Preliminary Results
BISICHI MINING PLC
Preliminary results forthe year ended 31 December 2010
DIFFICULT TRADING CONDITIONS IN SOUTH AFRICA
RESULT IN
A CHALLENGING YEAR
* Losses at Black Wattle arose from a strong SA Rand against the US Dollar, a
shortage of railway trucks for the export coal and generally lower coal
prices
* Prospects for 2011 in South Africa will benefit from:
+ Better stripping ratios
+ Higher yields from the washing plant
+ Significantly improved coal prices
+ Reduced dependency on rail transport
+ Cost cutting
* Property portfolio independently revalued to £12.1 million (2009: £11.9
million)
* Cash reserves of £5.4 million and very little net debt
* New Black Empowerment Partner, Vunani Ltd, concluded purchase of 37.5% of
Black Wattle
* Final Dividend proposed of 3p per share payable in shares or cash in
addition to the interim dividend of 1p per share
For further information, please call:
Andrew Heller, Robert Corry or Garrett Casey, Bisichi Mining PLC 020 7415 5030
CHAIRMANS STATEMENT
2010 has been a very challenging year for your Company and particularly for its
direct coal mining subsidiary in South Africa, Black Wattle, which operated at
a loss during 2010.
The reasons for the loss are as follows:
* the strengthening of the SA Rand against the US Dollar;
* a shortage of railway trucks at our coal loading siding; and
* lower prices for our coal.
To overcome the effect of the strong SA Rand, we increased production by
expanding our washing plant and buying in high quality coal. Our railway siding
was also expanded and markets were found for this increased production.
However, the shortage of railway trucks to deliver this coal to our customers
meant that during the second half of the year we built up unacceptable levels
of stock. In order to reduce these stock levels we had to stop buying in coal,
which in turn had a material effect on our earnings. Despite this, the
investments that we have made in 2010 in terms of mine expansion and new
reserve acquisitions will reap substantial benefits in years to come.
At the 31 December 2010, Bisichi had very little net debt and cash balances of
£5.4 million which can be used to expand Group activities.
By the second half of 2011 I believe that we will return to an acceptable level
of profitability. The reasons for this are:
* the reserves that we are mining in 2011 have a lower average stripping
ratio than the reserves we mined in 2010;
* the washing plant yield is higher than the yield on the reserves that we
mined throughout 2010;
* coal prices have gone up significantly in all our markets - so far we have
seen an average increase in the export price in 2011 of 28% and an average
increase in the domestic price of 12% free on mine;
* the markets that we are now selling into are less reliant on rail
performance, although the supply of trains to our coal loading siding has
recently improved; and
* we are in the process of building up production and we have undertaken a
substantial and successful cost cutting programme.
As previously announced, Vunani Limited has concluded the purchase of a 37.5%
shareholding in Black Wattle. Vunani Limited is a leading, publicly listed,
black-owned and managed company and we are very pleased that they have joined
us as a partner in Black Wattle.
On the subject of health and safety, I am very pleased to report that Black
Wattle had another very good year having made significant investment in this
area over a number of years. A more detailed report on health and safety is
included in the Mining Review.
Bisichi's UK property portfolio, managed by London and Associated Properties
PLC, continues to perform well. It showed a small increase in external
valuation at year end and - as in previous years when the mine has
under-performed - the income from the property portfolio has underwritten many
of our costs and so provided the company with a stable financial cushion. Voids
in the portfolio have continued to remain low, even during the difficult
retailing conditions that have been experienced over the last 18 months.
As recently announced, Michael Stevens, who held the position of Group Company
Secretary for twenty five years, has retired. I would like to thank Michael on
behalf of the Board, for his extremely valuable contribution during the years
of substantial growth for the company and to wish Michael a very enjoyable
retirement.
The Board paid an interim cash dividend of 1p during the year. The Directors
recommend the payment of a final dividend of 3p (2009: 3p). The final dividend
will be payable on 8 August 2011 to shareholders registered at the close of
business on 1 July 2011. It will be proposed that shareholders are given the
opportunity of electing to receive all or part of the final dividend in the
form of fully paid ordinary shares rather than cash.
Although the company made a loss in 2010, the Board felt it was appropriate to
maintain the dividend but to pay it in a form that will give shareholders the
opportunity to either take cash or to take new shares and receive the benefit
of the investment we have made in the mine during the year, which will be
realised in years to come. Your directors, and London & Associated Properties
PLC have agreed to elect to take their full entitlement in new shares in lieu
of cash, representing over 51% of the ordinary share capital of the company.
On behalf of the Board I would like to thank all of our staff for their hard
work during the course of the year.
Michael Heller Chairman 15 April 2011
MINING REVIEW
As noted in the Chairman's statement, the challenging environment experienced
in the first half of 2010 by Black Wattle our direct mining subsidiary,
continued into the second half of 2010. Although Black Wattle continued to mine
opencast coal, buy-in coal was stopped and overall production was limited as a
result of a shortage of railway trucks in the second half of the year. This
together with the strong South African Rand and lower market priceshad a
material effect onBlack Wattle's profitability.
As we continue into 2011, the effect of these factors has been mitigated by the
significant improvement in market prices and the commencement of mining of
higher quality opencast reserves.
Production
Although production through the washing plant increased in 2010, with total run
of mine production of 1.46 million metric tonnes for the year (2009: 1.26
million metric tonnes), overall monthly production through the washing plant
decreased from 135,000 metric tonnes in the first eight months of 2010 to
94,000 metric tonnes in the last four months. As stated above, this decrease in
production was a direct result of a shortage of railway trucks in the second
half of the year.
As noted in our previous annual report, Black Wattle's remaining opencast
permissions were granted in February 2010. This represented an important
landmark in the mine's development and, going forward, gives Black Wattle the
ability to mine strategically and more flexibly its remaining reserves.
In addition to its existing reserves, Black Wattle has concluded an agreement
to purchase run of mine coal from an opencast reserve of coal contiguous to
Black Wattle's existing opencast mine. The reserve, which is expected to make
up approximately half of Black Wattle's overall monthly production is made up
of high quality run of mine coal with a lower average stripping ratio and a
higher yield than the reserves we mined in 2010.
We are pleased to report that mining of this reserve commenced at the end of
last year and overall production is steadily being increased. Much of the new
reserve comprises very low phosphorous coal, which we can sell at a premium
into the domestic metallurgical industry and delivery of this coal is not
reliant on the performance of the rail provider as the coal is supplied by road
transport.
Markets
International coal prices remained relatively stable in 2010 in comparison to
the extreme volatility seen in the international coal market in 2009. The
average weekly price of Free on Board (FOB) Coal from Richards Bay Coal
Terminal (API4) remained in a range of US$85.00 to US$95.00 per metric tonne
for the most of 2010. However, over the same period, the South African Rand
continued to appreciate by over 10% against the US Dollar. This is in addition
to the 21% appreciation of the Rand experienced in 2009. In addition to the
downturn in the Rand denominated international coal price, domestic prices
continued to decrease in 2010 resulting in a reduction in prices in all our
domestic steam coal markets.
Going forward into 2011, the international coal price has significantly
improved with the price of FOB coal from Richards Bay Coal Terminal increasing
to approximately US$120 per metric tonne at the time of writing this report. In
addition, the domestic price has increased over 12% from the prices we achieved
in 2010. Our ability to diversify our product will allow us to sell to markets
which give the highest return and we look forward to taking advantage of this
as production from our new opencast reserve increases in 2011.
Shareholding
As noted in the Chairman's statement, we are very pleased to report that Vunani
Limited has concluded the purchase of a 37.5% shareholding in Black Wattle. We
are proud of our longstanding commitment to Black Economic Empowerment in South
Africa and we see this transaction with Vunani as the first of many we will do
together in South Africa. Vunani Limited is a publicly listed, black owned
and managed company.
Health, Safety & Environment (HSE)
Black Wattle is committed to creating a safe and healthy working environment
for its employees and the health and safety of our employees is of the utmost
importance. In addition to the required personnel appointments and assignment
of direct health and safety responsibilities on the mine, a system of Hazard
Identification and Risk Assessments has been designed, implemented and
maintained at Black Wattle.
Health and Safety training is conducted on an ongoing basis. Supervisors and
about 95 percent of employees to date have received training in hazard
identification and risk assessment in their work areas.
A medical surveillance system is also in place which provides management with
information used in determining measures to eliminate, control and minimise
employee health risks and hazards and all Occupational Health hazards are
monitored on an ongoing basis.
Various systems to enhance the current HSE strategy have been introduced as
follows:
* In order to improve hazard identification before the commencing of tasks,
mini risk assessment booklets have been distributed to all mine employees
and long term contractors on the mine.
* A Job Safety Analysis form has been introduced to ensure effective
identification of hazards in the workplace.
* In order to improve the current reporting practice of incidents on the
mine, initial reporting of incidents booklets were handed out to all
employees and contractors.
