to align the interests of the Directors, key management and company with those of the shareholders. The Nomination and Remuneration Committee reviews key management personnel packages annually by reference to the consolidated group's performance, executive performance and comparable information from industry sectors. The performance of key management personnel is measured against criteria agreed annually with each executive and bonuses and incentives are linked to predetermined performance criteria. The performance criteria vary and are determined in line with each individual's performance contract. The Board may, however, exercise its discretion in relation to approving incentives, bonuses and options, and can recommend changes to the Nomination and Remuneration Committee's recommendations. Any changes must be justified by reference to measurable performance criteria. The policy is designed to attract the highest calibre of executives and reward them for performance results leading to long-term growth in shareholder wealth. All remuneration paid to key management personnel is valued at the cost to the Company and expensed. The Board's policy is to remunerate Non-Executive Directors at market rates for time, commitment and responsibilities. The Nomination and Remuneration Committee determines payments to the Non-Executive Directors and reviews their remuneration annually, based on market practice, duties and accountability. The maximum aggregate amount of fees, excluding share-based payments, that can be paid to Non-Executive Directors is A$1,000,000. To assist directors with independent judgement, it is the Board's policy that if a director considers it necessary to obtain independent professional advice to properly discharge the responsibility of their office as a director then, provided the director first obtains approval from the Chairman for incurring such expense, the Company will pay the reasonable expenses associated with obtaining such advice. Options granted under the arrangement do not carry dividend or voting rights. Options are valued using the Black-Scholes methodology. Performance - based remuneration The key performance indicators (KPIs) are set annually, with a certain level of consultation with key management personnel to ensure buy-in. The measures are specifically tailored to the area each individual is involved in and has a level of control over. The KPIs target areas the Board believes hold greater potential for group expansion and profit, covering financial and non-financial as well as short and long-term goals. Performance in relation to the KPIs is assessed annually, with bonuses being awarded depending on the number and deemed difficulty of the KPIs achieved. Relationship between remuneration policy and Company performance The remuneration policy has been tailored to increase goal congruence between shareholders, Directors and key management. Two methods have been applied to achieve this aim, the first being a performance-based bonus based on key performance indicators, and the second being the issue of options to the majority of Directors and key management to encourage the alignment of personal and shareholder interests. The tables below set out summary information about the Group's earnings and movements in shareholder wealth for the five years to June 2012. Year ended Year ended Year ended Year ended Year ended 30 June 2012 30 June 2011 30 June 30 June 30 June 2010 2009 2008 US$'000 US$'000 US$'000 US$'000 A$'000 Revenue 243,842 261,425 98,376 17,120 53,774 Net loss before tax 150,551 218,106 178,656 9,613 10,324 Net loss after tax 138,908 219,003 167,758 9,849 11,244 Year ended Year ended Year ended Year ended Year ended 30 June 2012 30 June 2011 30 June 30 June 30 June 2010 2009 2008 Share price at A$1.08 A$1.68 A$1.57 A$4.14 A$1.07 start of year Share price at end A$0.24 A$1.08 A$1.68 A$1.60 A$4.18 of year Basic and diluted 0.23 0.41 0.37 0.02 4.08 loss per share (US$ cents) Remuneration of directors and key management personnel Details of the nature and amount of each major element of the remuneration of each director and senior management personnel for the year are: Short term employee benefits Post-employment Other Share- Total Share benefits long based term based % of benefits payments Total Salary Bonus^5 Non Super-annuation Options / and fees -monetary Shares benefits 2012 $ $ $ $ $ $ $ % Non-Executive Directors R Linnell^1 124,997 - - - - 567,816 692,813 82 P Cordin 112,538 - - 10,128 - 283,916 406,582 70 S Bywater^2 119,774 - - - - - 119,774 - D Murray 103,064 - - 9,276 - - 112,340 - M Xayiya^3 45,529 - - - - - 45,529 - K Mosehla 60,706 - - - - - 60,706 - R Torlage 60,706 - - - - - 60,706 - Executive Directors S Farrell^4 567,872 - - - - 