UNIVERSAL COAL PLC For personal use only · 2012-10-25 · BANKERS HSBC Bank Australia Ltd Level 1,...

ANNUAL REPORT | 2012

UN

IVERSA

L CO

AL PLC

AN

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AL R

EPOR

T | 2012

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DIRECTORS John Hopkins Non-Executive Chairman

Hendrik Bonsma Non-Executive Director

Anton Weber Executive Director and ChiefExecutiveOfficer

Shammy Luvhengo Executive Director

JOINT COMPANY John Bottomley (United Kingdom) SECRETARIES of SGH Martineau Company Secretarial LLP

and

Emma Lawler (Australia)

UNITED KINGDOM One America SquareREGISTERED CrosswallOFFICE London EC3N 2SG United Kingdom

Telephone +44 20 7264 4444 Facsimile +44 20 7264 4440

AUSTRALIAN Level 12REGISTERED 680 George StreetOFFICE Sydney, NSW, 2000 Australia

OPERATIONAL 467 Fehrsen StreetOFFICE 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 Australian Securities Exchange EXCHANGE (Share code: UNV)LISTING

SHARE Computershare Investor Services Pty LtdREGISTRARS Level 2, 45 St Georges Terrace Perth WA 6000, Australia

Computershare Investor Services plc The Pavilions, Bridgwater Road Bristol BS99 6ZY United Kingdom

BANKERS HSBC Bank Australia Ltd 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

SOLICITORS Sparke Helmore Lawyers Level 16 321 Kent Street Sydney, NSW, 2000 Australia

Mayer Brown International LLP 201 Bishopgate London Greater London EC2M EUG United Kingdom

Webber Wentzel Attorneys 10 Fricker Road Illovo Boulevard Illovo, Johannesburg 2196 South Africa

WEBSITE www.universalcoal.com

Corporate Directory

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ContentsChairman’s Statement 2

Directors and Key Management 4

Directors’ Report 6

Directors’ Responsibilities 19

Independent Auditor’s Report to the Members of Universal Coal PLC 20

Consolidated Statement of Financial Position 23

Company Statement of Financial Position 24

Consolidated Statement of Comprehensive Income 25

Consolidated Statement of Changes in Equity 26

Company Statement of Changes in Equity 27

Consolidated Statement of Cash Flows 28

Company Statement of Cash Flows 29

Notes to the Consolidated and Company Annual Financial Statements 30

Corporate Governance Statement 68

Corporate Responsibility Report 76

Mining and Prospecting Licences 77

ASX Additional Information 78

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2


On behalf of the Board of Directors of Universal Coal plc, I am pleased to report on the Company’s activities during the 2012 financial year.

Since successfully listing on the ASX in December 2010, the Company has focussed on advancing the development of its suite of South African coal assets. A number of important milestones have been reached across the portfolio with the Company significantly increasing its JORC compliant resources and moving closer to first coal production at Kangala.

In addition to the activities at Berenice and Kangala, the Company’s two other Witbank thermal coal projects have also been advanced. At the Brakfontein project the final phase drilling program and an upgrade to Measured category was completed during Q2 and Q4 2011 with the JORC compliant resource currently standing at 87.66Mt. Universal’s interest in the project increased from 30% to 50.29% during the year. A New Order Mining Right application was lodged in Q4 2011. The close proximity of Brakfontein to Universal’s proposed Kangala Mine opens the option of developing off the shared Kangala infrastructure that would result in significant lower development capital and a corresponding increase in the potential financial returns from Brakfontein.

At the Roodekop Project, a New Order Mining Right application was lodged and the resource upgraded to a total of 82.2Mt (JORC). The resource upgrade enabled the company to increase its stake in the Roodekop project to 50%. A feasibility study incorporating detailed mine planning for Roodekop remains in progress with the results expected to be made available in the Q4 2012.

Coal AssetsAll of the Company’s coal assets are located in South Africa. The Company has three thermal exploration coal projects in

the Witbank Coalfield in the Mpumalanga Province and two exploration coking coal projects in the Limpopo Province.

Thermal Coal Exploration AssetsKangala

At Kangala, the JORC compliant resource was upgraded in June 2012 to a total of 146.8Mt from the previous 124.0Mt. The coal resource is made up of 19.5Mt of Proven Reserves, 74.18Mt of Measured, 19.48Mt Indicated and 33.64Mt of Inferred Resources.

On 27 September 2010 Universal Coal Development I (Pty) Ltd was awarded a Mining Right which was executed on 3 May 2012. On 01 February 2012, the Mpumalanga Provincial Government provided environmental authorisation (NEMA) for the development of the Kangala Colliery. The Kangala Colliery was also awarded a Water Licence (IWULA) on 25 May 2012 and the Waste Licence on 27 June 2012.

The Company completed a bankable feasibility study with Stefanutti Stocks Mining Services and through its 100% owned subsidiary, Universal Coal and Energy Holdings South Africa (Pty) Ltd, entered into a binding memorandum of understanding and term sheet with Eskom for the supply of ~2Mt per annum of thermal coal from its Kangala Project. The Company still awaits final signature on the Coal Sales Agreement with Eskom, for commencement of project development early in 2013 and first coal delivery in the first half of 2014.

On 17 September 2012, the Company announced a 65% (~A$31m) project financing deal with Rand Merchant Bank (“RMB”) of South Africa which is still subject to final approvals from RMB. First drawdown is scheduled from early 2013 to support the development of the Kangala boxcut, plant, infrastructure, commissioning phase and working capital requirements.

Chairman’s Statement

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CHAIRMAN’S STATEMENT

3

Roodekop

Universal Coal Development IV (Pty) Ltd is in the process of completing a feasibility study scheduled for Q4 2012 and is currently in the process of optimising this study for commercial production. The Environmental Impact Assessment required for the Mining Right was lodged during July 2011 with the NEMA application lodged at the end of the December 2011 quarter. The IWULA application was lodged in May 2012. Further development on the Roodekop project will be dependent on the award of the applicable Mining, IWULA and NEMA licences.