* In order to capture and record investigation findings from incidents, an
incident recording sheet was introduced to line management and contractors.
* Hazard Identification and Risk Assessment training was given to all levels
of employees, line management, Head of Departments, contractor
representatives and contractor employees.
* In order to control jobs effectively over weekends that require additional
risk assessments to safely perform tasks, a weekend work register was
introduced on the mine.
HSE performance in 2010:
* Black Wattle had a 64 percent reduction in the Lost Time Injury Frequency
Rate compared to 2009.
* No new cases of Occupational Diseases Certified were recorded.
* Zero cases for the Compensation for Occupational Diseases were submitted.
* Zero machines operating at Black Wattle exceeded the regulatory noise
level.
Environment Management Programme
Under the terms of the mine's Environmental Management Programme approved by
the Department of Mineral Resource ("DMR"), Black Wattle undertakes a host of
environmental protection activities to ensure that the approved Environmental
Management Plan is fully implemented. In addition to these routine activities,
Black Wattle regularly carries out environmental monitoring activities on and
around the mine, including evaluation of ground water quality, air quality,
noise and lighting levels, ground vibrations, air blast monitoring, and
assessment of visual impacts.
Black Wattle Colliery has improved its water management tremendously by
erecting a new pollution control dam as well as upgrading existing dams in
consultation with the Department of Water Affairs and Forestry.
Black Wattle Colliery Social and Labour Plan (SLP) progress
Black Wattle Colliery is committed to true transformation and empowerment
within the company as well as poverty eradication within the surrounding and
labour providing communities.
Black Wattle is committed to providing opportunities for the sustainable
socio-economic development of the company's stakeholders:
* Employees and their families, through Skills Development, Education
Development, Human Resource Development, Empowerment and Progression
Programmes.
* Surrounding and Labour sending communities, through Local Economic
Development, Rural and Community Development, Housing and Living Condition,
Enterprise Development and Procurement programmes.
* Empowerment partners, through Broad-Based Black Economic Empowerment
(BBBEE) and Joint Ventures with Historically Disadvantaged South African
(HDSA) new mining entrants and enterprises.
* The Company, through ongoing consultation with stakeholders to develop
strong company-employee relationships, strong company-community
relationships and strong company-HDSA enterprise relationships.
The key focus areas in terms of the detailed SLP programmes were updated as
follows:
* New implementation action plans, projects, targets and budgets were
established through regular workshops with all stakeholders.
* A comprehensive desktop socio-economic assessment was undertaken on
baseline data of the Steve Tshwete Local Municipality (STLM) and Nkangala
District Municipality (NDM).
* The current Black Wattle Colliery Local Economic Development (LED)
programmes were upgraded, and new LED projects were selected in
consultation with the key stakeholders from the STLM.
* An appropriate forum was established on the mine and a process initiated
for the consultation, empowerment and participation of the employee
representatives in the Black Wattle Colliery SLP process.
Procurement
In compliance with the Mining Charter and the Mineral and Petroleum Resource
Development Act, Black Wattle has implemented a BEE-focussed procurement policy
which strongly encourages our suppliers to establish and maintain BEE
credentials. At present, BEE companies provide approximately 52 percent of
Black Wattle's equipment and services. We closely monitor our monthly
expenditure and welcome potential BEE suppliers to compete for equipment and
service contracts at Black Wattle. Black Wattle also sells much of its coal
products to empowered companies as evidenced by our long term sales agreement
with a BEE company for the purchase of our discard product which is then sold
to Eskom, the national power utility.
Employment Equity
Black Wattle is committed to achieving the goals of the Employment Equity Act
and is pleased to report the following:
* Black Wattle Colliery has exceeded the 10 percent women in management and
core mining target.
* Black Wattle Colliery has achieved 15 percent women in middle to top
management.
* Black Wattle Colliery has achieved 15.1 percent women in core mining.
* 86.2 percent of the women at Black Wattle Colliery are HDSA females.
* Black Wattle Colliery has achieved a 40 percent participation level of
HDSA's in overall management.
Prospects
Black Wattle is a fully operational opencast mine with strong management,
existing infrastructure and markets in place. Along with the expansion of the
washing plant and upgrade of the railway siding, various cost cutting and
operational programmes have been undertaken at Black Wattle in order to ensure
maximum productivity; yield and profitability. As a result, the group is in a
strong position to take advantage of the improvement in market prices and the
increased production.
Going forward, I am confident that 2011 should be a successful year for our
South African operations.
Andrew Heller
Managing Director
15 April 2011
Consolidated income statement
for the year ended 31 December 2010
2010 2010 2010 2009
Notes Trading Revaluations Total
£'000 £'000 £'000 £'000
Group revenue 1 32,824 - 32,824 29,016
Operating costs 2 (34,864) - (34,864) (24,616)
Operating (loss)/profit 1 (2,040) - (2,040) 4,400
before fair value
adjustments
Increase in value of 3 - 245 245 67
investment properties
Gains on held for trading - 90 90 425
investments
Operating (loss)/profit 1 (2,040) 335 (1,705) 4,892
Share of profit in joint 13 - 61 61 101
ventures
(Loss)/profit before (2,040) 396 (1,644) 4,993
interest and taxation
Interest receivable 174 - 174 226
Interest payable 6 (343) - (343) (216)
(Loss)/profit before tax 4 (2,209) 396 (1,813) 5,003
Taxation 7 540 (13) 527 (1,330)
(Loss)/profit for the year (1,669) 383 (1,286) 3,673
Attributable to: (1,595) 383 (1,212) 3,673
Equity holders of the
company
Non-controlling interest 26 (74) - (74) -
(Loss)/profit for the year (1,669) 383 (1,286) 3,673
(Loss)/earnings per share - 9 (15.26)p 3.66p (11.60)p 35.14p
basic
(Loss)/earnings per share - 9 (15.26)p 3.66p (11.60)p 34.35p
diluted
Trading income reflects all the trading activity on mining and property
operations. Revaluation income reflects the revaluation of investment
properties and other assets within the group and any proportion of these
amounts within Joint Ventures. The total column represents the consolidated
income statement presented in accordance with IAS 1.
Consolidated statement of comprehensive income
for the year ended 31 December 2010
2010 2009
£'000 £'000
(Loss)/profit for the year (1,286) 3,673
Other comprehensive income:
Exchange differences on translation of 747 530
foreign operations
Taxation - -
Other comprehensive income for the year net (539) 4,203
of tax
Total comprehensive income for the year net (539) 4,203
of tax
Attributable to:
Equity shareholders (459) 4,203
Non-controlling interest (80) -
(539) 4,203
Company Registration No. 112155
Consolidated balance sheet
at 31 December 2010
2010 2009
Notes £'000 £'000
Assets
Non-current assets
Value of investment properties 10 12,110 11,865
Fair value of head lease 30 233 246
12,343 12,111
Mining reserves, plant and 11 9,615 8,057
equipment
Investments in joint ventures 12 3,607 3,259
Other investments 12 150 496
Total non-current assets 25,715 23,923
Current assets
Inventories 15 705 1,139
Trade and other receivables 16 4,719 2,060
Corporation tax recoverable 115 19
Held for trading investments 17 605 510
Cash and cash equivalents 5,399 6,609
Total current assets 11,543 10,337
Total assets 37,258 34,260
Liabilities
Current liabilities
Borrowings 19 (1,759) (4,593)
Trade and other payables 18 (7,865) (5,571)
Current tax liabilities (362) (260)
Total current liabilities (9,986) (10,424)
Non-current liabilities
Borrowings 19 (5,326) (533)
Provision for rehabilitation 20 (1,025) (772)
Finance lease liabilities 30 (233) (246)
Deferred tax liabilities 22 (2,340) (2,985)
Total non-current liabilities (8,924) (4,536)
Total liabilities (18,910) (14,960)
Net assets 18,348 19,300
Equity
Share capital 23 1,045 1,045
Translation reserve 68 (685)
Other reserves 24 485 480
Retained earnings 16,356 18,460
Total equity attributable to equity 17,954 19,300
shareholders
Non-controlling interest 26 394 -
Total equity 18,348 19,300
These financial statements were approved and authorised for issue by the board
of directors on15 April 2011 and signed on its behalf by:
A R Heller G J Casey
Director Director
Consolidated statement of changes in shareholders' equity
for the year ended 31 December 2010
Share Translation Other Retained Total Non-controlling Total
capital reserves reserves earnings interest equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 1,045 (1,215) 663 15,153 15,646 - 15,646
2009
Revaluation of - - - 67 67 - 67
investment properties
Other income statement - - - 3,606 3,606 - 3,606
movements
Profit for the year - - - 3,673 3,673 - 3,673
Exchange adjustment - 530 - - 530 - 530
Total comprehensive - 530 - 3,673 4,203 - 4,203
income for the year
Dividend - - - (366) (366) - (366)
Equity share options - - (183) - (183) - (183)
Balance at 1 January 1,045 (685) 480 18,460 19,300 - 19,300
2010
Revaluation of - - - 245 245 - 245
investment properties
Other income statement - - - (1,457) (1,457) (74) (1,531)
movements
Loss for the year - - - (1,212) (1,212) (74) (1,286)
Exchange adjustment - 753 - - 753 (6) 747
Total comprehensive - 753 - (1,212) (459) (80) (539)
income for the year
Dividend - - - (418) (418) - (418)
Equity share options - - 5 - 5 - 5
Disposal of shares in - - - (474) (474) 474 -
subsidiary
Balance at 31 December 1,045 68 485 16,356 17,954 394 18,348
2010
Consolidated cash flow statement
for the year ended 31 December 2010
Year ended Year ended
31 December 2010 31 December
2009
£'000 £'000
Cash flows from operating activities
Operating (loss)/profit (1,705) 4,892
Adjustments for:
Depreciation 2,414 2,541
Share based payment expense 5 (183)
Gain on investment held for trading (90) (425)
Unrealised gain on investment properties (245) (67)