1,135,632 1,703,505 67 J Wallington 692,334 378,885 - - - 154,874 1,226,093 13 W Koonin 428,848 379,567 - - - 108,412 916,827 12 A Nevhutanda 155,202 21,778 - - - - 176,980 - 2,471,571 780,230 - 19,404 - 2,250,651 5,521,855 41 Key management R van der Merwe 469,878 154,335 - - - 178,500 802,712 22 W Hattingh 302,416 104,950 - - - 133,431 540,797 25 772,294 259,284 - - - 311,931 1,343,509 23 3,243,864 1,039,514 - 19,404 - 2,562,581 6,865,364 37 Remuneration of directors and key management personnel (continued) Short term employee benefits Post-employment Other Share- Total Share benefits long based term based % of benefits payments Total Salary Bonus^(2) Non Super-annuation Options / and fees -monetary Shares benefits 2011 $ $ $ $ $ $ $ % Non-Executive Directors R Linnell 89,025 - - - - - 89,025 - P Cordin 56,383 - - 5,074 - - 61,457 - S Bywater 56,383 - - - - - 56,383 - H Verster 5,850 - - - - - 5,850 - D Murray 82,702 - - 7,443 - 472,951 563,096 84 K Mosehla - - - - - - - - M Xayiya - - - - - - - - R Torlage - - - - - - - - Executive Directors S Farrell 544,046 173,105 - - - 482,152 1,191,303 40 J Wallington 636,160 - - - - - 636,160 - B Sergeant 400,900 129,582 - - - 241,076 771,558 31 W Koonin 95,424 - - - - - 95,424 - A Nevhutanda 160,532 35,960 - - - - 196,491 - 2,127,405 338,647 - 12,517 - 1,196,179 3,666,747 33 Key management R van der 451,417 118,128 - - - 411,468 981,013 42 Merwe W Hattingh 301,426 43,060 - - - 150,156 494,642 30 752,843 161,188 - - - 561,624 1,475,655 38 2,880,248 499,835 - 12,517 - 1,757,803 5,142,402 34 1. Mr Linnell resigned as Non-Executive Chairman on 6 August 2012. 2. Mr Bywater resigned as Non-Executive Director on 6 August 2012. 3. Mr Xayiya resigned as Non-Executive Director on 6 August 2012. 4. Mr Farrell resigned as Executive Deputy Chairman on 6 August 2012. 5. Discretionary bonuses awarded to the executive directors and key management were approved by the board. No director or key management appointed during the period received a payment as part of his consideration for agreeing to hold the position. Share-based payments granted as compensation for the current financial year During the financial year, the following share-based payment arrangements were in existence: Grant date value Option series Number Grant date Expiry date AUD Vesting date Class A unlisted options 7,000,000 28/06/2006 30/09/2011 A$0.13 28 June 2006 Class D unlisted options 7,000,000 05/06/2007 30/09/2012 A$0.45 5 June 2007 Class G unlisted options 1,000,000 10/04/2008 30/09/2012 A$1.54 10/04/2008 Class I unlisted options 1,650,000 01/12/2008 31/07/2012 A$0.49 ^(1) Class J unlisted options 3,000,000 08/12/2009 30/11/2014 A$0.58 30/11/2009^(2) Class K unlisted options 482,500 25/02/2010 30/06/2014 A$0.92 ^(3) Class C unlisted options 2,500,000 09/11/2010 09/11/2015 A$0.59 ^(4) ESOP unlisted options 288,000 04/02/2011 30/09/2015 A$0.91 ^(5) ESOP unlisted options 572,000 16/09/2011 14/02/2017 ZAR3.46 ^(6) 23,492,500 ^(1) The options were granted to Mr van der Merwe on 1 December 2008 and all expired on 31 July 2012. 560,000 options vested on 1 December 2008, 500,000 options vested on 1 December 2009 and the remaining 590,000 options vested on 1 December 2010. ^(2) The 3,000,000 share options were granted to Mr Farrell on 8 December 2009. 2,000,000 of the options vested on 29 January 2011 and the remaining 1,000,000 options vest one year after the granting of the Makhado Project New Order Mining Right. ^(3) These options were issued to employees and one third vested immediately on granting, 25 February 2010, one third on 1 July 2010 and the remaining third on 1 July 2011. ^(4) Mr Murray was issued a total of 2,500,000 options with an expiry date 5 years from the issue date, 1,000,000 of which will vest 12 months after the date of issue, 750,000 of which will vest 24 months after the date of issue and the remaining 750,000 vesting 36 months from the date of issue. ^(5) These options were issued to employees and one third vested immediately on granting, 4 February 2011, one third on 30 September 2011 and the remaining third on 30 September 2012. ^(6) These options were issued to employees and one third vested on 1 July 2012, one third on 1 July 2013 and the remaining third on 1 July 2014. The following grants of share-based payment compensation to key management personnel relate to the current financial year: During the financial year % of % of compensation for the Option Number Number grant % of grant year consisting of Name series granted vested vested forfeited options R van der ESOP 286,000 - n/a 22 Merwe unlisted options n/a W Hattingh ESOP unlisted options 286,000 - n/a n/a 25 During the year, none of the key management personnel exercised options that were granted to them as