Annual Report 2017

contents
Chairman’s statement 4
Chief executive officer’s report 6
Directors 10
Mineral Resources and Ore Reserves Statement 12
Corporate Governance Statement 18
Sustainability Report 28
Strategic Report 34
Directors’ Report 44
Directors’ Responsibilities 52
Consolidated and Company Statement of Financial Position 56
Consolidated Statement of Comprehensive Income 57
Consolidated Statement of Changes in Equity 58
Company Statement of Changes in Equity 60
Consolidated and Company Statement of Cash Flows 61
Notes to the Consolidated and Company Annual Financial Statements 62 – 114
Auditor’s Report 115 – 120
ASX additional information 122
Corporate directory IBC

Maiden dividend declared | 3Mtpa saleable coal

delivered to market | New Clydesdale Colliery
in steady state production, expecting to deliver
2 million saleable tonnes in 2017 | Brakfontein off-
take negotiations in process
... two mines in production, delivering strong cash flow,
and poised to ramp-up to commercial
production at our second operation …
the future remains bright for Universal Coal …

Universal Coal annual report 2017–––––––1

 about this
report
This annual report covers
Universal Coal plc’s results and
those of its subsidiaries for
the financial year from 1 July
2016 to 30 June 2017, and includes
comparative data. The report is
our primary report to shareholders
and presents a concise view of
the Company, its performance,
strategy and governance,
with readers directed to our
website – www.universalcoal.
com – for additional information.
The aim of our report is to
provide meaningful and
transparent information to enable
investors and other stakeholders
to make a more informed
assessment of Universal Coal and
its prospects, our impacts and the
sustainable value we create.
The Company is incorporated
and domiciled in the United
Kingdom, and all monetary
values in this report are given
in Australian Dollar (A$) unless
otherwise stated.
Responsibility and preparation
The Directors are responsible
for preparing the annual report
and the financial statements in
accordance with applicable law
and regulations. Company law
requires the Directors to prepare
financial statements for each
financial year. Under that law the
Directors have elected to prepare
the Group and Company financial
statements in accordance with
International Financial Reporting
Standards (“IFRS”) as adopted
by the European Union, and in
accordance with the provisions
of the Companies Act 2006.
The Directors are also required
to prepare financial statements in
accordance with the rules of the
Australian Securities Exchange.

2
 highlights
Product Maiden
revenue Dividend
up 53% declared
year-on-year

Coal sales of EBITDA of

3 million A$25 million
tonnes for the year ended 30 June
2017 (2016: A$13.6 million)
up 50% from 2016

Operational cash flow

increased 160%

141% to NCC
A$26.3 Commissioned
million and reaches
(2016: A$10.3 million) steady state
production

A$27.4
million
gross profit for the
year, up 44%

Universal Coal annual report 2017–––––––3

 chairman’s
statement

The 2017 financial year has been both an eventful focus on increasing in shareholder wealth by bringing the
and productive year for the Company and the mining NCC into production and to advance the remainder of the
industry combined. On a positive note, the Coal industry project pipeline. The Brakfontein Project is fully regulated
experienced a sustained recovery in export thermal coal and is currently only awaiting commercialisation.
pricing and has had a positive impact on the coal market
Political and regulatory instability has been the
in general. With now two Collieries producing, your
cause for major investment uncertainty during the
Company has been able to benefit from the increase in
current period. This has all contributed to the anxiety
prices and market conditions.
surrounding investment in the South African mining
The Kangala Colliery (Kangala) had a spectacular space. The Department of Mineral Resources (“DMR”)
year of consistent production, attributed to pro-active unveiled new rules for black economic empowerment,
pre-stripping activities resulting in the supply of higher including more rigorous ownership requirements,
than expected tonnages to market. The Colliery reported increased expectations on skills development, and
a total of 2.4 million sales tonnes and augmented this expanded quotas for buying goods and services from
achievement with the decrease in injury frequency rate black-owned companies. That said though, UNV in the
to 0.50 with the Colliery now mid-life, the Company envious position that it fulfils nearly all the obligations in
is strategically evaluating the increase in reserve by the revised charter in its current format. Never the less,
including the Middlebult property adjacent to Kangala, at the time of this report the revised mining charter has
as well acquiring the Eloff project to provide the Colliery been prevented from implementation due to application
with a significant pipeline for development, both in life for a court to interdict the DMR by the mining houses.
extension and expansion.
The successful completion of both NCC and previously
The successful development of the New Clydesdale Kangala, has proven management’s ability to deliver
Colliery (NCC) has been great achievement for the profitable projects, by means of project development
Company during the current year. The Colliery has and thorough inorganic expansion. The Eloff acquisition
reached a steady state of production and is expected adds substantial expansion opportunity for Kangala and
to report nameplate production early in the FY2018. the potential to develop Brakfontein in the near future
The Colliery sales during the development period reported confirms the Company is well positioned to cement
0.5 million tonnes to the market, with a regrettable one its multi-mine producer status. Universal Coal is in a
lost time injury for the period. stable financial position with positive revenue generation
outlooks for the FY2018. With a strong balance sheet
The Company has a well-established working relationship
and solid cash generation, we are able to now consider
with Eskom, the South African electricity utility, having
additional projects that will increase shareholder returns
successfully secured two Coal supply agreements.
in the years to come.
During 2016, NCC entered new off-take agreements
with Eskom and Glencore South Africa, for the export We enter FY2018 with two operating collieries and our
coal, whilst Kangala Colliery extended the current off-take first dividend declared, the intention to develop the
to 2023. This creates a solid foundation for future coal Brakfontein project and the inclusion of the adjacent
supplying opportunities with Eskom and Glencore. Middlebult and Eloff projects to our reported reserves.
We forecast in excess of 4 million sales tonnes in the
With the Company, no corporate activity distractions during
period to come and strive to continue the dividend stream
the current year, it allowed management and the Board to
to our ever supportive shareholders.

4
 two operating
collieries and
our first dividend
declared

I would like to thank our CEO, Mr Tony Weber and the

Board of Directors for consistent support during the period
as we look forward to a prosperous FY2018.

Mr John Hopkins OAM

Chairman
26 September 2017

Universal Coal annual report 2017–––––––5

 chief executive
officer’s report
The 2017 financial year was a year of significant growth a higher percentage of ownership by Black Economic
and project execution for Universal Coal, transforming Empowerment (“BEE”) companies (30%) and the distribution
our Company into a multi-mine producer with a diverse of 1% of annual revenue to the BEE shareholders. Although
product suite that benefits from both the South African changes have been vigorously opposed by the South African
domestic market as well as the lucrative export coal market. mining sector, Universal is in the fortunate position that we
The Company has proven its ability to execute on project mostly comply with this charter, and following the acquisition
development commitments, yet remain focused on its growth of the Eloff project, the Kangala Colliery will be able to adjust
strategy, both through asset acquisition and development the empowerment percentage without any real financial
of the Company’s project pipeline. impact to the Company.
The 2017 year saw the Company’s second operating mine The Company expects to deliver well over 4 million saleable
come to fruition with the New Clydesdale Colliery (“NCC”) tonnes to market during FY2018 (4 Mt being contracted)
underground area reopened for production for the export and has an even greater prospect of increasing this to more
market, whilst commissioning of the Roodekop open pit area than 5.5 million tonnes by bringing the Brakfontein Project
at the start of CY2017. We were also successful in acquiring on line in the near future.
an initial stake in the Eloff Mining Company (Pty) Ltd and
Although global coal markets now have shown significant
will continue our negotiations for a majority shareholding
signs of a prolonged recovery, early during FY2017 we were
early in FY2018.
still faced with challenges including global overcapacity,
Our thermal coal assets, are all located within South Africa’s changes to the Chinese production days policy, and
leading coal province, the Emalahleni (previously Witbank) production uncertainty.
coalfields, east of Johannesburg, which supply the bulk of
The recovery in thermal coal prices over the previous year
the country’s saleable export and domestic coal. Our coking
has renewed the confidence of producers both domestically
coal asset is located in the Soutpansberg coalfield, outside
and abroad. This recovery in export thermal prices, together
the declared environmentally sensitive area in the north of
with the volatile local exchange rate (ZAR/USD), has allowed
the country, near existing rail infrastructure providing access
the Company to benefit from profitable coal pricing during
to both the Richards Bay Coal Terminal and Matola Coal
FY2017. The outlook for pricing seems stable for the next
Terminal. The Company has in excess of 2.3 billion tonnes
12 months and, together with the finalisation of two Eskom
of resource under management within South Africa and, with
coal supply agreements, gives the Company confidence
a strong balance sheet and sound relationships with our
about its cash inflows for the next few years.
stakeholders, we have confidence in our ability to extract
this resource base successfully and deliver significant The Company’s focus remains the production and
wealth to our shareholders. development of both its current thermal coal projects, and
to seek diversification in product – metallurgical coal in
The South African mining sector currently faces regulatory
particular. Currently only the Berenice-Cygnus project
challenges due to the government’s proposed changes to the
provides diversification to include coking coal.
Mining Charter and the Mineral and Petroleum Resources
Development Act (“MPRDA”). These changes propose

6
Operational performance, measured against the previous year, is reflected in the table below:
Total Total
YTD tonnes YTD tonnes Total from start
Operational performance (tonnes) 30 Jun 17 % change 30 Jun 16 of production
Run-of-mine (ROM)
Kangala Colliery 3 660 697 12% 3 269 212 10 035 525
New Clydesdale Colliery 763 892 100% – 763 892
Total ROM 4 424 589 35% 3 269 212 10 799 417
Feed to plant
Kangala Colliery 3 672 853 18% 3 124 199 9 828 448
New Clydesdale Colliery 1 681 351 100% – 1 681 351
Total feed to plant 5 354 204 71% 3 124 199 11 509 799
Plant yields
Kangala Colliery (%) 66 2% 65
New Clydesdale Colliery* * *
Domestic sales 2 596 445 33% 1 959 234 6 558 094
Export sales 406 405 420% 78 156 537 721
Total sales 3 002 850 47% 2 037 390 7 095 815

* New Clydesdale Colliery plant yields will only be disclosed once the Company has reached nameplate production.

THERMAL COAL ASSETS The Eloff acquisition

Since the Company’s inception, it has been management’s
Kangala Colliery delivers record output
intention to acquire the Eloff Project to extend and expand
The Kangala Colliery exceeded its contractual tonnages,
the life of Kangala Colliery. We are pleased to announce that
during FY2017 and thereby achieving record breaking
this plan is finally coming to fruition with the acquisition of a
tonnages. The Company remains focused to operate in a
29% stake on 30 June 2017. It is our intention to acquire a
safe and sustainable manner; unfortunately we did record
majority share in this Company and we are currently pursuing
three reportable injuries for the year. Management continues
this with the remaining shareholders. The asset is located
to strive for zero injuries and has refocused its safety efforts
adjacent to the Kangala pit and currently holds a significant
through introducing visible leadership and behavioural
resource base of 424 million tonnes, which not only allows
change coaching, with the aim of reaching this goal in the
for exponential life extension of the current operation, but
years to come.
tremendous expansion opportunity in throughput. Given
The Kangala Colliery increased its output by 12% to the existing infrastructure in place, conceptual brownfield
3.6 million tonnes of run-of-mine (“ROM”) coal, resulting expansion costs for such an enlarged operation would be
in a 20% increase in sales tonnes to 2.46 million tonnes significantly reduced. The 29% stake was acquired for
of product sold. Of this, 76 406 tonnes were sold to the A$4.35 million and settled in cash.
export market.
NCC in production
During the period, the Company successfully negotiated Located in the Kriel district, The NCC of today is the
an extension of the coal supply agreement with Eskom, amalgamation of the historic acquired NCC and our
securing off-take until 2023. previously-named Roodekop deposit. It has total resources
of 143.82 million tonnes, with current reserves of 49.9 million
With the reconfiguration of the main pit in FY2016, the
tonnes, giving a life-of-mine exceeding two decades. Having
improvement to both the safety and stability of the mining
begun production during FY2017 by recommissioning the
area had a positive impact on FY2017 production due to
Diepspruit underground mine, today it also boasts the new
increased flexibility in the production plan. Pre-stripping
opencast area at Roodekop.
in the Dry season in anticipation for the Wet season will
continue into the next year.

Universal Coal annual report 2017–––––––7

 chief executive officer’s
report continued

With NCC’s well established mining and processing Brakfontein

infrastructure, in addition to it having had all regulatory The Brakfontein project in the Delmas area approximately
approvals granted by the beginning of the financial year, 20km from the Kangala Colliery, consists of a JORC
the decision was made to open the underground operation compliant resource of 75.8 million tonnes, of which 9.1 million
first, late last year, thereby having taken the mine off care are a measured reserve. The project has already received all
and maintenance – which at the time was a significant cash its regulatory approvals and is currently subject to detailed
drain on the Company. Subsequent to entering the initial mine development and off-take discussions. Brakfontein’s
export contracts, the Colliery was able to finalise and secure comercialisation is within our short-term project strategy
a Coal Supply Agreement with Eskom. and has historically been viewed to have the ability to
contribute 1.2 million tonnes of saleable product to the
The last hurdle, the debt financing being finalised at the
Company’s revenue line.
beginning of this calendar year allowed for the development
of the opencast together with the commencement of the Arnot South
major components of recapitalisation of the processing The Arnot South project is located close to the NCC Colliery
facilities. The ramp up on the opencast operation was highly in Kriel. It has a prospecting right over 15 000 hectares,
aggressive, and I’m happy to say reached steady state coal containing a total resource of 206.6 million tonnes of
tonnage delivery by the end of the financial year. thermal coal. We are currently awaiting regulatory approvals
and transfers.
The Colliery managed to mine a total of 763 892 tonnes
from the underground and opencast areas as well as COKING COAL ASSETS
processing 872 425 tonnes of historic low grade stockpiled
Berenice-Cygnus – option on massive coking coal
coal. With plant capacity coming on stream the Colliery
project
was allowed to participate in a toll wash agreement to
Located in the Soutpansberg coalfield, Berenice-Cygnus
generate additional cash flow during the ramp-up phase.
contains a 1.35 billion tonnes JORC-compliant shallow
In total, 539 695 saleable tonnes were produced in the year,
resource, primarily of semi-soft coking coal. This is a
having reached steady state production by the end of June
massive deposit, as highlighted by our earlier scoping
2017 and commercial production is expected in FY2018.
study which confirmed the viability of a 10 Mtpa+ open cut
Having attained this throughput, two remaining modifications operation with life-of-mine in excess of 25 years.
on the mine remains ongoing, with the second of the export
The Mining Right application has been lodged and
plants undergoing a similar cyclone change undertaken in
the Company is currently preparing the Environmental
the first plant rebuild earlier this year. This will be concluded
Management Plan. The Company will consider its feasibility
by the end of the first quarter 2018FY – at no loss of
and development once all regulatory licences have
production throughput. A second added development not
been granted.
originally envisaged, at a capital cost of A$2 million (funded
from existing working capital) will include a new export crush SOCIO-ECONOMIC IMPACT
and screen circuit, replacing the current unit feeding the Universal Coal as a Company strongly believes in delivering
export plants with an eye on both increasing throughput (due benefits to all stakeholders, apart from the desire to return
to increased availability and utilisation) whilst lowering the value to shareholders, we believe we need to be inclusive of
operating cost (due to productivity improvements), again both the immediate local communities around our operations
coming on stream by end Q2 (again with no throughput as well as the greater economic impact on these areas.
impact during development). To this end, we contribute well and above the legislated
We are proud of what has been achieved at the Colliery requirement of development as per the Social and Labour
during the year and, while there were more than a few plans (SLPs) for these operations, and we firmly believe in
start-up teething problems, we are enthusiastic about the empowering local areas not only with employment – be it we
next year’s full production and commitment to deliver in employ 88% local at Kangala and over 70% at NCC at this
excess of two million tonnes of saleable coal to market. stage, but also with skills development programmes – to the

8
extent we train members of the community allowing for these Despite the strong operational performance, the Company’s
skills to be used on other operations (over and above those net profit was negatively affected by a A$9 million non-cash
persons we have employment for). Currently, in excess of accounting loss resulting from the disposal of assets at the
200 persons have been trained over the two operations, NCC Colliery. These assets were part of the NCC acquisition
with 85 having found work within our operations. In addition, and are redundant to the mine’s operations, and their sale
Bursaries on an ongoing annualised bases are awarded to provided the Colliery with a cash injection.
deserving candidates, as well as internships (68 currently on
The year’s accounts also include a A$3.9 million gain on
site) with a further Educational support, both to individuals
the acquisition value of the Company’s 29% stake in Eloff
as well as local educational institutions. As the operations
Colliery, offset by the increase in interest expense resulting
are becoming more mature in nature, opportunities to local
from the Investec Finance facilities.
enterprise development projects are now occurring, some
as diverse as laundries, cleaning and gardening services As a result, Universal’s net profit for FY2017 was A$4 million.
and convenience stores, totaling ZAR80 million in support The Company’s outlook for FY2018 is optimistic, with
at Kangala alone, all over and above development projects both operations at full production, favourable results are
that we entered into as part of our SLP – the Construction expected from both mines. We also expect to make the
of a Technical Vocational Education and Training College final settlement of the Susquehanna Pacific Convertible
(“TVET”) campus in Delmas with Exarro, having been Loan during the year.
completed and handed over to the beneficiary, Department
We are proud to announce the declaration of our first
of Education.
dividend to shareholders, and a A$0.01 per share dividend
CORPORATE will be included for your approval at the annual general
meeting held later this year. The strong performance and
Universal is proud to report its strongest operational
positive outlook has allowed the Company to reward its
results to date, with a total operating profit of A$12.7 million
shareholders with this proposed distribution.
reflecting the outstanding performance of Kangala and the
additional production from NCC. The Company recorded Lastly, where would a company be without its most direct
a 53% increase in revenue for the financial year, but the stakeholders? In this regard, I need to first of all thank
gross profit margin decreased by 1% to 18%, with NCC in the Universal Executive, management and staff for their
development mode this was well within expectation, being dedicated and stellar performance in making it happen. In the
below an optimal cost level. same vein, our dedicated and hardworking contractors, who
sometimes under the most trying of circumstances have
In addition to the strong operating profit, there was a
delivered, and truly form part of the success of the UNV
significant increase in the Company’s cash-generation,
group. Also our Joint Venture partners on the operational
mainly attributable to the Kangala Colliery. The Company’s
level for their input, our consultants and least we forget out
cash balance increased by A$7 million despite the
shareholder base who many have come with us through
A$4.35 million paid for the acquisition of the 29% stake in
some trying times.
Eloff Colliery; in addition A$1.9 million was paid to reduce
the Susquehanna Convertible loan. This cash balance forms In conclusion, I would like to thank my Chairman, Mr John
a solid foundation for shareholder returns to be initiated, Hopkins, the Board of Directors for consistent support and
allowing the company to consider concurrent returns and guidance. I would also like to thank our departing CFO,
further acquisition and pipeline developments going forward. Mr Daryl Edwards, for numerous years of hard work and
contribution to our Company, in achieving the above.

Tony Weber
Chief Executive Officer
26 September 2017

Universal Coal annual report 2017–––––––9

 directors

Tony Weber
Executive Director,
Chief Executive Officer
John Hopkins OAM (Non-independent)
Non-executive Chairman Tony Weber is a co-founder
(Independent) of Universal Coal and a
John Hopkins is a professional mining engineer with over
Company Director and former 20 years’ experience in
lawyer. John has over the project assessment, finance,
past 30 years been on the development and operations.
board or chairman of more Tony was previously an
than 20 public listed resource executive director of Nkwe
companies (both in Australia, Platinum, an Australian-listed
UK and Canada) and as such Platinum developer. Prior to
has been involved in the Shammy Luvhengo joining Nkwe Platinum in 2003,
Henri Bonsma
financing and development Executive Director he worked for Anglo Platinum
(and subsequent M & A as Operations Manager at Non-executive Director
(Non-independent) (Independent)
activities) of many energy (both the 40 to 60 million tonne per
coal and oil and gas), gold, Shammy Luvhengo is a annum Potgietersrus Platinum
Henri Bonsma is a qualified
base metals, mineral sands qualified investment banker Mine and at the Gamsberg
lawyer and successful
and other resources. who started his career as Feasibility Study for Anglo
businessman with interests
a geologist with Exxaro American Operations.
He currently also chairs Wolf throughout South Africa.
Resources before moving Previously, Tony worked at Henri has been actively
Minerals Ltd (ASX and AIM
into the investment world. the New Clydesdale Colliery investing in the South African
listed) and has in the past
Shammy worked for Investec and the Greenside Colliery for mining industry for over a
seven years overseen its
Bank and Nedbank Capital, GFSA and for a brief period at decade. He is a co-founder of
transition from explorer to
structuring and implementing the Prosper Hanniel Colliery Universal Coal and has been
major western world tungsten
project finance and BEE deals in Germany. involved in the establishment
producer. John is also a Fellow
within the resources industry. of various other junior
of the Australian Institute of He has significant skills and
Prior to joining Universal Coal, Chrome, Platinum and Iron
Company Directors and was experience in coordinating
he worked at Nkwe Platinum Ore companies and promoted
awarded the Medal of the project feasibility studies
Ltd as Head of Business several listings on the JSE,
Order of Australia in 2015 for and hands-on operational
Development and Investor AIM and ASX.
services to the minerals and experience in the coal
Relations.
resources sector. extraction industry.

10
Carlo Baravalle
Non-executive Director
(Non-independent)
Carlo Baravalle spent
several years in strategic
consulting, working on
assignment for many large
French conglomerates
between Paris and the USA.
Carlo then started in the
telecoms industry, firstly with
BT, starting new ventures
outside the UK, and then as
a Director of the Corporate
Finance Telecoms team at
Warburg. He then returned to
the industrial side of telecoms
with a senior global position
at Lucent Technologies.
At this point in his career David Twist
he started getting gradually Nonkululeko Nyembezi
Non-executive Director
involved with private equity (Non-independent) Non-executive Director
industry, first taking a senior (Non-independent)
assignment with a company Dr David Twist has a BSc
(Honours) in geology from the Nonkululeko Nyembezi is the Chief
owned by Apax Partners
University of Reading (U.K.) Executive Officer of Ichor Coal N.V.,
as MD International and
and a PhD in Geology from an international mineral resources
Main Board Member at The
the University of Newcastle company focusing on coal mining in
Exchange FS, and later as
upon Tyne (U.K.) and has more South Africa.
Senior Vice-President for
EMEA, Asia and LatAm for than 30 years’ experience Nonkululeko was previously Chief
LCC, a telecoms engineering in geological research, Executive Officer of ArcelorMittal
company initially invested by exploration and developing South Africa, the largest steel Andries Engelbrecht
the Carlyle Group. mineral resource projects producer on the African continent Non-executive Director
In 2006, together with two Among others, he is the and subsidiary of the ArcelorMittal (Non-independent)
co-founder of Sephaku Group, which in turn is the largest
partners he launched a private Andries Engelbrecht is
Fluoride (Pty) Limited, African steel producer in the world.
equity fund of funds aimed currently the Chief Operating
mainly at Italian institutional Precious Minerals and APM She has a BSc Honours degree Officer of Ichor Coal N.V.
investors. The Fund raised Mining, Sephaku Holdings in electrical engineering from the Andries has 22 years of
over $150 million and is Limited, Taung Gold (Pty) University of Manchester Institute experience in the mining
successfully invested in Limited and Sedibelo Platinum of Science & Technology and industry and prior to joining
mid-cap and restructuring Mines Limited (formerly, a masters degree in the same IchorCoal he was the Chief
funds and co-investments Platmin Limited), where he discipline from California Institute of Operating Officer of Riversdale
globally. Carlo leads the also served as CEO until 2006. Technology. She also has an MBA Mining Limited, responsible for
structuring, financial and He also served as executive from the Open University (UK). all Africa-based operations and
tax aspects of the projects director for most of the Nonkululeko has served as an projects. Before that he held
in addition to the structuring companies mentioned above. independent non-executive the roles of General Manager
and operations of the Fund, He is a Founding Partner director on numerous boards and Engineering Manager.
and compliance. He is also at AMED Funds (AF), one in both the public and private He has also held positions
responsible for the activities of Universal Coal’s largest sectors. She currently serves as at Ingwe Coal Corporation,
and relationships with the fund shareholders and has been non-executive chairman of the currently South 32, and
administrators, the custodian appointed to the Universal Johannesburg Stock Exchange and Richards Bay Coal Terminal.
bank and the auditors. Carlo Board as representative of AF. non-executive member of the board
has an MBA from INSEAD. of Old Mutual plc.

Universal Coal annual report 2017–––––– 11

 mineral resources and
ore reserves statement

2017 Production 2016 Production

(’000 tonnes) (’000 tonnes)
Universal Universal
Universal Coal Coal Coal
% Share Total Share Total Share
Kangala 70.5 2 463 1 737 2 037 1 436
NCC 49.0 540 264 – –
Universal Coal Total 3 003 2 001 2 037 1 436

Notes:
Marketable coal production figures refer to the total quantity of saleable coal produced on a product moisture basis following onsite processing.
Rounding (conforming to the JORC Code) may cause computational discrepancies.

Ore resources and reserves reporting consents to the inclusion in this report of information they
have provided in the form and context in which it appears.
Ore Reserves and Mineral Resources estimates for the
Competent Persons responsible for the estimates are listed
Universal Coal owned operations and projects are reported
below, by project, along with their professional affiliation,
in accordance with the Australasian Code for Reporting of
employer and accountability for Ore Reserves and/or
Exploration Results, Mineral Resources and Ore Reserves
Mineral Resources.
(the JORC Code, 2012) as required by the Australian
Securities Exchange (ASX) and are also SAMREC (South Ore reserves
African Code for Reporting of Coal Resources and Coal
The Ore Reserve figures in the following tables are as at
Reserves) complaint. The SAMREC Code is a rigorous Code
30 June 2017. Summary data for year-end 30 June 2016 is
that delivers compliant resource and reserve estimates and is
shown for comparison. Metric units are used throughout.
a “qualifying foreign estimate” for the purpose of ASX Listing
The figures used to calculate Universal Coal’s share of Ore
Rules. Both these Codes represent current best practice for
Reserves are often more precise than the rounded numbers
reporting Ore Reserves and Mineral Resources.
shown in the tables, hence small differences might result if
Ore Reserve and Mineral Resource information in the tables the calculations are repeated using the tabulated figures.
below are based on estimations compiled by Competent
The variation in Ore Reserves between 30 June 2016 and
Persons (as defined by JORC), including independent
30 June 2017 is due to depletion through production and
consultants and fulltime employees of Universal Coal.
remodelling following infill drilling and mine re-design
All Competent Persons have more than the required minimum
using current investment assumptions, including the use of
of five years’ relevant estimation experience and are members
projected long-term commodity prices, in calculating Reserve
of recognised professional bodies whose members are bound
estimates as prescribed by the JORC Code 2012.
by a professional code of ethics. Each Competent Person

12
 3 Mtpa Sales
Tonnes delivered
to market from
two operations

Ore Reserves Marketable Reserves Universal Coal Share 30 June 2017

2017 2016 2017 2016 Interest Ore Reserves Marketable
Proved Probable Proved Probable Reserves
Mine type (’000 tonnes) (’000 tonnes) (’000 tonnes) (’000 tonnes) (’000 tonnes) (’000 tonnes) % (’000 tonnes) (’000 tonnes)
Reserves at Operating Mines
Kangala O/C 12 294 – 16 281 – 7 612 12 612 70.5 8.668 5 367
NCC O/C & U/G 49 969 7 336 29 300 – 36 890 18 793 49 28 080 18 076
Undeveloped Reserves
Brakfontein O/C 9 100 – 9 100 – 7 248 7 248 50.29 4 599 3 645
Total 71 363 7 336 54 681 – 51 750 38 653 – 41 347 27 088

Definitions
O/C = open cut, U/G = underground
Notes
• Ore Reserve figures tabulated have been stated on an air-dried moisture basis.
• Marketable Reserve tonnages are reported on a product moisture basis. The yield factors applied reflect the impact of further processing, where necessary, to
provide marketable coal and are based on theoretical yields for the different export and domestic products as derived from test work conducted on drill core,
adjusted by practical plant factors established during feasibility studies and current operational performance.
• Coals have been analysed on an “air dried” moisture basis in accordance with South African Standards and the gross calorific values also reported on that basis.
• Rounding (conforming to the JORC Code) may cause computational discrepancies.

Universal Coal annual report 2017––––––13

 mineral resources and
ore reserves statement continued

Mineral Resources
As required by the Australian Securities Exchange (“ASX”), the following table contains details of other mineralisation, as at
30 June 2017, that has a reasonable prospect of being economically extracted in the future but which is not yet classified as
Proved or Probable Ore Reserves. This material as defined under the 2012 JORC Code are Mineral Resources estimates
which are largely based on geological information with only preliminary consideration of mining, economic and other factors.
While in the judgement of the Competent Persons there are realistic expectations that all or part of the Mineral Resources
will eventually become Proved or Probable Reserves, there is no guarantee that this will occur as the result depends on
further technical and economic studies and prevailing economic conditions in the future.
As in the case of Ore Reserves, operation and project estimates are completed using or testing against Universal Coal’s
long-term pricing and market forecasts/scenarios. All Mineral Resource figures are stated as inclusive of the Ore
Reserves reported earlier.
Likely
mining Total resources Universal Coal
method Coal type Coal resources at end 2017 2017 compared with 2016 interest 2017
Measured Indicated Inferred 2017 2016
millions millions millions millions millions Millions
of tonnes of tonnes of tonnes of tonnes of tonnes % of tonnes
Arnot South(a,b) O/C + U/G TC 2.28 65.30 139.00 206.58 206.58 50.0 103.29
Berenice Cygnus O/C + U/G MC + TC 424.90 800.90 124.30 1 350.10 1 204.31 50.0 675.05
Brakfontein O/C + U/G TC 31.70 39.40 4.70 75.80 75.80 50.29 38.12
Eloff(b) O/C + U/G TC 9.40 213.50 201.10 424.00 – 14.20 60.20
Kangala(a,c) O/C + U/G TC 61.17 15.03 32.33 108.53 131.65 70.50 76.52
NCC O/C + U/G MC + TC 96.01 41.80 6.04 143.85 144.66 49.0 70.48
Total 625.46 1 175.93 507.47 2 308.86 1 763.00 1 023.66

Definitions
O/C = open cut, U/G = underground, TC = thermal coal, MC = metallurgical/coking coal
Notes:
• Mineral resources are stated inclusive of mineral reserves.
• Resources are stated as Gross Tonnes in-Situ (GTIS).
• Rounding (conforming to the JORC Code) may cause computational discrepancies.
a. Mineral Resources for Kangala and Arnot South were updated during the 2017 financial year to comply with the JORC Code 2012.
b. Arnot South and Eloff are subject to the successful approval of the Prospecting Right transfer to Universal Coal in accordance with section 11 of the
Mineral and Petroleum Resources Development Act, 2002.
c. Reduction in the Kangala Resources from end June 2016 to end June 2017 is due to depletion through production and relinquishing of the Modderfontein
prospecting right.

14
Mineral Resources and Ore Reserves corporate governance
Universal Coal subscribes to a governance process supporting the generation and publication of Mineral Resources and
Ore Reserves to comply with the JORC Code 2012, which includes ongoing review and reporting of Mineral Resources and
Ore Reserves when and where material changes occur. Universal Coal’s Chief Geologist has the ultimate responsibility
for development of the Company’s Resources and Reserves estimation and reporting standards and procedures, while
overseeing and signing-off on the appointment of Competent Persons and the reviewing of Exploration results, Mineral
Resources or Ore Reserve data prior to public reporting.
Universal Coal ascribes to the continued enhancement of governance processes and Competent Person development
and training.

Competent persons
Name Association(a,b) Employer Accountability Deposits
Arnot South, Berenice,
NJ Denner SACNASP Gemecs (Pty) Ltd Resources Brakfontein, Cygnus and
Kangala (Middelbult)
K Donaldson/Mike Vertue ECSA Universal Coal Reserves Brakfontein
Universal Coal/Gemecs
S Mokitimi/D Zulu/Nico Denner SACNASP Resources Kangala (Wolvenfontein)
(Pty) Ltd
Universal Coal/Gemecs
S Mokitimi/P Rantao/Nico Denner SACNASP Resources NCC
(Pty) Ltd
Mindset/HF Procon
P van der Linde/Mike Vertue/H Fourie ECSA Reserves Kangala and NCC
(Pty) Ltd
J Malan SACNASP Universal Coal Resources Eloff

Notes:
a. SAIMM: South African Institute of Mining and Metallurgy, SACNASP: South African Council for Natural Scientific Professions, ECSA: Engineering Council
of South Africa.
b. Recognised Overseas Professional Organisations as defined by the JORC Code.