Brakfontein

A 72 hole exploration drilling programme was competed during the 1st half year to 31 December 2011 and all analyses at Brakfontein were submitted to an independent Competent Person for resource modelling and reporting purposes. Brakfontein currently contains a JORC-compliant in situ resource of 70.53Mt in the Measured category and 14.94Mt in the Indicated category.

Further to the above, a Mining Right Application was submitted to the Department of Mineral Resources in South Africa on 08 December 2011. During the quarter ended 31 March 2012 Universal approved the commissioning of an Environmental Impact Assessment over the targeted mining area.

During the year under review and based on the Acquisition and Option Agreement, together with an agreed amendment thereto, Universal managed to increase its shareholding from 30% to a majority and control basis of 50.29%.

A further drilling programme of 38 holes commenced on 1 September 2012 in an attempt to identify additional shallow minable high quality coal resources.

Coking Coal Exploration AssetsBerenice/Somerville and Cygnus

At Berenice-Cygnus an aggressive first-phase drilling program commenced in Q4 2011. The 52-hole program enabled the Company to increase its JORC compliant resources at the project from 122Mt to 1.32Bt and to advance its economic interest in the Berenice and Somerville projects from 7% to 40% during the course of the year. This figure includes resources of 7.9Mt Measured, 394.5Mt Indicated and 922Mt Inferred, with 479Mt (after geological losses) that are considered extractable by opencast mining methods.

Assay results indicated that coking coal product yields in the practical mining situation may be significantly higher than previously indicated. On the basis of the information currently available, practical coking coal yields of between 20% and 22% for the combined S6, S8 and S12 Plies may be realistically obtained within the targeted mining areas, compared with a yield of 16% obtained from the slim diameter exploration drilling.

The Company appointed DRA Mining (Pty) Ltd in early October 2011 to complete a scoping study for the Berenice/Cygnus project, the completion of which occurred at the end of March 2012, with pleasing results.

From these positive results, a 121 borehole drilling programme (large and slim diameter) commenced on 01 April 2012 aimed at bringing the majority of the resource base within the open cast areas into the Measured category. The Company completed the drilling (totalling 82 holes) within the southern open pit area by end-August 2012 and will provide a resource update towards the end of the 2012 calendar year. Upon completion of the resource update Universal’s ownership in the Berenice/Cygnus project will increase to 50% and unlock the option to acquire an additional 24% upon commercial agreement. The drilling of the northern open pit area will be undertaken thereafter with completion expected during 2013.

The company also completed the environmental risk assessment and the geotechnical study and geohydrological survey/water census fieldwork. The geotechnical and geohydrological reports will be completed in Q4/2012.

Donkin

On 30 August 2011, Universal Coal entered into an earn-in agreement whereby after successful completion of a legal and technical due diligence Universal was granted 15% ownership in the project with a sliding mechanism to reach 50% and an additional option to acquire up to 74% of the project on commercial terms.

CorporateOn 1 November 2011, Universal Coal Plc issued 6,000,000 shares at A$ 0.22 to Natasa Mining Limited.

During the year under review, the Company raised A$7 million through a binding Converting Note Agreement with Susquehanna Pacific Pty Ltd for a maximum of A$12 million worth of unlisted and secured Converting Notes at an issue price of A$ 1 each, at a coupon rate of 9.5% per annum and a maturity date of 7 years. The Converting Notes are to be issued in two tranches together with a maximum of 38,527,394 share options.

The Group realised a profit for the year of A$2,779,977 as a result of a gain on the step-up acquisitions of the Brakfontein and Berenice/Cygnus projects of A$ 8,778,507.

Furthermore, the Group has effected a change in accounting policy whereby exploration and development costs have been capitalised. The effect of this change in accounting policy is further explained in the annual financial statements and prior period amounts have been restated.

John Hopkins

Non-Executive Chairman 25 October 2012

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DIRECTORS AND KEY MANAGEMENT

4


Directors and Key ManagementBoard of DirectorsJohn HopkinsNon-Executive Director and ChairmanJohn Hopkins is a qualified and experienced lawyer and professional company director. He has been on the board or chairman of nearly 20 public listed companies since 1985 (both in Australia and Canada) and as such has been involved in the financing and development (and subsequent M & A activities) of many gold, base metal, energy (coal and oil and gas), mineral sands and other resource projects all over the world.

John has had significant experience in the Indonesian coal sector. In addition he is currently also Non-Executive Chairman of emerging tungsten/tin developer Wolf Minerals Ltd (dual ASX/AIM listed), Western Australian explorer Midas Resources Ltd (MDS) and non-executive director of explorer Thundelarra Exploration Ltd (THX).

Tony WeberChief Executive Officer and Executive DirectorTony Weber is a mining engineer with over 15 years’ experience in mining with experience that covers project assessment, finance, development and operations. Tony was an Executive Director of Nkwe Platinum, an Australian listed Platinum developer. Prior to joining Nkwe Platinum in 2003,

he worked for Anglo Platinum as Operations Manager at the 40-60 million tonne per annum Potgietersrus Platinum Mine and at the Gamsberg Feasibility Study for Anglo American Operations. Previously, Tony worked at the New Clydesdale Colliery and the Greenside Colliery for GFSA and for a brief period at the Prosper Hanniel Colliery in Germany. Tony has significant skills and experience in coordinating project feasibility studies and hands-on operational experience in the coal extraction industry.

Hendrik BonsmaNon-Executive DirectorHenri Bonsma is a qualified lawyer and businessman with interests throughout South Africa and has been actively investing in the South African mining industry for over a decade. He has been involved in various Chrome, Plantium, and Iron Ore transactions and has been the promoter of several listings on the JSE, AIM and ASX.

Shammy LuvhengoExecutive Director: Business DevelopmentShammy is a qualified geologist who started his career with Exxaro Resources before moving into the investment world. Shammy worked for Investec Bank and Nedbank Capital structuring and implementing project finance and BEE deals within the resources industry. Prior to joining Universal Coal, he worked at Nkwe Platinum Ltd as Head of Business Development and Investor Relations.

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5

Management teamDaryl EdwardsChief Financial OfficerDaryl is a qualified Chartered Accountant (SA) and a registered member of the South African Institute of Chartered Accountants and Institute of Chartered Accountants in Australia, with over ten years professional experience in finance and commerce.