part of their compensation. Share-based payments granted as compensation for the current financial year (continued) The following table summarises the value of options to key management personnel granted, exercised or lapsed during the year: Value of options Value of options Value of options lapsed at Name granted at grant date at exercise date the date of lapse R van der ZAR989,560 - - Merwe W Hatting ZAR989,560 - - R Linnell A$260,000 - A$260,000 P Cordin A$130,000 - A$130,000 S Farrell A$520,000 - A$520,000 Key terms of employment contracts The Company has entered into formal contractual employment agreements with the Non-Executive Deputy Chairman, the Chief Executive Officer and the Financial Director only and not with any other member of the Board. The employment conditions of the Non-Executive Deputy Chairman, the Chief Executive Officer and Financial Director are: 1. Mr Farrell's agreement commenced on 1 July 2009 and is for a 3.5 year fixed term, at an annual remuneration of A$550,000. The agreement may be terminated on 1 month written notice and in the event of termination by the Company, the remaining term of the agreement must be paid out. Mr Farrell's agreement was terminated on 6 August 2012 and $240,259 was paid to Mr Farrell in terms of his employment agreement. 2. Mr Wallington's agreement commenced on 31 May 2010 and is for a 3 year fixed term, at an annual remuneration of GBP400,000. Subject to shareholder approval and the satisfaction of certain capital performance conditions, Mr Wallington is also entitled to receive up to 250,000 shares following 12 months service, up to 500,000 shares following 24 months service and up to 500,000 shares following 36 months service. The agreement may be terminated on 3 month's written notice. 3. Mr Koonin's agreement commenced on 1 April 2011 and is for a 5 year fixed term, at an annual remuneration of GBP300,000 (2011: GBP240,000). Subject to shareholder approval and the satisfaction of certain capital performance conditions, Mr Koonin is also entitled to receive up to 175,000 shares following 12 months service, up to 350,000 shares following 24 months service, up to 350,000 shares following 36 months service, up to 350,000 shares following 48 months service and up to 350,000 shares following 60 months service. The agreement may be terminated on 3 month's written notice. The employment conditions of the following specified executives have been formalised in employment contracts: 1. Mr Van der Merwe is employed by CoAL in the capacity of Chief Operations Officer, at an annual remuneration of R3.2 million. The permanent employment contract commenced on 1 August 2008 and may be terminated by written notice of one month. 2. Mr Hattingh is employed by CoAL in the capacity of General Manager: Commercial, at an annual remuneration of R2.1 million. The permanent employment contract commenced on 1 January 2010 and can be terminated by written notice of one month. This directors' report is signed in accordance with a resolution of directors made pursuant to s.298(2) of the Corporations Act 2001. On behalf of the Directors John Wallington Chief Executive Officer 28 September 2012 The Board of Directors of Coal of Africa Limited is responsible for the establishment of a corporate governance framework that has regard to the best practice recommendations set by the ASX Corporate Governance Council. CoAL's objective is to achieve best practice in corporate governance and the Company's Board, senior executives and employees are committed to achieving this objective. This statement summarises the corporate governance practices that have been adopted by the Board. In addition to the information contained in this statement, the Company's website atwww.coalofafrica.comcontains additional details of its corporate governance procedures and practices. 1.1 ASX Best Practice Recommendations The ASX Listing Rules require listed companies to include in their Annual Report a statement disclosing the extent to which they have complied with the ASX best practice recommendations in the reporting period. The recommendations are not prescriptive and if a company considers that a recommendation is inappropriate having regard to its particular circumstances, the company has the flexibility not to adopt it. Where the Company considered it was not appropriate to presently comply with a particular recommendation, the reasons are set out in the relevant section of this statement. The Board has adopted a Corporate Governance policy that (except where expressly noted below) complies with the Corporate Governance Principles and Recommendations with 2010 Amendments ("ASX Principles"),,established by the ASX Corporate Governance Council. This Corporate Governance policy has been in effect for the entire reporting period. 