Cash flow before working capital 379 6,758
Change in inventories 434 258
Change in trade and other receivables (2,150) 4,042
Change in trade and other payables 834 (1,478)
Change in provisions 253 201
Acquisitions of held for trading investments (6) (75)
Proceeds from held for trading investments - 617
Cash generated from operations (256) 10,323
Interest received 174 226
Interest paid (343) (216)
Income tax paid (112) (2,359)
Cash flow from operating activities (537) 7,974
Cash flows from investing activities
Acquisition of reserves, plant and equipment (2,639) (2,087)
Disposal/(acquisitions) of investments 405 (136)
Cash flow from investing activities (2,234) (2,223)
Cash flows from financing activities
Borrowings drawn 2,300 406
Borrowings repaid (231) (700)
Equity dividends paid (418) (366)
Cash flow from financing activities 1,651 (660)
Net (decrease)/increase in cash and cash (1,120) 5,091
equivalents
Cash and cash equivalents at 1 January 5,077 (116)
Exchange adjustment 20 102
Cash and cash equivalents at 31 December 3,977 5,077
Cash and cash equivalents at 31 December
comprise:
Cash and cash equivalents as presented in the 5,399 6,609
balance sheet
Bank overdrafts (secured) (1,422) (1,532)
3,977 5,077
Group accounting policies
for the year ended 31 December 2010
Basis of accounting
The financial information presented in this preliminary announcement does not
constitute the statutory accounts of Bisichi Mining plc for the years ended 31
December 2010 or 31 December 2009 but is derived from those accounts. Statutory
accounts for 2009 have been delivered to the Registrar of Companies and those
for 2010 will be delivered in due course. The auditor has reported on both the
2009 and 2010 accounts; their reports were(i) unqualified, (ii) did not include
a reference to any matters to which the auditor drew attention by way of
emphasis without qualifying their report and (iii) did not contain a statement
under section 498 (2) or (3) of the Companies Act 2006.
The results for the year ended 31 December 2010 have been prepared in
accordance with International Financial Reporting Standards (IFRS) as adopted
by the European Union and with those parts of the Companies Act 2006 applicable
to companies reporting under IFRS. The principal accounting policies are
described below:
The group financial statements are presented in £ sterling and all values are
rounded to the nearest thousand pounds (£000) except when otherwise stated.
International Accounting Standards (IAS/IFRS)
The financial statements are prepared in accordance with International
Financial Reporting Standards and Interpretations in force at the reporting
date. These are prepared under the historic cost convention as modified by the
revaluation of investment properties and available for sale investments.
During 2010 the following accounting standards and guidance were adopted by the
group:
* IAS 27 (Revised): Consolidated and separate financial statements
The standard requires that transactions involving non-controlling interests,
where no change in control occurs should be accounted for as equity
transactions. Furthermore losses of the group, which are attributable to the
owners of non-controlling interest, are attributed to these owners, even if
this results in a deficit.
The impact on the results for the year is the disclosure of a £74,000 loss for
the year attributable to non-controlling interest.
During 2010 all other standards and interpretations that were mandatory for the
accounting period and were required to be adopted by the group either had no
material impact on the group's financial statements or were not relevant to the
operations of the group.
The group has not adopted any standards or interpretations in advance of the
required implementation dates. It is not expected that adoption of any
standards or interpretations which have been issued by the International
Accounting Standards Board but have not been adopted will have a material
impact on the financial statements.
Key Judgements and Estimates
The directors consider their judgements and estimates surrounding the life of
the mine and its reserves to have the most significant effect on the amounts
recognised in the financial statements and to be the area where the financial
statements are at most risk of a material adjustment due to estimation
uncertainty.
In addition the directors note that other areas, in particular the valuation of
the investment properties, are considered to be less judgemental due to the
nature of the underlying properties and the use of external valuers.
Basis of consolidation
The group accounts incorporate the accounts of Bisichi Mining Plc and all of
its subsidiary undertakings, together with the group's share of the results of
its joint ventures and associates. Non-controlling interests in subsidiaries
are presented separately from the equity attributable to equity owners of the
parent company. When changes in ownership in a subsidiary do not result in a
loss of control, the non-controlling shareholders' interest are initially
measured at the non-controlling interests' proportionate share of the
subsidiaries net assets. Subsequent to this, the carrying amount of
non-controlling interests is the amount of those interests at initial
recognition plus the non-controlling interests' share of subsequent changes in
equity. Total comprehensive income is attributed to non-controlling interests
even if this results in the non-controlling interests having a deficit balance.
Revenue
Revenue comprises sales of coal and property rental income. Revenue is
recognised when delivery of the product or service has been made and when the
customer has a legally binding obligation to settle under the terms of the
contract and has assumed all significant risks and rewards of ownership.
Revenue is only recognised on individual sales when all of the significant
risks and rewards of ownership have been transferred to a third party. In most
instances revenue is recognised when the product is delivered to the location
specified by the customer, which is typically when loaded into transport, where
the customer pays the transportation costs.
Rental income is recognised in the group income statement on a straight-line
basis over the term of the lease. This includes the effect of lease incentives.
Investment Properties
Investment properties comprise freehold and long leasehold land and buildings.
Investment properties are carried at fair value in accordance with IAS 40
`Investment Properties'. Properties are recognised as investment properties
when held for long-term rental yields, and after consideration has been given
to a number of factors including length of lease, quality of tenant and
covenant, value of lease, management intention for future use of property,
planning consents and percentage of property leased. Investment properties are
revalued annually by professional external surveyors and included in the
balance sheet at their fair value. Gains or losses arising from changes in the
fair values of assets are recognised in the consolidated income statement in
the period to which they relate. In accordance with IAS 40, investment
properties are not depreciated. Properties held for use in the business are not
recognised as investment properties and are held at depreciated historical
cost.
The fair value of the head leases is the net present value of the current head
rent payable on leasehold properties until the expiry of the lease.
Mining reserves, plant and equipment
The cost of property, plant and equipment comprises its purchase price and any
costs directly attributable to bringing the asset to the location and condition
necessary for it to be capable of operating in accordance with agreed
specifications. Freehold land is not depreciated. Other property, plant and
equipment is stated at historical cost less accumulated depreciation.
The life of mine remaining as at year end is currently estimated at 5 years. A
provision for rehabilitation of the mine is carried at fair value and is
provided for over the life of mine. The provision includes the restoration of
the underground, opencast and surface operations and is estimated to be
utilised at the end of the life of mine of the group. The timing and final cost
of the rehabilitation is uncertain and will depend on the duration of the mine
life and the quantities of coal extracted from the reserves.
Mine reserves and development cost
The purpose of mine development is to establish secure working conditions and
infrastructure to allow the safe and efficient extraction of recoverable
reserves. Depreciation on mine development is not charged until production
commences or the assets are put to use. On commencement of full production,
depreciation is charged over the life of the associated mine reserves on a
straight-line basis.
Surface mine development
Expenditure incurred prior to the commencement of working surface mine sites,
net of any residual value and taking into account the likelihood of the site
being mined, is capitalised within property, plant and equipment and charged to
the income statement over the life of the recoverable reserves of the scheme.
Other assets and depreciation
The cost, less estimated residual value, of other property, plant and equipment
is written off on a straight-line basis over the asset's expected useful life.
Residual values and useful lives are reviewed, and adjusted if appropriate, at
each balance sheet date. Changes to the estimated residual values or useful
lives are accounted for prospectively. Heavy surface mining and other plant and
equipment is depreciated at varying rates depending upon its expected usage.
The depreciation rates generally applied are:
Mining equipment The shorter of its useful life or the life of the mine
Mining reserves Over the expected life of the reserves
Motor vehicles 25-33 per cent per annum
Office equipment 10-33 per cent per annum
Employee Benefits
Share based remuneration
The company operates a share option scheme. The fair value of the share option
scheme is determined at the date of grant. This fair value is then expensed on
a straight-line basis over the vesting period, based on an estimate of the
number of shares that will eventually vest. The fair value of options granted
is calculated using a binomial or Black-Scholes-Merton model. Details of the
share options in issue are disclosed in the Directors' Remuneration Report on
page 25 under the heading Share option schemes which is within the audited part
of this report.