Prior to joining Universal Coal, Daryl was the CFO of Asenjo Energy, a Botswana based coal exploration and development company which is a Joint Venture between Aquila Resources (ASX), Sentula Mining (JSE) and Jonah Capital BVI.

Jaco MalanChief GeologistJaco is a qualified geologist with a Masters Degree in Exploration Geology. He started his career with Iscor Limited before moving into independent consulting. He has over 18 years’ experience in target generation and exploration across a range of commodities including coal, platinum, heavy minerals, gold and industrial minerals. He played a major role in identifying and acquiring Universal Coal’s current portfolio of projects. Jaco will be responsible for the day to day management of the Company’s geological resources and is a member of the development and delivery team for the current coal assets. He will also be responsible for the identification and evaluation of the Company’s further investment opportunities.

Kevin DonaldsonChief Development Engineer Kevin is a qualified mining engineer with over 20 years experience in coal mining in South Africa. He is the holder of a Mine Managers Certificate for Fiery Mines, is registered with ECSA (Engineering Council of South Africa) and is a member of both the SAIMM (South African Institute of Mining and Metallurgy) and SACMA (South African Colliery Managers Association). Kevin started his career with the then Rand Mines in operations where he reached the level of Mine Overseer. After Rand Mines he joined Anglo American where he moved into the mine planning and technical side of mining and project development. Kevin will be involved in the study phases of the projects and will be responsible for the implementation of the Kangala project.

Dr Mike SeegerChief Project EngineerMike is a qualified Mining Engineer with over 17 years’ experience in the international mining industry. He is a current holder of mine manager certificates for both coal and metalliferous mining in South Africa.

Minah Moabi Chief Environmental ManagerMinah Moabi is a qualified Environmental Scientist. She a obtained a Masters degree in Environmental Science from University of Witwatersrand in 2004. She is a member of South African Council for Natural Scientific professions (SACNASP). She has 10 years’ experience in environmental management, water management and sustainable development. Her working career started in 2002 with the Department of Water Affairs, where worked as a Geohydrologist responsible for groundwater assessment, development and management. After that she worked for an environmental consulting firm offering environmental and water services to mining companies. She then joined Exxaro resources where she became an Environmental Head for one of the operations for over five years; she was also actively involved in management of Exxaro sustainability reporting. Prior to joining Universal Coal she worked for BHP Billiton (BECSA) as a Project Manager, managing environmental related projects. Minah is responsible for developing, implementing and managing social and environmental management systems, strategies and action plans that ensure corporate sustainable development.

Anthony WardHead of Commercial and Corporate AffairsAnthony is responsible for Universal’s commercial initiatives including capital raising, debt & equity structuring, M&A, JVs and partnerships. Since joining the company in January 2012, Anthony has introduced strategic funding into UNV at a premium to market. In addition to commercial responsibilities, Anthony leads the company’s Investor and Public Relations activities in Australia, UK and South Africa. Anthony also provides support to the Chairman and Board on strategy development and implementation.

Anthony joined Universal with a significant background in Corporate Advisory both for public and private companies. His experience has seen him responsible for corporate strategy, capital raising, mergers and acquisitions, capital structuring, investor & public relations, commercial and legal advisory and negotiation.

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6


Directors’ Report

1. 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 continued to be that of 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.

At this stage in the Company’s development, the key performance indicators that the Directors monitor on a regular basis are management of liquid resources, which are cash-flows and bank balances. Net Group cash outflow in the year was A$ 4,004,270 (2011: A$ 12,574,868). Bank balances at the year-end totalled A$ 8,825,686 (2011: A$ 12,829,956).

During the year under review, the Company raised A$ 7 million through a binding Converting Note Agreement with Susquehanna Pacific Pty Ltd for a maximum of A$ 12 million worth of unlisted and secured Converting Notes at an issue price of A$ 1 each, at a coupon rate of 9.5% per annum and a maturity date of 7 years. The Converting Notes are to be issued in two tranches together with a maximum of 38,527,394 share options. Refer to note 13 in the notes to the consolidated and company annual financial statements.

The Company, through its 100% owned subsidiary, Universal Coal and Energy Holdings South Africa (Pty) Ltd entered into a binding memorandum of understanding and term sheet with Eskom for the supply of circa 2.1 million tonnes per annum of thermal coal from its Kangala Project and further earned into 40% of the Berenice/Cygnus Project and increased its holding in the Brakfontein Project to gain a majority stake (50.29%).

Principal risksThe 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.

The Directors present their report with the statutory financial statements of the Group and the Company for the year ended 30 June 2012.

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DIRECTORS’ REPORT

7

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

Financial instrument riskThe Company and Group are exposed to risks arising from financial instruments held. These are discussed in note 21.

Strategic riskSignificant and increasing competition exists for mineral acquisition opportunities throughout the world. As a result of this competition, 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 riskThe 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 at a profit. 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, speculative activities and increased production due to improved mining and production methods. Ultimately, the Group expects that all projects will be the subject of sufficient feasibility analysis to ensure a reasonable level of confidence appropriate to the circumstances under consideration.

Funding riskThe Group has raised funds via equity contributions from new and existing shareholders and via debt through the issuing of Converting Notes, thereby ensuring the Company remains a going concern until such time that revenues are earned through an off-take agreement. The directors regularly review cash flow requirements to ensure the Company can meet financial obligations as and when they fall due.

Operational riskMining operations are subject to hazards normally encountered in exploration, development and production. These include unexpected geological formations, rock falls, flooding, dam wall failure and other incidents or conditions which could result in damage to plant or equipment or the environment 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 will develop and maintain policies appropriate to the stage of development of its various projects.

Staffing and Key Personnel RisksRecruiting and retaining qualified personnel is critical to the Group’s success. The number of persons skilled in the acquisition, exploration and development of mining properties is limited and competition for such persons is intense. While the Group has good relations with its employees, these relations may be impacted by changes in the scheme of labour relations which may be introduced by the relevant governmental authorities. Adverse changes in such legislation may have a material adverse effect on the Group’s business, results of operations and financial condition. Staff are encouraged to discuss with management matters of interest to the employees and subjects affecting day-to-day operations of the Group.