1.2 Board of Directors Role and Responsibilities of the Board The role of the Board is to provide leadership for and supervision of the Company's senior management. The Board provides the strategic direction of the Company and regularly measures the progression by senior management of that strategic direction. The key responsibilities of the Board include: (a) overseeing the Company, including its control and accountability systems; (b) appointing the chief executive officer, or equivalent, for a period and on terms as the Directors see fit and, where appropriate, removing the chief executive officer, or equivalent; (c) ratifying the appointment and, where appropriate, the removal of senior executives, including the chief financial officer and the company secretary; (d) ensuring the Company's Policy and Procedure for Selection and (Re)Appointment of Directors is reviewed in accordance with the Company's Nomination Committee Charter; (e) approving the Company's policies on risk oversight and management, internal compliance and control, Code of Conduct, and legal compliance; (f) satisfying itself that senior management has developed and implemented a sound system of risk management and internal control in relation to financial reporting risks and reviewed the effectiveness of the operation of that system; (g) assessing the effectiveness of senior management's implementation of systems for managing material business risk including the making of additional enquiries and to request assurances regarding the management of material business risk, as appropriate; (h) monitoring, reviewing and challenging senior management's performance and implementation of strategy; 1.2 Board of Directors (continued) Role and Responsibilities of the Board (continued) (i) ensuring appropriate resources are available to senior management; (j) approving and monitoring the progress of major capital expenditure, capital management, and acquisitions and divestitures; (k) monitoring the financial performance of the Company; (l) ensuring the integrity of the Company's financial (with the assistance of the Audit and Risk Committee, if applicable) and other reporting through approval and monitoring; (m) providing overall corporate governance of the Company, including conducting regular reviews of the balance of responsibilities within the Company to ensure division of functions remain appropriate to the needs of the Company; (n) appointing the external auditor (where applicable, based on recommendations of the Audit and Risk Committee) and the appointment of a new external auditor when any vacancy arises, provided that any appointment made by the Board must be ratified by shareholders at the next annual general meeting of the Company; (o) engaging with the Company's external auditors and Audit and Risk Committee (where there is a separate Audit and Risk Committee); (p) monitoring compliance with all of the Company's legal obligations, such as those obligations relating to the environment, native title, cultural heritage and occupational health and safety; and (q) making regular assessment of whether each non-executive Director is independent in accordance with the Company's Policy on Assessing the Independence of Directors. In accordance with ASX Principle 1, the Board has established a Board Charter which sets out functions reserved to Board and those delegated to senior executives. This Charter is available on the Company's website. The Board has delegated responsibilities and authorities to management to enable management to conduct the Company's day to day activities. Matters which are not covered by these delegations, such as approvals which exceed certain limits, require Board approval. 1.2 Board of Directors (continued) Board composition The Board is comprised of three executive Directors and six non-executive Directors. The Company's website contains details on the procedures for the selection and appointment of new Directors and the re-election of incumbent Directors, together with the Board's policy for the nomination and appointment of Directors. ASX Principle 2 recommends the Board establish a Nomination Committee to focus on the selection and appointment practices of the Company. It is further recommended that the Nomination Committee have a formal Charter. The Company has a Nomination & Remuneration Committee which is comprised of three independent non-executive Directors and which undertakes the nomination functions for the Company. The Nomination & Remuneration Committee has adopted a formal Nomination and Remuneration Committee Charter, available on the Company's website, which includes information on the Company's approach to selection and appointment