Pensions
The group operates a defined contribution pension scheme. The contributions
payable to the scheme are expensed in the period to which they relate.
Foreign Currencies
Monetary assets and liabilities are translated at year end exchange rates and
the resulting exchange rate differences are included in the consolidated income
statement within the results of operating activities if arising from trading
activities and within finance cost/income if arising from financing.
For consolidation purposes, income and expense items are included in the
consolidated income statement at average rates, and assets and liabilities are
translated at year end exchange rates. Translation differences arising on
consolidation are taken directly to reserves. Where foreign operations are
disposed of, the cumulative exchange differences of that foreign operation are
recognised in the consolidated income statement when the gain or loss on
disposal is recognised.
Transactions in foreign currencies are translated at the exchange rate ruling
on transaction date.
Financial Instruments
The group classifies financial instruments, or their component parts, on
initial recognition as a financial asset, a financial liability or an equity
instrument in accordance with the substance of the contractual arrangement.
Bank loans and overdrafts
Bank loans and overdrafts are included as financial liabilities on the group
balance sheet at the amounts drawn on the particular facilities net of the
unamortised cost of financing. Interest payable on those facilities is expensed
as finance cost in the period to which it relates.
Finance lease liabilities
Finance lease liabilities arise for those investment properties held under a
leasehold interest and accounted for as investment property. The liability is
initially calculated as the present value of the minimum lease payments,
reducing in subsequent reporting periods by the apportionment of payments to
the lessor.
Interest rate derivatives
The group uses derivative financial instruments to manage the interest rate
risk associated with the financing of the group's business. No trading in such
financial instruments is undertaken. At each reporting date, these interest
rate derivatives are recognised at fair value, being the estimated amount that
the group would receive or pay to terminate the agreement at the balance sheet
date, taking into account current interest rates and the current credit rating
of the counterparties. The gain or loss at each fair value re-measurement is
recognised immediately in the income statement.
Held for trading investments
Financial assets/liabilities held for trading or short-term gain are measured
at fair value and movements in fair value are charged/credited to the income
statement in the period.
Trade receivables
Trade receivables do not carry any interest and are stated at their nominal
value as reduced by appropriate allowances for estimated recoverable amounts as
the interest that would be recognised from discounting future cash payments
over the short payment period is not considered to be material.
Trade payables
Trade payables are not interest bearing and are stated at their nominal value,
as the interest that would be recognised from discounting future cash payments
over the short payment period is not considered to be material.
Other Financial assets and liabilities
The groups other financial assets and liabilities not disclosed above are
accounted for as shown below.
Financial assets:
- Cash and cash equivalents are measured at cash value.
- Other receivables at amount owed
- Other loans receivable at amount owed
Finance liabilities:
- Other payables at amount owing
Joint Ventures
Investments in joint ventures, being those entities over whose activities the
group has joint control, as established by contractual agreement, are included
at cost together with the group's share of post acquisition reserves, on an
equity basis.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost
includes materials, direct labour and overheads relevant to the stage of
production. Net realisable value is based on estimated selling price less all
further costs to completion and all relevant marketing, selling and
distribution costs.
Other Investments
Other investments that do not have a quoted market price in an active market
and whose fair value cannot be reliably measured are recognised at cost less
any provision for impairment.
Impairment
Whenever events or changes in circumstance indicate that the carrying amount of
an asset may not be recoverable an asset is reviewed for impairment. An asset's
carrying value is written down to its estimated recoverable amount (being the
higher of the fair value less cost to sell and value in use) if that is less
than the asset's carrying amount.
Deferred Tax
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the tax computations, and is
accounted for using the balance sheet liability method. Deferred tax
liabilities are generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary
differences can be utilised. In respect of the deferred tax on the revaluation
surplus, this is calculated on the basis of the chargeable gains that would
crystallise on the sale of the investment portfolio as at the reporting date.
The calculation takes account of indexation on the historical cost of the
properties and any available capital losses.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the group income statement, except when it relates to
items charged or credited directly to equity, in which case it is also dealt
with in equity.
Dividends
Dividends payable on the ordinary share capital are recognised as a liability
in the period in which they are approved.
Cash and Cash Equivalents
Cash comprises cash in hand and on-demand deposits. Cash and cash equivalents
comprises short-term, highly liquid investments that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes
in value and original maturities of three months or less. The cash and cash
equivalents shown in the cashflow statement are stated net of bank overdrafts.
Segmental Reporting
For management reporting purposes, the group is organised into business
segments distinguishable by economic activity. The group's only business
segments are mining activities and investment properties. These business
segments are subject to risks and returns that are different from those of
other business segments and are the primary basis on which the group reports
its segment information. This is consistent with the way the group is managed
and with the format of the group's internal financial reporting. Significant
revenue from transactions with an individual customer, which makes up 10
percent or more of the total revenue of the group, is separately disclosed
within each segment.
Notes to the financial statements
for the year ended 31 December 2010
1. Segmental reporting
Business analysis
2010
Mining Property Other Total
£'000 £'000 £'000 £'000
Significant revenue 11,265 - - 11,265
customer A
Significant revenue 8,456 - - 8,456
customer B
Significant revenue 3,398 - - 3,398
customer C
Other revenue 8,707 975 23 9,705
Segment revenue 31,826 975 23 32,824
Operating (loss)/profit (2,664) 616 8 (2,040)
before fair value
adjustments
Revaluation of - 245 90 335
investments
Operating (loss)/profit (2,664) 861 98 (1,705)
and segment result
Segment assets 15,061 12,557 606 28,224
Unallocated assets
- Non-current assets 28
* Cash & cash 5,399
equivalents
Total assets 33,651
Segment liabilities (7,769) (2,473) (15) (10,257)
Borrowings (663) (5,000) - (5,663)
(8,432) (7,473) (15) (15,920)
Unallocated liabilities (2,990)
Total liabilities (18,910)
Net assets 14,741
Investment in joint 3,607
ventures non segmental
Net assets as per 18,348
balance sheet
Geographic analysis
United South Other Unallocated Total
Kingdom Africa
£'000 £'000 £'000 £'000 £'000
Revenue 998 31,826 - - 32,824
Operating profit/(loss) 959 (2,664) - - (1,705)
and segment result
Non-current assets 12,343 9,586 - 29 21,958
excluding investments
Total net assets 5,637 6,604 63 6,044 18,348
Capital expenditure 2 2,637 - - 2,639
Notes to the financial statements
for the year ended 31 December 2010
1. Segmental reporting
Business analysis
2009
Mining Property Other Total
£'000 £'000 £'000 £'000
Significant revenue 10,524 - - 10,524
customer A
Significant revenue 6,991 - - 6,991
customer B
Significant revenue 3,747 - - 3,747
customer C
Other Revenue 6,544 1,005 205 7,754
Segment revenue 27,806 1,005 205 29,016
Operating profit before 3,873 621 (94) 4,400
fair value adjustments
Revaluation of investments - 67 425 492
Operating profit and 3,873 688 331 4,892
segment result
Segment assets 11,587 12,236 509 24,332
Unallocated assets
- Non-current assets 60
* Cash & cash equivalents 6,609
Total assets 31,001
Segment liabilities (5,568) (2,736) (117) (8,421)
Borrowings (894) (2,700) - (3,594)
(6,462) (5,436) (117) (12,015)
Unallocated liabilities (2,945)
Total liabilities (14,960)
Net assets 16,041
Investment in joint 3,259
ventures non segmental
Net assets as per balance 19,300
sheet
Geographic analysis
United South Other Unallocated Total
Kingdom Africa
£'000 £'000 £'000 £'000 £'000
Revenue 1,210 27,806 - - 29,016
Operating profit and 1,019 3,873 - - 4,892
segment result
Non-current assets 12,111 7,997 - 60 20,168
excluding investments
Total net assets 7,151 5,112 55 6,982 19,300
Capital expenditure 25 2,062 - - 2,087
2. Operating costs
2010 2009
£'000 £'000
Mining 26,979 16,462
Property 120 81
Share dealing - -
Cost of sales 27,099 16,543
Administration 7,765 8,073
Operating costs 34,864 24,616
The direct property costs are:
Ground rent 9 15
Direct property expense 81 63
Bad debts 30 3
120 81
3. Gain on revaluation and sale of investment properties
The reconciliation of the investment surplus to the gain on revaluation of
investment properties
in the income statement is set out below:
2010 2009
£'000 £'000
Investment surplus 258 55
(Gain)/loss on valuation movement in respect of head (13) 12
lease payments
Gain/(loss) on revaluation of investment properties 245 67
4. (Loss)/profit before taxation
(Loss)/profit before taxation is arrived at after charging/(crediting):
2010 2009
£'000 £'000
Staff costs (see note 28) 6,036 6,661
Depreciation 2,414 2,541
Exchange gain (526) (237)
Fees payable to the company's auditor for 40 45
the audit of the company's annual accounts
Fees payable to the company's auditor and
its associates for other services:
The audit of the company's subsidiaries, pursuant to 32 28
legislation
Other services 5 1
The directors consider the auditors were best placed to provide the above
non-audit services.