Speculative Nature of Mineral Exploration and DevelopmentDevelopment 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 risk reduces substantially when a Group’s properties move from the exploration phase to the development phase.

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.

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DIRECTORS’ REPORT

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Political StabilityThe Group is conducting its activities in South Africa. The Directors believe that the Government of South Africa supports the development of natural resources by foreign investors and actively monitor the situation. However, there is no assurance that future political and economic conditions in South Africa will not result in the Government of South Africa adopting different policies regarding foreign development and ownership of mineral resources. Any changes in policy affecting ownership of assets, taxation, rates of exchange, environmental protection, labour relations, repatriation of income and return of capital, may affect the Group’s ability to develop the projects.

Uninsurable RisksThe Group may become subject to liability for accidents, pollution and other hazards against which it cannot insure or against which it may elect not to insure because of premium costs or for other reasons, such as in amounts, which exceed policy limits.

Security of TenureThe Group will investigate its rights to explore and extract minerals from all of its material properties and, to the best of its knowledge, those rights are expected to be in good standing. No assurance can be given, however, that the Group will be able to secure the grant or the renewal of existing mineral rights and tenures on terms satisfactory to it, or that governments in the jurisdiction in which the Group operates will not revoke or significantly alter such rights or tenures or that such rights or tenures will not be challenged or impugned by third parties, including local governments or other claimants. Although the Group is not currently aware of any existing title uncertainties with respect to any of its future material properties, there is no assurance that such uncertainties will not result in future losses or additional expenditures, which could have an adverse impact on the Group’s future cash flows, earnings, results of operations and financial condition.

Government RegulationsThe Group’s activities are subject to extensive laws and regulations controlling not only the mining of and exploration for mineral properties, but also the possible effects of such activities upon the environment and upon the interests of indigenous people. Permits from a variety of regulatory authorities are required for many aspects of mine operations and reclamation. Future legislation and regulations could cause additional expense, capital expenditures, restrictions and delays, the extent of which cannot be predicted.

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 licenses 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 in complete 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.

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DIRECTORS’ REPORT

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2. 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. This includes 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.

All Directors have access to the advice of the Company Secretary who is responsible for ensuring that all Board procedures are followed. Any Director may take independent professional advice at the Company’s expense in the furtherance of his duties.

On 1 July 2011 Mr Shammy Luvhengo was appointed by the Board as an Executive Director in the role of Business Development. On 18 April 2012, Dr Antony Harwood the executive Chairman tendered his resignation to the Board and was immediately replaced by Mr John Hopkins, an existing non-executive Board member as Chairman.

The names of Directors who held office during the 2012 year are:

Director Name Position Nationality Resigned

Antony Harwood Executive Chairman British 18 April 2012

John Hopkins Non-Executive Chairman Australian

Hendrik Bonsma Non-Executive Director South African

Anton Weber Executive Director and Chief Executive Officer South African

Shammy Luvhengo Executive Director South African

The composition of the Board reflects a wealth of minerals exploration and development experience.

The joint Company Secretaries are:

› Dan Robinson (resigned 30 June 2012)

› John Bottomley

3. Directors MeetingsThe Company held 7 (seven) 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 2012 are:

Director Name PositionNumber

of Meetings Attended

Number of Meetings

Eligible to Attend

Antony Harwood Executive Chairman 6 6

John Hopkins Non-Executive Chairman 7 7

Hendrik Bonsma Non-Executive Director 7 7

Anton Weber Executive Director and Chief Executive Officer 7 7

Shammy Luvhengo Executive Director 7 7

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DIRECTORS’ REPORT

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4. Committee MeetingsDuring the year an Audit and Risk Committee and a Remuneration Committee were formed with Mr Bonsma and Mr Hopkins acting as the respective Chairmen.

The Company held 3 (three) 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 2012 are:



Number of Meetings

Eligible to Attend


John Hopkins Non-Executive Director 3 3

Antony Harwood Executive Director 2 2

The Company held 3 (three) 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 2012 are:



Number of Meetings

Eligible to Attend

John Hopkins Non-Executive Director 3 3


Antony Harwood Executive Director 2 2

5. ResultsThe Group realised a profit for the year of A$ 2,779,977 (2011: loss of A$ 6,804,823). The profit has arisen from an accounting entry in the amount of A$ 8,778,507 upon step-up acquisitions through earn-in agreements with Universal Coal Development II (Pty) Ltd (7% to 40% shareholding) and Universal Coal Development III (Pty) Ltd (30% to 40% shareholding). The prior period loss was the result of the operating, administration and regulatory costs.

Furthermore, the Group has effected a change in accounting policy whereby exploration and development costs amounting to A$1,349,622 (2011: A$ 629,689 and 2010: A$ 420,696) have been capitalised. The effect of this change in accounting policy is further explained below in note 6 and prior period amounts have been restated

Rounding of amountsAll amounts are presented in A$’000 unless otherwise noted.

Details of major changes in the nature of the non-current assets of the company during the year were as follows:

Universal Coal Development I (Pty) LtdThere was no change in the ownership percentage in the year under review.

Universal Coal Development II (Pty) LtdOn 27 July 2011, a further 55 shares of Universal Coal Development II (Pty) Ltd were issued to Universal Coal and Energy Holdings South Africa (Pty) Ltd in accordance with the earn in Acquisition and Option Agreement representing a total shareholding in Universal Coal Development II (Pty) Ltd of 40%. The investment continues to be accounted for as an associated undertaking in the 2012 financial period

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DIRECTORS’ REPORT

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Universal Coal Development III (Pty) LtdUniversal Coal Development III (Pty) Ltd issued 20 ordinary shares to Universal Coal & Energy Holdings South Africa (Pty) Ltd, on the 8th of December 2011 and a further 29 ordinary shares to Universal Coal & Energy Holdings South Africa (Pty) Ltd on 7 June 2012 thus increasing the interest held by Universal Coal & Energy Holdings South Africa (Pty) Ltd from 30% to 50.29%, along with the related decrease in the interest held by Unity Rocks Mining (Pty) Ltd. Accordingly the investment is now accounted for as a subsidiary in the 2012 financial period.