Universal Coal annual report 2017––––––15

 mineral resources and
ore reserves statement continued

Prospecting and mining tenement information

Subsidiary Project Location Property
Universal Coal Kangala Delmas, Mpumalanga Wolvenfontein 244IR: Portion 1 and RE of Portion 2
Development I Province, South Africa
(Pty) Ltd Middelbult 235IR: Portion 40 and 82
Delmas, Mpumalanga
Province, South Africa

Delmas, Mpumalanga Modderfontein 236IR: Portion 1

Province, South Africa
Universal Coal Berenice Waterpoort, Berenice 548 MS; Celine 547 MS; Doornvaart 355 MS; Gezelschap
Development II Limpopo Province, 395 MS; Longford 354 MS; Matsuri 358 MS
(Pty) Ltd South Africa.
Universal Coal Brakfontein Brakfontein 264IR: Portions 6, 8, 9, 10, 20, 26, 30
Delmas, Mpumalanga
Development III and Remaining Extent
Province, South Africa
(Pty) Ltd
Universal Coal NCC Roodekop 63IS
Development IV (Roodekop)
Kriel, Mpumalanga
(Pty) Ltd
Province, South Africa

Universal Coal Eloff Droogfontein 242IR, Strydpan 243IR, Stompiesfontein 273IR

Delmas, Mpumalanga
Development IV
Province, South Africa
(Pty) Ltd
Universal Coal NCC Middeldrift 42 IS (Portion 4), Diepspruit 41 IS (RE, RE of Portions 1, 2,
Development VIII 3, Portions 7, 8, 9, 10). Rietfontein 43 IS (RE. RE of Portion 1, Portion
(Pty) Ltd Kriel, Mpumalanga 3, M/A 2, 3, 4 of RE Portion 1). Vaalkrans 29 IS (Portions 4, 6, 8, 9, 11,
Province, South Africa 12, 13, 14, 16, RE of Portion 16, M/A 2 of Portion 6), Clydesdale 483
IS, Lourens 472 IS, Enkelbosch 20 IS (M/A 4 and 5) and Haasfontein
28 IS (Portion 1, M/a 6 and 7 of Portion 7)
Universal Coal Arnot South Vlakfontein 166 IS (RE Ext. Portions 2, 5, 8, 9, 10, 13 and 14);
Development VII Project Tweefontein 203 IS (RE Ext. of Portion 3. RE Ext. of Portion 5, RE
(Pty) Ltd Ext. of Portion 9, RE Ext. of Portion 10 and Portions 4, 7, 8, 11, 12,
13, 14, 18, 19, 20, 21, 22, 23, 24, 25); Op Goeden Hoop 205 IS (RE
Ext. of Portion 2); Groblersrecht 175 IS – whole farm; Klipfontein 495
Arnot, Mpumalanga
IS (RE Ext. of MA 1); Vaalwater 173 IS (Portions 10, 12, 14, RE Ext.
Province, South Africa
of Portion 2); Mooiplaats 165 IS (Portions 4, 11, 12, 13, 15 and 16);
Helpmekaar 168 IS – whole farm; Schoonoord 164 IS (Portion 19);
Leeuwpan 494 JS (Portions 7, 8, 9, RE Ext. and RE Ext. of Portion 4);
Weltevreden 174 IS (Portions 1, 2 (MA), 4 and RE Ext); Nooitgedacht
493 JS (Portions 4 and 9)
Universal Coal Cygnus Alldays, Limpopo Cygnus 543MS and adjacent farms
Development V Province, South Africa
(Pty) Ltd

16
 %
Size (hectare) Permit type and number Expiry date Comment interest
951 Right: MP30/5/1/2/2/429MR 02/05/2032 – 70.5%

Prospecting Right: MP30/5/1/1/2/641PR The renewal of the prospecting right was 70.5%
942 09/07/2017 granted in July 2014 for a further three
years. Mining right in application

127
Prospecting Right: LP30/5/1/1/2/376PR
09/07/2017
Relinquished 0%

Prospecting Right: LP30/5/1/1/2/376PR A mining right application was submitted in 50%

6.595 19/03/2016 December 2015 and is pending

Mining Right: MP30/5/1/2/2/10027MR A mining right was granted in July 2014 for 50.29%
879 07/2034 20 years. Execution and registration of the right
is pending
Mining Right: MP30/5/1/1/2/492MR S102 has been granted to allow the 49%
amalgamation of the NCC project.
835 05/02/2034 Once the mining right has been executed this
mining right will be held in Universal Coal
Development IV (Pty) Ltd
Prospecting Rights: 788/2007(PR) Acquired during 2017. Mining right in application 14.2%
8.168 & 817/2007(PR) –

Mining Right: MP30/5/1/2/2/148MR S102 has been granted to allow the 49%
amalgamation of the NCC project.
Once the mining right has been executed this
4.125 05/12/2019
mining right will be held in Universal Coal
Development IV (Pty) Ltd

Prospecting Right: MP30/5/1/1/2/360PR Renewal of the prospecting right is pending 50%

and the acquisition is subject to the successful
approval of the prospecting right transfer to
(Original Universal Coal in accordance with section 11
application) of the Mineral and Petroleum Resources
15.532 30/10/2006 Development Act, 2002
and
29/10/2011

12.299 Prospecting Right: LP30/5/1/1/2/1276PR 31/03/2019 Prospecting right renewal executed on 50%
29 June 2016

Universal Coal annual report 2017––––––17

 corporate governance
statement
Introduction Delegation to CEO and senior executives
The Board of Directors is responsible for the overall strategy, The Board charter states that day-to-day management
governance and performance of the Universal Coal Group of the Company’s affairs is delegated to the CEO and
(the Company). The Company is an exploration company, the implementation of the corporate strategy and policy
whose strategy is to add substantial shareholder value initiatives has been formally delegated by the Board to the
through the acquisition, exploration, development and CEO and senior executives as set out in the authority of
commercialisation of coal projects in the Republic of South delegation policy.
Africa. The Board has adopted a corporate governance Access to information and independent advice
framework which it considers to be suitable given the size, The Company Secretary provides assistance to the Board,
history and strategy of the Company. and Directors also have access to senior executives at any
Corporate governance principles and time to request any relevant information. The Board Charter
provides that:
recommendations
• all Directors have unrestricted access to Company records
In accordance with the ASX Listing Rules, Universal Coal and information except where the Board determines that
plc is required to disclose the extent to which it has followed such access would be adverse to the Company’s interests;
the ASX Corporate Governance Council’s Principles and • all Directors may consult management and employees
Recommendations (“ASX Recommendations”) during the as required to enable them to discharge their duties as
financial year. Where the Company has not followed an Directors; and
ASX Recommendation, this has been identified and an • the Board, Board committees or individual Directors
explanation for the departure has been given. may seek independent external professional advice as
This Corporate Governance Statement reports against the considered necessary at the expense of the Company,
third edition of the ASX and the practices detailed in this subject to prior consultation with the Chairman. A copy of
Corporate Governance Statement are current as at 31 August any such advice received is made available to all members
2017. It was approved by the Board and is available on the of the Board.
Universal Coal website. Board committees
Further details relating to the Company’s corporate To assist the Board in carrying out its functions, the Board
governance practices are available in the Corporate has established:
Governance Plan on the Company’s website at http://www. • an Audit and Risk Committee; and
universalcoal.com/about-us/corporate-governance. • a Remuneration Committee.
Principle 1: Lay solid foundations for Each committee is established according to a Charter that
management and oversight is approved by the Board. Each committee is entitled to
the resources and information it requires to discharge its
The Board of Directors is responsible for the overall strategy,
responsibilities, including direct access to senior executives,
governance and performance of the Company.
employees and advisers as needed.
Board Charter
Director selection process and Board renewal
The Board has adopted a formal Board Charter which clearly
The composition of the Board is reviewed regularly to ensure
details its functions and responsibilities and delineates
the appropriate mix of skills, diversity and expertise is present
the role of the Board from that of the senior executives.
to facilitate successful strategic direction.
The Board’s function and responsibilities include strategy
and planning, corporate governance, appointment of the As detailed in the Board Charter, in appointing new members
Chief Executive Officer (“CEO”), remuneration, capital to the Board, consideration is given to the ability of the
expenditure and financial reporting, performance monitoring, appointee to contribute to the ongoing effectiveness of the
risk management, audit and compliance, developing and Board, to exercise sound business judgement, to commit the
monitoring diversity policies and objectives. necessary time to fulfil the requirements of the role effectively
and to contribute to the development of the strategic direction
A copy of the Board Charter is available in the Corporate
of the Company. Consideration will also be given to achieving
Governance Plan on the Company’s website at http://www.
a Board with a diverse range of backgrounds.
universalcoal.com/about-us/corporate-governance.

18
The process used for selecting new members for the Board, Diversity
as set out in the Board Charter, may be assisted by the use The Board has a Diversity Policy in place which is available
of external search organisations as appropriate. An offer of in the Corporate Governance Plan on the Company’s
a Board appointment will be made by the Chairman of the website at http://www.universalcoal.com/about-us/corporate-
Board only after having consulted all Directors. Detailed governance. The Board is committed to workplace diversity
background information in relation to a potential candidate and recognises the benefits arising from diversity, including
is provided to all Directors. a broad pool of high quality employees, accessing different
No new Directors were appointed during 2016/2017. perspectives and ideas and benefiting from all available
talent. Diversity includes, but is not limited to, gender, age,
Executive Directors are provided with executive contracts of ethnicity and cultural background.
employment and Non-executive Directors are provided with
service agreements setting out the key terms and conditions The policy provides a framework for the Company to achieve:
relative to that appointment (appointment letters). a. a diverse and skilled workforce that supports continuous
When appointing any new Director, at the commencement of improvement and achievement of corporate goals;
the Director selection process, the Company will undertake b. a workplace culture characterised by inclusive practices
appropriate checks on potential candidates to consider and behaviours;
their suitability to fill a casual vacancy on the Board or for c. equal employment and career development opportunities
election as a Director. for all staff, regardless of gender, age, ethnicity or cultural
Director rotation requirements in the Company’s Articles of background; and
Association require that each year one-third of Directors, or d. a work environment that values and utilises the
if the number is not a multiple of three, a number nearest contributions of employees with diverse backgrounds,
to one-third but not exceeding one-third must retire from experiences and perspectives.
office. Subject to the provisions of the Company’s Articles
The Board is responsible for setting and carrying out
of Association, prior to the Board proposing re-election of
strategies to meet the objectives of the Policy, including
Non-executive Directors, their performance will be evaluated
setting Measurable Objectives to achieve gender diversity
by the Board to ensure that they continue to contribute
(Measurable Objectives) and annually assessing the
effectively to the Board. In addition, material information
Measurable Objectives and the Company’s progress
is provided to shareholders regarding each Director being
in addressing them. From time to time the Board will
proposed for election or re-election to assist shareholders
consider the establishment, amendment or removal of
in their decision to elect or re-elect a Director.
Measurable Objectives.
Company Secretary
When Measurable Objectives are implemented by the
All Directors have direct access to the Company Secretary,
Board, the CEO will report to the Board on progress on
who is responsible to the Board through the Chairman on all
an annual basis. As the Company has started producing
matters relating to the conduct and functions of the Board
coal, the number of employees has been increasing and is
and committees. The Company Secretary’s responsibilities
now 129 (2016: 102). However, the Company is still a small
are set out in the Board Charter.
employer and as such has not implemented Measurable
Objectives at this stage. The Board will consider establishing
appropriate objectives and strategies for diversity as the
Company’s staff levels grow.

Universal Coal annual report 2017––––––19

 corporate governance
statement continued

The table below outlines the proportion of women and men employed by the Company as at 30 June 2017:
Actuals Actuals Actuals Actuals
30 June 2014 30 June 2015 30 June 2016 30 June 2017
UNV Board
Male 100% 87.5% 87.5% 87.5%
Female – 12.5% 12.5% 12.5%
Senior executive positions*
(Full-time equivalent (“FTE”))
Male 96% 86% 80% 75%
Female 4% 14% 20% 25%
Women in UNV (FTE)
Male 43% 62% 70% 64%
Female 57% 38% 30% 36%

* Senior executive means all direct reports to the CEO.

Board and Director performance evaluation Principle 2: Structure the Board to

The Board has not undertaken a review of its performance add value
during the year ended 30 June 2017. The Board has decided Nominations Committee
to not conduct a performance review process each year
The accountabilities and responsibilities of the Nominations
given the size of the Company. The last performance review
Committee are carried out by the Board. At this time, based
process was undertaken in 2014. The performance review
on the Company’s size and stage of development, it is not
process the Board follows involves a self-assessment
considered necessary to establish a separate Nominations
by Directors by way of a survey and includes a review of
Committee. The nomination related responsibilities of the
Board and committee operations and effectiveness, role
Board include assessing the skills, diversity and necessary
of the Chairman, Board composition, individual director
industry, technical or functional experience required by
contributions and the relationship between the Board and
the Board, recommending directors for re-election and
management. When conducted, a report on the outcomes of
conducting searches for new Board members when required.
the survey is provided to the Chairman who communicates
and discusses the results with the Board to agree any areas Structure of the Board
for change. The Board currently consists of eight directors including,
Performance of senior executives an Independent Chairman, an additional Independent
Non-executive Director, four Non-executive Directors who
The CEO and Chief Financial Officer (“CFO”) have
are not independent and two Executive Directors:
employment contracts describing their terms of office, rights
and responsibilities and entitlements on termination. Induction Mr John Hopkins OAM, Chair – Independent,
programmes are in place to allow new senior executives to Non-executive Director
participate fully and actively in management decision-making. Mr Henri Bonsma – Independent, Non-executive Director
The performance of senior executives is reviewed regularly Mr Tony Weber – CEO and Executive Director
by the CEO on an informal basis. On an annual basis, the
Remuneration Committee assesses the performance of the Mr Shammy Luvhengo – Executive Director
CEO as part of the annual remuneration determinations. Mr Carlo Baravalle – Non-executive Director
An informal performance evaluation of the CEO was
undertaken by the Remuneration Committee for the year Mr David Twist – Non-executive Director
ended 30 June 2017. The CEO evaluates the performance Ms Nonkululeko Nyembezi – Non-executive Director
of the senior executives and this was completed for the year
ended 30 June 2017. Mr Andries Engelbrecht – Non-executive Director
The skills, experience, expertise and length of service/
appointment date of each Director are set out in the Directors’
Report contained within the Annual Report.

20
Chairman’s responsibilities and independence the Company’s strategy. These skills include industry
The Board Charter provides that the Chairman of the Board and operational experience, project assessment and
is responsible for the leadership of the Board, ensuring management, financial, legal and executive experience.
the Board is effective, setting the agenda of the Board, Induction
conducting the Board meetings and conducting the There were no new Directors appointed during the year.
shareholder meetings. However, when new Directors are appointed they are
The Chairman of the Board, John Hopkins OAM, is an provided with information regarding the Company’s strategy
Independent Non-executive Director. The roles of the and operations and corporate governance practices and
Chairman and CEO are separated. policies as an induction to the Company.
Board independence Continuing education
An independent Director is one who is independent Directors are provided with continuing education opportunities
of management and free from any business or other to update and enhance their skills and knowledge. This
relationship, which could, or could reasonably be perceived consists of regular updates to the Board from management,
to, materially interfere with the exercise of independent separate to Board meetings, to ensure Non-executive
judgement. Any independent Director will meet the definition Directors are well-informed of the Company’s operations
of what constitutes independence as set out in the ASX and any recent developments.
Recommendations and set out in Annexure A to the
Principle 3: Promote ethical and
Board Charter. The materiality thresholds are assessed
on a case-by-case basis, taking into account the relevant responsible decision-making
Director’s specific circumstances, rather than referring to Corporate Code of Conduct
a general materiality threshold. The Company has implemented a Corporate Code
of Conduct (the Code) which applies to Directors and
At this time, there are two Directors the Board has
employees. The Code provides a framework for decisions
classified as independent – the Non-executive Chairman,
and actions in relation to ethical conduct in employment.
Mr John Hopkins OAM and Mr Henri Bonsma. Mr Weber
It underpins the Company’s commitment to integrity and
and Mr Luvhengo are executives of the Company and
fair dealing in its business affairs and to a duty of care to
therefore not independent. Mr Baravalle and Mr Twist are
all employees, clients and stakeholders. The Code sets out
not independent because they were nominated as Directors
the principles covering appropriate conduct in a variety of
by one of the Company’s substantial shareholders, Coal
contexts and outlines the minimum standard of behaviour
Development Holding B.V. Ms Nonkululeko Nyembezi and
expected from Directors and employees.
Mr Andries Engelbrecht are not independent because they
were nominated as Directors by one of the Company’s Employees are encouraged to raise any matters of concern
substantial shareholders Ichor Coal N.V. in good faith with the head of their business unit without
fear of retribution. Where the matter is inappropriate to be
The Board Charter states that, where practical, the majority of
raised with the head of their business unit, employees are
the Board is comprised of Non-executive Directors and where
able to raise the matter with the CEO or CFO as appropriate.
practical, at least 50% of the Board will be independent. At this
stage a majority of the Board are Non-executive Directors The CFO reviews and reports directly to the Board on
but the majority are not independent as only two of the eight any material breaches of the Code. The Audit and Risk
Directors can be considered independent. The Board has Committee oversees procedures for whistleblower protection.
assessed that this is appropriate for the current stage of
A copy of the Code is available in the Corporate Governance
development and size of the business and that the current
Plan on the Company’s website at http://www.universalcoal.
Board members have the skills, expertise and experience
com/about-us/corporate-governance.
required to effectively oversee the Company’s business.
The Board will review its composition at regular intervals. Dealings in securities

Board skills matrix The Company has implemented a Securities Trading Policy
which covers dealings in the Company’s securities by its Key
The Board has not developed a skills matrix at this time.
Management Personnel (Directors and those employees
The Board has determined that as there are no foreseeable
reporting to the CEO). The Securities Trading Policy sets
vacancies on the Board, the need for a skills matrix is
out the guidelines for trading in the Company’s securities,
not urgent. A skills matrix will be developed over time.
including closed periods, exceptions and approval and
The Board also believes that the current skills represented
notification requirements.
on the Board are appropriate for the current stage of the
Company’s development and are appropriate to implement
Universal Coal annual report 2017––––––21
 corporate governance
statement continued

A copy of the Securities Trading Policy is available in the Principle 4: Safeguard integrity in
Corporate Governance Plan on the Company’s website financial reporting
at http://www.universalcoal.com/about-us/corporate-
Audit and Risk Committee
governance.
The Board has established an Audit and Risk Committee
Conflicts of interest governed by the Audit and Risk Committee Charter, which
The Constitution and Code of Conduct set out the obligations is available in the Corporate Governance Plan on the
of Directors in dealing with any conflicts of interest. The Board Company’s website at http://www.universalcoal.com/about-
has adopted a Related Party Transactions/Conflicts Policy to us/corporate-governance.
provide further guidance to Directors regarding any potential
The objective of the Audit and Risk Committee is to assist the
related party transactions. Pursuant to the Constitution,
Board in monitoring and reviewing any matters of significance
Code of Conduct and Related Party Transaction/Conflicts
affecting financial reporting and compliance. The Audit and
Policy, Directors are obliged to:
Risk Committee’s responsibilities include:
• disclose to the Board any actual or potential conflicts of
• review of financial reports;
interest which may exist as soon as they become aware
• review and monitoring of risk management systems,
of the issue;
practices and procedures;
• take any necessary and reasonable measures to resolve
• external audit; and
the conflict; and
• any special reviews or investigations requested
• comply with all law in relation to disclosure of interests
by the Board.
and restrictions on voting.
Unless the Board determines otherwise, a Director with any
actual or potential conflict of interest in relation to a matter
before the Board, does not:
• receive any Board papers in relation to that matter; and
• participate in any discussion or decision-making in relation
to that matter.
The Company Secretary also maintains a register of any
potential conflicts of interests of Directors.

22
Audit and Risk Committee composition
The Audit and Risk Committee consists of two Independent The composition complies with the ASX Recommendations,
Non-executive Directors and two Non-executive Directors except in relation to having a majority of Independent
who are not independent. The members of the Audit and Risk Directors, being composed of:
Committee are Mr Henri Bonsma, Chair of the Committee, • four members;
Mr Baravalle, Mr John Hopkins OAM and Mrs Nyembezi. Both • all Non-executive Directors with equal numbers of
Mr Bonsma and Mr Hopkins are Independent Non-executive Independent Directors and non-independent Directors; and
Directors. All members of the Committee are financially • a Chair who is an Independent Director who is not the
literate and have experience in the industry in which the Chairman of the Board.
Company operates.

Profiles of each of the Committee members are set out in the Directors’ report and details of meeting attendance of
members of the Committee are contained in the following table:
Number of meetings Number of meetings
Director eligible to attend attended
Henri Bonsma, Independent Non-executive Director 2 2
John Hopkins OAM, Independent Non-executive Director 2 2
Carlo Baravalle, Non-executive Director 2 1
Nonkululeko Nyembezi, Non-executive Director 2 2

Universal Coal annual report 2017––––––23

 corporate governance
statement continued

Audit Principle 6: Respect the rights

The Audit and Risk Committee is responsible for: of shareholders
• the performance of the external auditor; The Company has adopted a Shareholder Communications
• ensuring rotation of the lead engagement partner; Policy which aims to ensure that shareholders are informed
• approving the audit plans and proposed fees for audit work; of all major developments affecting the Company’s state of
• meeting with the external auditors as required without affairs. Information is communicated to shareholders through:
management present; and • quarterly, half year and annual reports;
• monitoring independence of the external auditor. • disclosures and announcements made to the ASX;
Chief Executive Officer and Chief Financial • notices and explanatory notes of Annual General Meetings
Officer declaration and Extraordinary General Meetings and addresses or
Prior to Board approval of the Company’s quarterly, half presentations made at those meetings; and
year and annual financial reports, the CEO and CFO • the Company’s website.
must provide the Board with declarations required under
The Board encourages participation by shareholders at all
Recommendation 4.2 of the ASX Principles. This process
shareholder meetings which provides effective two-way
was followed during the year.
communication with investors. Shareholders are encouraged
Auditor at the AGM to attend shareholder meetings but if they are unable to
The auditor’s lead engagement partner is present at the attend they are encouraged to vote via proxy and send
AGM to answer questions from shareholders about the any questions to the Company, details which are provided
conduct of the audit and the preparation and content of the in the notice of meeting. In addition an investor relations
auditor’s report. A Mandatory lead audit partner rotation has programme is followed where key analysts and investors
been effected for the 2017 financial year-end engagement are briefed on a regular basis. The presentations for these
meetings are provided to the ASX for all shareholders
Principle 5: Make timely and to access.
balanced disclosure
The Company’s website provides detailed information for
The Company is committed to ensuring: shareholders, including:
• compliance with the requirements of the ASX Listing Rules, • corporate governance policies;
• all relevant regulations and the ASX Recommendations; • details of the Company’s projects;
• accountability at CEO level for that compliance; and • sustainability programmes;
• facilitation of an efficient and informed market in the • all ASX and media releases;
Company’s securities by keeping the market appraised • copies of reports released by the Company; and
through ASX announcements of all material information. • share price data.
The Company has implemented a Continuous Disclosure Shareholders have the option to receive communications
Policy which is designed to support the commitment to a fully from, and send communications to the Company and the
informed market in the Company’s securities by ensuring Company’s share registry, Computershare, electronically.
that announcements are: In addition, contact details of the Company are included on
• made to the market (via the ASX Company Announcements the website for investor’s to email or telephone regarding
platform) in a timely manner, are factual and contain all any questions they may have.
relevant material information; and
A copy of the Shareholder Communications Policy is
• expressed in a clear and objective manner that allows
available in the Corporate Governance Plan on the
investors to assess the impact of the information when
Company’s website at http://www.universalcoal.com/about-
making investment decisions.
us/corporate-governance.
A copy of the Continuous Disclosure Policy is available
in the Corporate Governance Plan on the Company’s
website at http://www.universalcoal.com/about-us/corporate-
governance.

24
Principle 7: Recognise and manage risk To this end, comprehensive practices are in place that are
Audit and Risk Committee directed towards achieving the following objectives;
In its function as a Risk Committee, the Audit and Risk • Compliance with applicable laws and regulations;
Committee assists the Board in fulfilling its corporate • Preparation of reliable published financial information; and
governance responsibilities in regard to oversight of • Implementation of risk transfer strategies where
the Company’s risk management systems, practices appropriate, e.g. insurance.
and procedures. The responsibility for undertaking and assessing risk
Details of the Audit and Risk Committee are contained management and internal control effectiveness is delegated
in the disclosure under Principle 4. For details regarding to management. Management is required to assess risk
the number of Audit and Risk Committee meetings and management and associated internal compliance and
the attendance at those meetings, refer to the disclosure control procedures and report regularly to the Audit and
under Principle 4. Risk Committee.

Risk Management Policy Further detail regarding specific risks facing the Company
The Company is committed to ensuring that: is noted in the Directors’ Report.

• its culture, processes and structures facilitate realisation During the financial year ended 30 June 2017, the Board
of the Company’s business objectives whilst material (through the Audit and Risk Committee) conducted an annual
risks are identified, managed, monitored and wherever review of the Company’s risk management framework.
appropriate and possible, mitigated; and Senior Management has reported to the Board (through
• to the extent practicable, its systems of risk oversight, the Audit and Risk Committee) on the effectiveness of the
management and internal control comply with the management of the material risks faced by the Company
ASX Recommendations. during 2016/2017. The Board Audit and Risk Committee has
reviewed the risk management framework and is satisfied
The Board determines the Company’s risk profile and is
that it continues to be sound.
responsible for overseeing and approving the Company’s
risk management strategy and policies, internal compliance Internal audit
and internal control. Due to the size and current stage of development of the
Company, the Board has not established an independent
The Board has delegated to the Audit and Risk Committee
internal audit function. Oversight of the effectiveness of
responsibility for implementing the risk management system
the Company’s risk management and internal control
and reporting to the Board.
processes currently form part of the responsibilities of the
The Company’s process of risk management and internal CFO (for financial risks and controls) and the CEO (for
compliance and control includes: operational risks). As the Company continues to develop,
• identifying and measuring risks that might impact upon the Audit and Risk Committee will consider establishing an
the achievement of the Company’s goals and objectives, independent internal audit function. In addition, the Audit
and monitoring the environment for emerging factors and and Risk Committee receives reports on and reviews risk
trends that affect these risks; management and internal control.
• formulating risk management strategies to manage Economic, environmental and social
identified risks, and designing and implementing sustainability risks
appropriate risk management policies and internal Universal Coal has material exposures to economic,
controls; and environmental and social sustainability risks which are
• monitoring the performance of, and improving the further disclosed under the Strategic Report and the
effectiveness of, risk management systems and internal Sustainability Report both contained within the Annual
compliance and controls, including regular assessment Report. The exposures include sustainable development,
of the effectiveness of risk management and internal safety and health, environmental management and
compliance and control. socio-economic development.
A copy of the Company’s risk management policy is available
in the Corporate Governance Plan on the Company’s
website at http://www.universalcoal.com/about-us/corporate-
governance.

Universal Coal annual report 2017––––––25

 corporate governance
statement continued

Principle 8: Remunerate fairly and responsibly

The Remuneration Committee Charter is available on the Company’s website in the Corporate Governance Plan at http://www.
universalcoal.com/about-us/corporate-governance.
The primary purpose of the Committee is to support and advise the Board in fulfilling its responsibilities to shareholders by:
• reviewing and approving the executive remuneration policy to enable the Company to attract and retain executives and
Directors who will create value for shareholders;
• ensuring that the executive remuneration policy demonstrates a clear relationship between key executive performance
and remuneration;
• recommending to the Board the remuneration of executive Directors;
• fairly and responsibly rewarding executives having regard to the performance of the Company, the performance of the
executive and the prevailing remuneration expectations in the market;
• reviewing the Company’s recruitment, retention and termination policies and procedures for senior management;
• reviewing and approving the remuneration of direct reports to the CEO, and as appropriate other senior executives; and
• reviewing and approving any equity based plans and other incentive schemes.
Further details can be found in the Committee’s charter.
The Remuneration Committee consists of two Independent Non-executive Directors and two Non-executive Directors who
are not independent. The members of the Remuneration Committee are Mr John Hopkins OAM, Chair of the Committee,
Mr Henri Bonsma, Mr David Twist and Mr Andries Engelbrecht. Both Mr Bonsma and Mr Hopkins are Independent
Non-executive Directors.
The composition complies with the ASX Recommendations, except in relation to having a majority of Independent Directors,
being composed of:
• four members;
• all Non-executive Directors with equal numbers of Independent Directors and Non-independent Directors; and
• a Chair who is an Independent Director.
Profiles of each of the Committee members are set out in the Directors’ report and details of meeting attendance of
members of the Committee are contained in the following table:
Number of meetings Number of meetings
Director eligible to attend attended
Henri Bonsma, Independent Non-executive Director 2 2
John Hopkins OAM, Independent Non-executive Director 2 2
David Twist, Non-executive Director 2 2
Andries Engelbrecht, Non-executive Director 2 2

Remuneration policy Under the Securities Trading Policy, participants are not
Information on the Company’s remuneration policies permitted to enter into transactions with Securities (or any
and practices is set out in the remuneration report in the derivative thereof) in associated products which limit the
Directors’ report. economic risk of any unvested entitlements under any
equity-based remuneration schemes awarded under any
The remuneration of Non-executive Directors is a fixed equity-based remuneration scheme currently in operation
annual fee. Non-executive Directors do not participate or which will be offered by the Company in the future.
in other remuneration components such as performance
related short-term or long-term incentives, options or variable Conclusion
remuneration and do not receive retirement benefits other The Board is satisfied with its level of compliance and
than superannuation. Information relating to the remuneration corporate governance requirements for the current stage of
of Non-executive Directors is disclosed in the Remuneration development and size of the Company. However, the Board
Report contained within the Directors’ report. recognises that processes and procedures require continual
Executive Directors participate in an Employee Share and monitoring and improvement and this will continue to occur.
Option Plan as part of rewards for performance.