of Directors. The composition of the Board is reviewed at least annually to ensure the balance of skills and experience is appropriate. The current Directors have a broad range of qualifications, experience and expertise in mining exploration and production and in the corporate and finance industries. The Board is of the view that the current composition comprises the mix of skill sets and experience it is looking to achieve in membership of the Board. The skills, experience and expertise of Directors are set out in the Directors' Report. The names of the Directors in office at the date of this Report, the date they were appointed if appointed during the year, their status as executive, non-executive and/or independent Directors and whether they are retiring by rotation and seeking re-election by shareholders at the 2012 Annual General Meeting, are set out in the Directors' Report. Independence of non-executive directors The Board considers an independent Director to be a non-executive Director who meets the criteria for independence set out in Principle 2 of the ASX Corporate Governance Principles and Recommendations. In determining a Director's independence, the Board considers the relationships that may affect independence, as set out in Box 2.1 of the ASX Principles. Materiality for these purposes is based on quantitative and qualitative thresholds, set out in the Board Charter available from the Company's website. In summary, the Board has agreed on the following guidelines for assessing the materiality of matters: 1.3 Materiality - Quantitative Balance sheet items Balance sheet items are material if they have a value of more than 10% of pro-forma net asset. Profit and loss items Profit and loss items are material if they will have an impact on the current year operating result of 10% or more. 1.4 Materiality - Qualitative Items are also material if: (a) they impact on the reputation of the Company; (b) they involve a breach of legislation; (c) they are outside the ordinary course of business; (d) they could affect the Company's rights to its assets; (e) if accumulated they would trigger the quantitative tests; (f) they involve a contingent liability that would have a probable effect of 10% or more on balance sheet or profit and loss items; or (g) they will have an effect on operations which is likely to result in an increase or decrease in net income or dividend distribution of more than 10%. 1.5 Material Contracts Contracts will be considered material if: (a) they are outside the ordinary course of business; (b) they contain exceptionally onerous provisions in the opinion of the Board; (c) they impact on income or distribution in excess of the quantitative tests; (d) there is a likelihood that either party will default, and the default may trigger any of the quantitative or qualitative tests; (e) they are essential to the activities of the Company and cannot be replaced, or cannot be replaced without an increase in cost of such a quantum, triggering any of the quantitative tests; (f) they contain or trigger change of control provisions; (g) they are between or for the benefit of related parties; or (h) they otherwise trigger the quantitative tests. The Board has reviewed and considered the positions and associations of each of the Directors in office at the date of this report and consider that a majority of the Directors are not independent. Messrs David Brown, Bernard Pryor, Peter Cordin and David Murray are considered independent. Executive Directors Messrs John Wallington and Wayne Koonin and Alfred Nevhutanda and non-executive Directors Khomotso Mosehla and Rudolph Torlage are not considered independent. Notwithstanding that the current composition of the Board does not meet the requirements of ASX Principle 2 as a majority of the Directors are not independent, the Board considers that the composition of the Board is adequate for the Company's current size and operations, and includes an appropriate mix of skills and expertise, relevant to the Company's business. The Board has formed the view that the individuals on the Board can, and do make quality judgments in the best interests of the Company on all relevant issues. 1.6 Independent professional advice The Board has adopted a formal policy on access to independent professional advice which provides that Directors are entitled to seek independent professional advice for the purposes of the proper performance of their duties. The advice is at the Company's expense and advice so obtained is to be made available to all Directors. 1.7 Meetings The Board held 5 scheduled and 3 unscheduled meetings during the reporting year. Senior management attended and made presentations at the Board Meetings as considered appropriate and were available for questioning by Directors. The attendance of Directors at Board meetings during the year ended 30 June 2012 is detailed in the Directors' Report. 