Universal Coal Development IV (Pty) LtdThere was no change in the ownership percentage in the year under review.

Universal Coal Development V (Pty) LtdThere was no change in the ownership percentage in the year under review.

Universal Coal Development VI (Pty) LtdOn 30 August 2011, Universal Coal & Energy Holdings South Africa (Pty) Ltd entered into an earn-in agreement with Universal Coal Development VI (Pty) Ltd “UCDVI”) and Pacific Breeze Trading 725 (Pty) Ltd, whereby after successful completion of a legal and technical due diligence and subject to Board approval, Universal Coal & Energy Holdings South Africa (Pty) Ltd will be granted 15% ownership in UCDVI. Universal Coal & Energy Holdings South Africa (Pty) Ltd will further achieve an additional 10% upon the confirmation of a an inferred resource, a further 10% on confirmation of an indicated resource and a further 15% on confirmation of a measured resource. Due to the significant influence Universal Coal & Energy Holdings South Africa (Pty) Ltd has in Universal Coal Development VI (Pty) Ltd, the acquisition has been accounted for an associated undertaking during the 2012 financial period.

Universal Coal Development VII (Pty) LtdOn 19 April 2012, Universal Coal & Energy Holdings South Africa (Pty) Ltd acquired 1 ordinary share (50 %) of Universal Coal Development VII (Pty) Ltd, a special purpose entity formed with the intention of acquiring additional prospecting rights in South Africa. This investment has been treated as a prepayment during the 2012 financial period as certain conditions precedent still have to be concluded.

Twin Cities Trading 374 (Pty) LtdTwin Cities Trading 374 (Pty) Ltd issued 74 ordinary shares to Universal Coal and Energy Holdings South Africa (Pty) Ltd, on 14 March 2010. Twin Cities Trading 374 (Pty) Ltd has applied to the Department of Mineral Resources for prospecting licenses over Darwina Louw 254 IR and Strehla 261 IR, Portions 3(RE), 6, 8, 9, 12, 13 (RE). The applications have been declined by the Department of Mineral Resources and Universal Coal and Energy Holdings South Africa (Pty) Ltd has lodged an appeal in this regard.

Epsimax (Pty) LtdEpsimax (Pty) Ltd issued 74 ordinary shares to Universal Coal and Energy Holdings South Africa (Pty) Ltd, on the 18th of November 2009. Epsimax (Pty) Ltd has applied to the Department of Mineral Resources for a prospecting license over Vlakvarkfontein 213 IR, portion 4. This application is currently under appeal with the Department of Mineral Resources. This investment has been accounted for as a subsidiary during the 2012 financial period.

Episolve (Pty) LtdEpisolve(Pty) Ltd issued 74 ordinary shares to Universal Coal and Energy Holdings South Africa (Pty) Ltd, on the 18th of November 2009. Episolve(Pty) Ltd has applied to the Department of Mineral Resources for a prospecting license over Goedgedacht 228 IR, portion 14 and portion of portion 26. This investment has been accounted for as a subsidiary during the 2012 financial period.

Bold Moves 1765 (Pty) LtdBold Moves 1765 (Pty) Ltd issued 74 ordinary shares to Universal Coal and Energy Holdings South Africa (Pty) Ltd, on the 18th

of November 2009. Bold Moves 1765 (Pty) Ltd has applied to the Department of Mineral Resources for a prospecting license over Langsloot 99 IS, Portions 3, 4, 8, 13, 14, 15 & 16. This investment has been accounted for as a subsidiary during the 2012 financial period.

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6. Change in Accounting PolicyDuring the current financial period the Company effected a change in accounting policy in accordance with IFRS 6: Exploration for and Evaluation of Mineral Resources, whereby exploration and development costs have been capitalised. The change in accounting policy is anticipated to produce reliable and more relevant information about the effects of transactions, other events or conditions on the Company’s financial position, financial performance and future cash flows. This adjustment has been reflected retrospectively in the financial statements.

Effect of the Prior Year Adjustment (PYA)

Previous result A$’000

After PYA result

A$’000

Effect of PYA

A$’000

30 June 2011

Intangible assets 5,082 7,037 1,955 Investments in associates 8,000 8,672 672 Foreign currency translation reserve (3,673) (3,414) 259 Retained deficit 32,557 29,634 (2,923) Non-controlling interest 512 548 36 Effect on basic and diluted loss per share (cents) (1.9)

30 June 2010

Intangible assets 5,000 5,870 870 Investments in associates 4,985 5,047 62 Foreign currency translation reserve (4,253) (4,235) 18 Retained deficit 26,110 24,875 (1,235) Non-controlling interest 185 469 284Effect on basic and diluted loss per share (cents) (3.8)

7. Environmental ResponsibilityThe 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 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.

8. DividendsThere have been no dividends declared or paid during the current period (2011: A$ nil).

9. Policy on Payment of CreditorsThe Group and Company’s policy is to settle terms of payment with suppliers when agreeing terms of business, to ensure that the suppliers are aware of the terms of payment and to abide by them. The Group and Company settles its trade payables in accordance with this policy. Trade payables of the Group as at 30 June 2012 were equivalent to 48 (2011: 35) days purchases, based on the average daily amount invoiced by suppliers to the Group during the year.F

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10. Charitable and Political ContributionsDuring the year, the Group made no charitable or political contributions (2011: A$ nil).

11. Going ConcernThe accounts have been prepared on the going concern basis. At the year end the Group had A$ 8,825,686 (2011: A$12,829,956) of cash reserves. The Directors are therefore satisfied that the Group has adequate resources to continue in business for the foreseeable future.

12. Capital Structure and Share IssuesCapital structure at 30 June 2012: Current issued share capital (shares) 209,684,554

Outstanding share options (potential shares) 57,420,491

Ordinary share issues during the year:On 1 November 2011, Universal Coal Plc issued 6,000,000 shares at A$ 0.22 to Natasa Mining Limited.