The audit committee reviews the nature and extent of non-audit services to
ensure that independence is maintained.
5. Directors' emoluments
Directors' emoluments are shown in the Directors' remuneration report on pages
24 and 25 under the heading Directors' remuneration which is within the audited
part of this report.
6. Interest payable
2010 2009
£'000 £'000
On bank overdrafts and bank loans 291 94
Other interest payable 52 122
Interest payable 343 216
7. Taxation
2010 2009
£'000 £'000
(a) Based on the results for the year:
Corporation tax at 28% (2009: 28%) 352 1,203
Adjustment in respect of prior years - UK 6 -
Current tax 358 1,203
Deferred tax - current year (885) 127
Total tax in income statement (527) 1,330
(b) Factors affecting tax charge for the year:
The corporation tax assessed for the year is different
from that at the standard rate of corporation tax in the
United Kingdom of 28% (2009: 28%)
The differences are explained below:
(Loss)/profit on ordinary activities before taxation (1,813) 5,003
Tax on profit on ordinary activities at 28% (2009: 28%) (508) 1,401
Effects of:
Expenses not deductible for tax purposes 84 67
Capital gains in excess of profit on disposal 13 -
Other differences (127) (119)
Adjustment to smaller companies rates - (19)
Adjustment in respect of prior years 11 -
Total tax (527) 1,330
(c) Analysis of United Kingdom and Overseas tax
United Kingdom tax included in above:
Corporation tax 300 -
Adjustment in respect of prior years 6 -
Current tax 306 -
Deferred tax 113 242
419 242
Overseas tax included in above:
Corporation tax 52 1,203
Current tax 52 1,203
Deferred tax (998) (115)
(946) 1,088
8. Dividends paid
2010 2010 2009 2009
Per share £'000 Per share £'000
Dividends paid during the year 4.00 p 418 3.50 p 366
relating to the prior period
Dividends to be paid:
Interim dividend for 2010 paid on the 1.00 p 105 1.00p 105
4 February 2011
Proposed final dividend for 2010 3.00 p 313 3.00p 313
4.00 p 418 4.00p 418
The dividends to be paid are not accounted for until they have been approved at
the Annual General Meeting. The amount will be accounted for as an
appropriation of retained earnings in the year ending 31 December 2011.
9. (Loss)/earnings and diluted (loss)/earnings per share
Both the basic and diluted (loss)/earnings per share calculations are based on
a loss of £1,286,000 (2009: profit £3,673,000). The basic (loss)/earnings per
share have been calculated on 10,451,506 (2009: 10,451,506) ordinary shares
being in issue during the period. The diluted (loss)/earnings per share have
been calculated on the number of shares in issue of 10,451,506 (2009:
10,451,506) plus the dilutive potential ordinary shares arising from share
options of nil (2009: 241,313) totalling 10,451,506 (2009: 10,692,819).
Dilutive potential ordinary shares of 279,790 were excluded from the
calculation of diluted ordinary shares in 2010 as there was no dilutive effect
due to the loss for the year.
10. Investment properties
Long
Freehold Leasehold Total
£'000 £'000 £'000
Valuation at 1 January 2010 8,865 3,000 11,865
Additions - - -
Revaluation 245 - 245
Valuation at 31 December 9,110 3,000 12,110
2010
Valuation at 1 January 2009 8,673 3,100 11,773
Additions 25 - 25
Revaluation 167 (100) 67
Valuation at 31 December 8,865 3,000 11,865
2009
Historical cost
At 31 December 2010 4,801 728 5,529
At 31 December 2009 4,801 728 5,529
Long leasehold properties are those for which the unexpired term at the balance
sheet date is not less than 50 years.
All investment properties are held for use in operating leases and all
properties generated rental income during the period.
Freehold and Long Leasehold properties were externally professionally valued at
31 December on an open market basis by:
2010 2009
£'000 £'000
BNP Paribas Real Estate 9,100 8,865
Carter Towler LLP, Chartered Surveyors 3,000 3,000
12,100 11,865
The valuations were carried out in accordance with the Statements of AssetValuation and Guidance Notes published by
The Royal Institution of Chartered Surveyors.
11. Mining reserves, plant and equipment
Mining Mining Motor Office
Reserves equipment Vehicles equipment Total
£'000 £'000 £'000 £'000 £'000
Cost at 1 January 2010 1,911 12,581 387 119 14,998
Exchange adjustment 318 2,094 42 12 2,466
Additions - 2,637 - 2 2,639
Disposals (17) (2,372) - (5) (2,394)
Cost at 31 December 2010 2,212 14,940 429 128 17,709
Accumulated depreciation 1,407 5,195 271 68 6,941
at 1 January 2010
Exchange adjustment 267 829 31 6 1,133
Charge for the year 111 2,245 43 15 2,414
Disposals in year (17) (2,372) - (5) (2,394)
Accumulated depreciation 1,768 5,897 345 84 8,094
at 31 December 2010
Net book value at 31 444 9,043 84 44 9,615
December 2010
Cost at 1 January 2009 1,705 11,360 346 103 13,514
Exchange adjustment 225 1,500 23 7 1,755
Additions - 2,000 50 12 2,062
Disposals (19) (2,279) (32) (3) (2,333)
Cost at 31 December 2009 1,911 12,581 387 119 14,998
Accumulated depreciation 1,151 4,523 232 54 5,960
at 1 January 2009
Exchange adjustment 156 593 21 3 773
Charge for the year 119 2,358 50 14 2,541
Disposals in year (19) (2,279) (32) (3) (2,333)
Accumulated depreciation 1,407 5,195 271 68 6,941
at 31 December 2009
Net book value at 31 504 7,386 116 51 8,057
December 2009
12. Investments held as non-current assets
2010 2010 2009 2009
Joint Joint
Ventures Ventures
Assets Other Assets Other
£'000 £'000 £'000 £'000
At 1 January 2,343 779 2,363 617
Disposals - (405) - -
Transfer - - (121) 137
Exchange adjustment - 59 - 25
Share of gain/(loss) in joint 61 - (101) -
ventures
Net assets at 31 December 2,404 433 2,343 779
Loan to joint venture:
At 1 January 916 - 709 -
Additions 287 - 207 -
At 31 December 1,203 - 916 -
At 31 December 3,607 433 3,259 779
Provision for diminution in value:
At 1 January - (283) - (283)
Write down of investment - - - -
At 31 December - (283) - (283)
Net book value at 31 December 3,607 150 3,259 496
Included in other investments are: 2010 2009
£'000 £'000
Net book value of unquoted 133 133
investments
Rehabilitation fund - 348
Net book value of investments 17 15
listed on overseas Stock Exchanges
150 496
Market value of the overseas listed 17 15
investments
13. Joint ventures
The company owns 50% of the issued share capital of Dragon Retail Properties
Limited, an unlisted property investment company. The remaining 50% is held by
London & Associated Properties PLC. Dragon Retail Properties Limited is
incorporated in England and Wales. It has issued share capital of 500,000
(2009: 500,000) ordinary shares of £1 each.
The company owns 49% of the issued share capital of Ezimbokodweni Mining (pty)
Limited, an unlisted prospective coal production company. The company is
incorporated in South Africa. It has issued share capital of 100 (2009: 100)
ordinary shares of ZAR1 each.
Ezimbokodweni Dragon
49% 50% 2010 2009
£'000 £'000 £'000 £'000
Turnover - 103 103 101
Profit and loss
Profit before tax - 61 61 101
Taxation - - - -
Profit after taxation - 61 61 101
Balance sheet
Non-current assets 1,203 1,583 2,786 2,431
Current assets - 1,339 1,339 1,311
Current liabilities (1,203) (1,061) (2,264) (1,952)
Non-current liabilities - (140) (140) (130)
Share of net assets at 31 - 1,721 1,721 1,660
December
14. Subsidiary companies
The company owns the following ordinary share capital of the principal
subsidiaries which are included within the consolidated financial statements:
Activity Percentage of
share capital Country of
incorporation
Mineral Products Limited Share dealing 100% England and Wales
Black Wattle Colliery Coal mining 62.5% South Africa
(pty) Limited
Bisichi Coal Mining (pty) Coal mining 100% South Africa
Limited
Bisichi Mining Holding company 100% England and Wales
(Exploration) Limited
Ninghi Marketing Limited Dormant 90.1% England and Wales
Details on the non-controlling interest in subsidiaries are shown under note
26.