1.8 Evaluation of Board and Senior Executive performance A process has been established to review and evaluate the performance of the Board, individual Directors and senior executives. The Board is required to meet annually with the specific purpose of reviewing the role of the Board, assessing the performance of the Board and individual Directors over the previous 12 months and examining ways in which the Board can better perform its duties. Membership of the Board has recently been refreshed and as a result, the Company has deferred its annual Board review to enable the new Board the opportunity to work together as a group prior to such review. The Managing Director is responsible for assessing the performance of the key executives within the Company. This is performed through a formal process involving a formal meeting with each senior executive. 1.9 Remuneration ASX Principle 8 recommends the Board establish a Remuneration Committee to focus on appropriate remuneration policies. It is further recommended that the Remuneration Committee have a formal Charter. The Company has a Nomination and Remuneration Committee which is comprised of 3 independent non-executive Directors and which undertakes the remuneration functions for the Company. The Nomination & Remuneration Committee has adopted a formal Remuneration Committee Charter, available on the Company's website, which includes information on the Company's approach to remuneration of Directors (executive and non-executive) and senior executives. In accordance with Principle 8, executive Directors and key executives are remunerated by way of a salary or consultancy fees, commensurate with their required level of services. Non-executive Directors receive a fixed monthly fee for their services. Total aggregated non-executive Directors' fees are currently capped at A$1,000,000 per annum. The Company does not have any scheme relating to retirement benefits for non-executive Directors. See the Remuneration Report for details of remuneration paid to Directors and key executives during the year. 1.10 Risk Management In accordance with ASX Principle 7, the Company has a policy for the oversight and management of material business risks, which is available on the Company's website. The Board is responsible for approving the Company's policies on risk oversight and management and satisfying itself that management has developed and implemented a sound system of risk management and internal control. Implementation of the risk management system and day-to-day management of risk is the responsibility of the Managing Director, with the assistance of senior management, as required. The Managing Director has responsibility for identifying, assessing, monitoring and managing risks. The Managing Director is also responsible for identifying any material changes to the Company's risk profile and ensuring, with approval of the Board, the risk profile of the Company is updated to reflect any material change. The Managing Director is required to report on the progress of, and on all matters associated with, risk management on a regular basis, and at least annually. During the reporting period, the Managing Director regularly reported to the Board as to the effectiveness of the Company's management of its material business risks. Further, in accordance with Principle 7, the Managing Director and Chief Financial Officer have confirmed in writing to the Board that: (a) the Company's financial reports present a true and fair view, in all material respects, of the Company's financial condition and operational results are in accordance with relevant accounting standards; (b) the above confirmation is founded on a sound system of risk management and internal compliance and control which implements the policies of the Board; (c) the Company's risk management and internal compliance and control system is operating efficiently and effectively in all material respects. 1.11 Financial Reporting ASX Principle 4 recommends the Board establish an Audit Committee to focus on issues relevant to the integrity of the Company's financial reporting. It is further recommended the Audit Committee have a formal Charter. The Company has established an Audit and Risk Committee which is comprised of a majority of independent non-executive Directors. The role of the Audit and Risk Committee is to: (a) monitor and review the integrity of the financial reporting of the Company, reviewing significant financial reporting judgments; (b) review the Company's internal financial control system and, unless expressly addressed by a separate risk committee or by the Board itself, risk management systems; (c) monitor, review and oversee the external audit function including matters concerning appointment and remuneration, independence and non-audit services; (d) monitor and review compliance with the Company's Code of Conduct; and (e) perform such other functions as assigned by law, the Company's Constitution, or the Board. The Audit and Risk Committee has adopted a formal Audit and Risk Committee Charter, available from the Company's website, which promotes an environment consistent with best practice financial reporting. 