13. Remuneration ReportThis 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/FeesExecutive Directors and Key Management Personnel 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 PaymentsNo other payments are due to Key Management Personnel.

Share OptionsRefer to section 14 of the Directors report.

Short-Term Cash IncentivesNo short term cash incentives were paid during the year to Directors and Key Management Personnel.

Long-Term BenefitsNo long term benefits were paid during the year.

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Termination PaymentsA termination payment of A$ 186,360 has been provided for in the 2012 financial period.

Service contracts:

Anton WeberExecutive Service agreement

› Commencement date is 1 July 2011

› Salary and Director’s fees payable from 1 January 2012 are A$ 325,000 per annum

› Termination is subject to 12 months’ notice by either party

Shammy LuvhengoExecutive Service agreement

› Commencement date is 1 July 2011

› Salary and Director’s fees payable from 1 January 2012 are A$ 225,000 per annum


› Upon successful completion of terms within an agreement between the Company and Mr Luvhengo and subject to approval by the Board, Mr Luvhengo will be issued with 2,200,000 ordinary shares at an issue price of A$ 0.23 . At 30 June 2012 the terms remain outstanding and the shares have not been issued.

Hendrik BonsmaNon-Executive Service agreement

› Commencement date is 1 December 2009

› Director’s fees payable from 1 April 2012 are A$ 55,000 per annum

› Consultancy fees are payable at the rate of $ 1,610 per day with a maximum of 5 days per month


John HopkinsNon-Executive Service agreement

› Commencement date is 1 September 2010

› Director’s fees payable from 1 April 2012 are A$ 110,000 per annum


Antony HarwoodConsultancy agreement

› Consultancy agreement through Zander Investing Ltd

› Commencement date is 1 July 2010 to 30 June 2013

› Base salary for the period ended 18 April 2012 (termination date) was A$ 155 300 per annum

Executive Service agreement

› Commencement date is 1 December 2009

› Directors fees payable are A$ 46,590 per annum

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Post-Employment BenefitsKey management personnel or other personnel do not receive retirement benefits in any form upon termination of their employment or service.

Directors’ and key management personnel remuneration, Company and consolidatedDetails of the nature and amount of each element of remuneration of each Director and Key Management Personnel, including their names and position of Universal Coal plc are set out in the following tables:

2012

All figures are stated in Australian dollars

Short-term benefits

Salary/ Fees

Share based payments

Termination payments Total % Options

Executive Directors

Antony Harwood1 160,709 136,178 186,360 483,247 28%

Anton Weber 263,434 136,178 - 399,613 34%

Shammy Luvhengo2 203,391 40,854 - 244,244 17%

Non-Executive Directors

Hendrik Bonsma 112,721 108,943 - 221,663 49%John Hopkins 61,900 27,236 - 89,136 31%

802,155 449,389 186,360 1,437,903

Key Management Personnel

Marthinus Malan 183,652 91,935 - 275,587 33%Michael Seeger 157,705 68,089 - 225,794 30%Daryl Edwards 202,421 20,150 - 222,571 9%

Dan Robinson3 110,018 - - 110,018 0%

John Bottomley 20,408 - - 20,408 0%

674,204 180,174 - 854,378

TOTAL 1,476,359 629,563 186,360 2,292,281

1 Resigned 18 April 2012.2 Appointed as Executive Director on 1 July 2011.3 Resigned on 30 June 2012.

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2011


Short-term benefits

Salary/ Fees

Share based payments

Termination payments Total % Options

Executive Directors

Antony Harwood 209,272 139,925 - 349,197 40%Anton Weber 209,272 112,408 - 321,680 35%

Non-Executive Directors

Hendrik Bonsma 101,294 89,490 - 190,784 47%

John Hopkins3 40,245 32,069 - 72,314 44%

Shammy Luvhengo4 106,896 386,2229 - 493,118 7%

666,979 760,114 - 1,427,093

Key Management Personnel

Duncan Craib5 85,452 18,873 71,492 175,817 11%

Timothy Horgan5 113,464 18,874 95,610 227,948 8%

Marthinus Malan6 159,508 75,494 - 235,002 32%

Michael Seeger6 156,608 18,873 - 175,481 11%

Daryl Edwards7 18,126 - - 18,126 0%

Dan Robinson8 65,000 - - 65,000 0%

John Bottomley8 3,823 - - 3,823 0%

TOTAL 1,268,960 892,228 167,102 2,328,290

3 Appointed on 1 September 2010.4 Appointed on 7 December 2010.5 Resigned on 31 January 2010. Duncan Craib was the Company’s former Chief Financial Officer and Timothy Horgan was the Company’s former Company Secretary.

6 Appointed on 1 December 2009. Marthinus (Jaco) Malan is the Company’s Chief Geologist and Michael Seeger is the Company’s Chief Engineer.

7 Appointed on 1 June 2011. Daryl Edwards is the Company’s current Chief Financial Officer. 8 Outsourced service contracts. Dan Robinson and John Bottomley are the joint Company secretaries. 9 Shares to the value of A$ 354,153 have been accrued for but have not been issued and are subject to Board approval.

14. Share OptionsOn 9 January 2012 8,000,000 share options were issued at a strike price of A$ 0.40 with an expiry date of 15 March 2014 to various directors, staff and consultants of Universal Coal Plc which were approved at the Annual General Meeting of 12 December 2011.

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The terms and conditions of these share options are:

Director Grant Date Price Amount In relation to Vested % Expiry

Black-Scholes

Valuation


Antony Harwood 9 Jan 2012 $ 0.40 1,679,349 Director 100% 15 Mar 2014 A$ 136,178Anton Weber 9 Jan 2012 $ 0.40 1,679,349 Director 100% 15 Mar 2014 A$ 136,178Hendrik Bonsma 9 Jan 2012 $ 0.40 1,343,479 Director 100% 15 Mar 2014 A$ 108,943John Hopkins 9 Jan 2012 $ 0.40 335,870 Director 100% 15 Mar 2014 A$ 27,236Shammy Luvhengo 9 Jan 2012 $ 0.40 503,805 Director 100% 15 Mar 2014 A$ 40,854


Black-Scholes

Valuation


Marthinus Jacobus Malan 9 Jan 2012 $ 0.40 1,133,744 Executive 100% 15 Mar 2014 A$ 91,935

Michael Seeger 9 Jan 2012 $ 0.40 839,675 Executive 100% 15 Mar 2014 A$ 68,089

On 22 June 2012, 500,000 share options were issued at a strike price of $0.40 with an expiry date of 31 Dec 2014 to Daryl Edwards, the Chief Financial Officer.