15. Inventories
2010 2009
£'000 £'000
Coal
Washed 540 1,048
Run of mine 122 57
Other 43 34
705 1,139
16. Trade and other receivables
2010 2009
£'000 £'000
Amounts falling due within
one year:
Trade receivables 3,791 1,875
Other receivables 112 98
Prepayments and accrued 816 87
income
4,719 2,060
17. Held for trading investments
2010 2009
£'000 £'000
Market value of Listed
Investments:
Listed in Great Britain 522 448
Listed outside Great Britain 83 62
605 510
Original cost of Listed 458 452
Investments
Unrealised surplus of market 147 58
value over cost
18. Trade and other payables
2010 2009
£'000 £'000
Trade payables 3,604 1,004
Amounts owed to joint 1,205 1,165
ventures
Other payables 687 569
Accruals and deferred 2,369 2,833
income
7,865 5,571
19. Financial liabilities - borrowings
Current Non-current
2010 2009 2010 2009
£'000 £'000 £'000 £'000
Bank overdraft (secured) 1,422 1,532 - -
Bank loan (secured) 337 3,061 5,326 533
1,759 4,593 5,326 533
2010 2009
£'000 £'000
Bank overdraft and loan
instalments by reference
to the balance sheet date:
Within one year 1,759 4,593
From one to two years 5,326 533
From two to five years - -
7,085 5,126
Bank overdraft and loan
analysis
by origin:
United Kingdom 5,000 2,700
Southern Africa 2,086 2,426
7,085 5,126
The United Kingdom bank loans and overdraft are secured by way of a first
charge over the investment properties in the UK which are included in the
financial statements at a value of £12,100,000. The South African bank loans
are secured by way of a first charge over specific pieces of mining equipment
and the debtors of the relevant company which holds the loan which are include
in the financial statements at a value of £6,507,000.
Consistent with others in the mining and property industry, the group monitors
its capital by its gearing levels. This is calculated as the net debt (loans
less cash and cash equivalents) as a percentage of the equity. During 2010 this
increased to 9.4% (2009: nil) which was calculated as follows:
2010 2009
£'000 £'000
Total debt 7,085 5,126
Less cash and cash (5,399) (6,609)
equivalents
Net debt 1,686 (1,483)
Total equity 17,954 19,300
Gearing 9.4% -
20. Provision for rehabilitation
2010 2009
£'000 £'000
As at 1 January 772 571
Additions 253 201
As at 31 December 1,025 772
21. Financial instruments
Treasury policy
The group enters into derivative transactions such as interest rate swaps and
forward exchange contracts as necessary in order to help manage the financial
risks arising from the group's activities. The main risks arising from the
group's financing structure are interest rate risk, liquidity risk, market
risk, credit risk, currency risk and commodity price risk. There have been no
changes during the year of the main risks arising from the groups finance
structure. The policies for managing each of these risks and the principal
effects of these policies on the results are summarised below.
Interest rate risk
Interest rate risk is the risk that the value of a financial instrument or
cashflows associated with the instrument will fluctuate due to changes in
market interest rates. Interest rate risk arises from interest bearing
financial assets and liabilities that the group uses. Treasury activities take
place under procedures and policies approved and monitored by the Board to
minimise the financial risk faced by the group. Interest bearing assets
comprise cash and cash equivalents which are considered to be short-term liquid
assets and loans to joint ventures. Interest bearing borrowings comprise bank
loans, bank overdrafts and variable rate finance lease obligations. The rates
of interest vary based on LIBOR in the UK and PRIME in South Africa.
As at 31 December 2010, with other variables unchanged, a 1% increase or
decrease in interest rates, on investments and borrowings whose interest rates
are not fixed, would respectively decrease or increase the profit for the year
by £27,000 (2009: £14,000). The effect on equity of this change would be an
equivalent decrease or increase for the year of £27,000 (2009: £14,000).
Liquidity risk
The group's policy is to minimise refinancing risk. Efficient treasury
management and strict credit control minimise the costs and risks associated
with this policy which ensures that funds are available to meet commitments as
they fall due. As at year end the group held borrowing facilities in the UK in
Bisichi Mining Plc and in South Africa in Black Wattle Colliery (Pty) Ltd. The
company was within its bank borrowing facilities and had not breached any of
its covenants. New borrowings were signed in March 2010 in both the UK and
South Africa. Further details are provided in borrowing facilities information
later in this note. Trade and other payables are all due within one year.
The table below shows the currency profiles of cash and cash equivalents:
2010 2009
£'000 £'000
Sterling 3,710 2,904
South African Rand 1,689 3,705
5,399 6,609
Cash and cash equivalents earn interest at rates based on LIBOR in Sterling and
Prime in Rand.
Market risk
The group is exposed to market price risk through interest rate and currency
fluctuations and commodity price risk.
Credit risk
The group is exposed to credit risk on its cash and cash equivalents and trade
and other receivables as per the balance sheet. At the balance sheet date there
was no significant concentration of credit risk. The maximum exposure to credit
risk is represented by the carrying amount of each financial asset in the
balance sheet which at year end amounted to £9,302,000 (2009: £8,582,000).
Trade debtor's credit ratings are reviewed regularly. The group only deposits
surplus cash with well-established financial institutions of high quality
credit standing. As at year end the amount of material receivables held past
due date was £nil (2009: £nil).
Financial assets maturity
On 31 December 2010, cash at bank and in hand amounted to £5,399,000 (2009: £
6,609,000) which is invested in short term bank deposits maturing within one
year bearing interest at the bank's variable rates. Cash and cash equivalents
all have a maturity of less than 3 months.
Total financial assets and liabilities
The group's financial assets and liabilities are as follows, representing both
the fair value and the carrying value:
Assets at
Financial fair
Liabilities value
measured at through
Loans and amortised profit
receivables cost and loss 2010 2009
£'000 £'000 £'000 £'000 £'000
Cash and cash 5,399 - - 5,399 6,609
equivalents
Investments held for - - 605 605 510
trading
Other Investments - - 150 150 496
Trade and other 3,903 - - 3,903 1,973
receivables
Bank Borrowings - (7,085) - (7,085) (5,126)
Finance leases - (233) - (233) (246)
Other Liabilities - (7,677) - (7,677) (5,403)
9,302 (14,995) 755 (4,938) (1,187)
Investments held for trading fall under level 1 of the fair value hierarchy
into which fair value measurements are recognised in accordance with the levels
set out in IFRS 7. Other investments are held at cost. The directors are of the
opinion that the difference in value between cost and fair value of other
investments is not significant or material. The comparative figures for 2009
fall under the same category of financial instrument as 2010.
Borrowing facilities
The group has signed new borrowing facilities in both its UK and South African
operations.
In the UK, a term loan facility of £5million and an overdraft facility of £
2million were signed by Bisichi Mining Plc in March 2010 with Royal Bank of
Scotland. This facility will expire in December 2012 and is secured against the
group's UK retail property portfolio.
In South Africa, a structured trade finance facility of R60million (South
African Rand) was signed by Black Wattle Colliery (pty) Limited in March 2010
with Absa Bank Limited, a South African subsidiary of Barclays Bank PLC. The
facility is renewed annually and is secured against inventory, debtors and cash
that are held by Black Wattle Colliery (pty) Limited. This facility comprises
of a R40million revolving loan to cover the working capital requirements of the
group's South African operations, and a R20million loan facility to cover
guarantee requirements related to the group's South African mining operations.
At 31 December 2010 the group was within its bank borrowing facilities and had
not breached any of its covenants. Term loan repayments are as set out in Note
19. Details of other financial liabilities are shown in notes 18 and 19.
Commodity price risk
Commodity price risk is the risk that the group's future earnings will be
adversely impacted by changes in the market
of commodities. The group is exposed to commodity price risk as its future
revenues will be derived based on a contract with a physical off-take partner
at prices that will be determined by reference to market prices of coal at the
delivery date.
From time to time the group may manage its exposure to commodity price risk by
entering into forward sales contracts with the goal of preserving future
revenue streams.
Foreign exchange risk
All trading is undertaken in the local currencies. Funding is also in local
currencies other than inter-company investments
and loans and it is not the group's policy to obtain forward contracts to
mitigate foreign exchange risk on these amounts.
As a result of the group's mining assets being held in South Africa and having
a functional currency different than the presentation currency, the group
balance sheet can be affected significantly by movements in the pounds sterling
to the South African Rand. During 2009 and 2010 the group did not hedge its
exposure of foreign investments held in foreign currencies. There is no
significant impact on profit and loss from foreign currency movements
associated with these South African subsidiary assets and liabilities as the
effect of foreign currency gains or losses arising are recorded through the
translation reserve.