1.12 Safety, Health and Environment Committee The role of the Safety, Health and Environment Committee is to assist the Board in the effective discharge of its responsibilities in relation to health, safety and environmental ("HSE") issues for CoAL, and the oversight of risks relating to these issues. The Committee's responsibilities include to: (a) Understand the risks of HSEC issues involving CoAL's activities; (b) Ensure that the systems and processes for identifying, assessing and managing HSE risks of CoAL are adequately monitored; (c) Regularly review and ensure compliance with the HSE strategies and policies of CoAL's and the supporting Management systems and processes; (d) Monitor developments in relevant HSE related legislation and regulations and monitor CoAL's compliance with relevant legislation, including through audits. 1.13 Code of Conduct The Board encourages appropriate standards of conduct and behaviour from Directors, officers, employees and contractors of the Company. The Board has adopted a Code of Conduct in relation to Directors and employees, available from the Company's website. This Code of Conduct is regularly reviewed and updated as necessary to ensure that it reflects the highest standards of behaviour and professionalism and the practices necessary to maintain confidence in the Company's integrity. A fundamental theme is that all business affairs are conducted legally, ethically and with strict observance of the highest standards of integrity and propriety. 1.14 Securities Trading As required by Listing Rule 12.12, the Board has adopted a Securities Trading Policy which regulates dealings by Directors, offices and employees in securities issued by the Company. Under the policy, which is available on the Company's website, Directors, officers and employees of the Company must not, whether in their own capacity or as an agent for another, subscribe for, purchase or sell, or enter into an agreement to subscribe for, purchase or sell, any securities (ie. shares or options) in the Company, or procure another person to do so: (a) if that Director, officer or employee possesses information that a reasonable person would expect to have a material effect on the price or value of the securities if the information was generally available; (b) if the Director, officer or employee knows or ought reasonably to know, that: · the information is not generally available; and · if it were generally available, it might have a material effect on the price or value of the securities in the Company; and (c) without the written acknowledgement of the Chair. 1.14 Securities Trading (continued) Further, Directors, officers and employees must not either directly or indirectly pass on this kind of information to another person if they know, or ought reasonably to know, that this other person is likely to deal in the securities of the Company or procure another person to do so. The policy regulates trading by key management personnel within defined closed periods, as well as providing details of trading not subject to the policy, exceptional circumstances in which key management personnel may be permitted to trade during a prohibited period with prior written clearance and the procedure for obtaining written clearance. Directors, officers and employees must not enter into transactions or arrangements which operate to limit the economic risk of their security holding in the Company without first seeking and obtaining written acknowledgement from the Chair. Executives are also prohibited from entering into transactions or arrangements which limit the economic risk of participating in unvested entitlements. 