Black-Scholes

Valuation


Daryl Edwards 22 Jun 2012 $ 0.40 500,000 Executive 100% 31 Dec 2014 A$ 20,150

15. Directors InterestsDirector Name Number of fully paid ordinary shares Share Options Outstanding2

Anton Weber1 4,630,346 3,802,405

Hendrik Bonsma1 4,109,726 3,165,899

John Hopkins 40,000 1,135,870Shammy Luvhengo - 1,303,805

Notes:1 Messrs Anton Weber and Hendrik Bonsma each hold a relevant interest in 4,000,000 Shares by virtue of the issue of the Injula Consideration Shares pursuant to the Deed of Cession, in accordance with the Kangala Acquisition Agreement. Notwithstanding that Mr Weber and Mr Bonsma were not directors of the Company at the time of execution of the Kangala Acquisition Agreement, the Company obtained Shareholder approval on 8 September 2010 for the entry into the Kangala Project arrangements, for the purpose of the issue of these Shares.

2 Please refer to the Remuneration Report above for details of these options.For

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16. Rounding of AmountsThe company is of a kind referred to in Class Order 98/100, 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.

17. Directors IndemnityThe 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.

18. Directors Statement as to Disclosure of Information to AuditorsThe Directors who were members of the Board at the time of approving the Directors’ report are listed on page 9.

Having made enquiries of fellow Directors, each of these Directors confirms that:

› to the best of each Director’s 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 themselves aware of any information needed by the Company’s auditors for the purpose of their audit.

19. Events Subsequent to Reporting DateOn 2 July 2012 Universal Coal plc appointed Emma Lawler as joint company secretary effective 1 July 2012, upon the resignation of Dan Robinson.

On 2 July 2012, the Company issued 343 431 Chess Depositary Interests (CDI’s) at an issue price of A$ 0.119 to Susquehanna Pacific Pty Ltd pursuant to the Converting Note Agreement dated 4 April 2012 between the Company and Susquehanna Pacific Pty Ltd.

On 17 July 2012, Universal Coal plc entered into a binding Private Placement Deed with Power Origin Developments Ltd for up to 19.99% of the issued share capital of Universal Coal plc in two tranches. The first tranche being executed on 13 August 2012 whereby 12,264,521 CDI’s have been issued to Power Origin Developments Ltd at an issue price of A$ 0.163072 for A$ 2,000,000. The Company had agreed to grant Power Origin Developments Ltd an extension to satisfy certain conditions precedent for the issue of the further tranche of CDI’s, this extension has now lapsed, though the company continues talks with Power Origin to complete the proposed transaction.

On 17 September 2012, Universal Coal plc announced a 65% project financing arrangement with a leading South African bank for the funding of the Kangala Project. The financing arrangement is subject to several conditions precedent which are anticipated to be met by Q1 2013.

ON BEHALF OF THE BOARD:

Mr John Hopkins Chairman27 September 2012

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STATEMENT OF DIRECTORS’ RESPONSIBILITIES

Directors’ ResponsibilitiesThe directors are responsible for preparing the Director’s report, 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 as adopted by the European Union (IFRSs). 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 of the group for that period. The directors are also required to prepare financial statements in accordance with the rules of the Australian Securities Exchange.

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 IFRSs, 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.

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 requirements of the Companies Act 2006. 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.

Website publicationThe 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 on-going integrity of the financial statements contained therein.

On Behalf of the Board:

Mr John Hopkins Chairman27 September 2012

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INDEPENDENT AUDITOR’S REPORT

Independent Auditor’s Report to the Members of Universal Coal PLCWe have audited the financial statements of Universal Coal plc for the year ended 30 June 2012 which comprise the consolidated and company statement of financial position, the consolidated statement of comprehensive income, the consolidated and company statement of changes in equity, consolidated and company statement of cash flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards as adopted by the European Union (IFRSs) and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

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.

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Respective responsibilities of directors and auditorsAs explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.

Scope of the audit of the financial statementsA description of the scope of an audit of financial statements is provided on the APB’s website at www.frc.org.uk/apb/scope/private.cfm.

Opinion on financial statementsIn our opinion:

› the financial statements give a true and fair view of the state of the Group’s and the parent company’s affairs as at 30 June 2012 and of the Group’s profit for the year then ended;

› the Group financial statements have been properly prepared in accordance with IFRSs;

› the parent company financial statements have been properly prepared in accordance with IFRSs 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.

Opinion on other matters prescribed by the Companies Act 2006In our opinion the information given in the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements.

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Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

› adequate accounting records have not been kept by the parent company, 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.

Anne Sayers (senior statutory auditor)

For and on behalf of BDO LLP, statutory auditorLondon United Kingdom

27 September 2012

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

The financial statements, on pages 6 to 67, were approved by the Board on 27 September 2012. The audit report contained within these financial statements is reproduced above.

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Consolidated Statement of Financial PositionAll figures are stated in Australian Dollars GROUP

2012 2011 2010

Audited Restated Restated

Note A$’000 A$’000 A$’000

Assets

NonCurrent Assets

Property, plant and equipment 4 166 56 11

Intangible assets 5 19,799 7,037 5,870

Investments in associated undertakings 7 15,282 8,672 5,047

35,247 15,765 10,928

Current Assets

Trade and other receivables 8 1,652 439 829

Cash and cash equivalents 9 8,826 12,830 255

10,478 13,269 1,084

TOTAL ASSETS 45,725 29,034 12,012

Equity and Liabilities

Equity

Share capital 10 17,534 17,077 7,730

Share premium 10 35,358 34,495 18,218

Foreign Currency Translation Reserve 2,165 3,414 4,235

Shares to be issued - - 5,105

Share based payment reserve 12 6,128 3,373 1,857

Retained deficit (26,695) (29,634) (24,875)

34,490 28,725 12,270

Noncontrolling interest 4,973 (548) (469)

Equity Attributable to Equity Holders of Parent 39,463 28,177 11,801

Liabilities

Non-Current Liabilities

Converting Notes 13 5,315 - -

Current Liabilities

Trade and other payables 14 947 857 211

TOTAL EQUITY AND LIABILITIES 45,725 29,034 12,012

The notes on page 30 to 67 form part of the financial statements.