The effect of a movement in foreign currencies on the income statement and
equity of the group is shown in the sensitivity analysis below:
Profit and
loss Equity Equity
2010 2009 2010 2009
£'000 £'000 £'000 £'000
If there were a 10%
weakening
of the South African Rand
against
Sterling with all other (136) (185) (573) (598)
variables
held constant - (decrease)
If there were a 10%
strengthening
of the South African Rand
against
Sterling with all other 181 211 701 731
variables
held constant - increase
22. Deferred taxation
2010 2009
£'000 £'000
Balance at 1 January 2,985 2,625
Recognised in income (885) 127
Exchange adjustment 240 233
2,340 2,985
The deferred tax balance
comprises
the following:
Revaluation of properties 1,229 1,216
Capital allowances 552 1,969
Short-term timing 559 (200)
differences
2,340 2,985
23. Share capital
2010 2009
£'000 £'000
Authorised: 13,000,000 1,300 1,300
ordinary
shares of 10p each
Allotted and fully paid: 1,045 1,045
10,451,506 ordinary shares
24. Other reserves
2010 2009
£'000 £'000
Equity share options 399 394
Net premium on share 86 86
capital
in joint venture
485 480
25. Share based payments
Details of the share option scheme are shown in the Directors' remuneration
report on page 24 and 25 under the heading Share option schemes which is within
the audited part of this report. Further details of the share option schemes
are set out below.
The Bisichi Mining PLC Unapproved Option Schemes:
Year of Subscription Period within Number of Number of Number of
grant price per which options share share share
share exercisable for which options for which
options issued/ options
outstanding (cancelled) outstanding
at during year at
31 December 31 December
2009 2010
2002 34.0p Sep 2005 - Sep 313,000 - 313,000
2012
2004 149.0p Sep 2007 - Sep 80,000 - 80,000
2014
2006 237.5p Oct 2009 - Oct 325,000 - 325,000
2016
2010 202.5p Aug 2013 - Aug - 80,000 80,000
2020
The exercise of options under the Unapproved Share Option Schemes is subject to
the satisfaction of objective performance conditions specified by the
remuneration committee, which will conform to institutional shareholder
guidelines and best practice provisions in force from time to time. The
remuneration committee has not yet set these guidelines for the first scheme
and the 2006 scheme. The performance conditions for the 2004 and 2010 scheme,
agreed by members on 23 June 2005 and 31 August 2010 respectively, requires
growth in net assets over a three year period to exceed the growth of the
retail prices index by a scale of percentages.
The 2010 options were valued at £45,000 at date of grant using the
Black-Scholes-Merton model with the following assumptions:
Expected volatility 62.80%
Expected life 4.00 Years
Risk free rate 1.44%
Expected dividends 1.95%
Expected volatility was determined by reference to the historical volatility of
the share price over a period commensurate with the option's expected life. The
expected life used in the model is based on the risk-averse balance likely to
be
required by the option holders.
2010 2010 2009 2009
Weighted Weighted
average average
Exercise Exercise
Number price Number price
Outstanding at 1 January 718,000 138.9p 1,113,000 164.4p
Granted / (cancelled) 80,000 202.5p (395,000) 210.6p
during year
Outstanding at 31 December 798,000 145.2p 718,000 138.9p
Exercisable at 31 December 718,000 138.9p 718,000 138.9p
26. Non-controlling Interest
2010 2009
£'000 £'000
As at 1 January - -
Issue of shares in subsidiary 474 -
Share of loss for the year (74) -
Exchange adjustment (6) -
As at 31 December 394 -
The issue of shares in subsidiary relates to the disposal of a 37.5%
shareholding in Black Wattle Colliery (pty) Ltd. The total issued share capital
in Black Wattle Colliery (pty) Ltd has been increased from 136 shares to 1000
shares at par of R1 (South African Rand) through the following shares issue:
* a subscription for 489 ordinary shares at par by Bisichi Mining
(Exploration) Limited increasing the number of shares held from 136
ordinary shares to a total of 675 ordinary shares;
* a subscription for 110 ordinary shares at par by Vunani Mining (pty) Ltd;
* a subscription for 265 "A" shares at par by Vunani Mining (pty) Ltd
Bisichi Mining (Exploration) Limited is a wholly owned subsidiary of Bisichi
Mining PLC incorporated in England and Wales.
Vunani Mining (pty) Ltd is a South African Black Economic Empowerment company
and minority shareholder in Black Wattle Colliery (pty) Ltd.
The "A" shares will rank pari passu with the ordinary shares save that they
will have no dividend rights until such time as the dividends paid by Black
Wattle Colliery (pty) Ltd on the ordinary shares subsequent to 30 October 2008
will equate to R832,075,000.
A non-controlling interest of 15% in Black Wattle Colliery (pty) Ltd is
recognised for all profits distributable to the 110 ordinary shares held by
Vunani Mining (pty) Ltd from the date of issue of the shares (18 October 2010).
An additional non-controlling interest will be recognised for all profits
distributable to the 265 "A" shares held by Vunani Mining (pty) Ltd after such
time as the profits available for distribution, in Black Wattle Colliery (pty)
Ltd, before any payment of dividends after 30 October 2008, exceeds
R832,075,000.
27. Related Party Transactions
At 31 During the
December year
Amounts Costs Cash paid
owed Amounts recharged (to)
to related owed (to) / by / by
party by related related related
£000 party party party
£000 £000 £000
Related party:
London & Associated Properties 326 - 275 (92)
PLC (note (a))
Dragon Retail Properties 1,205 - (72) 72
Limited (note (b))
Ezimbokodweni Mining (pty) - (1,203) (287) -
Limited (note (c))
As at 31 December 2010 1,531 (1,203) (84) (20)
London & Associated Properties 143 - 300 (304)
PLC (note (a))
Dragon Retail Properties 1,205 - (40) (265)
Limited (note (b))
Ezimbokodweni Mining (pty) - (916) (208) -
Limited (note (c))
As at 31 December 2009 1,348 (916) 52 (569)
London & Associated Properties PLC is a substantial shareholder.
Dragon Retail Properties Limited is a joint venture and is treated as a
non-current asset investment.
Ezimbokodweni Mining (pty) Limited is a joint venture and is treated as a
non-current asset investment.
(a) London & Associated Properties PLC
Property management, office premises, general management, accounting and
administration services are provided for Bisichi Mining PLC and its UK
subsidiaries.
(b) Dragon Retail Properties Limited
Dragon Retail Properties Limited is owned equally by the company and London &
Associated Properties PLC.
(c) Ezimbokodweni Mining (pty) Limited
Ezimbokodweni Mining is a prospective coal production company based in South
Africa.
Details of key management personnel compensation and interest in share options
are shown in the Directors' Remuneration Report on pages 24 and 25 under the
headings Directors' remuneration, Pension schemes and incentives and Share
option schemes which is within the audited part of this report.
28. Employees
2010 2009
Number Number
The average weekly numbers of employees of the
group during
the year were as follows:
Production 257 325
Administration 18 18
275 343
£'000 £'000
Staff costs during the year
were as follows:
Salaries 5,666 6,462
Social security costs 111 129
Pension costs 254 253
Share based payments 5 (183)
6,036 6,661
29. Capital commitments
2010 2009
£'000 £'000
Commitments for capital expenditure approved 146 604
but not contracted for
at the year end
Share of commitment of capital expenditure in 2,451 2,101
joint venture
30. Head lease commitments and future property lease rentals
Present value of head leases on properties
Minimum Present value
lease of Minimum
payments lease payments
2010 2009 2010 2009
£'000 £'000 £'000 £'000
Within one year 14 15 14 15
Second to fifth year 56 59 52 55
After five years 1,708 1,978 167 176
1,778 2,052 233 246
Discounting (1,545) (1,806) - -
adjustment
Present value 233 246 233 246
Finance lease liabilities are in respect of leased investment property. Many of
the leases provide for contingent rents in addition to the rents above which
are a proportion of rental income. Finance lease liabilities are effectively
secured as the rights to the leased asset revert to the lessor in event of
default.
The group leases out its investment properties under operating leases. The
future aggregate minimum rentals receivable under non-cancellable operating
leases are as follows:
2010 2009
£'000 £'000
Within one year 805 727
Second to fifth year 2,707 2,384
After five years 10,650 9,910
14,162 13,021
31. Contingent liabilities
Bank guarantees have been issued by the bankers of Black Wattle Colliery (pty)
Limited on behalf of the company to third parties. The guarantees are secured
against the assets of the company and have been issued in respect of the
following:
2010 2009
£'000 £'000
Rail siding 3 -
Rehabilitation of mining land 1,732 1,734
Water & electricity 90 78
Company Registration No. 112155
Company balance sheet
at 31 December 2009
2010 2009
Notes £'000 £'000
Fixed assets
Tangible assets 33 12,138 11,925
Investment in joint ventures 34 846 846
Other investments 34 1,013 1,030
13,997 13,801
Current assets
Debtors 35 2,794 654
Bank balances 4,841 3,960
7,635 4,614
Creditors - amounts falling due within one year 36 (2,508) (5,139)
Net current assets/(liabilities) 5,127 (525)
Total assets less current liabilities 19,124 13,276
Creditors - amounts falling due within one year 36 (5,000) -
- medium term bank loan
Net assets 14,124 13,276
Capital and reserves
Called up share capital 23 1,045 1,045
Revaluation reserve 38 6,183 5,938
Other reserves 38 400 395
Retained earnings 38 6,496 5,898
Shareholders' funds 14,124 13,276
The company financial statements were approved and authorised for issue by the
board of directors on 15 April 2011
and signed on its behalf by:
A R Heller G J Casey
Director Director
Company accounting policies
for the year ended 31 December 2010
The following are the main accounting policies of the company:
Accounting convention
The financial statements have been prepared under the historical cost
convention, as modified by the revaluation of investment properties, and in
accordance with applicable UK Generally Accepted Accounting Practice.