26
Universal Coal annual report 2017––––––27
 sustainability
report
Sustainable development programmes are conducted on site by both management
and employees; where unsafe activities are identified, an
In the midst of turbulent macro-economic conditions
instruction to “stop and fix” is issued right away.
adversely impacting the coal sector, we maintain our focus
on building a business that has a viable, long-term future, In FY2017, the Department of Mineral Resources (“DMR”)
regardless of the different challenges it faces. As part of that inspectors of mine machinery, Occupational Hygiene, Mining
future, we remain committed to sustainable development that and Medical visited Kangala Colliery. No major findings were
is also of benefit to the regions and communities we operate reported. Audit feedback revealed improvement, compliance
within, and that minimises the environmental and social and best practice in the mining industry.
impacts of our activities. Universal Coal has implemented
In FY2017, Kangala achieved fatality-free man hours of
a policy based upon responsible, proactive environmental
1 741 767. Regrettably, the Kangala Colliery was issued
management. We continue to comply with all relevant
with a section 54 mine stoppage notice in terms of the
legislative obligations, and meet all our environmental and
Mine Health and Safety Act (“MHSA”) in order to ensure
social responsibilities.
compliance thereof. A fully encompassing preventative action
Safety and health plan was subsequently developed to prevent reoccurrence,
Our Vision – Zero harm is achievable. When extracting and presented to and accepted by the DMR. The code of
and processing coal at our various operations, we aspire practice for women in mining personal protective equipment
to Zero Harm to people, our host communities and the was launched and implemented in FY2017.
environment as much as is operationally practicable. We are Kangala maintained personal dust exposure and noise
committed to introduce and sustain a healthy and safe induced hearing loss within the acceptable limits as per
working environment, by operating in an environmentally occupational hygiene targets. An annual average dust level
and socially responsible manner, focused on share price of 0.41mg/m3 of personal dust exposure was maintained
while adding value to all stakeholders. Our principles: in FY2017, well below the target threshold of 1.5mg/m3.
• A zero tolerance approach will save lives and protect A single Noise Induced Hearing loss claim was reported
the environment; by an employee with a previous history of noise exposure.
• Be responsible and accountable;
• Embrace the culture of learning from previous incidents;
NCC Health and Safety performance
• Respect and protect the culture, beliefs and heritage of The resumption of underground production with three
the communities in which we operate; and underground sections and the starting of the green-field
• Simple, non-negotiable standards and rules. opencast operation at NCC has been a safety success
story with over 811 new employees from various contractors
Accordingly, we remain committed to providing safe
combining their efforts to achieve a zero harm environment
working environments for our employees and contractors,
and attain a noticeable safety performance.
incorporating the highest safety and health standards across
all our sites. We aim to instill a work culture that views As a new operation, NCC has sourced over 70% of current
safety and health as of paramount importance, and train labour from immediate surrounding communities. One of the
our employees to work responsibly and look after their own achievements of the operation’s safety success story is the
and fellow employees’ health and safety. integration of our less skilled communities’ employees with
experienced core team members from the major contractors,
Kangala Colliery Health and Safety with NCC management providing and maintaining on site
performance constant supervision.
Kangala Colliery had an improved safety record with an In the pursuit of a zero harm environment, NCC has
average total recordable injury frequency rate of 0.50 in established a tripartite partnership (comprised of the DMR,
FY2017 compared to 0.87 in FY2016, with management NCC management and contractors) which demands the
continuing to work together with contractors and employees best safety practice from all stakeholders on the mine – this
in achieving zero harm environment. The management team safety ethos has resulted in NCC achieving fatality-free man
has established a safety strategic drive called “ASIPHEPHE”. hours of 1 392 879.
This safety drive entails weekly visible leadership and
behavioural change coaching. Inspections and training

28
Regrettably, NCC had a Lost Time Injury Frequency Rate Consistent surface and groundwater sampling and analysis
(“LTIFR”) in the reporting period. Preventive measures have of various chemical constituents and groundwater level
been put in place to prevent reoccurrences and the team measurements are conducted on a monthly and quarterly
continues to harness the experience of our contractors basis as required by the WUL and South African National
and benchmark externally to prevent safety incidents on Standards (“SANS”) drinking water quality standards, to
the operation. ensure effective management of the water resources on
site and in surrounding areas.
Environmental management
Kangala utilises water from a borehole for potable human
The Company takes a proactive approach towards
consumption. The water quality tests from the potable
environmental management. As basis of that approach,
water supply borehole detected no biological and chemical
we develop an Environmental Management Plan (“EMP”)
contamination. Sulphate concentrations are considered to
prior to any mining activity, which identifies and addresses
be the main tracing element in evaluating the potential future
environmental impacts that could arise during the exploration,
impacts on water resources; both surface and groundwater
mining and mine closure phases. Incorporated within the
monitoring points are being monitored and are well below the
EMP are reports and plans to address water management,
sulphate water quality objective target of 400mg/l specified
land management, waste management (non-hazardous
in the WUL and within the SANS drinking water quality
and hazardous materials), air quality management, energy
standards.
consumption and greenhouse gas emissions.
Abstracted water quantity for potable use was within the
Kangala Colliery environmental authorised quantity consumption, with actual abstraction of
performance 27 411m3/annum, which is below the limit of 32 400m3/annum.
Air quality, biomonitoring, surface water, groundwater, Kangala has established and implements a water
aquatic, rehabilitation and noise monitoring programmes conservation programme wherein the site vehicles’ wash
are in place as approved in the Environmental Management bays and dust suppression activities are conducted using
Plans (“EMP”). The results of the monitoring programmes water from the pollution control dam (“PCD”). The plant’s
are within the acceptable legal limits. No environmental primary water source is the water from the PCD. It only gets
penalties have been received from the regulatory authorities. augmented from other sources when there is insufficient
In FY2017, environmental legal compliance audits and supply of water from the PCD.
environmental performance assessments were conducted Biomonitoring
by independent specialists and regulatory authorities. In general, water quality in the nearby stream is acceptable
There were no major findings from the audits. Significant and would not pose a significant threat to local aquatic biota.
improvement in topsoil management was highlighted by In wet season biomonitoring, the biological trends revealed
the audit findings. an overall improvement in the river health sampling method
Water management SASS5 scores (South African Scoring System Version 5).
Kangala Colliery’s integrated water use licence (“IWUL”) has
been amended to include additional section 21(a) activity
in terms of the National Water Act, related to abstraction of
water from a groundwater resource. Internal and External
WUL audits have been conducted in FY2017. An external
IWUL audit reported a 1.15% increase in compliance
with IWUL conditions from 94.27% in FY2016 to 95.42%
in FY2017.

Universal Coal annual report 2017––––––29

 sustainability
report continued

Air quality and environmental dust fall out

Dust is one of the key pollutants of concern associated with open-cast mining activities. Dust fallout monitoring stations are
currently monitored regularly. Monthly dust fallout rates are compared against the baseline conditions as per the air quality
impact assessment conducted for Kangala Colliery. Dust suppression systems are in place to manage and reduce dust
emissions within the mine, particularly in the areas close to the dust generating source.
In FY2017, the dust fallout rates recorded at the monitoring sites were below the non-residential area standard of
1 200mg/m2/day. There were no instances where the non-residential area standard of 1 200mg/m2/day was exceeded.
The highest dust concentration recorded was 892mg/m2/day in quarter three of FY2017. Therefore the dust fallout
rates at the sites are considered in compliance with the South African National Dust Control Regulations (2013) for the
FY2017. The daily average PM10 concentrations fell below the South African National Standard of 75ug/m3, with the
highest concentration record of 57ug/m3.
Noise monitoring
A quarterly environmental noise survey is undertaken at the communities surrounding the Kangala Colliery to establish
the noise climate in the area and the potential impact on the surrounding communities. All measurements taken on the
different days of the surveys revealed noise levels below the minimum statutory requirements.
Environmental Management
System and International Finance
Corporation Standards
A pre-certification stage system analysis
audit for implementation of environmental
management system ISO 14001:2015 system
has been successfully conducted. A stage
two certification audit is scheduled in
FY2018. ISO certification is anticipated to
be awarded in FY2018.
Kangala Colliery has been implementing
the International Finance Corporation’s
Environmental and Social Performance
Standards together with the requirements
of the World Bank’s Environmental,
Health and Safety General and Mining

30
Guidelines as international best practice in project compiled by an appointed qualified service provider.
finance, through the implementation of Equator Principles. A volumetric assessment of the in-pit material has been
Although the implementation was mandated by the project’s conducted for areas still to be mined and a mined-out
finance provider, Kangala Colliery enforces implementation topography developed. The post-mining landform was
and we have also adopted and carried over the standards designed to be free-draining with slopes that minimise
in other operations to ensure that all our operations are erosion risks and are consistent with the surrounding
developed in a manner that is socially responsible and landscape. To reduce erosion and ponding risks further,
reflects sound environmental management practices. sub-catchments and a rolling topography have been created
in the model. The effects of possible secondary settlement
An annual performance assessment for Kangala Colliery
over time has also been considered.
against the various EHS requirements was conducted by an
independent Equator Principles monitoring and performance The deposition of overburden materials and the reconciliation
reviewer in FY2017. The performance assessment evaluated of volumes on a monthly are moved and handled to comply
the status of the systems and processes in place to ensure with final landscape design. Thus far, 44.2ha of the 110ha
compliance with the IFC Performance Standards and opencast pit area have been rehabilitated and covered
applicable World Bank Guidelines. The findings raised during with top soil. The full benefits of concurrent rehabilitation
the assessment were areas of improvement in amending the will be evident in future assessments of the environmental
emergency response standard to ensure the requirements liability cost.
are clear, linked to the mandatory code of practice and
Kangala has updated the estimated Life-of-Mine (“LoM”) as
including of site-wide emergency drills to prepare for any
well as immediate closure liabilities. Provision for the costs
possible significant emergency situations. Significant
for remediation of environmental damage are managed
progress has been made with addressing the minor findings
through the issuing of financial guarantees to the South
and further improve the system’s effectiveness.
African DMR. Rehabilitation guarantees are evaluated and
Mine rehabilitation approved by the DMR as per section 41 of the MPRDA.
Concurrent rehabilitation commenced in FY2017 at the
Kangala Colliery, with backfilling to designed levels and
in accordance with the post-mining landform design as

Universal Coal annual report 2017––––––31

 sustainability
report continued

Kangala Colliery and Middelbult section Water monitoring and management

consolidation process
An integrated water use licence (“IWUL”) has been granted
Universal Coal Development I (Pty) Ltd (Kangala Colliery) for both underground and surface mining operations.
holds a prospecting right (“Middelbult section”) granted Surface and ground water quality sampling and analysis
in terms of section 23(1) of the Mineral and Petroleum of various chemical constituents and groundwater level
Resources Development Act, 28 of 2002 by the DMR. measurements are conducted on a monthly and quarterly
The Middelbult section adjoins the existing Kangala basis as prescribed in the IWUL licence. The water quality
Colliery, separated by a farm boundary. Kangala Colliery results are compared with targets prescribed in the IWUL
intends to extend its life of mine through consolidation and South African Bureau Standards (“SABS”) drinking
of the proposed Middelbult development. The proposed water quality standards, to ensure effective management
development is planned to utilise the mining infrastructure of the water resources on site and surrounding areas. None
located at Kangala Colliery. This consolidation process will of the surface water and groundwater quality determinants
necessitate an integrated environmental approval process monitored exceeded domestic water quality standards
in terms of the National Environmental Management Act to systematically, except for Total Dissolve Solids and Sulphate
obtain the environmental authorisations and other relevant over short periods during the dry season. Here, the low flows
environmental licences to begin construction and operation. clearly contribute to the increase in concentrations, and thus
The Middelbult project Mining Right and environmental are not likely to contribute significantly to the salinity load
applications were lodged with the DMR in FY2017. entering the Olifants river. The groundwater level taken prior
to mining varies between 0 and 22mbgl with an average of
NCC environmental performance
~5mbgl. The levels were recorded during the first half of
NCC has an approved environmental management FY2017; consequently the recorded data will be used as
plan (“EMP”) for the opencast operation, plant area and baseline information.
underground operations. Biomonitoring
In F Y2017, an environmental per formance A baseline study was conducted to provide detailed
assessment against the environmental management plans information to guide the activities associated with the
(“EMP”) was conducted by an independent environmental proposed open-cast mining activities in the vicinity of the
practitioner. There were no major environmental findings resources and ensure that the ongoing functioning of the
reported. Internal environmental risk assessments have been ecosystem will support local and regional conservation
performed and areas of improvement identified. Practical requirements and the provision of ecological services in
measures to manage and/or prevent the risks have been the local area. Factors investigated included the visual
identified and are being implemented. conditions of the site, including the assessment of impacts
Air quality, biomonitoring, surface water, groundwater, aquatic on the stream, at each point. Biota specific water quality
and noise monitoring programmes are in place as approved parameters were assessed. Habitat integrity and suitability
in the EMP. The results of the monitoring programmes are for aquatic macro-invertebrates was evaluated using the
all within the acceptable legal limits. No environmental Intermediate Habitat Integrity Assessment (“IHIA”) and the
penalties have been issued by the regulatory authorities. Invertebrate Habitat Assessment System (“IHAS”) method.
The integrity of the aquatic macro-invertebrate community
Environmental monitoring was assessed using the South African Scoring System
NCC environmental monitoring has two elements namely: version (“SASS5”) and the Macro-invertebrate Response
regular monitoring against set standards, legal limits or Assessment Index (MIRAI). The fish community integrity
performance criteria and a periodic review or evaluation. was assessed using the fish Habitat Cover Rating (“HCR”)
The aim of the monitoring programme is to focus on the and the Fish Response Assessment Index (“FRAI”).
assessment of the effectiveness of the plan or programme.
Air quality and environmental dust fall out
An independent environmental control officer has been The dust fallout monitoring network at NCC comprises
appointed to ensure compliance with the EMP during the single and directional dust fallout monitors. Monitoring is
construction phase of the opencast area. This is a condition undertaken at 16 strategic positions. The dust fallout rates
stipulated in the environmental authorisation awarded to fell below the non-residential area standard in FY2017.
NCC by the competent regulatory authority (DMR). Three excesses were observed in one site, attributed to
the construction work that took place in close proximity to
the station.

32
Noise monitoring Community Development
A noise survey was conducted prior to the construction Kangala Colliery launches Grade R Class at
phase of the mine, to gain a detailed understanding of the Swartklip Combined School, Delmas
baseline noise environment at the proposed opencast mine The sod turning event to mark commencement of the
site and determine and assess the noise impacts (including construction of Grade R Class at Swartklip Combined
cumulative impacts) to receptors and resources in the vicinity School. Kangala Colliery is delighted to introduce Grade R,
of the mine. The prevailing ambient noise levels in and a pre-primary class which plays an important role in early
around the abutting residential areas and the proposed childhood educational development. Universal Coal initiated
opencast site were determined, and control measures to and implemented the project to improve the quality of
minimise the possible noise impact on the environment and early education for the immediate hosting community.
the abutting residential areas have been recommended and The infrastructure will be comprised of a big classroom
will be implemented. with ablution facilities, offices and a kitchen to cater for
Closure and rehabilitation 35 children.
The closure environmental liability associated with NCC
mining activities has been determined and quantified using
the approach and methodology advocated in the DMR
Guideline Document for the Evaluation of the Quantum
of Closure-Related Financial Provisions Provided by a
Mine (2005). Provision for the costs for remediation of
environmental damage are managed through the issuing of
financial guarantees to the South African DMR. Rehabilitation
guarantees have been evaluated and approved by the DMR
as per section 41 of the MPRDA.

Socio-economic Development and

Stakeholder Engagement
Kangala Colliery performance Construction work has been awarded to a local community
Procurement, Enterprise Development and supplier, who will in turn hire labourers from the community
Supplier Development thereby creating jobs for the local community members.
Our approach to supplier development and enterprise and The project is not part of our Social and Labour Plan
supplier development is to nurture, advance and sustain which is a social licence to operate; it is above and beyond
Small-, Medium- and Micro-sized Enterprises (“SMMEs”) Universal Coal’s statutory obligation. The school principal,
by providing technical and business development support, Ms Mashego commended Universal Coal and mentioned
through mentoring and coaching. that Kangala Colliery has come to the party not once, but
on several occasions in the past as well. “We are grateful
Kangala Colliery’s key supplier development and enterprise that the company has pledged to build the Grade R class at
development programmes to empower small-, medium- and our school. The partnership between our school, Universal
micro enterprises are illustrated in diagram below. Coal and the local Municipality is very important as they
In FY2017, Kangala Colliery invested R80 million in are making sure that our learners benefit in a long-term
local community supplier development and enterprise educationally,” she said.
development projects and programmes.

School Principal, Ms Mashego, and the

representatives from Kangala Colliery.
Universal Coal annual report 2017––––––33
 sustainability
report continued

Kangala Colliery also assisted one of the schools by

providing study materials for Grade 12 study camps hosted
at the school. Forty six learners participated in the study
camp during the school holidays, and more than 35 passed.
Ms Mashego added: “We thank Universal Coal for their
resilient support, and none of this would have been possible
without their funding and intervention.”
Mr Sabelo Masina, Local Economic Development Manager
of Victor Khanye, Local Municipality expressed gratitude to
Kangala Colliery: “As the municipality, we appreciate what
Universal Coal is doing and we strongly believe that we all
should strengthen the communication between mines and
the municipality.”
Handover of Nkangala Technical Vocational
Education and Training College (“TVET”) Campus
in Delmas
Kangala Colliery’s local economic development project,
construction of a TVET campus in Delmas has been
completed and handed over to the beneficiary, the
Department of Education.
The event was attended by the Honourable Executive Mayor
of Victor Khanye Local Municipality, Mrs Eva Makhabane,
Department of Higher Education and Training Executive
Council and Management and community members.
Ms Minah Moabi, Universal Coal Corporate Affairs Director
handed over the building official papers to Nkangala
TVET College Deputy Chairperson of the Council,
Ms Nomusa Kininda.
On 5 May 2017, Universal Coal in partnership with Victor
Khanye Local Municipality (“VKLM”) and Exxaro handed over
the long awaited TVET College in Delmas to the Department
of Higher Education and Training.

34
During construction, four SMMEs were contracted to build, Human Resource Development
equip and furnish the TVET College. Thirty-five temporary
Kangala Colliery Bursary Fund
jobs were created. The construction phase was completed in
2017 due to delayed registration process with the Department Kangala Colliery established a Bursary Sponsorship
of Higher Education and Training which took longer than Programme for previously disadvantaged and academically
expected to approve the required specifications of the deserving students from the community to give them an
infrastructure in line with the Department’s regulations. opportunity to study at any public University in South
The College is scheduled to enrol the first learners in 2018. Africa. The Colliery’s first bursary fund has sponsored three
students from Victor Khanye Local Municipality schools with
Kangala Colliery committed to further assist the learners with a four-year comprehensive bursary that covers tuition fees,
bursaries. The Chief Whip of the Municipality, Councillor Vusi accommodation and meals, book allowance, experiential
Buda said that it has always been the wish of the Municipality training and monthly allowance.
to have the College and the Municipality is very pleased with
this milestone for the construction of the College. Delmas
community is growing very fast because of the booming
mining sector making it necessary to instil relevant skills in
the local community to eradicate unemployment. Executive
Mayor, Eva Makhabane expressed her appreciation for
the contribution that Universal Coal has made through
its partnership with other funders and hopes that many
companies will follow suit to benefit the communities.
The Future of Tomorrow’s Leaders
Kangala Colliery reached out to underprivileged school in
the Delmas area and handed over desks and chairs for the
learners. Khanagela primary school is one of the schools
Mxolisi Sibande, Civil Engineering at Wits University, Donald Sibanyoni, BCom Financial
that do not have resources such as desks for children to use, Management at Johannesburg University and Mbongeni Mankge, Electrical Engineering
making it difficult and uncomfortable for them to concentrate at Wits University.

and participate in class. Kangala Colliery took the opportunity In FY2017, four additional bursaries were awarded to young
to make a change in the lives of these children. matriculates to further their studies at a higher education
institution, TVET.

Universal Coal annual report 2017––––––35

 sustainability
report continued

Sibiya Bongani Isaac: Learnerships Programme

Electrical Engineering Ten students were awarded an opportunity to register for a
“I completed my matric in 2013 with learnership programme in basic coal preparations at Colliery
the dream of studying electrical Training Centre institute. The course entailed theoretical
engineering. I almost lost hope of and practical introduction to coal processing on a coal
pursuing my dreams because of the processing plant. It focuses on geology, coal preparation and
years I stayed at home doing nothing the market; sampling and analysis, sizing, size reduction,
until I saw a Kangala Bursary fund coal preparation processes, solid-liquid separation, total
advert in a local newspaper. I applied plant control, maintenance and safety.
and got a positive response. I was
hopeless and always had negative
thoughts about my future due to the
fact that there is no source of income
in my family to finance my studies.
Life was hard and difficult to face
every day. Thank you, Universal
Coal, for making my dreams come
true. I feel humbled and honoured to
be granted this opportunity.”
Mabena, Ntokozo Patience:
Boiler Maker
“Kangala Colliery offered a bursary Mr Vusi Petrus Nkuta, Basic Coal Preparation Learnership, one of the learners who
completed the programme on time.
to students who were unable to
pursue their studies due to their He was offered a permanent employment at the Plant. When
financial difficulties. Opportunely, asked how he feels about the opportunity offered to him.
I was among those who were He responded “I am so grateful for the opportunity, there
selected to be given the opportunity was no hope for to pursue my dreams due to my family’s
to further my studies at a higher poor financial background until Kangala Colliery offered a
education institution. I would like course in Basic Coal Preparation. I commit to work hard as
to thank Universal Coal for giving a token of appreciation to Kangala Colliery.”
me this bursary to fulfill my dreams Operator’s Skills Training Programme
and allow me to become what I have
We have identified Education as a key area that will change
always wanted to be.”
the lives of the youth and learners of our hosting community.
Metswamere, Josephine Masori: Universal Coal is contributing enormously, offering skills
Electrical Engineering training programmes, internships and learnerships, higher
“There is a saying that it takes a education funding for students, building further education
village to raise a child, Kangala facilitates and donations to local schools.
Colliery made my future shine. What
Universal Coal’s Kangala operation commenced its mining
excites me the most is that it is a
activities in July 2013. During the recruitment process, it was
comprehensive bursary fund that
extremely challenging to source the relevant skills required
covers accommodation, food and
for the operation from the Victor Khanye Local Municipality
monthly stipends, books etc. I have
due to lack of mining skills in the area. As a responsible
always dreamed of becoming an
cooperate citizen, in 2015 Universal Coal embarked on a
electrical engineer but because of
mission to train 150 local affected residents of Victor VKLM
financial difficulties and my poor
and equip them with heavy mining machinery operator’s
family background, I had given
skills within a period of one year.
up chasing my dreams. Universal
Coal made my dreams come true by
granting me a bursary to further my
studies which will also allow me to
become something important in life.”

36
To date, the programme has resulted in over 100 local Human Resource Development
residents being successfully trained to become Mining A skills audit plan will be developed and commissioned in
Qualification Authority (“MQA”) qualified and competent FY2018, towards the end of recruitment phase. NCC will then
operators on Articulated Dump Trucks (“ADT”) and address the lack of skills required, both internal and external,
Excavators. Eighty-five operators have been appointed as through training, learnerships and bursary programmes.
Articulate Dump Trucks operators for the Kangala Colliery. Core, non-core mining and other portable skills training will
The skills training programme continues, with the goal of be offered to the employees and community candidates.
training a further 50 local residents to become machine
operators by the end of December 2017. The main aim is
to equip the operators with a MQA recognised qualification
which will enable them to become employable in the mining
sector. This opportunity will provide them with valuable
experience needed to grow their working future.

NCC Colliery performance

Procurement, Enterprise Development and Supplier
Development
In addition to our local procurement commitment, we have
made it a contractual condition for NCC contractors to
procure services from the Historically Disadvantaged South
Africans (“HDSA”) and other local suppliers. A procurement
database where all service providers’ and suppliers’
information is captured has been developed. In FY2017,
NCC identified and signed an enterprise development
agreement with a local HDSA company. The company will
be operating a canteen on site and a wash bay facility for
mine machinery. Financial assistance has been provided
by NCC to set up the project and ensure sustainability of
the business. NCC is in the process of re-establishing
suitable local development projects in collaboration with
regulatory stakeholders, including local municipalities
and the DMR. We intend to engage in projects that would
ensure a sustainable socio-economic future for the host
communities in which we operate.

Universal Coal annual report 2017––––––37

 strategic report
The Directors present their strategic report with the statutory financial statements of the Group and the Company for the
year ended 30 June 2017.

1. CORPORATE STRATEGY
Universal Coal’s vision is to become the next mid-tier, lowest cost quartile coal mining Company in South Africa,
delivering long-term value to shareholders. We intend to achieve this lowest cost quartile through:
• taking advantage of our multi-disciplinary skills set, experience and relationships developed over 30 years;
• expansion of our existing thermal coal production and resource footprint in the Emalahleni (previously Witbank)
Coalfield through organic growth;
• advancing our substantial coking coal project, located within South Africa’s emerging Soutpansberg Coalfields;
• assessing additional coal assets around our key focus areas that support sustainable growth; and
• continually improving safety performance across all sites.

2. REVIEW OF THE BUSINESS

The results for the year and financial position of the Company and Group are as shown in the financial statements.
The principal activity of the Group in the year under review was that of coal mining, coal beneficiation and mineral
exploration and development of coal interests in South Africa.
The function of the business review is to provide a balanced and comprehensive review of the Group’s performance
and developments during the year and its position at the year-end. The review also covers the principal risks and
uncertainties faced by the Group.

Kangala Colliery
Located in the Emalahleni area approximately 65km from Johannesburg in the Mpumalanga province of South Africa
and consist of the Wolwenfontein and Middelbult projects.
The Kangala Colliery achieved record production and sales figures during the year and this is being reflected in the
revenue as well as earnings before interest, taxation and depreciation (“EBITDA”) for the FY2017. Mine planning
and management at Kangala has been commendable during the period by proactive stripping and preparation that
allowed for sufficient coal availability on stockpiles for processing during the slower months.
Kangala also experienced the benefit of the Coal Handling and Processing Plant (“CHPP”) for the full period under
review with consistent plant yields of 66% achieved during the period. Also the mining contractor introduced a larger
mining fleet which remained on site for the full period to assist in the handling of increased production.
The Kangala Colliery has finalised its Eskom contract and has committed coal to Eskom under the renewed Coal
Supply Agreement (“CSA”) until 2023. The Colliery have also finalised an export off-take for a small portion of its
production, allowing for the benefit from higher export prices.
ROM tonnages for the year improved by 12% year-on-year with a total of 3 660 697 tonnes (2016: 3 269 212 tonnes)
and tonnes sold increased by 21% to 2 463 224 (2016: 2 037 390).
The increase in revenue per tonne1 of A$41.4 (2016: A$38.52) for the period has been affected by the slight exposure
to the export market currently achieving higher prices than in the previous period, as well as the 8% increase of the
South African Rand (“ZAR”) against the Australian Dollar over the reporting period.
Cash cost per ROMt 2 of A$14.4 (2016: A$12.72) has increased by 13% from the previous period. 80% of the
year-on-year increase is due to the increase of the South African Rand (“ZAR”) against the Australian Dollar over
the reporting period. The remainder of the increase are due to inflationary increased and other expected increases
on diesel and power.
The gross profit margin for the 2017 financial year was 22% (2016: 13%), reflecting a gross margin per sales tonne
of A$11.63 (2016: A$9.34).
1. Revenue per tonne is calculated by dividing revenue from product sales, excluding transport and other income, by tonnes of product sold.
2. Cash cost per tonne is calculated based on cost of sales, excluding inventory movements, transport, depreciation and indirect costs divided by
tonnes mined in the period.

38
Universal Coal annual report 2017––––––39
 strategic
report continued

NCC
Located in the Kriel district, approximately 149km from Johannesburg, consists of the Roodekop and Diepspruit
projects.
The Company officially commissioned the NCC mine in September 2016 with the production of the first ROM tonnes
from the Diepspruit underground section. To capitalise on the recovery in the global thermal coal markets, it was
decided to proceed with the underground development first, being economically favourable with the recovery in
export thermal coal prices coinciding with a low rand exchange rate. The underground operation yields a higher
quality output, suitable for both the local and international markets. The underground section ramped up to steady
state production by December 2016.
Roodekop commenced development of the opencast pit in January 2017 and in June 2017 the Colliery had reached
a steady state production from both the underground and opencast area and is confident that the Colliery will reach
its nameplate production number early in the FY2018.
During the period NCC has entered into a long-term off-take agreement with Glenocre to supply 650kt per annum
of export quality coal as well as committed to a seven-year Eskom Coal Supply agreement supplying 1.2 million
tonnes per annum of thermal coal to the local power producer.
During the period Ingwenya Mineral Processing Proprietary Limited was appointed to conduct the refurbishment
and the future operation of the Coal Handling and Processing Plant. STA Coal Mining Company Proprietary Limited
was appointed to conduct the underground mining, and Trollope Mining is currently responsible for the Roodekop
development and opencast mining.
The Colliery had successfully concluded on the Investec Loan facility which has enable the Colliery to successfully
complete the refurbishment of the CHPP and the mine development during the period.
ROM tonnages for the FY2017 totalled 763 892 tonnes mined, 872 425 of low grade surface coal and 134 379 of
coal treated per toll wash agreement. The total coal available for processing during the period under review totalled
1 681 351 tonnes resulting in a total of 539 695 tonnes of coal sold to market for the FY2017. A revenue per tonne
sold of A$36.76 have been achieved during the year, and a related A$10.8 cash cost per ROM tonne. These costs
are affected by the fact that not all tonnes are mined (tonnes from discard have been rewashed and charges for the
toll wash agreement also included). A more accurate cost per tonne is expected in the FY2018 year contributed by
the more consistent production numbers over the period.
NCC is currently in the process of amalgamating the UCDIV and UCDVIII projects and has already received the
section 11 authorisation from the DMR to move the Mining right previously held within UCDVIII to UCDIV. All other
legal transfers will occur in the next financial year
During the FY2017 the NCC acquired a 29% in the Eloff Mining Company (Pty) Ltd (Eloff Project), a company
incorporated in South Africa. The acquisition price of A$4.35 million has been settled from the Company’s cash
resources. The Eloff Project is the holding company for two prospecting rights, covering an area of 8 168ha. The Eloff
Project owns the surface rights to 6 146.7ha of the project area. These surface rights cover most if not all the areas
identified for the Kangala expansion and the Mining Right application has already been submitted to the DMR.
The acquisition allows Universal the opportunity to consolidate the contiguous resource base of the Eloff project
with Universal’s existing Kangala mine and provides optionality to extend Kangala’s mine life.

Other assets
The Brakfontein project is located in the Delmas district less than 20km from the Kangala Colliery and is fully compliant
with a Mining Right, IWUL and the Environmental Authorisation granted in terms of NEMA. The Brakfontein project
is currently in the tender process for potential off-take agreements and once a favourable contract has been secured
will be the short-term development focus for the Company.

40
 The Berenice and Cygnus Projects remain significant metallurgical coal assets located in the Soutpansberg Coalfield
of the Limpopo Province of South Africa. The Berenice and Cygnus Projects has resources in excess of 1.35 billion
tonnes. A Mining Right application has been submitted over the Berenice project to the authorities in December
2015 and an Environmental Impact Assessment has been commissioned.

Universal Group and Acquisitions

Group cash generated from operations in the year was A$26.3 million (2016: A$10.4 million). Bank balances representing
both unrestricted and restricted cash balances at the year-end totalled A$15.2 million (2016: A$7.6 million). The increase
in cash is due to the positive cash flow generated by the Kangala Colliery and the NCC reaching positive cashflows
towards the end of the financial period. The increase in cash is also post the cash flow of A$4.35 million for the
acquisition of the 29% stake in the Eloff Project.
The Group realised an EBITDA result of A$25 million (2016: A$13.6 million) or 17% of total revenue (2016: 14%). Profit
for the year after taxation of A$4 million (2016: A$16.5 million) has been negatively affected by the loss on disposal of
asset within the NCC to the value of A$9.7 million. The operating profit for the FY2017 shows a significant increase of
136% from the previous year which supports the successful results of the safe and cost-effective mining operations.
The FY2016 profit was enhanced by the gain on bargain purchase of the NCC of A$15.9 million.
During the FY2017 the Group had made a successful application to the British High Court for the reduction of capital
to cancel the share premium account to diminish the retained loss carried at the Group level. Shareholder approval
has been received and ultimately allows the Group to distribute dividends back to shareholders if the group liquidity
and solvency allows for this distribution.
Financial year 2016 has seen a recovery in the South African Rand against the Group’s reporting currency being
the Australian Dollar, leading to a profit reflected under Other Comprehensive Income on exchange differences on
the translation of foreign operations in the amount of A$11.2 million (2016: loss of A$18.4 million). This gain was
accounted for as an increase of the Foreign Currency Translation Reserve account in the Consolidated Statement
of Financial Position.

Markets
Key performance indicators
The key performance indicators that the Directors monitor on a regular basis are:
• ROM tonnages, processing plant yields and sales tonnages;
• revenue per tonne;
• cash cost per run-of-mine tonne (“ROMt”);
• gross margin in percentage and gross margin per sales tonne;
• EBITDA and EBITDA percentage of revenue on a monthly and year-to-date basis; and
• management of liquid resources through regular analysis of working capital requirements, bank balances, stay in
business capital requirements, cash flow forecasts, accounts receivable and accounts payable ageing metrics.

3. PRINCIPAL RISKS
The management of the business and the execution of the Group’s strategy are subject to a number of risks.
Risks are formally reviewed by the Board and appropriate processes put in place to monitor and mitigate them.
If more than one event occurs, it is possible that the overall effect of such events would compound the possible
adverse effects on the Group.
A strategic risk assessment has been conducted and a risk management process to mitigate identified risks that are
applicable has been adopted by the Group.

Universal Coal annual report 2017––––––41

 strategic
report continued

The key business risks affecting the Group are set out below:

Principal risks
Operational risk
Mining operations are subject to hazards normally encountered in exploration, development and production. These
include unexpected geological formations, rock falls, flooding, dam wall failure, regulatory stoppages and other incidents
or conditions which could result in damage to plant or equipment, the environment or interruptions to coal production
and sales and which could impact production throughout. Although it is intended to take adequate precautions to
minimise risk, there is a possibility of a material adverse impact on the Group’s operations and its financial results.
The Group has adopted policies supporting operations at the Kangala and NCC, will maintain policies appropriate
to the stage of development of its various other projects.
Cash flow risk
The Group’s operations have successfully generated sufficient cash flows through the production and sale of coal
and both operations are current self-sustained by their own generated cash flows. Both Kangala and NCC have
obtained debt facilities to finance the original mine development and has to date met all commitments on repayment
of these facilities. Kangala has been able to settle a significant portion of its outstanding shareholders’ loans during
the period and the final settlement of these loans are expected in July 2017. NCC utilised its debt facility to finance
the development and working capital required to commence operations at the Colliery.
The directors regularly review cash flow requirements to ensure the Company can meet financial obligations as and
when they fall due. Corporate costs and corporate funding commitments are currently serviced out of excess cash
generated from operations in the form of managements fees. The Company also expects to receive dividends from
Kangala as soon as the final shareholders’ loans have been settled in full.
The Company has also been able to settle the Susquehanna Pacific (Pty) Ltd converting notes according the
Convertible Note agreement. The Company is in a position to settle these notes in cash when this option is elected
by the indebted party.
Commodity price risk
Factors beyond the control of the Group may affect the marketability of any minerals discovered. Coal prices are
subject to volatile price changes from a variety of factors including international economic and political trends,
expectations of inflation, global and regional demand, currency exchange fluctuations, interest rates and global or
regional consumption patterns, speculate activities and increased production due to improved mining and production
methods. The Group ensures that all projects are subjected to detail feasibility studies to ensure a reasonable level
of confidence appropriate to the circumstance under consideration. All operational feasibility is monitored on an
ongoing basis by applying market forecast prices and indicators to the operational financial models. The Group also
mitigates the risk of commodity price risk by securing long-term off-take agreement.