1.15 Privacy The Company has resolved to comply with the National Privacy Principles contained in the Privacy Act 1988, to the extent required for a company the size and nature of CoAL. 1.16 Continuous Disclosure In accordance with ASX Principle 5, the Board has an established Continuous Disclosure Policy which is available from the Company's website. The Company promotes timely and balanced disclosure of all material matters concerning the Company and recognises that all investors should have equal and timely access to material information. The Company has adopted certain procedures to ensure that it complies with its continuous disclosure obligations and has appointed a Responsible Officer who is responsible for ensuring the procedures are complied with. 1.17 Shareholder Communication In accordance with ASX Principle 6, the Board has established a communications strategy which is available from the Company's website. The Board aims to ensure that the shareholders are informed of all major developments affecting the Company. All shareholders receive the Company's annual report, and may also request copies of the Company's half-yearly and quarterly reports. The Company maintains a website atwww.coalofafrica.comand makes comprehensive information available on a regular and up to date basis. The Company provides shareholder materials directly to shareholders through electronic means. A shareholder may request a hard copy of the Company's annual report to be posted to them. Shareholders are encouraged at annual general meetings to ask questions of Directors and senior management and also the Company's external auditors, who are requested to attend the Company's annual general meetings. 1.18 Diversity On 30 June 2010, the ASX Corporate Governance Council introduced a number of new recommendations in respect of diversity. These changes apply for financial years commencing on or after 1 January 2011, being the financial year ending 30 June 2012 for CoAL. On 30 June 2010, the ASX Corporate Governance Council introduced a number of new recommendations in respect of diversity. These changes apply for financial years commencing on or after 1 January 2011, being the financial year ending 30 June 2012 for CoAL. The Company is committed to developing a diverse workforce and providing a work environment in which all employees are treated fairly and with respect. To this end, the Company has in place an Employment Equity Policy which details its commitment to being an equal opportunity employer and is in line with the South African Mining Charter and Employment Equity legislation in South Africa. A copy of the Employment Equity Policy is available on the Company's website. The Mining Charter requires that a company establish measurable objectives for achieving gender diversity and assess such objectives and progress toward achieving them.The targets set for CoAL include 10% female representation in core mining positions. Employment Equity targets as these relate to designated groups (one of which is women) are included as part of the business key performance areas which are included in all management performance contracts. As at the date of this report, the proportion of women employees in the organisation is: Employees 17% Senior Executive 16% Board: 0% The directors declare that: a) in the directors' opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; b) in the directors' opinion, the attached financial statements are in compliance with International Financial Reporting Standards, as stated in note 2.1 to the financial statements; c) in the directors' opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the Consolidated Entity; and d) the directors have been given the declarations required by s.295A of the Corporations Act 2001 Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001. On behalf of the Directors John Wallington Chief Executive Officer 28 September 2012 Year ended Year ended 30 June 2012 30 June 2011 Note $'000 $'000 Revenue 5 243,842 261,425 Cost of sales - direct (210,429) (223,483) Gross profit 33,413 37,942 Depreciation and 6 (70,000) (79,521) amortisation Foreign exchange losses 6 (48,871) (29,923) Employee benefits 6 (35,690) (21,362) expense Other expenses (32,067) (26,134) Take or pay port (1,570) - obligation Operating lease expenses (1,449) (1,874) Goodwill written off (1,191) - Impairment reversals / 6 324 (97,400) (losses) Other gains and losses 6 412 (498) Other income 7,984 - Operating loss (148,705) (218,770) Finance income 8 1,128 2,486 Finance costs 8 (2,974) (1,822) Loss before tax (150,551) (218,106) Income tax credit / 9 11,643 (897) (charge) Net loss for the year (138,908) (219,003) Other comprehensive income Exchange differences on (21,051) 119,470 translating foreign operations Total comprehensive loss (159,959) (99,533) for the year Loss attributable to: Owners of the (138,908) (219,003) Company Non-controlling - - interests (138,908) (219,003) Total comprehensive loss attributable to: Owners of the (159,959) (99,533) Company Non-controlling - - interests (159,959) (99,533) The story has been truncated, [TRUNCATED]
Coal of Africa Ltd CZA Annual Consolidated Financial Statements
Press spacebar to pause and continue. Press esc to stop.