Dividends received
Dividends are credited to the profit and loss account when received.
Depreciation
Provision for depreciation on tangible fixed assets is made in equal annual
instalments to write each item off over its useful life. The rates generally
used are:
Motor vehicles 25 - 33 per cent
Office equipment 10 - 33 per cent
Foreign currencies
Monetary assets and liabilities expressed in foreign currencies have been
translated at the rates of exchange ruling at the balance sheet date. All
exchange differences are taken to the profit and loss account.
Investment properties
The investment property portfolio is included in the financial statements at
open market valuation. An external professional valuation is carried out
annually by professional external surveyors. Surpluses and deficits arising on
valuations are taken direct to the revaluation reserve. No depreciation or
amortisation is provided in respect of freehold and leasehold investment
properties. The directors consider that this accounting policy, which is not in
accordance with the Companies Act 2006, results in the accounts giving a true
and fair view. Depreciation or amortisation is only one of many factors
reflected in the valuation and the amount which might otherwise have been shown
cannot be separately identified or quantified.
Investments
Investments of the company are stated in the balance sheet as fixed assets at
cost less provisions for impairment.
Financial Instruments
Bank loans and overdrafts
Bank loans and overdrafts are included in creditors on the company balance
sheet net of the unamortised cost of financing.
Interest payable on those facilities is expensed as a finance cost in the
period to which it relates.
Interest rate derivatives
The company uses derivative financial instruments to manage the interest rate
risk associated with the financing of the group's business. No trading in such
financial instruments is undertaken.
Debtors
Debtors do not carry any interest and are stated at their nominal value as
reduced by appropriate allowances for estimated recoverable amounts.
Creditors
Creditors are not interest bearing and are stated at their nominal value.
Joint Ventures
Investments in joint ventures, being those entities over whose activities the
group has joint control as established by contractual agreement, are included
at cost, less impairment.
Deferred taxation
As required by FRS 19 "Deferred Tax", full provision is made for deferred tax
arising from all timing differences between the recognition of gains and losses
in the financial statements and recognition in the tax computation, except for
those timing differences in respect of which the standard specifies that
deferred tax should not be recognised. Deferred tax assets and liabilities are
calculated at the tax rates expected to be effective at the time the timing
differences are expected to reverse.
Leased Assets and Obligations
All leases are "Operating Leases" and the annual rentals are charged to the
profit and loss account on a straight line basis over the lease term. Rent free
periods or other incentives received for entering into a lease are accounted
for over the period of the lease so as to spread the benefit received over the
lease term.
Pensions
The company makes contributions to a money purchase scheme and the costs are
charged to the profit and loss account in the period to which they relate.
Share based remuneration
The company operates a share option scheme. The fair value of the share option
scheme is determined at the date of grant. This fair value is then expensed on
a straight-line basis over the vesting period, based on an estimate of the
number of shares that will eventually vest. The fair value of options granted
is calculated using a binomial model or Black-Scholes-Merton model. Details of
the share options in issue are disclosed in the Directors' Remuneration Report
on pages 24 and 25 under the heading Share option schemes which is within the
audited part of this report.
Notes to the financial statements continued
For the year ended 31 December 2010
32. Dividends
The aggregate amount of dividends comprises:
2010 2009
£'000 £'000
Final dividends in respect of prior year but not 418 366
recognised as liabilities in that year:
The aggregate amount of dividends to be paid and not recognised as liabilities
as at year end is £418,000 (2009: £418,000).
33. Tangible fixed assets
Investment properties
Long Motor Office
Freehold leasehold vehicles Equipment Total
£'000 £'000 £'000 £'000 £'000
Cost or valuation at 1 8,865 3,000 137 49 12,051
January 2010
Additions - - - 2 2
Disposals - - - - -
Revaluation 245 - - - 245
Cost or valuation at 31 9,110 3,000 137 51 12,298
December 2010
At valuation 9,110 3,000 - - 12,110
At cost - - 137 51 188
9,110 3,000 137 51 12,298
Accumulated depreciation - - 88 38 126
at 1 January 2010
Charge for the year - - 29 5 34
Disposals in year - - - - -
Accumulated depreciation - - 117 43 160
at 31 December 2010
Net book value at 31 9,110 3,000 20 8 12,138
December 2010
Net book value at 31 8,865 3,000 49 11 11,925
December 2009
Details of historical cost of investment properties are shown in note 10.
34. Investments
Joint Subsidiaries
ventures Other
Shares Shares Loans investments Total
£'000 £'000 £'000 £'000 £'000
Cost at 1 January 2010 846 111 1,580 300 1,991
Invested during the year - 250 - - 250
Drawn in year - - (267) - (267)
Cost at 31 December 2010 846 361 1,313 300 1,974
Provision for impairment
As at 1 January - - (678) (283) (961)
Impaired during the year - - - - -
As at 31 December 2010 - - (678) (283) (961)
Net book value at 31 846 361 635 17 1,013
December 2010
Net book value at 31 846 111 902 17 1,030
December 2009
Other investments comprise £17,000 (2009: £17,000) shares and £nil (2009: £nil)
loans.
Investments in subsidiaries are detailed in note 14. In the opinion of the
directors the aggregate value
of the investment in subsidiaries is not less than the amount shown in these
financial statements.
35. Debtors
2010 2009
£'000 £'000
Amounts falling due within one
year:
Amounts due from subsidiary 2,578 527
undertakings
Other debtors 110 96
Prepayments and accrued income 106 31
2,794 654
36. Creditors
2010 2009
£'000 £'000
Amounts falling due within one year:
Bank loan (secured) - 2,700
Joint venture 1,205 1,165
Current taxation 292 -
Other taxation and social security 48 60
Other creditors 424 276
Accruals and deferred income 539 938
2,508 5,139
Amounts falling due in more than
one year:
Bank loan (secured) 5,000 -
Bank and other loan instalments by reference to the balance sheet date:
Within one year - 2,700
From one to two years 5,000 -
From two to five years - -
5,000 2,700
The bank loan of the company is secured by a charge over freehold and long
leasehold properties.
37. Provisions for liabilities
No provision has been made for the approximate taxation liability at 28% (2009:
28%) of £1,229,000 (2009: £1,216,000) which would arise if the investment
properties were sold at the stated valuation.
38. Share Capital & Reserves
Share Revaluation Other Retained Shareholders
Capital reserve reserve earnings funds
£'000 £'000 £'000 £'000 £'000
Balance at 1 January 1,045 5,938 395 5,898 13,276
2010
Dividend paid - - - (418) (418)
Revaluation of - 245 - - 245
investment property
Share options - - 5 - 5
Retained profit for - - - 1,016 1,016
the year
Balance at 31 1,045 6,183 400 6,496 14,124
December 2010
A profit and loss account for Bisichi Mining PLC has not been presented as
permitted by Section 408(2) of the Companies Act 2006. The profit for the
financial year, before dividends, was £1,016,000 (2009: £938,000).
Details of share capital are set out in note 23 and details of the share
options are shown in the Directors' Remuneration Report on page 25 under the
heading Share option schemes which is within the audited part of this report
and note 25.
39. Related party transactions
At 31 During the year
December
Costs Cash paid
Amounts recharged (to)
owed (to) / by / by
by related related related
party party party
£000 £000 £000
Related party:
Black Wattle Colliery (pty) Ltd (2,776) (2,501) -
(note (a))
Ninghi Marketing Limited (note (102) - -
(b))
As at 31 December 2010 (2,878) (2,501) -
Black Wattle Colliery (pty) Ltd (739) (1,443) 6,373
(note (a))
Ninghi Marketing Limited (note (102) - -
(b))
As at 31 December 2009 (841) (1,443) 6,373
(a) Black Wattle Colliery (pty) Ltd
Black Wattle Colliery (pty) Ltd is a coal mining company based in South Africa.
(b) Ninghi Marketing Limited
Ninghi Marketing Limited is a dormant coal marketing company incorporated in
England & Wales.
In addition to the above, the company has issued a company guarantee of
R17,000,000 (2009: nil) (South African Rand) to the bankers of Black Wattle
Colliery (pty) Ltd in order to cover bank guarantees issued to third parties in
respect of the rehabilitation of mining land.
Under Financial Reporting Standard 8 Related Party Disclosures, the Company has
taken advantage of the exemption from disclosing transactions with other wholly
owned Group companies.
Details of other related party transactions are given in note 27 of the Group
financial statements.
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