Other risks
Speculative nature of mineral exploration and development
Development of the Group’s mineral exploration properties is contingent upon obtaining satisfactory exploration
results. Mineral exploration and development involves substantial expenses and a high degree of risk, which even a
combination of experience, knowledge and careful evaluation may not be able to adequately mitigate. The degree of
speculative exploration risk reduces substantially when a Group’s properties move from the exploration phase to the
development phase. The Group mitigates this risk as far as possible by the completion of detailed technical feasibility
studies, environmental impact assessments, the entering into of off-take agreements, detailed due diligence activities
and conducting rigorous Credit Committee evaluations through debt funding arrangements with financial institutions.
The discovery of mineral deposits is dependent upon a number of factors including the technical skill of the exploration
personnel involved. The commercial viability of a coal deposit, once discovered, is also dependent upon a number
of factors, including the size, grade and proximity to infrastructure, coal prices and government regulations, including
regulations relating to royalties, allowable production, importing and exporting of minerals, and environmental protection.
In addition, several years can elapse from the initial phase of drilling until commercial operations are commenced.

42
 Financial instrument risk
The Company and Group are exposed to risks arising from financial instruments held. These are discussed in note 31.
Strategic risk
Significant and increasing competition exists for mineral acquisition opportunities throughout the world. As a result,
the Group may be unable to acquire rights to exploit additional attractive mining properties on terms it considers
acceptable. Accordingly, there can be no assurance that the Group will acquire any interest in additional operations
that would yield reserves or result in commercial mining operations. The Group expects to undertake sufficient due
diligence where warranted to help ensure opportunities are subjected to proper evaluation.
Commercial risk
The mining industry is competitive and there is no assurance that, even if commercial quantities of coal are discovered,
a profitable market will exist for the sale of such coal. There can be no assurance that the quality of the coal will be
such that the Group’s properties can be mined economically.
Environmental legislation is evolving in a manner which will require stricter standards and enforcement, increased
fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a
heightened degree of responsibility for companies and their officers, Directors and employees.
There is no assurance that future changes in environmental regulation, if any, will not adversely affect the Group’s
operations. Environmental and employee health and safety laws and regulations have tended to become more
stringent over time. Any changes in such laws or in the environmental conditions at the Group’s properties could
have a material adverse effect on the Group’s financial condition, cash flows or results of operations.
Failure to comply with applicable environmental and health and safety laws can result in injunctions, damages,
suspension or revocation of licences and the imposition of penalties. Whilst endeavouring to do so, there can be no
assurance that the Group has been or will be at all times incomplete compliance with such laws, regulations and
permits, or that the costs of complying with current and future environmental and health and safety laws and permits
will not adversely affect the Group’s business, results of operations, financial condition or prospects.
Political risk
Political and regulatory instability has been the cause for major investment uncertainty during the current period.
This has all contributed to the anxiety surrounding investment in the South African mining space. The DMR unveiled
new rules for BEE, including more rigorous ownership requirements, increased expectations on skills development,
and expanded quotas for buying goods and services from black-owned companies. That said though, the Group is
in a fortunate position that it fulfils nearly all obligations in the revised charter in its current format. Nevertheless, at
the time of this report the revised mining charter has been prevented from implementation due to application for a
court to interdict the DMR by the mining houses.

4. NON-CURRENT ASSET CHANGES

Rounding of amounts
All amounts are presented in A$’000 unless otherwise noted.
Details of major changes in the nature of the non-current assets of the Group during the year were as follows:

Universal Coal Development I (Pty) Ltd (Kangala Colliery)

The Kangala Colliery is operating at steady state productions and successfully contributes to the Group by way of
managements fees and repayment of shareholder loans.
There was no change in the Group’s ownership percentage in the year under review.

Universal Coal Development II (Pty) Ltd (Berenice Project)

Universal Coal has applied to the relevant authorities for a Mining Right over the Berenice Project and has commissioned
an Environmental impact Assessment.
There was no change in the Group’s ownership percentage in the year under review.

Universal Coal annual report 2017––––––43

 strategic
report continued

Universal Coal Development III (Pty) Ltd (Brakfontein Project)

The Brakfontein projected is fully regulated with a Mining Right and NEMA (National Environmental Management Act) as
well as a Integrated Water Use Licence. The Company is currently assessing various options regarding mine development
and potential off-takes for this project.
There was no change in the Group’s ownership percentage in the year under review.

Universal Coal Development IV (Pty) Ltd (Roodekop Project) and Universal Coal
Development VIII (Pty) Ltd (NCC)
As Universal Coal and Energy Holdings South Africa (Pty) Ltd has operational control over Universal Coal Development VIII
(Pty) Ltd and Universal Coal Development IV (Pty) Ltd it is exposed to and has rights to variable returns from its involvement
with these entities, and has the ability to affect those returns through its operational control contained in the Operating
and Management Agreement over Universal Coal Development VIII (Pty) Ltd and Universal Coal Development IV (Pty)
Ltd. The investment continues to be accounted for as a subsidiary for the 2017 financial period.
There was no change in the Group’s ownership percentage in the year under review.

Eloff Mining Company (Pty) Ltd (Eloff Project)

During the period, the Universal Coal Development IV (Pty) Ltd acquired a 29% stake in the Eloff Mining Company (Pty)
Ltd, a company incorporated in South Africa. The acquisition price of A$4.35 million has been settled from the Company’s
cash resources. Universal Coal effectively own 14.29% of the Eloff Projects as the Universal Coal Development IV (Pty)
Ltd are held 49% by Universal Coal and 51% by Ndalamo Resources (Pty) Ltd.

Universal Coal Development V (Pty) Ltd (Cygnus Project)

Refer to the Berenice Project (Universal Coal Development II (Pty) Ltd).
There was no change in the Group’s ownership percentage in the year under review.

44
 Universal Coal Development VI (Pty) Ltd
There was no change in the Group’s ownership percentage in the year under review.

Universal Coal Development VII (Pty) Ltd (SPV for additional coal projects)
There was no change in the Group’s ownership percentage in the year under review.

Twin Cities Trading 374 (Pty) Ltd (Darwina Louw 254 IR and Strehla 261 IR application)
There was no change in the Group’s ownership percentage in the year under review.

Epsimax (Pty) Ltd (Vlakvarkfontein 213 IR application)

There was no change in the Group’s ownership percentage in the year under review.

Episolve (Pty) Ltd (Goedgedacht 228 IR application)

There was no change in the Group’s ownership percentage in the year under review.

Bold Moves 1765 (Pty) Ltd (Langsloot Project)

There was no change in the Group’s ownership percentage in the year under review.

Universal Coal Logistics (Pty) Ltd

There was no change in the Group’s ownership percentage in the year under review.

Universal Coal Power Generation (Pty) Ltd

There was no change in the Group’s ownership percentage in the year under review.

5. ENVIRONMENTAL RESPONSIBILITY
The Group recognises that its activities require it to have regard to the potential impact that it, its subsidiaries and
partners may have on the environment. Where mining, exploration and development works are carried out, care is taken
to limit the amount of disturbance and where any such works are required they are carried out as and when required.

6. EVENTS SUBSEQUENT TO REPORTING DATE

Issue of Ordinary Shares
On 17 July 2017, 350 000 converting notes were settled in cash.
On 8 August 2017, 350 000 converting notes were settled in cash.
On 14 September 2017, 350 000 converting notes were settled in cash.
On 26 September 2017, the board of directors declared a final gross cash dividend of A$0.01 (2016: A$ nil) per share
in respect of the year ended 30 June 2017. The dividend is declared in Australia dollar and is subject to shareholder
approval at the annual general meeting for 2017.
On behalf of the Board

Mr John Hopkins OAM

Chairman
26 September 2017

Universal Coal annual report 2017––––––45

 directors’
report
The Directors present their report with the statutory financial statements of the Group and the Company for the year ended
30 June 2017.

1. Review of the business

Please refer to the relevant section contained within the Strategic Report.

2. Financial risk management

Please refer to the relevant section contained within the Strategic Report.

3. The Board of Directors and Officers of the Company

The Board ordinarily meets on a quarterly basis and as and when further required, providing effective leadership
and overall management of the Group’s affairs through the schedule of matters reserved for its decision. These
include the approval of the budget and business plan, major capital expenditure, acquisitions and disposals, risk
management policies and the approval of the financial statements. Formal agendas, papers and reports are sent
to the Directors in a timely manner, prior to the Board meetings. The Board may delegate certain responsibilities to
Board committees and the Chief Executive Officer.
All Directors have access to the advice of the Company Secretary and the ASX Liaison who are responsible for
ensuring that all Board procedures are followed and ASX listing requirements are adhered to. Any Director may
take independent professional advice, in consultation with the Chairman first, at the Company’s expense in the
furtherance of his or her duties.
The names of Directors who held office during the 2017 year are:
Director name Position Nationality
John Hopkins OAM Non-executive Chairman Australian
Henri Bonsma Non-executive Director South African
Carlo Baravalle Non-executive Director British
David Twist Non-executive Director British
Tony Weber Executive Director and Chief Executive Officer South African
Shammy Luvhengo Executive Director South African
Nonkululeko Nyembezi Non-executive Director South African
Andries Engelbrecht Non-executive Director South African

The composition of the Board reflects a wealth of minerals exploration and mine development experience.
The Company Secretary is Benjamin Harber (United Kingdom) and the ASX Liaison Officer is Emma Lawler (Australia).

46
4. Directors’ meetings
The Company held 4 (four) Board meetings during the course of the year and the number of meetings attended by
each of the Directors of the Company during the year to 30 June 2017 are:
Number
of meetings Number
eligible to of meetings
Director name Position attend attended
John Hopkins OAM Non-executive Chairman 4 3
Henri Bonsma Non-executive Director 4 4
Carlo Baravalle Non-executive Director 4 3
David Twist Non-executive Director 4 4
Tony Weber Executive Director and Chief Executive Officer 4 4
Shammy Luvhengo Executive Director 4 4
Nonkululeko Nyembezi Non-executive Director 4 4
Andries Engelbrecht Non-executive Director 4 4

5. Committee meetings
The Company held 2 (two) Audit and Risk Committee meetings during the course of the year and the number of
meetings attended by each of the members during the year to 30 June 2017 are:
Number
of meetings Number
eligible to of meetings
Director name Position attend attended
Henri Bonsma Non-executive Director 2 2
John Hopkins OAM Non-executive Director 2 2
Carlo Baravalle Non-executive Director 2 1
Nonkululeko Nyembezi Non-executive Director 2 2

The Company held 2 (two) Remuneration Committee meetings during the course of the year and the number of
meetings attended by each of the members during the year to 30 June 2017 are:
Number
of meetings Number
eligible to of meetings
Director name Position attend attended
Henri Bonsma Non-executive Director 2 2
John Hopkins OAM Non-executive Director 2 2
David Twist Non-executive Director 2 2
Andries Engelbrecht Non-executive Director 2 2

Universal Coal annual report 2017––––––47

 directors’
report continued

6. Dividends
On 26 September 2017, the board of directors declared a final gross cash dividend of A$0.01 (2016: A$ nil) per share
in respect of the year ended 30 June 2017. The dividend is declared in Australia dollar and is subject to shareholder
approval at the annual general meeting for 2017.

7. Going concern
The accounts have been prepared on the going concern basis. At the year-end, the Group had
A$14 460 894 (2016: A$7 048 030) of unrestricted cash reserves and A$724 339 (2016: A$526 594) of restricted cash.
The performance of the Kangala Colliery during the 2017 financial year has demonstrated its ability to generate
sufficient cash flows to support the Colliery project debt repayments, operating costs and to cover the Group
overheads. The Colliery has settled all outstanding shareholder loans post-year-end. The NCC cash flow forecast
proves the ability to generate sufficient cash flow to support the operating cost and debt repayment. The Colliery can
still rely on potential Investec facility drawdowns for development purpose if needed. On this basis, and the detailed
cash flow modelling performed by management, the Directors are therefore satisfied that the Group has adequate
resources to continue as a going concern for a period of not less than 12 months from the date of approval of these
financial statements.

8. Capital structure and share issues

Capital structure at 30 June 2017:
Current issued ordinary share capital (shares) 522 471 758
Converting notes (potential shares) 12 228 125
Outstanding share options (potential shares) 3 300 001

Ordinary share issues during the year

On 7 July 2016, 350 000 converting notes were redeemed in exchange for 2 007 774 Ordinary Shares at an issue
price of A$0.1743 per Ordinary Share.
On 8 August 2016, 171 500 converting notes were redeemed in exchange for 1 486 242 Ordinary Shares at an issue
price of A$0.1154 per Ordinary Share.
On 9 September 2016, 171 500 converting notes were redeemed in exchange for 1 494 694 Ordinary Shares at an
issue price of A$0.1147 per Ordinary Share.
On 10 October 2016, 350 000 converting notes were redeemed in exchange for 2 770 923 Ordinary Shares at an
issue price of A$0.1263 per Ordinary Share.
On 14 November 2016, 350 000 converting notes were redeemed in exchange for 2 537 077 Ordinary Shares at an
issue price of A$0.1380 per Ordinary Share.
On 12 December 2016, 350 000 converting notes were redeemed in exchange for 2 658 261 Ordinary Shares at an
issue price of A$0.1317 per Ordinary Share.
On 3 June 2017, 22 474 315 unlisted options issued to Susquehanna Pacific (Pty) Ltd have expired.

48
9. Remuneration report
This report outlines the remuneration arrangements in place for Directors and executives of Universal Coal Plc.
The overall strategic aim of Universal Coal Plc’s reward management is to develop and implement the reward policies,
processes and practices required to support the achievement of the organisation’s goals by helping to ensure that
Universal Coal Plc has the ability to attract and retain competent, well-motivated and committed people.
The philosophy underpinning the strategy is that people should be rewarded for the value they create.

Remuneration
Salary/fees
Executive Directors are paid a fixed salary which is paid monthly in arrears per the service agreement for services
rendered as an employee of Universal Coal Plc.
Non-executive Directors are paid a fixed annual fee for acting as a Director of Universal Coal Plc which is paid
monthly in arrears for services rendered as a Director.
Other payments
No other payments are due to Directors (2016: A$ nil).
Share options
As noted with section 10 of the Directors’ report there have been no share options issued to Directors in the year
(2016: A$ nil).
Short-term cash incentives
No additional amounts of cash were paid to Directors as part of the short-term cash incentive scheme for the period
ending June 2017.
Long-term benefits
No long-term benefits were paid during the year (2016: A$ nil).
Termination payments
No termination fees were paid to Directors during the year (2016: A$ nil).

Universal Coal annual report 2017––––––49

 directors’
report continued

Service contracts
Tony Weber
Executive service agreement
• Commencement date is 1 July 2011.
• Salary and Directors’ fees payable from 1 July 2016 are A$392 000 per annum.
• Termination is subject to 12 months’ notice by either party.
Shammy Luvhengo
Executive service agreement
• Commencement date is 1 July 2011.
• Salary and Directors’ fees payable from 1 July 2016 are A$273 000 per annum.
• Termination is subject to three months’ notice by either party.
Henri Bonsma
Non-executive service agreement
• Commencement date is 1 December 2009.
• Directors’ fees payable from 1 July 2016 are A$80 000 per annum.
• Consultancy fees are payable at the rate of $1 355 per day with a maximum of five days per month (paid to
service company).
• Termination is subject to three months’ notice by either party.
John Hopkins OAM
Non-executive service agreement
• Commencement date is 1 September 2010.
• Directors’ fees payable from 1 July 2016 are A$118 000 per annum.
• Termination is subject to three months’ notice by either party.
David Twist
Non-executive service agreement (paid to African Minerals Exploration and Development GP SARL)
• Commencement date is 7 January 2013.
• Directors’ fees payable from 1 July 2016 are A$80 000 per annum.
• Termination is subject to CDH’s discretion and along terms contained within a Subscription Agreement or by a
shareholders’ resolution to remove.
Carlo Baravalle
Non-executive service agreement (paid to African Minerals Exploration and Development GP SARL)
• Commencement date is 7 January 2013.
• Directors’ fees payable from 1 July 2016 are A$80 000 per annum.
• Termination is subject to CDH’s discretion and along terms contained within a Subscription Agreement or by a
shareholders’ resolution to remove.
Nonkululeko Nyembezi
Non-executive service agreement (paid to IchorCoal N.V.)
• Commencement date is 16 October 2014.
• Directors’ fees payable from 1 July 2016 are A$80 000 per annum.
• Termination is subject to IchorCoal’s discretion and along terms contained within a Subscription Agreement or by
a shareholders’ resolution to remove.

50
Andries Engelbrecht
Non-executive service agreement (paid to IchorCoal N.V.)
• Commencement date is 16 October 2014.
• Directors’ fees payable from 1 July 2016 are A$80 000 per annum.
• Termination is subject to IchorCoal’s discretion and along terms contained within a Subscription Agreement or by
a shareholders’ resolution to remove.

Post-employment benefits
Directors do not receive retirement benefits in any form upon termination of their employment or service.

Directors’ remuneration, Company and consolidated

Details of the nature and amount of each element of remuneration of each Director, including their names and
executive/non-executive position of Universal Coal Plc are set out in the following tables:
Short-term
benefits
2017 Salary/fees/ Short-term
All figures are stated in Australian Dollars consultancy incentive Total % options
Executive Directors
Tony Weber 392 000 – 392 000 –
Shammy Luvhengo 273 000 – 273 000 –
Non-executive Directors
Henri Bonsma 160 804 – 160 804 –
John Hopkins OAM 118 000 – 118 000 –
David Twist 80 000 – 80 000 –
Carlo Baravalle 80 000 – 80 000 –
Nonkululeko Nyembezi 80 000 – 80 000 –
Andries Engelbrecht 80 000 – 80 000 –
Total 1 263 804 – 1 263 804 –

Short-term
benefits
2016 Salary/fees/ Short-term
All figures are stated in Australian Dollars consultancy incentive Total % options
Executive Directors
Tony Weber 370 000 87 750 457 750 –
Shammy Luvhengo 257 500 61 000 318 500 –
Non-executive Directors
Henri Bonsma 177 483 – 177 483 –
John Hopkins OAM 118 000 – 118 000 –
David Twist 80 000 – 80 000 –
Carlo Baravalle 80 000 – 80 000 –
Nonkululeko Nyembezi 80 000 – 80 000 –
Andries Engelbrecht 80 000 – 80 000 –
Total 1 242 983 148 750 1 391 733 –

Universal Coal annual report 2017––––––51

 directors’
report continued

10. Share options

No share options were issued to Directors during the year (2016: nil).

11. Directors’ interests

Number of fully paid Share options
Director name ordinary shares outstanding
Tony Weber 9 518 489 –
Henri Bonsma 5 701 392 –
John Hopkins OAM 40 000 –
Shammy Luvhengo 2 200 000 –
David Twist1 – –
Carlo Baravalle1 – –
Nonkululeko Nyembezi2 – –
Andries Engelbrecht2 – –

Notes:
1. Nominated director of Coal Development Holding B.V. with an indirect interest of 143 467 056 CDI’s.
2. Nominated director of IchorCoal N.V. with an indirect interest of 151 660 000 CDI’s.

12. Rounding of amounts

The Company is of a kind referred to in ASIC Legislative Instrument 2016/191, issued by the Australian Securities
and Investments Commission relating to the “rounding off” of amounts in the Directors’ report. Amounts in the
Directors’ report have been rounded off in accordance with the Class Order to the nearest thousand dollars, or in
certain cases, to the nearest dollar.

13. Directors’ indemnity

The Company has arranged appropriate Directors’ and Officers’ insurance to indemnify the Directors against liability
in respect of proceedings brought by third parties. Such provisions remain in force at the date of this report.

14. Events after the reporting period

Please refer to the relevant section contained with the Strategic report.

52
15. Future developments
The Company anticipates the 2017 financial year will require the Directors and management to focus on the following
potential development activities:
• Obtain additional shares in the Eloff Colliery to allow the Company a majority share of the resource.
• Ensure the Colliery is fully regulated by means of a Mining Right, IWUL and Environmental authorisations.
• Secure off-take agreements for the Brakfontein project and evaluate the implementation of a development strategy
for the project.
• Secure the Mining Right at Berenice/Cygnus and continue with pre-feasibility and environmental studies.

16. Directors’ statement as to disclosure of information to auditors

The Directors who were members of the Board at the time of approving the Directors’ report are listed on page 46.
Having made enquiries of fellow Directors, each of these Directors confirms that:
• To the best of each Directors’ knowledge and belief, there is no information relevant to the preparation of their
report of which the Company’s auditors are unaware; and
• Each Director has taken all the steps a Director might reasonably be expected to take to make himself or herself
aware of any information needed by the Company’s auditors for the purpose of their audit.
On behalf of the Board

Mr John Hopkins OAM

Chairman
26 September 2017

Universal Coal annual report 2017––––––53

 directors’
responsibilities
The directors are responsible for preparing the annual report and the financial statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the directors
are required to prepare the Group financial statements and have elected to prepare the Company financial statements
in accordance with IFRS as adopted by the European Union. Under Company law the Directors must not approve the
financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and
Company and of the profit or loss for the Group and Company for that period.
In preparing these financial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether they have been prepared in accordance with IFRS as adopted by the European Union, subject to any
material departures disclosed and explained in the financial statements;
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will
continue in business; and
• prepare a director’s report, a strategic report and director’s remuneration report which comply with the requirements of
the Companies Act 2006.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to
ensure that the financial statements comply with the Companies Act 2006 and, as regards the Group financial statements,
Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and hence for
taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible
for ensuring that the annual report and accounts, taken as a whole, are fair, balanced, and understandable and provides
the information necessary for shareholders to assess the Group’s performance, business model and strategy.

Website publication
The Directors are responsible for ensuring the annual report and the financial statements are made available on a website.
Financial statements are published on the company’s website in accordance with legislation in the United Kingdom
governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions.
The maintenance and integrity of the company’s website is the responsibility of the Directors. The Directors’ responsibility
also extends to the ongoing integrity of the financial statements contained therein.
The Directors confirm to the best of their knowledge:
• The Group financial statements have been prepared in accordance with IFRS as adopted by the European Union and
Article 4 of the IAS Regulation and give a true and fair view of the assets, liabilities, financial position and profit and
loss of the Group.
• The annual report (including the Directors’ Report and strategic report) includes a fair review of the development and
performance of the business and the financial position of the Group and the parent company, together with a description
of the principal risks and uncertainties that they face.
On behalf of the Board

Mr John Hopkins OAM

Chairman
26 September 2017

54
Index

The reports and statements set out below comprise the consolidated annual financial statements presented to
the shareholders:
Page
Consolidated and Company Statements of Financial Position 56
Consolidated Statement of Profit or Loss and Other Comprehensive Income 57
Consolidated Statement of Changes in Equity 58
Company Statement of Changes in Equity 60
Consolidated and Company Statements of Cash Flows 61
Notes to the Consolidated and Company Annual Financial Statements 62 – 114
Independent Auditors’ Report 115 – 120
ASX additional information 122

A report of the directors has not been prepared as the group is a wholly owned subsidiary of Universal Coal and Energy Holdings
South Africa Proprietary Limited (“UCEHSA”) which is incorporated in South Africa.
The consolidated annual financial statements set out on pages 56 to 114, which have been prepared on the going concern
basis, were approved by the directors on 26 September 2017 and were signed on its behalf by:

Universal Coal annual report 2017––––––55

 consolidated and company
statement of financial position
as at 30 June 2017

Group Company
2017 2016 2017 2016
Note A$’000 A$’000 A$’000 A$’000
ASSETS
Non-current assets
Property, plant and equipment 4 115 149 104 733 – –
Intangible assets 5 45 803 49 362 – –
Investment in subsidiaries 7 – 60 258 60 423
Invest in associated undertakings 8 8 340 6 – –
Loan receivable 9 8 378 6 475 – –
Other financial assets 10 1 293
178 963 160 576 60 258 60 423
Current assets
Inventories 11 5 157 3 118 – –
Trade and other receivable 12 21 353 10 782 2 104 2 841
Cash and cash equivalents (including restricted amounts) 13 15 185 7 575 233 81
41 695 21 475 2 337 2 922
Total assets 220 658 182 051 62 595 63 345
EQUITY AND LIABILITIES
Equity
Share capital 14 44 466 43 374 44 466 43 374
Share premium 14 – 52 941 – 52 941
Reserves 16 (5 570) (12 170) 755 2 498
Retained earnings/(accumulated loss) 49 758 (10 678) 15 403 (42 183)
Attributable to equity holders parent 88 654 73 467 60 624 56 630
Non-controlling interest 7 34 249 32 536
Total equity 122 903 106 003 60 624 56 630
LIABILITIES
Non-current liabilities
Borrowings 17 25 068 19 096 – –
Converting notes 18 1 476 4 891 1 476 4 891
Derivative financial liability 19 277 1 658 277 1658
Deferred tax 20 10 124 9 267 –
Provisions 21 32 341 25 798 –
69 286 60 710 1 753 6 549
Current liabilities
Borrowings 17 6 539 5 215 – –
Trade and other payables 22 21 930 10 123 218 166
28 469 15 338 218 166
Total liabilities 97 755 76 048 1 971 6 715
Total equity and liabilities 220 658 182 051 62 595 63 345

The notes on pages 62 to 114 form part of the financial statements.

The Company has taken advantage of the exemption allowed Signed on behalf of the Board of Directors
under section 408 of the Companies Act 2006 and has not
presented its own statement of comprehensive income in these
financial statements. The Group profit for the year includes a
profit after tax of A$2 251 068 (2016: A$2 080 442), which is Mr John Hopkins OAM
dealt with in the financial statements of the Parent Company. Chairman

The financial statements of Universal Coal Plc, registered number 26 September 2017
4482856, were approved by the Board of Directors and authorised
for issue on 26 September 2017.
56
consolidated statement of profit or loss
and other comprehensive income
for the year ended 30 June 2017

Group
2016 2015
Note A$’000 A$’000
Revenue 149 297 97 581
Cost of sales 24 (121 854) (78 559)
Gross profit 27 443 19 022
Operating expenses (14 753) (13 640)
Operating profit 23 12 690 5 382
Finance income 25 1 776 2 687
Loss on sale of fixed assets (9 725) (2 098)
Foreign exchange loss (14) (16)
Impairment loss – intangible assets 5 – (2 634)
Gain on bargain purchase 6 – 15 872
Gain on acquisition of associated undertaking 3 972 –
Increase/(decrease) in fair value of derivative financial liability 19 1 381 (283)
Finance expenses 26 (6 129) (1 017)
Profit before taxation 3 951 17 893
Taxation 27 49 (1 443)
Profit for the year 4 000 16 450
Other comprehensive income:
Items that may be reclassified
Exchange differences on translating foreign operations 11 157 (18 383)
Other comprehensive income/(loss) for the year net of taxation 11 157 (18 383)
Total comprehensive income/(loss) for the year 15 157 (1 933)
Profit attributable to:
Owners of the parent 5 101 8 556
Non-controlling interest (1 101) 7 894
Profit for the year 4 000 16 450
Total comprehensive (loss)/income attributable to:
Owners of the parent 13 444 (4 740)
Non-controlling interest 1 713 2 807
15 157 (1 933)
Earnings per share
Per share information
Basic earnings per share (c) 32 0.98 1.69
Diluted earnings per share (c) 32 0.98 1.60
The Company profit after tax for the year was A$2 251 068 (2016: loss A$2 080 442)
The notes on page 62 to 114 form part of the financial statements

Universal Coal annual report 2017––––––57

 consolidated statement
of changes in equity
for the year ended 30 June 2017

Foreign
currency
Share Total share translation
Share capital premium capital reserve
A$ '000 A$ '000 A$ '000 A$ '000
Balance at 1 July 2015 42 989 52 605 95 594 (2 800)
Profit for the year – – – –
Other comprehensive income – – – (13 296)
Total comprehensive income for the year – – – (13 296)
Transactions with owners
Conversion of options 104 96 200 –
Conversion of converting notes 281 240 521 –
Transfer between reserves – – – –
Dilution of shareholding in subsidiary – – – –
Other movements within equity 385 336 721 –
Balance at 1 July 2016 43 374 52 941 96 315 (16 096)
Profit for the year – – – –
Other comprehensive income – – – 8 343
Total comprehensive profit for the year – – – 8 343
Transactions with owners – – – –
Conversion of converting notes 1 092 651 1 743 –
Transfer between reserves – (53 592) (53 592) –
Other movements within equity 1 092 (52 941) (51 849) –
Balance at 30 June 2017 44 466 – 44 466 (7 753)
Note 14 14 14 16
The notes on pages 62 to 114 form part of the financial statements.

58
 Retained Total
Convertible Share based earnings/ attributable Non-
instrument payment Total (accumulated to equity controlling
reserve reserve reserves loss) holders of the interest Total equity
A$ '000 A$ '000 A$ '000 A$ '000 group A$ '000 A$ '000 A$ '000
2 053 4 709 3 962 (22 070) 77 486 26 086 103 572
– – – 8 556 8 556 7 894 16 450
– – (13 296) – (13 296) (5 087) (18 383)
– – (13 296) 8 556 (4 740) 2 807 (1 933)

– (163) (163) 163 200 – 200

– – – – 521 – 521
– (2 673) (2 673) 2 673 – – –
– – – – – 3 643 3 643
– (2 836) (2 836) 2 836 721 3 643 4 364
2 053 1 873 (12 170) (10 678) 73 467 32 536 106 003
– – – 5 101 5 101 (1 101) 4 000
– – 8 343 – 8 343 2 814 11 157
– – 8 343 5 101 13 444 1 713 15 157
– – – – – – –
– – – – 1 743 – 1 743
– (1 743) (1 743) 55 335 – – –
– (1 743) (1 743) 55 335 1 743 – 1 743
2 053 130 (5 570) 49 758 88 654 34 249 122 903
16 15 16 7 & 16

Universal Coal annual report 2017––––––59

 company statement
of changes in equity
for the year ended 30 June 2017

Retained
Foreign Share- earnings/
Total currency Convertible based Accu-
Share Share share translation instrument payment Total mulated Total
capital premium capital reserve reserve reserve reserves loss equity
A$’000 A$’000 A$’000 A$’000 A$’000 A$’000 A$’000 A$’000 A$’000
Balance at 1 July 2015 42 989 52 605 95 594 625 – 4 709 5 334 (42 939) 57 989
Loss for the year – – – – – – (2 080) (2 080)
Total comprehensive loss
for the year – – – – – – (2 080) (2 080)
Transactions with owners
Conversion of options 104 96 200 – – (163) (163) 163 200
Conversion of converting
notes 281 240 521 – – – – 521
Transfer between reserves – – – – – (2 673) (2 673) 2 673 –
Other movements within
equity 385 336 721 – – (2 836) (2 836) 2 836 721
Balance at 1 July 2016 43 374 52 941 96 315 625 – 1 873 2 498 (42 183) 56 630
Profit for the year – – – – – – – 2 251 2 251
Total comprehensive
income for the year – – – – – – – 2 251 2 251
Transactions with owners
Conversion of options – – – – – – – – –
Conversion of converting
notes 1 092 651 1 743 – – – – – 1 743
Transfer between reserves – (53 592) (53 592) – – (1 743) (1 743) 55 335 –
Other movements within
equity 1 092 (52 941) (51 849) – – (1 743) (1 743) 55 335 1 743
Balance at 30 June 2017 44 466 – 44 466 625 – 130 755 15 403 60 624
Note 14 14 14 16 15 15 16

The notes on pages 62 to 114 form part of the financial statements.

60
consolidated and company
statements of cash flows
for the year ended 30 June 2017

Group Company
2017 2016 2017 2016
Notes A$’000 A$’000 A$’000 A$’000
Cash flows from operating activities
Cash generated from/(utilised in) operations 28 26 321 10 376 (507) (5 375)
Net cash from operating activities 26 321 10 376 (507) (5 375)
Cash flows from/(used in) investing activities
Acquisition of property, plant and equipment 4 (13 222) (11 421) – –
Sale of property, plant and equipment 4 1 715 1 001 – –
Acquisition of other intangible assets 5 (773) (282) – –
Business acquisition 6 – (7 454) – –
Repayment of capital/(investments in) subsidiaries 7 – – – 6 183
Investments in associated undertakings (4 361) – – –
Purchase of other financial assets (1 293) – – –
Loans to related parties 9 11 – 2 987 –
Transfer (to)/from restricted cash (197) 19 321 – –
Finance income 25 497 709 – 2
Net cash from/(used in) investing activities (17 623) 1 874 2 987 6 185
Cash flows from/(used in) financing activities
Proceeds from share issues, net of share issue expenses 14 – 200 – 200
Draw down from Investec project finance facility 13 130 30 403 – –
Repayment of Investec project finance facility (8 239) (5 154) – –
Repayment of RMB project finance facility – (30 393) – –
Shareholder loan repayment (1 864) (1 462) – –
Transaction costs on Investec project finance facility – (494) – –
Cash settlement of converting notes (1 922) (858) (1 922) (858)
Finance expenses 26 & 29 (2 633) (2 628) (406) (699)
Net cash from/(used in) financing activities (1 528) (10 386) (2 328) (1 357)
Total cash movement for the year 7 170 1 864 152 (547)
Unrestricted cash at the beginning of the year 7 048 6 691 81 628
Effect of exchange rate movement on cash balances 243 (1 507) – –
Total cash and cash equivalents 13 14 461 7 048 233 81
Restricted cash 13 724 527 – –
Total cash and cash equivalents (including restricted cash) 13 15 185 7 575 233 81

The notes on pages 62 to 114 form part of the financial statements.

Universal Coal annual report 2017––––––61

 notes to the consolidated and company
annual financial statements
for the year ended 30 June 2017

1. Significant accounting policies

General information
The Company is domiciled in the UK. The address of the registered office is 60 Gracechurch Street, London,
EC3V 0HR. The registered number of the company is 4482856.

Basis of preparation
The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies
have been consistently applied to all the years presented, unless otherwise stated. Both the Parent Company financial
statements and the Group financial statements have been prepared on a historical cost basis and approved by the
Directors in accordance with International Financial Reporting Standards ("IFRS’s") and IFRIC interpretations, issued
by the International Accounting Standards Board and as adopted by the European Union.

Going concern
The accounts have been prepared on the going concern basis. At the year end the Group had A$14 460 894 (2016:
A$7 048 030) of unrestricted cash reserves and A$724 339 (2016: A$526 594) of restricted cash.
The performance of the Kangala Colliery during the 2017 financial year has demonstrated its ability to generate sufficient
cash flows to support the Colliery project debt repayments, operating costs and to cover the Group overheads. The
Colliery has settled all outstanding shareholder loans post year-end. The NCC cash flow forecast proves the ability to
generate sufficient cash flow to support the operating cost and debt repayment. The Colliery can still rely on potential
Investec facility drawdowns for development purpose if needed. On this basis, and the detailed cash flow modelling
performed by management, the Directors are therefore satisfied that the Group has adequate resources to continue as
a going concern for a period of not less than 12 months from the date of approval of these financial statements.

Functional and presentation currency

Items included in the consolidated annual financial statements of each of the Group entities are measured using
the currency of the primary economic environment in which the entity operates (functional currency). The functional
currency of the South African business operations is ZAR.
The Company’s functional currency is Australian Dollar (“A$”). The consolidated annual financial statements are
presented in Australian Dollar (“A$”), which is the Group’s presentation currency. Further details are provided on the
foreign currency accounting policy in note 1.7

1.1 Basis of consolidation

Business combinations
The Group accounts for business combinations using the acquisition method of accounting. The cost of the
business combination is measured as the aggregate of the fair values of assets acquired, liabilities incurred or
assumed and equity instruments issued. Costs directly attributable to the business combination are expensed as
incurred, except the costs to issue debt which are amortised as part of the effective interest and costs to issue
equity which are included in equity.
The acquiree’s identifiable assets, liabilities and contingent liabilities which meet the recognition conditions of
IFRS 3 Business Combinations are recognised at their fair values at acquisition date.
Contingent liabilities are only included in the identifiable assets and liabilities of the acquiree where there is a
present obligation at acquisition date that arises from past events and its fair value can be measured reliably.

62
 Any difference arising between the fair value and the tax base of the acquiree’s assets and liabilities that give rise
to a taxable or deductible difference result in the recognition of a deferred tax liability or asset.
Non-controlling interest arising from a business combination is measured either at their share of the fair value of
the assets and liabilities of the acquiree or at fair value. The treatment is not an accounting policy choice but is
selected for each individual business combination and disclosed in the note for business combinations.
Goodwill is not amortised but is tested on an annual basis for impairment. If goodwill is assessed to be impaired,
that impairment is not subsequently reversed.
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to or has rights to
variable returns from its involvement with the entity and has the ability to affect those returns through its power over
the entity. A parent entity has power over the subsidiary, when it has existing rights to direct the relevant activities
of the subsidiary. The relevant activities are those which significantly affect the subsidiary’s returns. Subsidiaries
are fully consolidated from the date on which control is transferred until the date that the control ceases.
The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group.
Intercompany transactions, balances and unrealised gains on transactions between Group entities are eliminated
on consolidation.
The company’s investments in its subsidiaries are carried at cost, less any impairment recognised.
Non-controlling interest
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group’s
equity. Non-controlling interests consist of the amount of those interests at the date of the original business
combination and the non-controlling shareholder’s share of changes in equity since the date of the combination.
The non-controlling interests’ share of losses, where applicable, are attributed to the non-controlling interests
irrespective of whether the non-controlling shareholders have a binding obligation and are able to make an
additional investment to cover the losses.
Investment in associates
The Group’s interests in equity-accounted investees comprise interests in associates. Associates are those
entities in which the Group has significant influence, but not control or joint control, over the financial and operating
policies. Interest in associates is accounted for using the equity method. They are initially recognised at cost, which
includes transaction costs. On acquisition of the investment, any difference between the cost of the investment
and the entity’s share of the net fair value of the investee’s identifiable assets and liabilities is recognised as a
gain or loss at the date of acquisition. Subsequent to initial recognition associates include the Group’s share of
the profit or loss and other comprehensive income of the associate, until the date on which significant influence
or joint control ceases.

1.2 Intangible assets

Exploration and evaluation assets
Exploration and evaluation activity involves the search for mineral resources, the determination of technical
feasibility and the assessment of commercial viability of an identified resource. Exploration and evaluation activity
include researching and analysing historical exploration data, gathering exploration data through geophysical
studies, exploratory drilling and sampling, determining and examining the volume and grade of resources, surveying
transportation and infrastructure requirements, conducting market and finance studies and borrowing cost.

Universal Coal annual report 2017––––––63

 notes to the consolidated and company
annual financial statements (continued)
for the year ended 30 June 2017

1. Significant accounting policies (continued)

Exploration and evaluation expenditure for each area of interest is capitalised and carried forward as an asset if:
• such costs are expected to be recouped in full through successful development and exploration of the area
of interest or alternatively by its sale; or
• it is planned to continue with active and significant operations in relation to the area, or at the reporting
period end, the activity has not reached a stage which permits a reasonable assessment of the existence
of commercially recoverable reserves.
Purchased exploration and evaluation assets are recognised as assets at cost of acquisition or at fair value if
purchased as part of a business combination.
Capitalised exploration and evaluation expenditure is recorded as a component of intangible assets.
No amortisation is charged during the exploration and evaluation phase.
Exploration and evaluation assets are transferred to “Mine development assets” once the technical feasibility and
commercial viability of extracting the mineral resource supports the future development of the property and such
development has been appropriately approved. Prior to transferring the exploration and evaluation assets to mine
development assets, an impairment test is completed.

1.3 Property, plant and equipment

Mining assets
Mine assets including capitalised exploration and evaluation expenditures and capitalised mine development
expenditure is stated at cost less accumulated depreciation and less accumulated impairment losses.
Upon transfer of Exploration and evaluation assets to Mine development assets, all subsequent expenditure on
the construction, installation or completion of infrastructure facilities are capitalised. Development expenditure is
net of proceeds from the incidental sale of coal extracted during the development phase.
Stripping costs incurred in the development phase of a mine before production commences are capitalised,
where they give rise to future benefits, as part of the cost of constructing the mine and subsequently amortised
over the life of the mine on a units of production basis.
When a mine construction project moves into the production stage, the capitalisation of certain mine construction
costs ceases and costs are either regarded as part of the cost of inventory or expensed.
Once the project reaches commercial production, all assets included in “Mine development assets” are transferred
to “Mine assets”.
Capital work in progress is disclosed as an asset category of property, plant and equipment, which is measured
at cost and is not depreciated. Capital work in progress consists of capital expenditure less revenue generated
by the project prior to reaching commercial production.

64
Depreciation
Property, plant and equipment is stated at cost less accumulated depreciation and any recognised impairment
losses. Depreciation is charged so as to write off the costs of assets, over their estimated useful lives:
Item Average useful life
Mineral properties Units of production
Development and production assets Units of production
Land rehabilitation asset Units of production
Mine development asset Units of production
Mining infrastructure Units of production
Mine owners assets Units of production
Processing plant Units of production
Deferred stripping costs Units of production
Motor vehicles 4 years straight-line
Furniture and fixtures 5 years straight-line
Computer equipment 3 years straight-line

Depreciation costs calculated using the units of production method are included in cost of sales in the statement
of comprehensive income, as these costs pertain to mining assets while depreciation changes resulting from the
straight lining method are included in operating expenses in the Statement of Comprehensive Income.
The units of production depreciation method refers to the estimated economically recoverable reserves which
are used in determining the depreciation of mine specific assets proportional to the depletion of the anticipated
remaining life of mine production. Each item’s life, which is assessed annually, has limitations resulting from both
its physical life and the present assessment of economically recoverable reserves (proven and probable) to which
the asset is related.
The residual value, useful life and depreciation method of each asset is reviewed at the end of each reporting
period. If the expectations differ from previous estimates, the change is accounted for as a change in accounting
estimate.
The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or
loss when the item is derecognised. The gain or loss arising from the de-recognition of an item of property, plant
and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount
of the item.
Stripping costs
As part of its mining operations, the Group incurs stripping (waste removal) costs both during the development
phase and production phase of its operations. Stripping costs incurred in the development phase of a mine
are capitalised as a stripping activity asset. Stripping costs incurred during the production phase are generally
considered to create two benefits, being either the production of inventory or improved access to the coal to be
mined in the future. Where the benefits are realised in the form of inventory produced in the period, the production
stripping costs are accounted for as part of the cost of producing those inventories.
Where the benefits are realised in the form of improved access to coal to be mined in the future, the costs are
recognised as a non-current asset, referred to as a “stripping activity asset”, if the following criteria are met:
• future economic benefits (being improved access to the coal body) are probable;
• the component of the coal body for which access will be improved can be accurately identified; and
• the costs associated with the improved access can be reliably measured.

Universal Coal annual report 2017––––––65

 notes to the consolidated and company
annual financial statements (continued)
for the year ended 30 June 2017

1. Significant accounting policies (continued)

1.3 Property, plant and equipment (continued)
If one of the criteria is not met, the production stripping costs are charged to the Statement of Comprehensive
Income as operating costs as they are incurred. The stripping activity asset is initially measured at cost, which is
the accumulation of costs directly incurred to perform the stripping activity that improves access to the identified
component of coal, plus an allocation of directly attributable overhead costs.
If the costs of the inventory produced and the stripping activity asset are not separately identifiable, a relevant
production measure is used to allocate the production stripping costs between the inventory produced and the
stripping activity asset. This production measure is calculated for the identified component of the coal body and
is used as a benchmark to identify the extent to which the additional activity of creating a future benefit has
taken place. The stripping activity asset is accounted for as an addition to, or an enhancement of, an existing
asset, being the “Mine asset” in the statement of financial position. The stripping activity asset is subsequently
depreciated using the units of production method over the life of the identified component of the coal body that
became more accessible as a result of the stripping activity. The stripping activity asset is then carried at cost less
depreciation and any impairment losses.

1.4 Financial instruments

Recognition
Financial assets and financial liabilities are recognised when a Group entity becomes a party to the contractual
provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction
costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other
than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from
the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs
directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are
recognised immediately in profit or loss.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability
and of allocating interest over the relevant period. The effective interest rate is the rate that exactly discounts
estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective
interest rate, transaction costs and other premiums or discounts) through the expected life of the instrument, or,
where appropriate, a shorter period, to the net carrying amount on initial recognition.
Income is recognised on an effective interest basis for debt instruments other than those financial assets classified
as at fair value through profit or loss (FVTPL).
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. The Group’s loans and receivables comprise of trade and other receivables and loan
receivable, which are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, less provisions for impairment.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, demand deposits and other short-term highly liquid
investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of
changes in value. These are initially and subsequently recorded at fair value.

66
 Restricted cash
Restricted cash comprises cash balances which are restricted through the granting of security in favour of various
financial institutions.
Other financial assets
Other financial assets comprise of investment policies dedicated as collateral to the funding of the rehabilitation
obligation. These investments are initially measured at cost and subsequently measured at fair value through profit
and loss.
Derivatives
Derivative financial instruments, which are not designated as hedging instruments, consisting of interest rate
swaps and embedded conversion options in convertible loan notes, are initially measured at fair value on the
contract date and are re-measured to fair value at subsequent reporting dates.
Changes in the fair value of derivative financial instruments are recognised in profit or loss as they arise.
Financial assets
Financial assets are classified into the following specified categories: FVTPL, ‘held-to-maturity’ investments,
‘available-for-sale’ (AFS) financial assets and ‘loans and receivables’. The classification depends on the nature
and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases
or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or
sales are purchases or sales of financial assets that require delivery of assets within the time frame established
by regulation or convention in the marketplace.
Financial liabilities
Financial liabilities are initially measured at fair value. Financial liabilities comprise short-term and long-term
interest-bearing borrowings and trade and other payables (excluding income received in advance).
Subsequent to initial measurement, such liabilities are carried at amortised cost using the effective interest method.
Borrowings
Borrowings comprise short-term and long-term interest-bearing borrowings. Premiums or discounts arising
from the difference between the fair value of borrowings raised and the amount repayable at maturity date are
recognised in the consolidated statement of profit or loss as borrowing costs based on the effective interest rate
method.
Derecognition
Financial liabilities are derecognised when the associated obligation has been discharged, cancelled or has
expired.

1.5 Converting notes

The proceeds received on issue of the Group’s convertible debt are allocated into their liability and equity
components. The amount initially attributed to the debt component equals the discounted cash flows using a
market rate of interest that would be payable on a similar debt instrument that does not include an option to
convert. Subsequently, the debt component is accounted for as a financial liability measured at amortised cost
until extinguished on conversion or maturity of the bond. Interest on the debt element of the loan accrete over
the term of the loan. The remainder of the proceeds is allocated to the convertible instrument reserve within
shareholders’ equity, net of income tax effects.
In terms of the Convertible Loan Note Agreement the conversion to ordinary shares takes place at the conversion
price (note 18) per ordinary share. The financial liability is reclassified to equity and no gain or loss is recognised
in profit or loss.

Universal Coal annual report 2017––––––67

 notes to the consolidated and company
annual financial statements (continued)
for the year ended 30 June 2017

1. Significant accounting policies (continued)

1.6 Tax
Current taxation
Current taxes are based on the results shown in the financial statements and are calculated according to local tax
rules, using tax rates enacted or substantially enacted by the end of the reporting period. Current taxation assets
and liabilities are measured at the amount expected to be recovered from or paid to the local taxation authorities.
Deferred tax
Deferred income tax is provided using the balance sheet method on temporary differences between the tax bases
of assets and liabilities and their carrying amounts on the Statement of Financial Position.
Deferred income tax liabilities are recognised for all taxable temporary differences, except:
• where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability
in a transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit; and
• in respect of taxable temporary differences associated with investments in subsidiaries, associates and
interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled by
the parent, investor or joint venturer and it is probable that the temporary differences will not reverse in the
foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, the carry forward of unused
tax credits and any unused tax losses, to the extent that it is probable that taxable profit will be available against
which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses
can be utilised, except:
• where the deferred income tax asset relating to the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss; and
• in respect of deductible temporary differences associated with investments in subsidiaries, associates and
interests in joint ventures, deferred income tax assets are recognised only to the extent that it is probable that
the temporary differences will reverse in the foreseeable future and taxable profit will be available against
which the temporary differences can be utilised.
The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and reduced
to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the
deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at the end of
each reporting period and are recognised to the extent that it has become probable that future taxable profit will
be available to allow the deferred income tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year
when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period.
Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to
set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same
taxable entity and the same taxation authority.
Current and deferred tax relating to items recognised directly in equity is recognised in equity and not in the
Statement of Comprehensive Income.

68
1.7 Foreign currencies
Foreign currency transactions
Items included in the financial statements of each of the Group’s entities are measured using the currency of
the primary economic environment in which the entity operates (the ‘functional currency’). Foreign currency
transactions are translated into the relevant functional currency using the exchange rates prevailing at the date of
the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from
the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognised in the Statement of Profit or Loss.
On consolidation, the results of overseas operations are translated into A$ at rates approximating to those ruling
when the transactions took place. All assets and liabilities of overseas operations, including goodwill arising on the
acquisition of those operations, are translated at the rate ruling at the reporting date. Exchange differences arising
on translating the opening net assets at opening rate and the results of overseas operations at actual rate are
recognised in other comprehensive income and accumulated in the foreign exchange reserve.

1.8 Share-based payments

The Company has granted equity-settled share-based payments in the form of share options and warrants. The
fair value of the incentive granted is recognised as an expense with a corresponding increase in equity. The fair
value is measured at the grant date and spread over the period during which the employees or third parties
become unconditionally entitled to the incentives. When identifiable, the fair value is determined by the value of the
services provided. When a fair value for the services provided cannot be ascertained the fair value is measured
based upon commonly used valuation models.

1.9 Employee benefits

Short-term employee benefits
The cost of short-term employee benefits, (those payable within 12 months after the service is rendered, such as
paid vacation leave and sick leave, bonuses, and non-monetary benefits such as medical care), are recognised in
the period in which the service is rendered and are not discounted.
The expected cost of compensated absences is recognised as an expense as the employees render services that
increase their entitlement or, in the case of non-accumulating absences, when the absence occurs.

1.10 Inventories
Inventories, which includes finished product and run of mine, are stated at the lower of cost of production on the
weighted average basis or estimated net realisable value. Cost of production includes direct labour, other direct
costs and related production overheads. Net realisable value is the estimated selling price in the ordinary course
of business less marketing costs. Net realisable value also incorporates any directly attributable mine general and
administration costs of processing in the case of the run of the mine stockpiles.
Consumables are stated at the lower of cost or net realisable value.

1.11 Revenue
Revenue is recognised to the extent it is probable that the economic benefits will flow to the Group and the
revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding
discounts, rebates and sales taxes or duty.

Universal Coal annual report 2017––––––69

 notes to the consolidated and company
annual financial statements (continued)
for the year ended 30 June 2017

1. Significant accounting policies (continued)

1.11 Revenue (continued)
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership have been
transferred, which is considered to occur as determined by customer offtake arrangements and delivery terms for
the supply of coal. At this point the Group retains neither continuing managerial involvement to the degree usually
associated with ownership nor effective control over the commodities and the costs incurred, or to be incurred, in
respect of the sale can be reliably measured.
Revenue generated from the rendering of toll washing services is recognised for measured tonnages completed
during the financial period.
Revenue generated by any mining operation prior to reaching commercial production is capitalised to the Mine
development asset.

1.12 Borrowing costs

Interest is recognised on a time proportion basis, taking into account the principal outstanding and the effective
rate over the period to maturity. Borrowing costs are expensed as incurred except to the extent that it relates directly
to the construction of property, plant and equipment during the time that it is required to complete and prepare
the asset for its intended use, when it is capitalised as part of property, plant and equipment. Borrowing costs are
capitalised as part of the cost of the asset where it is probable that the asset will result in economic benefit and
where the borrowing cost can be measured reliably. No interest or borrowing costs have been capitalised during
the year.

1.13 Fair value

A number of assets and liabilities included in the Group and Company’s financial statements require measurement
at, and/or disclosure of, fair value. The fair value measurement of the Group and Company’s financial and non-
financial assets and liabilities utilises market observable inputs and data as far as possible. Inputs used in
determining fair value measurements are categorised into different levels based on how observable the inputs
used in the valuation technique utilised are (the ‘fair value hierarchy’):
Level 1: Quoted prices in active markets for identical items (unadjusted).
Level 2: Observable direct or indirect inputs other than Level 1 inputs.
Level 3: Unobservable inputs (i.e. not derived from market data).
The classification of an item into the above levels is based on the lowest level of the inputs used that has a
significant effect on the fair value measurement of the item. Transfers of items between levels are recognised in
the period they occur.
The Group and Company measures a number of financial instruments at fair value. All instruments are categorised
as level 3, there are no level 1 or level 2 instruments.
For more detailed information in relation to the fair value measurement of the items above, please refer to note 31.

1.14 Short-term and long-term loans

Finance income on loans receivable are accrued on a timely basis using the effective interest method, which
exactly discounts estimated future cash flows through the expected life of the financial asset, to which the finance
income derived, to its net carrying value.
Finance income during the year related to bank interest received and interest on the Ndalamo loan accrued.
The impact of discounting was immaterial.
Interest income and expense are reported on an accrual basis.

70
1.15 Provisions
Rehabilitation provisions
The Group records the present value of estimated costs of legal and constructive obligations required to restore
mining and other operations in the period in which the obligation is incurred. The nature of these restoration
activities includes dismantling and removing structures, rehabilitating mines and tailings dams, dismantling
operating facilities, closure of plant and waste sites, and restoration, reclamation and revegetation of affected
areas. The obligation generally arises when the “Mine development asset” is installed or the ground/environment
is disturbed at the mining production location.
The provision is discounted using a current market-based pre-tax discount rate. Over time, the discounted liability
is increased for the change in present value based on the discount rates and the unwinding of the discount is
included in finance expenses. The provision is reviewed on an annual basis for changes to obligations, legislation
or discount rates that impact estimated costs or lives of operations.
At the time of establishing the provision, a corresponding asset is capitalised by increasing the carrying amount
of the related mine assets. The cost of the related asset is adjusted for changes in the provision resulting from
changes in the estimated cash flows or discount rate and the adjusted cost of the asset is depreciated prospectively.
Additional disturbances or changes in rehabilitation costs are recognised as additions to the corresponding mine
assets and rehabilitation liability when they occur. Any reduction in the rehabilitation liability and, therefore, any
deduction from the asset to which it relates, may not exceed the carrying amount of that asset. If it does, any
excess over the carrying value is taken immediately to profit or loss. If, for mature mines, the revised mine assets
net of rehabilitation provisions exceeds the recoverable value, that portion of the increase is charged directly to
expense.
Costs related to restoration of site damage (subsequent to start of commercial production) which is created on
an ongoing basis during production are provided for at their net present values and recognised in profit or loss as
extraction progresses.
For closed sites, changes to estimated costs are recognised immediately in profit or loss.

1.16 Share capital and equity

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all
of its liabilities.
Ordinary shares are classified as equity.

1.17 Preferred shares

Where the contractual terms of preferred shares do not meet the definition of a financial liability, they are recognised
in equity. If the contractual terms meet the financial liability definition the preferred shares will be accounted for
in terms of accounting policy 1.4. The preferred shares are convertible in to ordinary shares at the election of the
holder, in the ratio of one preferred share to one ordinary share.

Universal Coal annual report 2017––––––71

 notes to the consolidated and company
annual financial statements (continued)
for the year ended 30 June 2017

1. Significant accounting policies (continued)

1.18 Judgements made in applying accounting policies and key sources of
estimation uncertainty
The significant judgements made by management in applying the Group’s accounting policies and the key sources
of estimation were:
Impairment of intangible assets and property, plant and equipment (note 4 and 5)
In formulating accounting policies the Directors are required to apply their judgement, and where necessary
engage professional advisors, with regard to the impairment review assumptions used in assessing the carrying
value of its assets.
These assets of the Group are subject to periodic review by the Directors.
Property, plant and equipment (note 4)
Property, plant and equipment primarily consists of mining assets at the Kangala and NCC. The Group assesses
each asset or cash-generating unit (“CGU”) in each reporting period to determine whether any indication of
impairment exists. These assessments require the use of estimates and assumptions such as commodity prices,
discount rates, operating costs, future capital requirements, closure and rehabilitation costs, exploration potential,
reserves and resources and operating performance. These estimates and assumptions are subject to risk and
uncertainty. Therefore, there is a possibility that changes in circumstances will impact these projections, which
may impact the recoverable amount of assets and/or CGUs.
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried
out on the smallest group of assets to which it belongs for which there are separately identifiable cash flows.
Estimated economically recoverable coal reserves at the Kangala and NCC are used in determining the
depreciation of mine specific assets proportional to the depletion of the anticipated remaining life of mine
production. Each item’s life, which is assessed annually, has limitations resulting from either its physical life or
the present assessment of economically recoverable reserves to which the asset is related. This requires the
use of estimates and assumptions, including the amount of recoverable reserves and estimates of future capital
expenditure, as explained in more detail below under coal resource estimate.
Intangible assets (note 5)
The application of the Group’s accounting policy for exploration and evaluation expenditure requires estimates and
assumptions to determine whether future commercial exploitation or sale are likely. This requires management
to make certain estimates and assumptions about future events or circumstances, in particular, whether an
economically viable extraction operation can be established. Exploration and evaluation assets are assessed by
management for impairment when there are facts and circumstances that suggests that the carrying amount of
an exploration and evaluation asset may exceed its recoverable amount.
Management considers the following indicators in assessing if an impairment test is required:
• the period for which the Group has the right to explore in the specific area has expired during the period or
will expire in the near future, and is not expected to be renewed.
• substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is
neither budgeted nor planned.
• exploration for and evaluation of mineral resources in the specific area have not led to the discovery of
commercially viable quantities of mineral resources and the Group has decided to discontinue such activities
in the specific area.
• sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the
carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful
development or by sale.

72
In the event that an impairment indicator is identified by management the recoverable amount of the exploration
and evaluation asset is required to be determined. The determination of the recoverable amount requires the use
of valuation estimates, judgments and assumptions such as techniques and methodologies contained within
competent person’s reports, commodity prices, discount rates, future capital requirements, exploration potential
and reserves and resources.
These estimates and assumptions are subject to risk and uncertainty and may change if new information
becomes available or if there are significant fluctuations in commodity markets. There is therefore, the possibility
that changes in circumstances will impact these projections, which may impact the recoverable amount of the
intangible asset.
Impairment (note 8)
Coal resource estimate
The Group discloses its coal reserves and resources in accordance with “The Australasian Code for Reporting
of Exploration Results, Mineral Resources and Ore Reserves” (the ‘JORC Code’) which is set by the Australian
Joint Ore Reserves Committee (‘The JORC Committee’). The JORC Committee comprises representatives of
The Minerals Council of Australia (“MCA”), The Australasian Institute of Mining and Metallurgy (The AusIMM), the
Australian Institute of Geoscientists (AIG); as well as representatives of the ASX, the Financial Services Institute
of Australasia and the accounting profession. The JORC Code is a binding standard for Public Reporting and
disclosure in Australasia, applied by appropriately qualified and experienced persons (Competent Persons), and
sets out minimum standards, recommendations and guidelines that requires the use of information relating to
the geological and technical data on the size, depth, shape and grade of the coal body and suitable production
techniques and recovery rates. Further, the JORC Code requires estimates of foreign exchange rates, commodity
prices, future capital requirements and production costs. Due to the change of such information over time as well
as additional data that may be collected, estimates of reserves and resources may change and may subsequently
affect the financial results and positions of the Group, including:
• The carrying value of exploration and evaluation assets, mine properties, and property, plant and equipment
may be affected due to changes in estimated future cash flows, which may result in accelerated depreciation
or impairment.
• Depreciation and amortisation charges in the statement of comprehensive income may change where such
charges are determined using the units of production method, or where the useful life of the related assets
change.
• Provisions for rehabilitation and environmental provisions may change where changes to the reserve
estimates affect expectations about when such activities will occur and the associated cost of these activities.
• Contingent liabilities may change where the level of future obligations and economic outflows are based on
reserve estimates.

Inventories (note 11)

Inventory stockpiles are measured by appropriately qualified persons, applying surveying methodologies, which
consider the size and grade of the coal stockpile. The estimated recovery percentage is based on the expected
processing method. In addition, net realisable value tests are performed at each reporting date and represent the
estimated future sales price of the ROM coal the entity expects to realise when the ROM coal is processed and
sold, less estimated costs to bring the ROM coal to sale.
Judgement is applied in estimating the variables noted above.
Fair value of financial instruments (note 31)
The fair value of financial instruments that are not traded in an active market (for example, over the counter
derivatives) is determined by using valuation techniques. The fair value of interest rate swaps is calculated as the
present value of the estimated future cash flows.

Universal Coal annual report 2017––––––73

 notes to the consolidated and company
annual financial statements (continued)
for the year ended 30 June 2017

1. Significant accounting policies (continued)

1.18 Judgements made in applying accounting policies and key sources of
estimation uncertainty (continued)
The fair value of zero interest converting notes and shareholder loans are calculated as the present value of
the converting loan notes and shareholder loans discounted at market related interest rates from the respective
maturity date.
Rehabilitation provision (note 21)
The Group assesses its mine rehabilitation provision at each reporting date. Significant estimates and assumptions
are made including the extent and costs of rehabilitation activities, technological changes, regulatory changes, cost
increases as compared to the inflation rates and discount rates. Estimates and assumptions may change if new
information becomes available, which could have a material effect on the carrying value of the mine rehabilitation
provision and the related mineral asset.
Recovery of deferred tax assets (note 20)
Deferred tax assets require management to assess the likelihood that the Group will generate sufficient taxable
earnings in future periods, in order to utilise recognised deferred tax assets. This requires estimates of future
taxable income based on forecasted cash flows as well as judgement about the application of existing tax
legislation in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from
estimates, the ability of the Group to realise the net deferred tax assets recorded at the reporting date could be
adversely impacted.
Subsidiaries (note 7)
The Group consolidates certain subsidiaries on the basis of effective control in accordance with IFRS 10.
In assessing control, potential voting rights are only considered if they are substantive. Areas reviewed by the
Group which may evidence effective control include:
• Holding a significant voting interest (even if less than half of the voting rights).
• The ability to establish policies and guide operations through appointing the investee’s senior management.
• The minority shareholders have no participating rights or other preferential rights, excluding standard
protective rights.
• Ownership of a majority of the voting power that participates in the general meetings and ability to appoint
the majority of directors and indirectly, senior management.
Refer to note 7 for specific considerations in assessing control of the various subsidiaries.
Business combinations (note 6)
The valuation techniques used for measuring the fair value of material assets and liabilities acquired were as
follows:
Assets acquired Valuation technique
Property, plant and equipment Depreciated replacement cost: Depreciated replacement cost reflects adjustment
for physical deterioration as well as functional and economic obsolescence.
Inventories Market realisation value.
Intangible assets Market comparison technique and cost technique.
Reserves Market comparison technique.

Refer to note 6 for specific considerations in the estimates and judgements involved.

74
2. Standards and interpretations
The consolidated annual financial statements have been prepared on the basis of accounting standards, interpretations
and amendments effective at the beginning of the accounting period.

Standards and interpretations effective and adopted in the current year.

The following were amendments to published standards and interpretations to existing standards effective in the year
and adopted by the Group. These new standards and interpretations had no effect on reported results, financial position
or disclosure in the financial statements:
Amendment to IFRS 11 Joint arrangements – acquisition of interests in joint operations
Amendment to IAS 27 Separate financial statements – equity method

New standards and interpretations not yet adopted

The Group has elected not to early adopt the following revised and amended standards, which are not yet mandatory
in the EU. The list below includes only standards and interpretations that could have an impact on the Consolidated
Financial Statements of the Group.
Annual periods
Standards Details of amendment beginning on or after
IFRS 9 Financial instruments The complete standard has been issued in July 2014 including 1 January 2018
the requirements previously issued and additional amendments.
The new standard replaces IAS 39 and includes a new expected
loss impairment model, changes to the classification and
measurement requirements of financial assets as well as to
hedge accounting. The effect from the additional disclosure
requirements will be assessed and disclosure will be made once
the Group has fully assessed the impact of applying IFRS 9
during FY2018.
IFRS 15 Revenue from The new standard was issued in May 2014 and establishes the 1 January 2018
contracts with customers principles for the measurement, recognition and disclosure of
useful information in the financial statements in respect of
contracts with customers. The company has only two contracted
customers to consider and will allow for the additional disclosure
as required in IFRS. The company will fully assess the impact
during the FY2018.
IFRS 16 Leases The new standard sets out the principles for the recognition, 1 January 2019
measurement, presentation and disclosure of leases for both
parties to a contract, i.e. the customer (‘lessee’) and the supplier
(‘lessor’). The effect from the additional disclosure requirements
will be assessed and disclosure will be made once the Group has
fully assessed the impact of applying IFRS 16 during the FY2018

Universal Coal annual report 2017––––––75

 notes to the consolidated and company
annual financial statements (continued)
for the year ended 30 June 2017

3. Segmental reporting
All investments in associates and subsidiaries operate in one geographical location being South Africa, and are
organised into three business units from which the Group’s expenses are incurred and revenues are earned, being
(1) for the exploration and development of coal, (2) mining and sale of coal and (3) corporate activities. The reporting
on these investments to the Chief Operating Decision Makers, the Board of Directors, focuses on the on the key
performance indicators that the Directors monitor on a regular basis which are:
• ROM tonnages, processing plant yields and sales tonnages
• Revenue per tonne
• Cash cost per run-of-mine tonne (ROMt)
• Gross margin in percentage and gross margin per sales tonne
• Management of liquid resources through regular analysis of working capital requirements, bank balances, stay
in business capital requirements, cash flow forecasts, accounts receivable and accounts payable ageing metrics.

The NCC mining operations effectively commenced during the period, thus the mining and sale of coals: NCC represents
a new operating segment in the period.
The non-current assets relating to the capitalisation expenditure associated with the coal projects are located in South
Africa. All corporate expenditure, assets and liabilities relate to incidental operations carried out in the United Kingdom,
Australia and South Africa.
Mining and Mining and Exploration and
sale of coal: sale of coal: development Corporate
For the year ended Kangala NCC of coal (Unallocated) Total
30 June 2017 A$’000 A$’000 A$’000 A$’000 A$’000
Revenue 129 297 20 000 – – 149 297
Cost of sales (100 461) (21 393) – – (121 854)
Cost of sales – depreciation (12 265) (1 692) – – (13 957)
Cost of sales excluding
depreciation (88 196) (19 701) – – (107 897)
Gross profit 28 836 (1 393) – – 27 443
Operating expenses (6 812) (3 089) (102) (4 750) (14 753)
Finance income 330 109 – 1 337 1 776
Foreign exchange loss – – – (14) (14)
Finance expenses (3 142) (2 332) – (655) (6 129)
Loss on sale of fixed assets – (9 725) – – (9 725)
Gain on acquisition of
associated undertaking – 3 972 – – 3 972
Increase in fair value of
derivative financial liability – – – 1 381 1 381
Profit/(loss) before taxation 19 212 (12 458) (102) (2 701) 3 951
Taxation (4 390) 4 439 – – 49
Profit/(loss) after taxation 14 822 (8 019) (102) (2 701) 4 000
Total non-current assets 40 280 74 812 54 945 8 926 178 963
Total capital expenditure 1 768 14 929 773 13 17 483
Total assets 66 210 90 043 55 580 7 989 220 658
Total liabilities (46 167) (50 535) (27) (1 026) (97 755)

Revenue to the value of A$122 156 001 (2016: A$26 850 459) was received from Eskom Holdings SOC Limited and
Glencore Plc respectively.

76
All revenues were earned in South Africa.
Exploration
Mining and
and development Corporate
sale of coal of coal (Unallocated) Total
For the year ended 30 June 2016 A$’000 A$’000 A$’000 A$’000
Revenue 95 491 2 090 – 97 581
Cost of sales (76 633) (1 926) – (78 559)
Cost of sales – depreciation (6 494) – – (6 494)
Cost of sales excluding depreciation (70 139) (1 926) – (72 065)
Gross profit 18 858 164 – 19 022
Operating expenses (4 338) (2 896) (6 406) (13 640)
Finance income 200 207 2 280 2 687
Foreign exchange loss – – (16) (16)
Impairment of intangible asset – (2 634) – (2 634)
Finance expenses (4 591) 4 521 (947) (1 017)
Loss on sale of fixed assets – (2 098) – (2 098)
Gain on bargain purchase 15 872 15 872
Increase in fair value of derivative financial liability – – (283) (283)
Profit/(loss) before taxation 10 129 13 136 (5 372) 17 893
Taxation (2 004) 561 – (1 443)
Profit/(loss) after taxation 8 125 13 697 (5 372) 16 450
Total non-current assets 45 919 106 486 8 171 160 576
Total capital expenditure 7 900 3 778 25 11 703
Total assets 59 219 113 989 8 843 182 051
Total liabilities (40 611) (28 722) (6 715) (76 048)

Revenue to the amount of A$70 949 000 was received from a single customer, being Eskom Holdings SOC Limited.

Universal Coal annual report 2017––––––77

 notes to the consolidated and company
annual financial statements (continued)
for the year ended 30 June 2017

4. Property, plant and equipment

2017 2016
Accumulated Carrying Accumulated Carrying
Cost depreciation value Cost depreciation value
Group A$’000 A$’000 A$’000 A$’000 A$’000 A$’000
Mine development 12 361 (4 961) 7 400 10 510 (2 768) 7 742
Mining infrastructure 13 479 (5 207) 8 272 10 739 (2 804) 7 935
Processing plant 48 808 (6 897) 41 911 49 396 (3 226) 46 170
Mine owners’ assets 15 280 (2 508) 12 772 10 087 (1 317) 8 770
Mineral properties 8 545 (1 609) 6 936 7 783 (908) 6 875
Development and production assets 23 423 (2 751) 20 672 13 019 (1 264) 11 755
Land rehabilitation asset 7 155 (1 565) 5 590 3 340 (941) 2 399
Furniture and fixtures 46 (36) 10 40 (30) 10
Computer equipment 189 (108) 81 116 (67) 49
Motor vehicles 1 000 (232) 768 239 (123) 116
Capital work in progress 4 136 – 4 136 5 580 – 5 580
Deferred stripping costs 8 965 (2 364) 6 601 8 165 (833) 7 332
Total 143 387 (28 238) 115 149 119 014 (14 281) 104 733

Reconciliation of property, plant and equipment

Foreign
Opening exchange
balance Additions Disposals Transfers movements Depreciation Total
Group 2017 A$’000 A$’000 A$’000 A$’000 A$’000 A$’000 A$’000
Mine development 7 742 – – 820 1 031 (2 193) 7 400
Mining infrastructure 7 935 966 – 722 1 052 (2 403) 8 272
Processing plant 46 170 138 (11 930) 6 362 4 842 (3 671) 41 911
Mine owners’ assets 8 770 – – 4 204 989 (1 191) 12 772
Mineral properties 6 875 – – – 762 (701) 6 936
Development and
production assets 11 755 – – 9 128 1 276 (1 487) 20 672
Land rehabilitation asset 2 399 4 652 (1 165) – 328 (624) 5 590
Furniture and fixtures 10 62 – – (54) (8) 10
Computer equipment 49 2 – – 71 (41) 81
Motor vehicles 116 774 (36) – 23 (109) 768
Capital work in progress 5 580 10 116 – (12 108) 548 – 4 136
Deferred stripping costs 7 332 – – – 798 (1 529) 6 601
104 733 16 710 (13 131) 9 128 11 666 (13 957) 115 149

78
Reconciliation of property, plant and equipment
Additions
through Foreign
Opening business exchange
balance Additions combinations Transfers movements Depreciation Total
Group 2016 A$’000 A$’000 A$’000 A$’000 A$’000 A$’000 A$’000
Mine development 10 626 – – – (1 745) (1 139) 7 742
Mining infrastructure 10 325 481 – – (1 703) (1 168) 7 935
Processing plant 14 050 274 40 676 – (7 273) (1 557) 46 170
Mine owners’ assets 4 398 11 7 431 (800) (1 648) (622) 8 770
Mineral properties 8 532 – – – (1 291) (366) 6 875
Development and
production assets 4 759 – (9 463) – (1 957) (510) 11 755
Land rehabilitation asset 3 555 – – (189) (586) (381) 2 399
Furniture and fixtures 15 1 – (2) (4) – 10
Computer equipment 48 14 – (1) (12) – 49
Motor vehicles 126 626 – (599) (37) – 116
Capital work in progress 2 665 3 509 – – (594) – 5 580
Deferred stripping costs 1 853 6 505 – – (275) (751) 7 332
60 952 11 421 57 570 (989) (17 674) (6 547) 104 733

Pledged as security
On 31 July 2015 Universal Coal entered into new debt financing agreements with Investec Bank Limited (Investec),
acting through its Corporate and Institutional Banking division, replacing the existing banking facilities with Rand
Merchant Bank, a division of FirstRand Bank Limited.
Security over the debt facilities are standard for a facility of this nature, and involve first ranking security over assets,
including bonds over movable and immovable property, mining and surface rights. A project completion guarantee for
NCC has been provided from the parent company; Universal Coal Plc.
Refer to note 17 for changes in security due to new financing facilities.

Universal Coal annual report 2017––––––79

 notes to the consolidated and company
annual financial statements (continued)
for the year ended 30 June 2017

5. Intangible asset
2017 2016
Accumulated Accumulated
amortisation amortisation
and Carrying and Carrying
Project Cost impairment value Cost impairment value
A$’000 A$’000 A$’000 A$’000 A$’000 A$’000
Exploration and
evaluation assets
(held by:)
Universal Coal
Development I (Pty) Ltd Kangala 909 – 909 828 – 828
Universal Coal
Development II (Pty) Ltd Berenice 33 492 (2 634) 30 858 30 337 (2 634) 27 703
Universal Coal
Development III (Pty) Ltd Brakfontein 10 170 – 10 170 9 250 – 9 250
Universal Coal
Development IV (Pty) Ltd Roodekop – – – 8 159 – 8 159
Universal Coal
Development V (Pty) Ltd Cygnus 3 671 – 3 671 3 344 – 3 344
Other intangible assets
Computer software 590 (395) 195 401 (323) 78
Total 48 832 (3 029) 45 803 52 319 (2 957) 49 362

Roodekop has commenced development during the current period and has been transferred to property, plant and
equipment.

Reconciliation of intangible assets – Group 2017

Transfer to
Foreign property,
Project exchange plant and
Project opening Additions movements equipment Amortisation Total
A$’000 A$’000 A$’000 A$’000 A$’000
Universal Coal
Development I (Pty) Ltd Kangala 828 – 81 – – 909
Universal Coal
Development II (Pty) Ltd Berenice 27 703 440 2 715 – – 30 858
Universal Coal
Development III (Pty) Ltd Brakfontein 9 250 14 906 – – 10 170
Universal Coal
Development IV (Pty) Ltd Roodekop 8 159 169 800 (9 128) – –
Universal Coal
Development V (Pty) Ltd Cygnus 3 344 – 327 – – 3 671
Computer software 78 150 7 – (40) 195
49 362 773 4 836 (9 128) (40) 45 803

Reconciliation of intangible assets – Group 2016

Foreign
Project exchange
Project opening Additions movements Amortisation Total
A$’000 A$’000 A$’000 A$’000 A$’000
Universal Coal Development I (Pty) Ltd Kangala 965 – (137) – 828
Universal Coal Development II (Pty) Ltd Berenice 35 237 116 (5 016) (2 634) 27 703
Universal Coal Development III (Pty) Ltd Brakfontein 10 745 34 (1 529) – 9 250
Universal Coal Development IV (Pty) Ltd Roodekop 9 513 – (1 354) – 8 159
Universal Coal Development V (Pty) Ltd Cygnus 3 886 119 (661) – 3 344
Computer software 214 13 (65) (84) 78
60 560 282 (8 762) (2 718) 49 362

80
Supplementary information on intangible assets
The following detailed schedule provides additional information pertaining specifically to the interests held by Universal Coal Plc
in the identifiable Mining Rights (MR) and Prospecting Rights (PR) as at year end:

Size Permit type Expiry %

Project Entity Location Property (hectare) and number date Comment interest
Kangala Universal Coal Delmas Wolvenfontein 244IR: 951 Mining Right: 02/05/2032 Refer to note 70.50
Development I Mpumalanga Portion 1 and RE of MP30/5/1/2/2/429MR 4 for security
(Pty) Ltd Province Portion 2 provided
South Africa
Kangala Universal Coal Delmas Middelbult 235IR: Portions 942 Prospecting Right: 09/07/2017 The renewal of 70.50
Development I Mpumalanga 40 and 82 MP30/5/1/1/2/641PR the prospecting
(Pty) Ltd Province right was
South Africa granted in
July 2014
for a further
three years.
Mining right in
application
Kangala Universal Coal Delmas Modderfontein 236IR: 127 Prospecting Right: 09/07/2017 Relinquished –%
Development I Mpumalanga Portion 1 MP30/5/1/1/2/639PR
(Pty) Ltd Province
South Africa
Berenice Universal Coal Waterpoort Berenice 548 MS; 6 595 Prospecting Right: 19/03/2016 A mining right 50.00
Development II Limpopo Celine 547 MS; LP30/5/1/1/2/37 application was
(Pty) Ltd Province Doornvaart 355 MS; 6PR submitted in
South Africa Portion 1 December 2015
Gezelschap 395 MS; and is pending
Longford 354 MS; Matsuri
358 MS
Brakfontein Universal Coal Delmas Brakfontein 264IR: 879 Mining Right: 07/2034 A mining right 50.29
Development III Mpumalanga Portions 6, 8, 9, 10, 20, MP30/5/1/2/2/1 was granted in
(Pty) Ltd Province 26, 30 and Remaining 0027MR July 2014 for 20
South Africa Extent years.
Execution and
registration
of the right is
pending
Roodekop Universal Coal Kriel Roodekop 63IS 835 Mining Right: 05/02/2034 S102 has 49.00
Development IV Mpumalanga MP30/5/1/1/2/4 been granted
(Pty) Ltd Province 92MR to allow the
South Africa amalgamation
of the NCC
and Roodekop
project. Once
the mining
right has been
executed this
mining right
will be held in
Universal Coal
Development IV
(Pty) Ltd.
Eloff Universal Coal Delmas. Droogfontein 242IR. 8 168 Prospecting Rights: – Acquired 14.20
Development IV Mpumalanga Strydpan 243IR. 788/2007(PR) & during 2017
(Pty) Ltd Province Stompiesfontein 273IR 817/2007(PR) mining right in
South Africa application

Cygnus Universal Coal All Days Cygnus 543MS and 12 299 Prospecting Right: 31/03/2019 Prospecting 50.00
Development V Limpopo adjacent farms LP30/5/1/1/2/12 Right renewal
(Pty) Ltd Province 76PR executed on 29
South Africa June 2016

New Universal Coal Kriel Middeldrift 42 IS (portion 4 125 Mining right: 05/12/2019 S102 has 49.00
Clydesdale Development Mpumalanga 4), Diepspruit 41 IS (RE, MP30/5/1/2/2/148MR been granted
Colliery VIII (Pty) Ltd Province RE of portions 1, 2, 3, to allow the
South Africa portions 7, 8, 9, 10), amalgamation
Rietfontein 43 IS (RE, RE of the NCC
of portion 1, portion 3, M/A and Roodekop
project. Once
2, 3, 4 of RE portion 1),
the mining
Vaalkrans 29 IS (portions
right has been
4, 6, 8, 9, 11, 12, 13, 14, executed this
16, RE of portion 16, M/A mining right
2 of portion 6), Clydesdale will be held in
483 IS, Lourens 472 IS, Universal Coal
Enkelbosch 20 IS (M/A 4 Development IV
and 5) and Haasfontein 28 (Pty) Ltd.
IS (portion 1, M/A 6 and 7
of portion 7)

Universal Coal annual report 2017––––––81

 notes to the consolidated and company
annual financial statements (continued)
for the year ended 30 June 2017

5. Intangible assets (continued)

Size Permit type Expiry %

Project Entity Location Property (hectare) and number date Comment interest
Arnot Universal Coal Arnot. Vlakfontein 166 IS 15 532 Prospecting Right: (Original Renewal of the 50.00
South Development Mpumalanga (RE Ext.. MP30/5/1/1/2/360PR application) prospecting
Project VII (Pty) Ltd Province. portions 2. 5. 8. 9. 10. 13 30/10/2006 right is pending
and the
South Africa and 14); &
acquisition is
Tweefontein 203 IS (RE 29/10/2011 subject to the
Ext. of successful
portion 3. RE Ext. of approval of the
portion 5.RE Prospecting
Ext. of portion 9. RE Ext. Right transfer to
of portion Universal Coal
in accordance
10 and portions 4. 7. 8. 11.
with Section 11
12. 13. of the Mineral
14. 18. 19. 20. 21. 22. 23. and Petroleum
24. 25); Resources
Op Goeden Hoop 205 IS Development
(RE Ext. Act 2002
of portion 2);
Groblersrecht 175 IS
– whole farm; Klipfontein
495 IS
(RE Ext. of MA 1);
Vaalwater 173
IS (portions 10. 12. 14. RE
Ext. of
portion 2); Mooiplaats
165 IS
(portions 4. 11. 12. 13. 15
and 16);
Helpmekaar 168 IS –
whole farm;
Schoonoord 164 IS
(portion 19);
Leeuwpan 494 JS
(portions 7. 8.
9. RE Ext. and RE Ext. of
portion
4); Weltevreden 174 IS
(portions
1. 2 (MA). 4 and
RE Ext);
Nooitgedacht 493 JS
(portions 4 and 9)

During the current period, the Modderfontein prospecting right has been relinquished due to the fact that the project did
not prove to be financially viable. No asset value has been attributed to this right and therefore no impairment has been
incurred. During the prior financial year, the Somerville project was impaired by A$2.63 million as the prospecting right
over the Somerville project area expired and was not capable of further renewal.

82
6. Business combinations Completed in a prior period
During the previous financial period, UCD VIII acquired all of the assets and assumed certain liabilities of NCC from
Exxaro Coal Mpumalanga Proprietary Limited (“Exxaro”). UCEHSA (an intermediary holding company) holds a 49%
interest in UCD VIII and a BEE partner, Ndalamo, holds the balance of 51% of the equity of UCD VIII. Management has
performed a control assessment as required under IFRS 10 Consolidated Financial Statements and concluded that
by virtue of the Operating and Management Agreement (“O&M”) between UCD IV, UCD VIII, UCEHSA and Ndalamo,
UCD VIII is controlled by UCEHSA. UCEHSA is a wholly owned subsidiary of Universal Coal Plc.
The acquisition of NCC will enable the Group to realise synergies from the access to the Roodekop coal reserves that
are located adjacent to NCC. The Roodekop reserves are held by the Group in UCD IV.
In the 11 months to 30 June 2016, UCD VIII through its acquisition of the NCC contributed a profit of A$18.9 million
(ZAR180 million) to the group’s results. This includes a gain on bargain purchase of A$15.9 million (ZAR155 million),
a decrease in the rehabilitation provision of A$6.6 million (ZAR50 million) due to a change in estimate and a loss of
A$3.6 million (ZAR25 million) relating to the trading of coal. In determining these amounts, management has assumed
that the fair value adjustments that arose on the date of acquisition would have been the same if the acquisition had
occurred on 1 July 2015. Management has assessed the additional effect of UCD VIII’s revenue and profit on the group
results, had the acquisition occurred on 1 July 2015, as not being material as the mine was on care and maintenance
and therefore had minimal activity.

Identifiable assets acquired and liabilities assumed

Fair value
Cost uplift Fair value
Note A$’000 A$’000 A$’000
Property, plant and equipment 4 3 907 44 200 48 107
Mining resource 4 1 441 8 022 9 463
Inventory 1 596 1 664 3 260
Environmental rehabilitation provision 21 – (30 331) (30 331)
Deferred tax liability 20 – (7 173) (7 173)
Total fair value of identifiable net assets acquired 6 944 16 382 23 326

Measurement of fair values

NCC’s operations are subject to specific environmental regulations. The Group has conducted an assessment of the
environmental rehabilitation provision arising from these regulations and has recognised an amount, which reflects the
fair value of such liabilities (refer to page 74).

Universal Coal annual report 2017––––––83

 notes to the consolidated and company
annual financial statements (continued)
for the year ended 30 June 2017

6. Business combinations Completed in a prior period (continued)

Consideration transferred
The following table summarises the acquisition date fair value of the consideration transferred:
2016
A$’000
Cash 6 934
Contingent consideration 520
Total consideration transferred 7 454

The original purchase price of A$15 million (ZAR170 million) inclusive of Value Added Taxation, was amended by the
parties to A$6.9 million (ZAR76 million) inclusive of Value Added Taxation, following further negotiation and offset of
the obligation for Exxaro to transfer the rehabilitation trust fund and the assumption of Universal Coal Development VIII
(Pty) Ltd to repair the discard facility.

Contingent consideration
At acquisition date, a condition of sale existed whereby the purchase consideration for the acquisition of the NCC
may or may not have been increased upwards by A$0.5 million (ZAR5.7 million). This condition was dependent on
the DMR and the Department of Water Affairs and Sanitation accepting and unconditionally approving a high-density
polyethylene (plastic) lined solution for the management of the Discard Facility stormwater run-off. The required
approval was subsequently obtained and the contingent consideration was settled in November 2015. The A$0.5 million
represented the acquisition date fair value. Due to the short term between acquisition date and the date of settlement of
the contingent consideration, management does not consider the effects of discounting as material.

Acquisition related costs

The Group incurred acquisition-related costs of A$1 655 618 in legal fees, transfer costs, registration costs, licence fees,
and statutory approval costs. These costs were included in under operating expenses in the financial results.

Gain on acquisition
The gain on business acquisition has been recognised as follows:
2016
A$’000
Consideration transferred 7 454
Fair value of identifiable net assets (23 326)
Gain on acquisition (15 872)

A gain of A$15.9 million has been recognised. Exxaro had previously placed NCC under care and maintenance as NCC
did not fit in with Exaxaro’s strategic plan. Universal Coal purchased NCC from Exxaro in order to realise the synergies
on Universal Coal’s adjacent coal reserves, Roodekop. The gain has been included in a separate line item on the
consolidated statement of profit and loss.

Loss on assets acquired

During FY2017 NCC incurred a loss on the sale of assets of A$9.725 million arising from the sale of underground
mining assets. An underground contract miner was appointed at NCC and has supplied new equipment tailored to the
current underground conditions.

84
7. Investments in subsidiaries
Significant subsidiaries of the Group, which are those with the most significant contribution to the Group’s net profit or
net assets, is currently limited to Universal Coal Development I (Pty) Ltd, Universal Coal Development IV (Pty) Ltd and
Universal Coal Development VIII (Pty) Ltd. The registered office for all subsidiaries are listed as:
467 Fehrsen Street
Brooklyn, 0182, Pretoria
South Africa

Subsidiaries with non-controlling interests

Country of
Subsidiaries incorporation Principal activity Effective interest
2017 2016
% %
Universal Coal and Energy Holdings
South Africa (Pty) Ltd South Africa Mining and energy holding company 100.00 100.00
Bold Moves 1765 (Pty) Ltd South Africa Coal prospecting and mining company 74.00 74.00
Episolve (Pty) Ltd South Africa Coal prospecting and mining company 74.00 74.00
Epsimax (Pty) Ltd South Africa Coal prospecting and mining company 74.00 74.00
Twin Cities Trading 374 (Pty) Ltd South Africa Coal prospecting and mining company 74.00 74.00
Universal Coal Power Generation (Pty) Ltd South Africa Coal prospecting and mining company 100.00 100.00
Universal Coal Development I (Pty) Ltd South Africa Coal prospecting and mining company 70.50 70.50
Universal Coal Development II (Pty) Ltd South Africa Coal prospecting and mining company 50.00 50.00
Universal Coal Development III (Pty) Ltd South Africa Coal prospecting and mining company 50.29 50.29
Universal Coal Development IV (Pty) Ltd South Africa Coal prospecting and mining company 49.00 49.00
Universal Coal Development V (Pty) Ltd South Africa Coal prospecting and mining company 50.00 50.00
Universal Coal Development VII (Pty) Ltd South Africa Coal prospecting and mining company 50.00 50.00
Universal Coal Development VIII (Pty) Ltd South Africa Coal prospecting and mining company 49.00 49.00

The country of incorporation and the principal place of business are the same in all cases.
The investment in the directly held subsidiaries at 30 June was:
2017 2016
A$’000 A$’000
Country of incorporation South Africa South Africa
Class of share Ordinary Ordinary
Portion held of the ordinary shares 100% 100%
Reconciliation of movements for the year:
Balance at beginning of the year 60 423 65 162
Repayment of capital from subsidiary (165) (4 739)
Total carrying value at the end of the year 60 258 60 423

Control considerations where 50% or less of share capital held:

Universal Coal Development IV (Pty) Ltd
During the previous financial period, Ndalamo subscribed for an additional 102 shares in UCD IV for the amount of
ZAR40 million (A$3.6 million). Ndalamo settled the subscription price through effecting a draw down under the Term
Loan Agreement with UCEHSA. The Ndalamo Ltd loan is secured through a share pledge, bears interest at prime plus
1% per annum and is fully repayable by 30 June 2020 in varying capital installments. The balance of the equity share
capital post the subscription represented 49% or 148 shares being held by UCEHSA.

Universal Coal annual report 2017––––––85

 notes to the consolidated and company
annual financial statements (continued)
for the year ended 30 June 2017

7. Investments in subsidiaries (continued)

The Ndalamo loan interest rate has been reduced during the current year. The original loan agreement included a loan
interest of prime plus 7.5%. Although the Group owns less than 50% of UCD IV, management has determined that the
Group controls the entity because UCEHSA manages and directly controls the entity by virtue of an Operating and
Management agreement, receiving substantially all of the returns related to their operations and net assets and has the
current ability to direct the entities activities that most significantly affect these returns. The relevant activities are the
mining, processing and selling of coal.
As UCEHSA has operational control over UCD IV and is exposed to and has rights to variable returns from its involvement
with UCD IV and has the ability to affect those returns through its operational power over UCD IV, the Company has
been accounted for as a subsidiary for the 2016 financial period.
Universal Coal Development ll (Pty) Ltd
Although the Group owns 50% of Universal Coal Development II (Pty) Ltd, management has determined that the
Group controls the entity because within the shareholder arrangement UCEHSA has an option to purchase a further
24% of shares in Universal Coal Development II (Pty) Ltd. UCEHSA has the practical ability to exercise the option
as no restriction exists on the exercise of the option. This potential voting right has therefore, been considered to be
substantive and has been included in management’s assessment as to whether UCEHSA has control.
Universal Coal Development V (Pty) Ltd
Although the Group owns 50% of Universal Coal Development V (Pty) Ltd, management has determined that the Group
controls the entity because UCEHSA has an option to exercise a further 24% share purchase and has the practical
ability to exercise the option as no restriction exists on the exercise of the option. Therefore, the right to exercise this
option is considered substantive and has been included in management’s assessment as to whether UCEHSA has
control.
Universal Coal Development VII (Pty) Ltd
Although the Group owns 50% of Universal Coal Development VII (Pty) Ltd, management has determined that the
Group controls the entity because the chairman of the Board of Universal Coal Development VII (Pty) Ltd, who has
the casting vote at Directors meetings is a Director of and appointed by UCEHSA. The Board is responsible for the
management of Universal Coal Development VII (Pty) Ltd.
Universal Coal Development VIII (Pty) Ltd
Although the Group owns less then 50% (49%) of Universal Coal Development VIII (Pty) Ltd, management has
determined that the Group controls the entity because UCEHSA manages and directly controls the entity by virtue of
an Operating and Management agreement, receiving substantially all of the returns related to their operations and net
assets and has the current ability to direct the entities activities that most significantly affect these returns. The relevant
activities are the mining, processing and selling of coal.

86
The following tables summarise the information relating to each of the Group’s material subsidiaries that has a material
Non-controlling interest (“NCI”):

Summarised statement of financial position

Carrying
amount
Intra- of non-
NCI Non- Non- group control-
percen- current Current Total current Current Total elimi- ling
tage assets assets assets liabilities liabilities liabilities nations interests
30 June 2017 % A$’000 A$’000 A$’000 A$’000 A$’000 A$’000 A$’000 A$’000
Universal Coal
Development I
(Pty) Ltd 29.50 40 280 25 930 66 210 (29 023) (17 144) (46 167) – 5 239
Universal Coal
Development IV
(Pty) Ltd 51.00 28 507 5 375 33 882 (33 428) (5 037) (38 465) 35 171 5 860
Universal Coal
Development VIII
(Pty) Ltd 51.00 46 305 10 691 56 996 (9 162) (8 104) (17 266) (35 171) (1 455)
Non-controlling
interest in all other
subsidiaries* 24 605
Non-controlling
interest per
statement of
financial position 34 249
* Other non-controlling interests of A$20.9 million relate to UCD II (A$15.4 million) and UCD III (A$5.05 million), and represent the non-controlling interests
of share of exploration assets.

Summarised statement of comprehensive income

Profit/
(loss)
allocated
Profit/ Other Total to non-
NCI (loss) compre- compre- control-
percen- before Tax Profit/ hensive hensive ling
tage Revenue tax expense (loss) income income interest
30 June 2017 % A$’000 A$’000 A$’000 A$’000 A$’000 A$’000 A$’000
Universal Coal Development I
(Pty) Ltd 29.50 129 297 14 222 (4 390) 9 832 – 9 832 2 900
Universal Coal Development IV
(Pty) Ltd 51.00 – (1 440) 7 261 5 821 – 5 821 2 969
Universal Coal Development VIII
(Pty) Ltd 51.00 20 000 (14 657) (2 808) (17 465) – (17 465) (8 907)
Profit or loss allocated to
non-controlling interest of
other subsidiaries 1 937
Total profit or loss allocated
to non-controlling interest (1 101)

Universal Coal annual report 2017––––––87

 notes to the consolidated and company
annual financial statements (continued)
for the year ended 30 June 2017

7. Investments in subsidiaries (continued)

Summarised statement of cash flows
Cash flow Cash flow Net increase/
from from Cash flow (decrease)
NCI operating financing from investing in
percentage activities activities activities cash flow
30 June 2017 % A$’000 A$’000 A$’000 A$’000
Universal Coal Development I (Pty) Ltd 29.50 25 184 (15 331) (2 316) 7 537
Universal Coal Development IV (Pty) Ltd 51.00 (393) 6 125 (7 770) (2 038)
Universal Coal Development VIII (Pty) Ltd 51.00 (1 607) 8 832 (6 114) 1 111
Total 23 184 (374) (16 200) 6 610

Summarised statement of financial position

Carrying
amount
of
non-
NCI Non- Non- control-
percen- current Current Total current Current Total Intra-group ling
tage assets assets assets liabilities liabilities liabilities eliminations interest
2016 % A$’000 A$’000 A$’000 A$’000 A$’000 A$’000 A$’000 A$’000
Universal Coal
Development I
(Pty) Ltd 29.50% 46 109 13 300 59 409 (36 880) (13 452) (50 332) (12 368) 1 801
Universal Coal
Development IV
(Pty) Ltd 51.00% 2 780 3 656 6 436 (273) (268) (541) (273) 2 314
Universal Coal
Development VIII
(Pty) Ltd 51.00% 47 133 2 245 49 378 (36 283) (1 297) (35 753) (5 719) 7 530
Non-controlling
interest in all other
subsidiaries* 20 891
Non-controlling
interest per
statement of
financial position 32 536
* O
 ther non-controlling interests of A$20.9 million relate to UCD II (A$15.4 million) and UCD III (A$5.05 million), and represent the non-controlling
interests of share of exploration assets.

88
Summarised statement of comprehensive income
Profit/
(loss)
allocated
Other Total to non-
NCI Profit compre- compre- control-
percen- before Tax Profit/ hensive hensive ling
tage Revenue tax expense (loss) income income interest
2016 % A$’000 A$’000 A$’000 A$’000 A$’000 A$’000 A$’000
Universal Coal Development I
(Pty) Ltd 29.50 95 197 7 011 (2 004) 5 007 – 5 007 1 387
Universal Coal Development IV
(Pty) Ltd 51.00 – (92) – (92) – (92) (47)
Universal Coal Development VIII
(Pty) Ltd 51.00 2 140 14 260 (561) 14 821 – 14 821 7 559
Profit or loss allocated to
non-controlling interest of
other subsidiaries (1 005)
Total profit or loss allocated to
non-controlling interest 7 894

Summarised statement of cash flows

Net
Cash flow Cash flow Cash flow increase/
NCI from from from (decrease)
Percen- operating financing investing in
tage activities activities activities cash flow
% A$’000 A$’000 A$’000 A$’000
Universal Coal Development I (Pty) Ltd 29.50 11 766 (6 036) (7 336) (5 582)
Universal Coal Development IV (Pty) Ltd 51.00 166 4 697 (1 219) 3 643
Universal Coal Development VIII (Pty) Ltd 51.00 (1 670) 40 787 (37 948) 1 169
Total 10 262 39 448 (46 503) (770)

Universal Coal annual report 2017––––––89

 notes to the consolidated and company
annual financial statements (continued)
for the year ended 30 June 2017

8. Investments in associated undertakings

The group has interests in three associates, of which only one is regarded as individually material. The following table
summarise, in aggregate, the carrying amount and share of profit and other comprehensive income of these individually
immaterial associated undertakings:
% %
ownership ownership Carrying Carrying
interest interest amount amount
2017 2016 2017 2016
Universal Coal Logistics Proprietary Limited 49.00 49.00 11 6
Universal Coal Development VI Proprietary Limited 15.00 15.00 5 –
Eloff Mining Company Proprietary Limited 29.00 – 8 324 –
8 340 6

Carrying amount of investments accounted for using the equity method

2017 2016
A$’000 A$’000
Opening balance 6 12
Acquisition of associated undertaking at cost 4 350 –
Gain on acquisition of associated undertaking 3 972 –
Investment in the period 11 –
Impairment of investment in associate (included in operation expenses) – (5)
Foreign exchange movement in opening balances 1 (1)
Total carrying value at the end of the year 8 340 6

On 30 June 2017, the subsidiary UCD IV acquired 29% of the shares of the Eloff Mining Company (Pty) Ltd and paid
A$4.35 million in cash for the investment. The investment includes the Group’s share of the difference between the
acquisition price and its share of the fair value of the associates net assets on acquisition. The fair value increase mainly
related to the intrinsic market value of the coal resource held by the associate at acquisition. Coal resource valuation are
considered a significant judgement per note 1.18.
All the associate companies are incorporated in South Africa and operate in the coal mining industry.

Summarised financial information of material associates

Group Company
2017 2016 2017 2016
A$’000 A$’000 A$’000 A$’000
Eloff Mining Company Proprietary Limited
Statement of financial position
Assets
Non-current assets 5 652 – – –
Current assets 2 943 – – –
Liabilities
Current liabilities (4 850) – – –
Total net assets 3 745 – – –

90
 Group Company
2017 2016 2017 2016
A$’000 A$’000 A$’000 A$’000
Eloff Mining Company Proprietary Limited
Statement of profit/loss and other comprehensive income
Revenue 659 – – –
Profit from continuing operations 511 – – –

9. Loan receivable
Loans and receivables
Ndalamo Resources Proprietary Limited 8 378 6 475 – –

The loan is secured against a share pledge of Ndalamo’s shares in UCD VIII and UCD IV, bears interest at prime plus
1% per annum and is fully repayable by 30 June 2020 in varying capital installments. The balance above represents
a net amount of A$5.0 million (2016: A$4.6 million) and accumulated interest of A$3.3 million (2016: A$1.9 million).
To date a gross capital amount of A$17.1 million (2016: A$13.5 million) has been loaned to Ndalamo of which
A$12.1 million (2016: A$8.9 million) has been on lent to UCD IV and UCD VIII. On consolidation this amount is offset
against the gross loan balance due to offsetting rights included in the agreements.

10. Other financial assets

Mining rehabilitation guarantees
Opening balance – – – –
Acquired during the year 1 293 – – –
Closing balance 1 293 – – –

Legislation stipulates that all mining operations within South Africa are required to make provision for environmental
rehabilitation during the life of the mine and at closure. In line with this requirement the company entered into policies
with a reputable insurance broker to set aside funds for aforementioned purposes. On the back of these policies the
insurance broker provide the required mining rehabilitation guarantees which are accepted by the DMR. The company
makes annual premium payments towards structured products that will allow the matching of the environmental
rehabilitation liability against company assets over a period of time.
This financial asset comprises the premium paid to the insurer; plus interest; less charges, and claims paid by the
insurer to the company and is measured at amortised cost, as the formula includes the effect of the time value of money.

11. Inventories
ROM stockpiles 2 640 2 191 – –
Coal product stockpiles 1 799 294 – –
Consumable stores 627 561 – –
Diesel on hand 91 72 – –
5 157 3 118 – –

Universal Coal annual report 2017––––––91

 notes to the consolidated and company
annual financial statements (continued)
for the year ended 30 June 2017

12. Trade and other receivables

Group Company
2017 2016 2017 2016
A$’000 A$’000 A$’000 A$’000
Trade receivables 17 727 7 366 2 000 2 800
Deposits 1 8 – –
Financial assets 17 728 7 374 2 000 2 800
Value Added Taxation 1 378 1 457 43 41
Prepayments 2 247 1 951 61 –
21 353 10 782 2 104 2 841

Significant Prepayments: Universal Coal Development VII (Pty) Ltd

On 19 April 2012, Universal Coal & Energy Holdings South Africa Proprietary Limited acquired 1 (one) ordinary share
(50%) of Universal Coal Development VII Proprietary Limited, a special purpose entity formed with the intention of
acquiring additional prospecting rights in South Africa. Because certain conditions precedent still have to be concluded,
the contribution of A$1 732 800 (2016: A$1 574 494) is included in prepayments.

13. Cash and cash equivalents

Cash and cash equivalents consist of:
Bank balances 14 461 7 048 233 81
Restricted cash 724 527 – –
15 185 7 575 233 81

Restricted cash and cash equivalents

Restricted cash and cash equivalents consist of standby equity and security for financial guarantees provided by
financial institutions on behalf of the Group.
Supplier guarantees 724 527 – –
Supplier guarantees
Supplier guarantees have been provided to certain suppliers of Universal Coal Development I (Pty) Ltd and have been
fully secured by a cash balance of A$0.7 million (ZA7.2 million) (2016: A$0.5 million (ZAR5.6 million)).

92
14. Share capital
Issued Group Company
2017 2016 2017 2016
A$’000 A$’000 A$’000 A$’000
522 471 758 (2016: 509 516 787)
Ordinary shares of £0.05 44 466 43 374 44 466 43 374
Share premium – 52 941 – 52 941
44 466 96 315 44 466 96 315
Reconciliation of number of shares issued:
Reported as at 1 July 2016 43 374 42 989 43 374 42 989
Issue of shares – ordinary shares – 6 481 – 6 481
Conversion of debentures – (6 481) – (6 481)
Exercise of share options – 104 – 104
Conversion of convertible notes 1 092 281 1 092 281
44 466 43 374 44 466 43 374
Reconciliation of share premium:
Reported as at 1 July 2016 52 941 52 605 52 941 52 605
Issue of ordinary shares – 6 339 – 6 339
Transfer to reserves* (53 592) – (53 592) –
Conversion of preferred shares – (6 339) – (6 339)
Exercise of share options – 96 – 96
Conversion of convertible notes 651 240 651 240
– 52 941 – 52 941

* During the current financial period, the Company implemented a capital reduction scheme where the share premium account was cancelled and
set off against the accumulated loss. The Company had a Share premium account to the value of A$53 591 657 at June 2017 that is classified as a
distributable reserve. The Reduction in capital has been approved by shareholders and has also been granted by the United Kingdom High Court of
justice on 28 June 2017. The Company now presents a positive distributable reserve instead of an accumulated loss which enables the company to
facilitate future dividend payments.

Universal Coal annual report 2017––––––93

 notes to the consolidated and company
annual financial statements (continued)
for the year ended 30 June 2017

14. Share capital (continued)

Significant changes in the share capital of the Group and Company during the 2017 financial year were as follows:
Number of Cumulative
Ordinary shares Date of issue shares issued shares issued
Opening balance – 509 516 787
Conversion of convertible notes 7 July 2016 2 007 774 511 524 561
Conversion of convertible notes 8 August 2016 1 486 242 513 010 803
Conversion of convertible notes 9 September 2016 1 494 694 514 505 497
Conversion of convertible notes 10 October 2016 2 770 923 517 276 420
Conversion of convertible notes 14 November 2016 2 537 077 519 813 497
Conversion of convertible notes 12 December 2016 2 658 261 522 471 758
Closing balance 522 471 758
During the year, the Company issued 12 954 971 shares to Susquehanna Pacific (Pty) Ltd in redemption of converting notes
received under the Converting Note Agreement (refer to note 18).
Significant changes in the share capital of the Group and Company during the 2016 financial year were as follows:

Opening balance – – 434 465 447

Conversion of preferred shares 14 August 2015 71 220 000 505 685 447
Exercise of share options 8 December 2015 1 000 000 506 685 447
Conversion of convertible notes 19 May 2016 1 876 340 508 561 787
Conversion of loan notes 15 June 2016 955 000 509 516 787
Closing balance 509 516 787

During the prior year, the Company issued 2 831 340 shares to Susquehanna Pacific (Pty) Ltd in redemption of converting notes
received under the Converting Note Agreement (refer to note 18).
Number of Cumulative
Preferred shares Date of issue shares issued shares issued
Opening balance – 71 220 000
Conversion to ordinary shares 14 August 2015 (71 220 000) –
71 220 000

A conversion notice for 71 220 000 preferred shares was received from the holder of the preferred shares and on
14 August 2015, 71 220 000 ordinary shares were converted from preferred to ordinary shares.
Holders of ordinary shares are entitled to dividends as declared from time to time and are entitled to one vote per share
at general meetings of the Company.

94
15. Share-based payments
Share options
The Company has share-based payment arrangements relating to share options granted, which are as below:
2016 grant Expiry date Exercise price Number issued Outstanding 2016
01/04/2013 01/04/2018 A$0.26 3 300 001 3 300 001

2016 grant Expiry date Exercise price Number issued Outstanding 2016
04/06/2012 03/06/2017 A$0.263 16 855 736 16 855 736
04/06/2012 03/06/2017 A$0.275 5 618 579 5 618 579
01/04/2013 01/04/2018 A$0.26 3 300 001 3 300 001
25 774 316 25 774 316

The fair value of the share-based payment is based upon the Black-Scholes formula, a commonly used option pricing
model. The calculation of volatility used in the model is based upon an average of market prices against current market
prices of listed companies operating in the mining industry.
All options are equity settled and it has been assumed that all options will vest.

Group share options

Year ended Year ended
30 June 2017 30 June 2016
Outstanding at start of year 25 774 316 46 090 043
Weighted average exercise price A$ 0.27 A$0.27
Lapsed (22 474 315) (20 315 727)
Weighted average exercise price A$ 0.27 A$0.29
Outstanding at end of year 3 300 001 25 774 316
Exercisable at the end of the year 3 300 001 25 774 316
Exercise date within one year 3 300 001 22 474 315
Weighted average contractual life 1.0 year 1.0 year
Weighted average exercise price A$ 0.26 A$0.27

Share based payments represent the value of unexercised share options to employees. The charge for share options in
the year amounted to A$ nil (2016: A$ nil).

16. Reserves
Share capital relates to the nominal value of the shares issued. The share premium relates to the excess consideration
paid over the nominal value of the shares after deducting related expenses.
The foreign currency translation reserve relates to the foreign exchange effect of the retranslation of the Group’s
overseas subsidiaries on consolidation into the Group’s financial statements.
The share based payment reserve, holds the equity element of the share option transactions adjusted for transfer on
exercise, cancellation or expiry of options.
The convertible instrument reserve consists of the equity component recognised by fair valuing shareholder loans and
converting loan note liabilities. The accumulated loss reserve is the cumulative net losses recognised in the statement
of comprehensive income adjusted for transfer on exercise, cancellation or expiry of options from the share option
reserve.

Universal Coal annual report 2017––––––95

 notes to the consolidated and company
annual financial statements (continued)
for the year ended 30 June 2017

17. Borrowings
Group Company
2017 2016 2017 2016
A$’000 A$’000 A$’000 A$’000
Non-current liabilities
Shareholder’s loans – 2 252 – –
Investec Project Finance Facility 25 068 16 844 – –
25 068 19 096 – –
Current liabilities
Current portion of Investec Project 6 539 5 215 – –
Finance Facility
6 539 5 215 – –
Shareholder’s loan
Mountain Rush Trading 6 Proprietary Limited – 2 252 – –

The above loan is unsecured, interest free and has no specified terms of repayment. In accordance with IAS 39, the
present value of the loan has been calculated at the prime rate of interest in South Africa plus two percent over 1 year
(2016: 2 years), with the present value of the equity component being recognised in a capital contribution reserve.
Finance facilities
Investec Project Finance Facility 31 607 22 059 – –

Investec Project Finance Facilities

On 31 July 2015 Universal Coal entered into new financing agreements with Investec Bank Limited (“Investec”), acting
through its Corporate and Institutional Banking division, replacing the existing banking facilities with Rand Merchant
Bank, a division of FirstRand Bank Limited.
Funds from the Investec facility are available as follows:
• Tranche A: Settlement of the Kangala project finance facility of A$26 million (ZAR285 million plus ZAR5 million for
fees).
• Tranche A: A Working Capital Facility: A$2.2 million (ZAR25 million) facility for working capital for the Kangala Colliery.
• Tranche B: A$19 million (ZAR215 million) facility to fund the balance of capital development activities at NCC.
The Kangala loan bears interest at three-month JIBAR plus 4% p.a. and the NCC loan at three month JIBAR plus
4.5% p.a.
Repayment of Tranche A will follow a quarterly cycle over twenty repayment periods, with interest being serviced
simultaneously. The revolving working capital facility has a tenure of five years and must be repaid at the end of the
period. Repayment of Tranche B will benefit from a repayment holiday for the first 12 months, and sixteen quarterly
repayments will be made thereafter. Interest on this second tranche will be serviced quarterly following drawdown.
Security over the debt facilities are standard for a facility of this nature, and involve first ranking security over assets,
including bonds over movable, immovable, mining and surface rights. A project completion guarantee for NCC was
provided from the parent company; Universal Coal Plc.
Transaction costs (debt issuance costs) of ZAR9.4 million (A$0.9 million) have been settled by utilising the finance
facility. Debt issuance costs are recorded as a deferred charge and amortised over the term of the debt using the
effective interest method.

96
 Investec short-term loan
A short-term uncommitted revolving working capital facility of A$2.2 million (ZAR25 million) has been provided to the
Kangala Colliery by Investec Bank Limited which is secured in line with the security package for the project financing
facility. Interest on the daily outstanding balance is levied at JIBAR plus 4% per annum.
At the end of the year the full working capital facility was undrawn and available for draw down as required.

18. Converting notes

Group Company
2017 2016 2017 2016
A$’000 A$’000 A$’000 A$’000
Held at amortised cost
Susquehanna Pacific (Pty) Ltd 1 476 4 891 1 476 4 891

Converting notes and options issued to Susquehanna Pacific (Pty) Ltd

On 5 April 2012, Universal Coal Plc entered into a binding Converting Note Agreement with Susquehanna Pacific (Pty)
Ltd for 7 000 000 unlisted and secured Converting Notes at a coupon rate of 9.5% per annum and a maturity date of
seven years to be issued together with a maximum of 22 474 315 share options as follows:
7 000 000 unlisted and secured Convertible Notes at a face value of A$1 each and a maximum of 22 474 315 options
(“Tranche A”).
The Tranche A options will be issued at a maximum of:
• 16 855 736 options (low) at an exercise price of A$0.2628 per option with a grant date of 4 June 2012 and an expiry
date of 3 June 2017
• 5 618 579 options (high) at an exercise price of A$0.2745 per option with a grant date of 4 June 2012 and an expiry
date of 3 June 2017
See also note 15: Share-based Payments
Subject to the terms of the Converting Note Agreement, the rate at which Converting Notes convert into CDI shares is
equal to the principal amount outstanding on the Converting Notes divided by the Conversion Price.
The Conversion Price for the Converting Notes is equal to 110% of the Close Price. The Close price is determined as
follows:
Close Price =
(a) A$0.25 per CDI if at any time during an eight-week notice period the five-day VWAP is equal to or greater than
A$0.25 per CDI or
(b) A$0.2336
Specific terms of the Converting Notes:
• Other than a conversion permitted as a result in a change of control or default event, no conversion is permitted for
the first 71/2 months.
• Noteholders are not permitted to hold in excess of 19.99% of the CDI’s in issue. A monthly cap of 5% of the principal
amount of the Converting Notes if they are first ranking in the capital structure of the Company and
• A monthly cap of 10% of the principal amount of the Converting Notes if they are subordinated in the capital structure
of the Company
• Converting Notes may be converted or redeemed if a change of control event occurs
• All outstanding Converting Notes must be converted on the maturity date

Universal Coal annual report 2017––––––97

 notes to the consolidated and company
annual financial statements (continued)
for the year ended 30 June 2017

18. Converting notes (continued)

• If by the date, three years and six months after the Closing Date, the five-day, 10-day and 30-day VWAP on the first
day of the month is equal to or greater than the Conversion Price, the Noteholder may issue a Conversion Notice to
convert as many Converting Notes as it wishes.
• If by the date, three years and six months after the Closing Date, the five-day, 10-day and 30-day VWAP on the first
day of the month is lower than the Conversion Price then the Noteholder must issue a Conversion Notice to convert
between 2.45% and 5% of the Principal being A$7 000 000 or 7 000 000 Converting Notes. Once the Conversion
Notice is issued, Universal Coal may elect to redeem the Converting Notes for cash or convert the Converting Notes
into ordinary share capital by dividing the cash amount that is payable by 90% x lower of the five-day, 10-day and
30-day VWAP on the first day of the month.
• The coupon rate of 9.5% fixed per annum is payable quarterly in arrears in cash or for the first 18 months, in shares
at a 10% discount to the lower of the five-day, 10-day and 30-day VWAP.

Converting notes
During the year converting notes were converted or redeemed as follows:
Outstanding
balance
Date Method Number A$
Opening balance 5 621 000 5 621 000
07/07/2016 Shares issued (350 000) 5 271 000
08/08/2016 Shares issued (171 500) 5 099 500
09/09/2016 Shares issued (171 500) 4 928 000
10/10/2016 Shares issued (350 000) 4 578 000
14/11/2016 Shares issued (350 000) 4 228 000
12/12/2016 Shares issued (350 000) 3 878 000
13/01/2017 Paid cash (350 000) 3 528 000
13/02/2017 Paid cash (350 000) 3 178 000
13/03/2017 Paid cash (171 500) 3 006 500
18/04/2017 Paid cash (350 000) 2 656 500
15/05/2017 Paid cash (350 000) 2 306 500
16/06/2017 Paid cash (350 000) 1 956 500
Closing balance 1 956 500 1 956 500

Converting notes
Group Company
2017 2016 2017 2016
A$’000 A$’000 A$’000 A$’000
Movement in Susquehanna Pacific (Pty) Ltd loan
Opening balance 4 891 6 021 4 891 6 021
Converting notes converted to equity (1 743) (522) (1 743) (522)
Converting notes settled in cash (1 922) (858) (1 922) (858)
Amortised financing cost 250 250 250 250
1 476 4 891 1 476 4 891

98
19. Derivative financial liability
Group Company
2017 2016 2017 2016
A$’000 A$’000 A$’000 A$’000
Opening balances 1 658 1 357 1 658 1 357
(Decrease)/Increase in fair value (1 381) 283 (1 381) 283
Closing balance 277 1 658 277 1 658

Contained within the Susquehanna Pacific (Pty) Ltd Converting Notes is an acceleration option which in the event that
the Universal Coal Plc share price is equal to or above the Conversion Price on or after 30 November 2015, there is
an option to convert all outstanding loan notes. This is considered to be an embedded derivative (“Converting Option”)
contained within the Converting notes.
The Conversion Price is A$0.25696 per share, calculated as 110% of the lower of A$0.2336 and A$0.25. Refer to
note 18: Converting notes.
The fair value of the Converting Option has been determined by using the Black-Scholes option pricing model, a
commonly used option pricing model.
The following key inputs were used in the valuation of the Derivative Financial Liability:
2017 2016
Share price A$0.16 A$0.20
Strike price A$0.25696 A$0.25696
Volatility 67.3% 67.3%
Risk-free rate 1.82% 1.82%
Time to maturity 1.92 years 2.92 years

The indicative fair value of the Converting Option at 30 June 2017 is A$0.0364 (2016: A$0.0758) per option.
There are still 1 956 500 loan notes (with a face value of A$1 each) in issue which are convertible at a price of
A$0.25696. On exercise, this would result in the issue of the total of 7 614 026 new shares. The total indicative fair value
of the Converting Option over these new shares is A$0.28 million (2016: A$1.7 million).

20. Deferred tax

Group
2017 2016
A$’000 A$’000
Reconciliation of deferred tax liability
At beginning of year 9 267 1 745
Foreign exchange adjustments to balance at beginning of the year 908 (205)
Statement of comprehensive income charge (49) 1 443
Net amount raised on the acquisition of NCC – 7 173
Foreign exchange adjustments to spot at year-end (2) (889)
Balance at the end of the year 10 124 9 267
Comprising
Deferred tax liability 20 423 16 589
Deferred tax asset (10 299) (7 322)
Total net deferred tax liability 10 124 9 267

The deferred tax assets and liabilities are offset to determine the amounts stated in the consolidated statements of
financial position when the taxes can be legally offset and will be settled net.

Universal Coal annual report 2017––––––99

 notes to the consolidated and company
annual financial statements (continued)
for the year ended 30 June 2017

20. Deferred tax (continued)

Group
2017 2016
A$’000 A$’000
Deferred tax comprises
Deferred tax liability
– Accelerated capital allowances for tax purposes 10 422 2 917
– Fair value increases in assets not recognised for tax purposes 10 001 13 672
Total deferred tax liability 20 423 16 589
Deferred tax asset
– Tax losses (1 088) –
– Timing difference on rehabilitation provision (9 211) (7 322)
Deferred tax balance from temporary differences other than unused tax losses (10 299) (7 322)
Net deferred tax liability 10 124 9 267

Deferred tax assets of A$10 299 000 (2016: A$7 322 000) have been recognised in respect of tax losses to be utilised
by future taxable profits. The Directors believe it will be probable that these tax assets will be recovered through future
taxable profits generated by the NCC.
All other tax losses carried forward are in entities for which no taxable profit is anticipated to arise in the near future.
No deferred tax asset has been recognised on these losses as there is no certainty that sufficient profits will arise in
future accounting periods from which these losses could be offset. The estimated unrecognised deferred tax asset is
A$9 992 918 (2016: A$5 715 024).

21. Provisions
Reconciliation of provisions
Increase/
(decrease)
in provision Foreign
Opening – change Unwinding of exchange
balance in estimate provision movement Total
Group 2017 A$’000 A$’000 A$’000 A$’000 A$’000
Environmental rehabilitation – Kangala 3 934 (1 165) 386 386 3 541
Environmental rehabilitation – NCC 21 864 2 659 2 135 2 142 28 800
25 798 1 494 2 521 2 528 32 341

Reconciliation of provisions
Decrease in
provision – Foreign
Opening change in Business Unwinding of exchange
balance estimate acquisition provision movement Total
Group 2016 A$’000 A$’000 A$’000 A$’000 A$’000 A$’000
Environmental rehabilitation –
Kangala 4 446 (188) – 320 (644) 3 934
Environmental rehabilitation –
NCC – (6 656) 30 331 2 217 (4 028) 21 864
4 446 (6 844) 30 331 2 537 (4 672) 25 798

100
 The rehabilitation provision relates to the estimated costs of correcting any disturbance relating to mining activities and
those incidental thereto for the Kangala and NCC. The level of provision is commensurate with work completed to date.
The cost of rehabilitation of the Kangala Colliery was estimated at A$4.0 million (ZAR39.5 million) (2016: A$4.6 million
(ZAR50.9 million). The future value of the Kangala provision was calculated by escalating estimated costs at CPI of 6%
per annum over the life of the mine of five years. This amount is discounted at the 10-year South African Government
Bond Rate of 8.94% to arrive at a carrying value of A$3.5 million (2016: A$3.9 million).
The total cost of rehabilitation of NCC underground and opencast mines was estimated at A$35.9 million (ZAR358.7)
(2016: A$30.3 million; ZAR289.7 million).
The future value of the NCC provision was calculated by escalating estimated costs at CPI of 6% per annum over the
life of the mine of 10 years. This amount is discounted at the 10-year South African Government Bond Rate of 8.94% to
arrive at a carrying value of A$28.8 million.
Refer to note 13 for financial guarantee undertaken on the environmental rehabilitation provision.

22. Trade and other payables

Group Company
2017 2016 2017 2016
A$’000 A$’000 A$’000 A$’000
Trade payables 19 083 8 821 181 45
Accrued expenses 2 847 1 302 37 121
Financial liabilities 21 930 10 123 218 166

23. Operating profit

Group
2017 2016
A$’000 A$’000
Operating profit for the year is stated after accounting for the following:
Auditors’ remuneration
Amounts received or due and receivables by BDO (UK) for
The audit of the company’s annual accounts 205 125
Amounts received or due and receivable by related practices of BDO (UK) for
The audit of subsidiary undertakings 96 106
Depreciation on property, plant and equipment 134 181
Amortisation on intangible assets (software) 40 136

24. Cost of sales

Sale of goods
Mining costs 47 946 34 092
Processing costs 14 072 6 024
Materials handling 4 129 2 987
Inventory movement (1 269) (1 419)
Indirect costs 6 560 4 729
Royalties and commissions 657 320
Ancillary costs 7 093 5 341
Depreciation of mining assets 13 957 6 494
Distribution costs 28 709 19 991
121 854 78 559

Universal Coal annual report 2017––––– 101

 notes to the consolidated and company
annual financial statements (continued)
for the year ended 30 June 2017

25. Finance income

Company
2016 2015
A$’000 A$’000
Interest revenue
Bank and fixed deposit interest 497 709
Ndalamo loan interest 1 279 1 978
1 776 2 687

26. Finance expenses

Interest on Investec Project Finance Facility 2 952 3 915
Interest on RMB Project Finance Facility – 273
Unwinding of rehabilitation provisions 2 521 2 537
Converting notes – interest 656 948
Decrease in rehabilitation provision estimate – (6 656)
6 129 1 017

27. Taxation
No provision has been made for 2017 tax as the Group has no taxable income. The estimated tax loss available for set
off against future taxable income is A$35.7 million (2016: A$30.9 million).
For the assessment of the deferred tax asset, refer to note 20.

Analysis of the tax charge

No liability to UK corporation tax arose on ordinary activities for the year ended 30 June 2017 or for the year ended
30 June 2016.

Factors affecting the tax charge

The tax assessed for the year is different to the standard rate of corporation tax in South Africa.
Profit on ordinary activities before tax 3 951 17 893
Tax at the applicable tax rate of 28% (2016: 28%) (1 106) (5 010)
Tax effect of adjustments on taxable income
Non-taxable gain on fair value adjustment of investment in associate 1 112 –
Non-taxable gain on bargain purchase – 4 046
Non-deductible expenses (49) (1 358)
Tax losses utilised 720 415
Under/over provision in previous years – 151
Tax losses not recognised (628) 313
Total taxation 49 (1 443)

102
28. Cash generated from/(utilised in) operations
Group Company
2016 2015 2016 2015
A$’000 A$’000 A$’000 A$’000
Profit/(loss) before taxation 3 951 17 893 2 251 (2 080)
Adjustments for:
Depreciation and amortisation 13 997 6 631 – –
Loss on sale of assets 9 725 2 098 – –
Foreign exchange loss – 16 – 16
Finance income (1 776) (2 687) (2 822) (1 461)
Finance expenses 6 129 1 017 656 948
(Decrease)/increase in fair value of derivative financial liability (1 381) 283 (1 381) 282
Gain on bargain purchase – (15 872) – –
Gain on acquisition of associated undertakings (3 972) – – –
Impairment to intangible assets – 2 634 – –
Changes in working capital:
(Increase)/decrease in inventories (1 732) (1 265) – –
(Increase)/decrease in trade and other receivables (9 516) (2 566) 737 (2 810)
Increase/(decrease) trade and other payables 10 896 2 194 52 (270)
26 321 10 376 (507) (5 375)
29. Significant non-cash transactions
Operating activities
Depreciation and amortisation 13 997 6 631 – –
Loss on sale of assets 9 725 2 098 – –
Impairment of intangible assets – 2 634 – –
Gain on acquisition of associated undertakings (3 972) – – –
19 750 11 363 – –
Investing activities
Finance income accrued (not received in cash at year-end) (1 279) (1 978) (2 822) (1 459)
Additions to tangible fixed assets (3 489) – – –
(4 768) (1 978) (2 822) (1 459)
Financing activities
Finance expenses (accrued not paid in cash at year-end) 3 496 1 611 249 249
Derivative financial liability (1 381) 283 (1 381) 282
2 115 1 894 (1 132) 531

Universal Coal annual report 2017––––– 103

 notes to the consolidated and company
annual financial statements (continued)
for the year ended 30 June 2017

30. Related parties

Relationships
Holding company Universal Coal and Energy Holdings South Africa Proprietary Limited (UCEHSA)
Subsidiaries Universal Coal Development I (Pty) Ltd
Universal Coal Development II (Pty) Ltd
Universal Coal Development III (Pty) Ltd
Universal Coal Development IV (Pty) Ltd
Universal Coal Development V (Pty) Ltd
Universal Coal Development VII (Pty) Ltd
Universal Coal Development VIII (Pty) Ltd
Twin Cities Trading 374 (Pty) Ltd
Epsimax (Pty) Ltd
Episolve (Pty) Ltd
Bold Moves 1765 (Pty) Ltd
Universal Coal Power Generation (Pty) Ltd
Associated undertakings Universal Coal Development VI (Pty) Ltd
Universal Coal Logistics (Pty) Ltd
Black Empowerment Economic Unity Rocks Mining (Pty) Ltd
Partners Mountain Rush Trading 6 (Pty) Ltd
Solar Spectrum Trading 365 (Pty) Ltd
Proper Health (Pty) Ltd
Pacific Breeze Trading 725 (Pty) Ltd
Azaramix Investments (Pty) Ltd
Identity Coal (Pty) Ltd
Ndalamo Resources (Pty) Ltd
Bono Lithihi Investments Group (Pty) Ltd
Other related parties and KEE Enterprises (Pty) Ltd
connected persons Hendrik Bonsma
Coal Development Holding B.V
African Minerals Exploration and Development GP SARL
IchorCoal N.V.
Bonsma Enterprises (Pty) Ltd

Related party balances

Group Company
2017 2016 2017 2016
A$’000 A$’000 A$’000 A$’000
Loan from related parties
Mountain Rush Trading 6 (Pty) Limited – 2 252 – –

Loan to related party

Ndalamo Resources (Pty) Limited 8 378 6 475 – –

Related party transactions

Consulting fees paid to related parties
African Minerals Exploration and Development GP SARL 160 160 160 160
IchorCoal N.V. 160 160 160 160
Mountain Rush Trading 6 (Pty) Limited 7 597 5 621 – –

Goods sold to related parties

Bonsma Enterprises (Pty) Ltd – 152 – –

Rent paid to related parties

KEE Enterprises (Pty) Limited 97 91 – –

Shareholder loan repayment

Mountain Rush Trading 6 (Pty) Ltd 2 252 1 463 – –

104
Universal Coal Development I (Pty) Ltd secured a portion of the 100% Kangala equity funding requirement of UCD I
secured a portion of the 100% Kangala equity funding requirement of A$16.9 million (ZAR160 million) through a
shareholders loan of A$4.30 million (ZAR47.2 million) from Black Economic Empowerment partner Mountain Rush
Trading 6 (Pty) Ltd. A shareholder loan repayment of A$2.3 million (ZAR23 million) was made during the year (2016:
A$1.5 million (ZAR16.1 million).
On 12 August 2014, a financing term sheet was entered into between UCEHSA and Ndalamo for the financing of the
NCC Roodekop project. The loan is secured against a share pledge of Ndalamo’s shares in UCD VIII and UCD IV, bears
interest at prime plus 1% per annum and is fully repayable by 30 June 2020 in varying capital installments. The balance
above represents a net amount of A$5.0 million (2016: A$4.6 million) and accumulated interest of A$3.3 million (2016:
A$1.9 million). To date a gross capital amount of A$17.1 million (2016: A$13.5 million) has been loaned to Ndalamo of
which A$12.1 million (2016: A$8.9 million) has been on lent to UCD IV and UCD VIII. On consolidation this amount is
offset against the gross loan balance due to offsetting rights included in the agreements.
On 5 December 2012, the Company entered into a private placement agreement with Coal Development Holding B.V.
(CDH) a wholly owned investment vehicle of African Minerals Exploration and Development GP SARL for the acquisition
of 29.99% of the issued share capital of Universal Coal Plc. One of the key terms of the placement was that CDH has
the right to nominate two Non-executive Directors to the Company’s Board. Following Shareholder approval at the
Company’s Annual General Meeting on 21 December 2012, the Board of Universal Coal Plc approved the appointment
of Mr David Twist and Mr Carlo Baravalle as Non-executive Directors effective from 7 January 2013. Monthly fees of
A$13.3 thousand are payable to African Minerals Exploration and Development GP SARL.
On 1 September 2014, Universal Coal Plc entered into a Subscription Agreement with IchorCoal N.V. for the strategic
investment of A$24.5 million and furthermore entered into a Warrant Instrument with IchorCoal N.V. whereby IchorCoal
N.V. would subscribe for 71 220 000 Warrants, exercisable for a period of 18 months at a strike price of A$0.36. As part
of the investment and effective from 16 October 2014, Messrs Nonkululeko Nyembezi-Heita and Andries Engelbrecht
were appointed to the Board of Universal Coal as nominee directors of IchorCoal N.V. Monthly fees of A$13.3 thousand
are payable to IchorCoal N.V.
Fees paid to Mountain Rush Trading 6 (Pty) Ltd relate to facilitation and service fees permitted in the Facilitation and
Service Fee Agreement entered into on 6 May 2013 between Mountain Rush Trading 6 (Pty) Ltd, Universal Coal
Development I (Pty) Ltd and UCEHSA.
During the prior period under review Bonsma Enterprises (Pty) Limited (“Bonsma Enterprises”) bought certain of the
assets of NCC. These assets were made available on bid offer to the public. The controlling shareholder of Bonsma
Enterprises, Hendrik Bonsma is also a Non-executive Director of Universal Coal Plc.
A lease agreement was entered into with KEE Enterprises on 1 June 2014 for office rental in South Africa. The controlling
shareholder of KEE Enterprises (Pty) Ltd, Hendrik Bonsma, is also a Non-executive Director of Universal Coal Plc. The
period of the lease is for five years at a market related rental of A$7.6 thousand per month with an annual escalation
clause of 8% per annum.
On 30 June 2017, the subsidiary Universal Coal Development IV (Pty) Ltd acquired 29% of the shares of the Eloff Mining
Company (Pty) Ltd and paid A$4.35 million in cash for the investment.

Universal Coal annual report 2017––––– 105

 notes to the consolidated and company
annual financial statements (continued)
for the year ended 30 June 2017

31. Risk management

Financial risk management
A. Accounting classifications and fair values
The Group’s activities expose it to a variety of financial risks: in particular market risk (including currency risk,
fair value and interest rate risk) and liquidity risk. The Group’s overall risk management programme focuses
on the unpredictability of financial markets and seeks to minimise the potential adverse effects on the Group’s
performance. The Board, on behalf of the members, carries out risk management and governance practices.
Loans and receivables Financial liabilities
Carrying Carrying
The financial instruments Fair value amount Fair value amount Fair value
of the Group are: Note hierarchy A$’000 A$’000 A$’000 A$’000
30 June 2017
Financial assets
Trade and other receivables1 12 Level 3 17 728 17 728 – –
Unrestricted cash1 13 Level 2 14 461 14 461 – –
Restricted cash1 13 Level 2 724 724 – –
Loan receivable1 9 Level 3 8 378 8 378 – –
Other financial assets 10 Level 3 1 293 1 293 – –
42 584 42 584 – –
Financial liabilities
Trade payables1 22 Level 3 – – 21 930 21 930
Derivative financial liability3 19 Level 3 – – 277 277
Borrowings2 17 Level 3 – – 31 607 31 607
Converting notes2 18 Level 3 – – 1 476 1 476
42 584 42 584 55 290 55 290

30 June 2016
Financial assets
Trade and other receivables1 12 Level 3 7 374 7 374 – –
Unrestricted cash1 13 Level 2 7 048 7 048 – –
Restricted cash1 13 Level 2 527 527 – –
Loan receivable 9 Level 3 6 475 6 475 – –
21 424 21 424 – –
Financial liabilities
Shareholder’s loan2 17 Level 3 – – 2 252 2 252
Trade payables1 22 Level 3 – – 10 122 10 122
Derivative financial liability3 19 Level 3 – – 1 658 1 658
Borrowings2 17 Level 3 – – 22 059 22 059
Converting notes2 18 Level 3 – – 4 891 4 891
21 424 21 424 40 982 40 982

1
The carrying amount of these financial assets and liabilities are a reasonable approximation of their fair values
2
Financial liabilities recognised at amortised cost
3
Financial liabilities designated as at fair value through profit or loss

Value Added Taxation and prepayments of A$3.6 million (2016: A$3.4 million) and provisions and deferred tax of
A$42.7 million (2016: A$36.9 million) have been excluded as these do not meet the definition of a financial asset
or financial liability as defined in IAS 32 Financial Instruments: Presentation.

106
 Loans and receivables Financial liabilities
Carrying Carrying
The financial instruments Fair value amount Fair value amount Fair value
of the Company are: Notes hierarchy A$’000 A$’000 A$’000 A$’000
30 June 2017
Financial assets
Trade and other recievables1 12 Level 3 2 000 2 000 – –
Bank balances1 13 Level 2 233 233 – –
2 233 2 233 – –
Financial liabilities
Trade and other payables1 22 Level 3 – – 218 218
Derivative financial liability3 19 Level 3 – – 277 277
Converting notes2 18 Level 3 – – 1 476 1 476
2 233 2 233 1 971 1 971
30 June 2016
Financial assets
Trade and other recievables1 12 Level 3 2 800 2 800 – –
Bank balances1 13 Level 2 81 81 – –
81 81 – –
Financial liabilities
Trade and other payables1 22 Level 3 – – 166 166
Derivative financial liability3 19 Level 3 – – 1 658 1 658
Converting notes2 18 Level 3 – – 4 891 4 891
2 881 2 881 6 715 6 715

1
The carrying amount of these financial assets and liabilities are a reasonable approximation of their fair values.
2
Financial liabilities recognised at amortised cost.
3
Financial liabilities designated as at fair value through profit or loss.

Prepaid expenses and Value Added Taxation of A$105 000 (2016: A$41 000) have been excluded as these do not
meet the definition of a financial asset or financial liability as defined in IAS 32 Financial Instruments: Presentation.
B. Valuation techniques and significant unobservable inputs
The Group has assessed the different levels in the fair value hierarchy, for its financial instruments, based on the
inputs used in the valuation techniques.
The following tables show the valuation techniques used in measuring level 3 fair values, as well as the significant
unobservable inputs used.
Financial instruments measured at fair value
Inter-relationship between
Valuation Significant significant unobservable inputs
Type technique unobservable input and fair value measurement
Derivative financial liabilities Black-Scholes option Refer to the sensitivity analysis table
(derivative component) pricing model Share price volatility below

Universal Coal annual report 2017––––– 107

 notes to the consolidated and company
annual financial statements (continued)
for the year ended 30 June 2017

31. Risk management (continued)

Financial risk management (continued)
B. Valuation techniques and significant unobservable inputs (continued)

Level 3 fair values

The following table shows a reconciliation from the opening balances to the closing balances for level 3 fair values:
Derivative
financial Converting
liability notes
Notes A$’000 A$’000
Balance at 1 July 2016 18, 19 1 658 4 891
Gain included in profit and loss (1 381) 250
Converting notes converted to equity – (1 743)
Converting notes settled in cash – (1 922)
Balance at 30 June 2017 277 1 476

Sensitivity of level 3 financial assets and liabilities

The carrying amount of financial assets and liabilities that are valued using inputs other than observable market
data are calculated using appropriate valuation models, including discounted cash flow modelling, with inputs
such as term of instruments, risk free interest rate, volatility and consumer price index. The potential effect of using
reasonably possible alternative assumptions in these models, based on change in the most significant input by
10 percent while holding all other variables constant would have the following effects:
Carrying 10% 10%
amount increase decrease
A$’000 in input in input
30 June 2017
Derivative financial liability 277 322 232
Converting notes 1 476 1 624 1 328
30 June 2016
Derivative financial liability 1 658 1 952 1 378
Converting notes 4 891 5 380 4 402

Capital risk management

The Group manages its capital to ensure that the Group will be able to continue as a going concern while optimising
the debt and equity balance. The capital structure of the Group consists of equity comprising issued share capital,
equity reserves, accumulated loss and debt comprising of converting notes, shareholder’s loan, long-term loans
and short-term loans.
Where future investment in the interest in associates or other Group projects is required the Board will assess the
structure of whether it can be funded from existing resources or financing arrangements as appropriate.
The Group finances its operations through equity and debt. During the prior year the Group raised finance through
refinancing the Kangala project finance debt facility and securing a project financing facility at NCC for the balance
of the capital development finance. Drawdown on the NCC project finance facility is dependant on securing a long-
term coal offtake agreement. No subsidiary company of the Group is permitted to enter into any borrowing facility
or lease agreement without prior consent of the Company.

108
Foreign exchange risk
Foreign exchange risk arises when individual Group entities enter into transactions denominated in a currency
other than their functional currency. The Group’s policy is, where possible, to allow group entities to settle liabilities
denominated in their functional currency with the cash generated from their own operations in that currency. Where
group entities have liabilities denominated in a currency other than their functional currency (and have insufficient
reserves of that currency to settle them), cash already denominated in that currency will, where possible, be
transferred from elsewhere within the Group.
The Group’s subsidiary entities all have functional currencies of ZAR. The majority of transactions entered into by
the entities and the denomination of assets/liabilities are ZAR.
As the functional currency of Universal Coal PLC is Australian Dollar there are significant foreign exchange gains
or losses recognised in other comprehensive income of the consolidation of subsidiaries. However this is not
considered a financial instrument risk for the Group as there is no monetary gain or loss.
The Group is however exposed to ZAR to AUD currency risk on future distributions made by the subsidiaries which
Management monitor on a continuing basis.
Exchange rates used for conversion of foreign items were:
2017 % change 2016 % change 2015
ZAR:AUD (Average) 10.2501 (3.03) 10.5705 10.68 9.5506
ZAR:AUD (Spot) 10.0003 (8.92) 10.9795 16.59 9.4173
GBP:AUD (Average) 0.5943 20.79 0.4920 (7.13) 0.5298
GBP:AUD (Spot) 0.5910 6.83 0.5532 13.27 0.4884

Foreign currency risk sensitivity analysis:

2017 2016
A$’000 A$’000
Change in profit/(loss) – (AUD:ZAR)
Improvement in AUD to ZAR by 10% (359) (1 512)
Decline in AUD to ZAR by 10% 439 1 847

Price risk
Prices ultimately received for coal sales in relation to the Group’s investments will have significant impact on
the profitability and viability of all projects in which the Group has an interest. An increase in prices may have
significant and leveraged effect on the current and future values of projects and shares held, the converse will
apply where prices fall.
The Kangala and NCC have contracted prices with a majority customer in Eskom Holdings SOC Limited, which
is not subject to global commodity pricing fluctuations. However the Kangala and NCC have contracted sale
agreements with Glencore Plc which are subject to the global commodity price fluctuations as well as foreign
exchange variances. The company does not currently have a foreign exchange hedging policy, but the exposure
will be managed as export sales volumes increase in the future.
Interest rate on financial assets and liabilities
The Group’s financial assets consist of cash and cash equivalents and other receivables. The Group earns interest
on its cash and cash equivalents, consequently the Group is exposed to cash flow interest rate risk on its financial
assets which earn interest based on variable interest rates. To mitigate this risk the cash balances maintained by
the Group is proactively managed in order to ensure that the maximum level of interest is received for the available
funds but without affecting the working capital flexibility the Group requires.

Universal Coal annual report 2017––––– 109

 notes to the consolidated and company
annual financial statements (continued)
for the year ended 30 June 2017

31. Risk management (continued)

Financial risk management (continued)
B. Valuation techniques and significant unobservable inputs (continued)

The Group’s financial liabilities consist of borrowings, converting notes, trade payables and a shareholder’s loan.
The Group incurs interest on its borrowings (variable) and converting notes (fixed) and is exposed to cash flow
interest rate risk on borrowings and fair value interest rate risk on converting notes. The Group does not enter into
hedging agreements at this point in time and proactively manages cash flow interest rate risk by analysing interest
rate forward curves.
At 30 June 2017, if interest rates on Australian Dollar-denominated cash balances had been 1% higher/(lower) with
all other variables held constant, post-tax profit for the year would have been A$1 514 (2016: A$3 535) higher/
(lower), mainly as a result of higher/(lower) interest rates.
At 30 June 2017, if interest rates on Rand-denominated cash balances had been 1% higher/(lower) with all other
variables held constant, post-tax profit for the year would have been A$112 232 (2016: A$167 025) higher/(lower),
mainly as a result of higher/(lower) interest rates.
The Group and Company’s exposure to interest rate risk, which is the risk that a financial instrument’s value will
fluctuate as a result of changes in market interest rates and the effective weighted average interest rate for each
class of financial assets and financial liabilities comprises:
Group
Fixed
interest
maturing
Fixed Floating within Non-interest-
interest rate interest rate one year bearing Total
30 June 2017 A$’000 A$’000 A$’000 A$’000 A$’000
Financial assets
Cash and cash equivalents – 15 185 – – 15 185
Trade and other receivables – – – 19 975 19 975
Loan receivable 8 378 – – – –
Weighted average interest rate – 9.07% – – 9
Financial liabilities
Trade and other payables – – – 19 083 19 083
Converting notes 1 476 – – – 1 476
Derivative financial liability 277 – – – 277
Borrowings 31 607 – – 31 607
Weighted average interest rate 10.55% – – – 11
30 June 2016
Financial assets
Cash and cash equivalents – 7 575 – – 7 575
Trade and other receivables – – – 9 325 9 325
Loan receivable 6 475 – – – 6 475
Weighted average interest rate – 9.32% – – –
Financial liabilities
Trade and other payables – – – 8 821 8 821
Converting notes 4 891 – – – 4 891
Derivative financial liabilities 1 658 – – – 1 658
Shareholder’s loan – – – 2 252 2 252
Borrowings 22 059 – – 22 059
Weighted average interest rate 10.80% – – – –

110
 Company
Fixed
interest
maturing
Fixed Floating within Non-interest-
interest rate interest rate one year bearing Total
30 June 2017 A$’000 A$’000 A$’000 A$’000 A$’000
Financial assets
Cash and cash equivalents – 233 – – 233
Weighted average interest rate – 2.3% – – –
Financial liabilities
Trade and other payables – – – 171 171
Converting notes 1 476 – – – 1 476
Derivative financial liability 277 – – – 277
Weighted average interest rate 9.3% – – – –
30 June 2016
Financial assets
Cash and cash equivalents – 81 – – 81
Weighted average interest rate – 2.5% – – –
Financial liabilities
Trade and other payables – – – 45 45
Converting notes 4 891 – – – 4 891
Derivative financial liabilities 1 658 – – – 1 658
Weighted average interest rate 9.5% – – – –

Credit risk
The carrying amount of the Group’s financial assets represents its maximum exposure to credit risk.
The Group is exposed to credit risk on payments from customers and cash deposits however it does not consider
that it has significant exposure because its major customers are Eskom Holdings SOC Limited (Eskom) and
Glencore Plc. The Group also banks with reputable institutions in various locations, including HSBC Bank Australia
Ltd, ANZ Bank Australia, ABSA Bank Ltd, Investec Ltd and FirstRand Bank. Eskom Holdings SOC Limited is a
state owned company and is backed by the South African Government. Both key customers continue to pay their
outstanding balances on a monthly basis.
Financial assets exposed to credit risk at year-end were as follows:
Group Company
2017 2016 2017 2016
A$’000 A$’000 A$’000 A$’000
Trade and other receivables 17 728 7 374 2 000 2 800
Cash and cash equivalents 15 185 7 575 233 81
Other financial assets 1 293 – – –

At 30 June 2017, the Group’s most significant customers, Eskom Holdings SOC Limited, accounted for
A$13 048 136 (2016: A$6 856 375) and Glencore Plc for A$2 503 945 (2016: A$ nil) of the trade and other
receivables carrying amount.

Universal Coal annual report 2017––––– 111

 notes to the consolidated and company
annual financial statements (continued)
for the year ended 30 June 2017

31. Risk management (continued)

Financial risk management (continued)
B. Valuation techniques and significant unobservable inputs (continued)

At 30 June 2017, the ageing of trade and other receivables that were not impaired was as follows:
Group Company
2017 2016 2017 2016
A$’000 A$’000 A$’000 A$’000
Neither past due nor impaired 15 873 7 017 2 000 2 800
Past due 1 – 30 days 292 – – –
Past due 31 – 90 days 1 563 357 – –
Past due 91 – 120 days – – – –
17 728 7 374 2 000 2 800

Management believes that the unimpaired amounts that are past due by more than 30 days are still collectible in
full, based on historical payment behaviour and extensive analysis of customer credit risk, including underlying
customer’s credit rating if they are available.
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash. Management monitors rolling forecasts
of the Group’s and Company’s liquidity reserve. The review consists of considering the liquidity of local markets,
projecting cash flows and the level of liquid assets to meet these. The Management raises additional capital
financing when the review indicates this to be necessary.
The table below analyses the Group’s financial liabilities and net-settled derivative financial liabilities into relevant
maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The
amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal
their carrying balances as the impact of discounting is not significant.
Group
Between Between
Less than 1 and 2 and Over
Total 1 year 2 years 5 years 5 years
A$’000 A$’000 A$’000 A$’000 A$’000
At 30 June 2017
Borrowings 31 607 6 539 6 539 18 529 –
Derivative financial instruments 277 277 – – –
Trade and other payables 21 930 21 930 – – –
Converting notes 1 957 1 957 – – –
At 30 June 2016
Borrowings 22 059 5 215 5 215 11 629 –
Derivative financial instruments 1 658 – – 1 658 –
Trade and other payables 8 821 8 821 – – –
Converting notes 5 621 2 058 3 563 – –
Shareholders’ loan 2 836 – – 2 836 –

112
 Company
Between Between
Less than 1 and 2 and Over
Total 1 year 2 years 5 years 5 years
A$’000 A$’000 A$’000 A$’000 A$’000
At 30 June 2017
Derivative financial instruments 277 277 – – –
Trade and other payables 228 228 – – –
Converting notes 1 957 1 957 – – –
At 30 June 2016
Derivative financial instruments 1 658 – – 1 658 –
Trade and other payables 45 45 – – –
Converting notes 5 621 2 058 3 563 – –

32. Earnings per share

2017 2016
Numerator
Earnings used in basic earnings per share (A$) 5 100 540 8 556 042
Earnings used in diluted earnings per share (A$) 5 100 540 8 556 042

Denominator
Weighted average number of shares used in basic and diluted earnings per share 519 055 408 506 502 245
Potential ordinary shares that could dilute earnings per share in future:

Weighted average number of shares used in basic earnings per share 519 055 408 506 502 245
Adjusted for convertible preferred shares in issue – –

Convertible loan notes and share options have not been included in the calculation of diluted earnings per share
because they are out of the money. The total number of options and warrants issued is disclosed in note 15.

33. Employees and directors

2017 2016
Average number of employees of the group are as follows: Number Number
Staff (Operational resources) 121 94
Directors 8 8
129 102

2017 2016
A$’000 A$’000
Wages and salaries 5 363 3 236

2017 2016
Average number of employees of the company are as follows: Number Number
Staff (Operational resources) 1 2
Directors 8 8
9 10

Universal Coal annual report 2017––––– 113

 notes to the consolidated and company
annual financial statements (continued)
for the year ended 30 June 2017

33. Employees and directors (continued)

2017 2016
A$’000 A$’000
Wages and salaries 1 505 1 467

There are no pension contributions paid by the Group in the current or prior year.
Certain employee costs directly attributable to the development of mining assets have been capitalised to Development
and Production Assets amounting to A$1 188 895 (2016: A$1 157 367).
The key management personnel of the business are considered to be the executive and non-executive directors of the
Company, as well as senior management being the chief financial officer, director of corporate affairs, chief geologist
and chief development engineer. Refer to Section 9: Remuneration report of the Directors’ report.
2017 2016
A$’000 A$’000
Executive directors 665 776
Senior management 892 918
Non-executive directors 598 615
2 155 2 309

34. Events after the reporting period

On 17 July 2017, 350 000 converting notes were settled in cash.
On 8 August 2017, 350 000 converting notes were settled in cash.
On 14 September 2017, 350 000 converting notes were settled in cash.
On 26 September 2017, the board of directors declared a final gross cash dividend of A$0.01 (2016: A$ nil) per share
in respect of the year ended 30 June 2017. The dividend is declared in Australian dollar and is subject to shareholder
approval at the annual general meeting for FY2017.

114
independent auditors’ report
Independent Auditor’s Report to the Members of Universal Coal Plc

Opinion
We have audited the financial statements of Universal Coal Plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the
year ended 30 June 2017 which comprise the consolidated and parent company statements of financial position, the consolidated
statement of profit or loss and other comprehensive income, the consolidated and the parent company’s statements of changes
in equity, the consolidated and the parent company’s statements of cash flows and notes to the financial statements, including
a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the group and parent company financial statements
is applicable law and International Financial Reporting Standards (IFRS) as adopted by the European Union.
In our opinion:
• the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 30 June
2017 and of the group’s profit for the year then ended;
• the group and parent company financial statements have been properly prepared in accordance with IFRS as adopted by
the European Union;
• the parent company financial statements have been properly prepared in accordance with IFRS as adopted by the European
Union and as applied in accordance with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements
section of our report. We are independent of the group in accordance with the ethical requirements that are relevant to our audit
of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled
our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
• the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
• the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant
doubt about the group’s or the parent company’s ability to continue to adopt the going concern basis of accounting for a
period of at least 12 months from the date when the financial statements are authorised for issue.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due
to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources
in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Universal Coal annual report 2017––––– 115

 independent auditors’ report (continued)
Independent Auditor’s Report to the Members of Universal Coal Plc

Matter
Carrying value of mining assets
The group’s mining assets, including property, plant and equipment, and stockpiles, represent its most significant assets and
total $78.9 million at 30 June 2017.
For the year ended 30 June 2017 management were required to assess whether there is any indication that an asset may
be impaired in accordance with the requirements of IAS 36 “Impairment of Assets”. The New Clydesdale Colliery entered
into production during the year, and as a result management prepared a formal impairment test using the value in use (VIU)
method to determine if as at 30 June 2017 the recoverable amount of the mining assets was greater than the carrying value.
No impairment charge has been recognised for the year ended 30 June 2017.
This formal assessment involved significant management judgement, which increased the risk of material misstatement.
The details regarding management’s judgements are included on pages 72 – 74 to the financial statements.

Our response
We evaluated management’s impairment model against the detailed mine plan, approved reserve report and our understanding
of the operations from an onsite visit. We critically challenged the key estimates and assumptions used by management.
Our testing included verification of price inputs to contractual offtake arrangements; recalculation of discount rates; and critical
review of the opencast cost and production profiles against historical performance and the overall mine plan.
We performed our own sensitivity analysis over individual key inputs, together with a combination of sensitivities over
such inputs.

Matter
Disposal of assets at NCC
During the year assets held at NCC were sold to a third party mining contractor. The assets sold comprised mining assets
which were acquired through the business combination completed on 30 July 2015.
In accordance with IFRS 3, these assets were recognised on acquisition at their respective fair values. The fair value was
determined as the “depreciated replacement cost” as provided by independent third party valuation experts. The depreciated
replacement cost was considered the appropriate valuation methodology to reflect the value that could be generated by the
assets under the “best use” principle noted in IFRS 3.
During the year assets to the value of AUD11.2 million were disposed of in return for proceeds of AUD1.5 million, resulting in
a loss of AUD9.7 million. Given the significant loss recognised on disposal, we considered whether the loss was indicative of
challenges to the fair value applied at initial recognition.
The determination of the loss on sale and the fair value of the assets was considered a significant risk due to the unusual
nature of the transaction and the quantum thereof.
Disclosure regarding this transaction can be found on page 84 to the financial statements.

Our response
We tested management’s control over the approval of the sale and the consideration agreed by the board and NCC operating
committee.
We reassessed the valuation applied to the assets as part of the accounting for the business combination in 2015.
We assessed the independence and qualifications of management’s expert and challenged management as to whether the
depreciated replacement cost valuation was representative of the best use principle under IFRS 3.

116
We recalculated the carrying value of the assets to the date of disposal as well as the loss on disposal to confirm arithmetic
accuracy, and agreed the proceeds receivable through inspection of invoices raised by the contractor.

Matter
Acquisition of shares in Eloff Mining Company
On 30 June 2017 the group completed the acquisition of a 29% stake in the Eloff Mining Company, a company which owns
the adjacent land to Kangala.
The acquisition completed on the last day of the financial year and management determined that all conditions precedent in
the acquisition agreement had been fulfilled and it was appropriate to account for the transaction in the period.
Management determined that the group has significant influence over the company and recognised an investment in an
associate in line with the requirements of IAS 28 and fair valued the underlying assets and liabilities of the Eloff Mining
Company. A gain of $4 million has been recognised in the statement of comprehensive income and this represents the excess
of the group’s share of the fair values of the assets and liabilities of Eloff over the consideration paid for the shares.
Given the size of the gain realised and the key judgements applied by management in determining the fair value of the
underlying assets and liabilities of Eloff, this was deemed a key risk for our audit.
Disclosure regarding this transaction can be found on page 90 to the financial statements.

Our response
We verified the legal documentation to support that all conditions precedent had been fulfilled at 30 June 2017 and the group
had legal title.
We verified the terms of the shareholder arrangement to confirm Universal’s ability to appoint directors to the board and assert
significant influence.
We verified the $4.35 million purchase price paid through to bank statements.
We agreed the underlying assets and liabilities acquired through to the company financial statements.
We obtained management’s assessment of the fair value of the underlying assets and liabilities and critically challenged the
key estimates and assumptions applied. Our testing included agreeing the exploration asset reserves to competent person
reports (CPR), assessing the independence and qualifications of the expert who prepared the CPR and considering the value
attributed to the reserves by reference to market data.
Our application of materiality
Group materiality FY2016 Group materiality FY2015 Basis for materiality
$4.1 million $3.6 million 2% of total assets

Company materiality FY2016 Company materiality FY2015 Basis for materiality

$1.2 million $1.2 million 2% of total assets

We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements.
We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic
decisions of reasonable users that are taken on the basis of the financial statements. Importantly, misstatements below these
levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and
the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.

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 independent auditors’ report (continued)
Independent Auditor’s Report to the Members of Universal Coal Plc

Our determination of materiality has remained unchanged with no significant movement in the total assets in the year impacting
materiality. We consider total assets to be the most significant determinant of the group’s financial performance used by
shareholders as the group continues to bring its mining assets through to production.
Whilst materiality for the financial statements as a whole was $4.1 million, each significant component of the group was audited
to a lower level of materiality ranging from $0.4 million to $2.5 million which is used to determine the financial statement areas
that are included within the scope of our audit and the extent of sample sizes used during the audit.
There were no misstatements identified during the course of our audit that were individually, or in aggregate, considered to be
material in terms of their absolute monetary value or on qualitative grounds.

An overview of the scope of our audit

Our group audit scope focused on the group’s principal operating locations being the Kangala mine and the NCC mine, which
were both subject to a full scope audit. Together with the parent company, which was also subject to a full scope audit, these
represent the significant components of the group.
The remaining components of the group were considered non-significant and these components were principally subject to
analytical review procedures, together with additional substantive testing over the risk areas detailed above where applicable to
that component. We set out below the extent to which the group’s total assets were subject to audit versus review procedures.

Full Scope Specific Scope and Desktop Review

The audits of each of the components were principally performed in South Africa (Pretoria) and the United Kingdom. All of the
audits were conducted by BDO LLP and BDO member firms.
As part of our audit strategy, the Responsible Individual and senior members of the audit team visited each of the principal
operating locations in the year.

Other information
The directors are responsible for the other information. The other information comprises the information included in the annual
report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements,
we are required to determine whether there is a material misstatement in the financial statements or a material misstatement
of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.

118
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors’ report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
• the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the
course of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report
to you if, in our opinion:
• adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches
not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.

Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have
no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required
to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of these financial statements.

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 independent auditors’ report (continued)
Independent Auditor’s Report to the Members of Universal Coal Plc

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Matt Crane
For and on behalf of BDO LLP, Statutory Auditor
London
26 September 2017
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

120
Universal Coal annual report 2017–––––121
 ASX additional
information
Shareholdings
The issued capital of the Company as at 31 August 2017 is 522 471 758 ordinary fully paid shares/CDIs. As at 31 August
2017, there are 3 300 001 unlisted options and 1 256 500 unlisted converting notes.
Ordinary Shares at 31 August 2017
Number % of issued
Range Total holders of shares capital
1 – 1 000 97 30 452 0.01
1 001– 5 000 182 565 617 0.11
5 001 – 10 000 217 1 827 499 0.35
10 001 – 100 000 603 22 192 672 4.25
100 001 and over 205 497 855 518 95.29
Rounding (0.01)
Total 1 304 522 471 758 100.00

As at 31 August 2017, the total number of shares on issue was 522 471 758. There were 190 shareholders (with a total
of 220 535 shares) holding less than a marketable parcel of shares under the ASX Listing Rules. The ASX Listing Rules
define a marketable parcel of shares as “a parcel of not less than AU$500”.
Options at 31 August 2017
Number % of total
Range Total holders of options options
0 – 1 000 – – –
1 001 – 5 000 – – –
5 001 – 10 000 – – –
10 001 – 100 000 – – –
100 001 – 1 000 000 5 3 300 001 100.0
1 000 001 and over – – –
Total 5 3 300 001 100.0

Other unlisted securities as at 31 August 2017

There is one holder of unlisted converting notes for a total of 1 256 500 converting notes.

122
Top 20 Shareholders as at 31 August 2017:
Number % of issued
of shares capital
1. Ichor Coal N.V. 151 660 000 29.03
2. Coal Development Holding B.V. 143 467 056 27.46
3. Maple Leaf International Limited 20 000 000 3.83
4. Citicorp Nominees (Pty) Ltd 16 291 232 3.12
5. Mr Geoffrey Robert Tarrant and Mrs Deborah Lee Tarrant and associated holdings 15 090 204 2.89
6. 31 May (Pty) Ltd 12 829 986 2.46
7. National Nominees Ltd 12 820 301 2.45
8. BNP Paribas Nominees (Pty) Ltd 9 862 431 1.89
9. Tony Weber 9 518 489 1.82
10. JP Morgan Nominees Australia (Pty) Ltd 9 513 403 1.82
11. Henri Willem Bonsma 5 701 392 1.09
12. Pheasant Dime Investments Limited 3 850 000 0.74
13. Lambro Holdings (Pty) Ltd <Stewart S/F A/C> 3 300 000 0.63
14. One Managed Invt Funds Ltd <Sandon Capital Inv> 2 878 077 0.55
15. Mr Darren Hile 2 640 709 0.51
16. Allbest Resources Inc 2 500 000 0.48
17. Mr Matthew Paul Hile 2 473 212 0.47
18. Mr Scott Michael Anderson <Abetha Holdings S/Fund A/C> 2 205 000 0.42
19. Shammy Luvhengo 2 200 000 0.42
20. Marthinus Jacobus Malan 2 000 000 0.38
20. Pinegold Investments (Pty) Ltd 2 000 000 0.38
432 801 492 82.84

Voluntary escrow
There are no Universal Coal securities under voluntary escrow.

Substantial holders
Universal Coal has been notified of the following substantial holder of its securities via a substantial shareholding notice
released to the ASX:
Coal Development Holding B.V. 141 921 603 CDIs*
* As per notification to the ASX via a substantial shareholder notice (9 March 2015)

Universal Coal annual report 2017–––––123

 ASX additional
information continued

In addition, the Company is aware that IchorCoal N.V. has a 29.03% interest in the Company’s ordinary shares.
Top Converting Note Holders as at 31 August 2017 (greater than 20% in a class, excluding those issued under an employee
incentive scheme. Note all options on issue were issued under an employee incentive scheme):
Holder Number % of total
Converting notes
Susquehanna Pacific (Pty) Ltd 1 256 500 100

Securities purchased on-market

There were no securities purchased on-market during the year.

Stock exchange listing

Universal Coal CDIs are only listed on the ASX.

Voting rights
Each CDI issued by Universal Coal represents one fully paid ordinary share. Each ordinary fully paid share and CDI
carries one vote per share/CDI without restriction. Unlisted options and unlisted converting notes have no voting rights.

124
corporate
directory
Directors John Hopkins OAM Non-executive Chairman
Henri Bonsma Non-executive Director
Tony Weber Executive Director and Chief Executive Officer
Shammy Luvhengo Executive Director
David Twist Non-executive Director
Carlo Baravalle Non-executive Director
Nonkululeko Nyembezi Non-executive Director
Andries Engelbrecht Non-executive Director

Company Secretary Benjamin Harber (United Kingdom) of Shakespeare Martineau LLP

ASX Liaison and local agent Emma Lawler (Australia) of Company Matters Proprietary Limited

United Kingdom registered office 6th Floor

60 Gracechurch Street
London EC3V 0HR
United Kingdom
Telephone: +44 20 7264 4444
Facsimile: +44 20 7264 4440
Australian registered office Level 12
680 George Street
Sydney, NSW, 2000
Australia
Telephone: +61 28 280 7355
Operational office 467 Fehrsen Street
Brooklyn, 0182, Pretoria
South Africa
Telephone: +27 12 460 0805
Facsimile: +27 12 460 2417
Auditors BDO LLP
55 Baker Street
London W1U 7EU
United Kingdom
Stock exchange listing Australian Securities Exchange
(Share code: UNV)
Share registrars Computershare Investor Services Proprietary Limited
Level 2, 45 St Georges Terrace
Perth WA 6000, Australia
Telephone: +61 89 323 2000
Computershare Investor Services Plc
The Pavilions, Bridgewater Road
Bristol BS99 6ZY
United Kingdom
Telephone: +44 87 070 2003
Bankers HSBC Bank Australia Limited
Level 1, 190 St Georges Terrace
Perth WA 6000, Australia
HSBC Bank Plc
Coventry DSC, Harry Weston Road
Binley
West Midlands CV3 2TQ
United Kingdom
Investec Bank Limited
100 Grayston Drive
Sandown, Sandton
South Africa
Telephone: +27 11 286 7000
First National Bank
4 First Place, 3rd Floor, Bankcity
Johannesburg, 2000
South Africa
Telephone: +27 11 352 5601
Solicitors Mayer Brown International LLP
201 Bishopgate London
London EC2M EUG
United Kingdom
Webber Wentzel Attorneys
10 Fricker Road
Illovo Boulevard
Illovo, Johannesburg, 2196
South Africa
Website www.universalcoal.com

Company registration number 4482856