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All figures are stated in Australian Dollars COMPANY

2012 2011 2010

Note A$’000 A$’000 A$’000

Assets

NonCurrent Assets

Property, plant and equipment 6 - -

Investments in subsidiaries 6 30,811 18,208 13,029

30,817 18,208 13,029

Current Assets

Trade and other receivables 8 251 255 149

Cash and cash equivalents 9 2,478 10,607 104

2,729 10,862 253

TOTAL ASSETS 33,546 29,070 13,282

Equity and Liabilities

Equity

Share capital 10 17,534 17,077 7,730

Share premium 10 35,358 34,495 18,218

Foreign Currency Translation Reserve 622 622 2,697

Shares to be issued - - 5,105

Share based payment reserve 12 6,128 3,373 1,857

Retained deficit (31,813) (26,665) (22,440)

Equity Attributable to Equity Holders of Parent 27,829 28,902 13,167

Liabilities

Non-Current Liabilities

Converting Notes 13 5,315 - -

Current Liabilities


TOTAL EQUITY AND LIABILITIES 33,546 29,070 13,282


Company Statement of Financial Position

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

25

All figures are stated in Australian Dollars 2012 2011

Audited Restated

Note A$’000 A$’000

Operating expenses (6,051) (5,642)

Share based payment charge (1,051) (3,750)

Operating loss (7,102) (9,392)

Finance income 16 283 458

Foreign exchange (loss) / gain (13) 1,558

Finance expenses 16 (69) (2)

Share of operating profit of associated undertakings 7 3 6

Gain arising on step up of interest in associated undertaking 7 8,778 567

Gain arising on step up of associated undertaking to subsidiary 899 -

Profit/ (loss) after taxation for the year 2,779 (6,805)

Other comprehensive income:

Exchange differences on translation of foreign operations (1,249) (821)

TOTAL COMPREHENSIVE INCOME / (LOSS) 1,530 (7,626)

Profit / (loss) attributable to :

Owners of the parent 2,900 (6,726)

Noncontrolling interest (121) (79)

2,779 (6,805)

TOTAL COMPREHENSIVE INCOME / (LOSS) ATTRIBUTABLE TO:

Owners of the parent 1,651 (7,547)

Noncontrolling interest (121) (79)

1,530 (7,626)

Earnings / (Loss) Per Share

Basic earnings / (loss) per share (cents) 23 1.4 (4.3)

Diluted earnings / (loss) per share (cents) 23 1.4 (4.3)


Consolidated Statement of Comprehensive Income

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

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GROUPShare

capitalShare

premium

Total share

capital

Foreign currency

translation reserve

Shares to be

issued

Share based

payment reserve

Total reserves

Retained deficit

Total attributable

to equity holders of the Group

Non- controlling

interestTotal

equity

Restated Restated Restated Restated Restated Restated Restated Restated Restated Restated Restated

All figures are stated in Australian Dollars

A$’000 A$’000 A$’000 A$’000 A$’000 A$’000 A$’000 A$’000 A$’000 A$’000 A$’000

Balance at 1 July 2010 7,730 18,218 25,948 4,235 5,105 1,857 11,197 (24,875) 12,270 (469) 11,801

Profit / (loss) for the year - - - - - - - (6,726) (6,726) (79) (6,805)

Other comprehensive income / (loss)

- - - (821) - - (821) - (821) - (821)

Issue of shares 9,347 16,277 25,624 - (5,105) - (5,105) - 20,519 - 20,519Share based payments - - - - - 3,483 3,483 - 3,483 - 3,483

Transfer between reserves

- - - - - (1,967) (1,967) 1,967 - - -

Balance at 1 July 2011 17,077 34,495 51,572 3,414 - 3,373 6,787 (29,634) 28,725 (548) 28,177

Profit / (loss) for the year - - - - - - - 2,900 2,900 (121) 2,779


- - - (1,249) - - (1,249) - (1,249) - (1,249)

Issue of shares 457 863 1,320 - - - - - 1,320 - 1,320Share based payments - - - - - 2,794 2,794 - 2,794 - 2,794

Transfer between reserves

- - - - - (39) (39) 39 - - -

Non-Controlling interest on acquisition of subsidiary

- - - - - - - - - 5,642 5,642

457 863 1,320 (1,249) - 2,755 1,506 2,939 5,765 5,521 11, 286

Balance at 30 June 2012

17,534 35,358 52,892 2,165 - 6,128 8,293 (26,695) 34,490 4,973 39,463

Note 10 10 10 12


Consolidated Statement of Changes in Equity

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Company Statement of Changes in Equity

COMPANYShare

capitalShare

premium

Total share

capital

Foreign currency

translation reserve

Shares to be

issued

Share based

payment reserve

Total reserves

Retained deficit

Total attributable

to equity holders

of the Company

Total equity

All figures are stated in Australian Dollars

A$’000 A$’000 A$’000 A$’000 A$’000 A$’000 A$’000 A$’000 A$’000 A$’000

Balance at 1 July 2010 7,730 18,218 25,948 2,697 5,105 1,857 9,659 (22,440) 13,167 13,167

Profit / (loss) for the year - - - - - - - (6,192) (6,192) (6,192)


- - - (2,075) - - (2,075) - (2,075) (2,075)

Issue of shares 9,347 16,277 25,624 - (5,105) - (5,105) - 20,519 20,519Share based payments - - - - - 3,483 3,483 - 3,483 3,483

Transfer between reserves - - - - - (1,967) (1,967) 1,967 - -

Balance at 1 July 2011 17,077 34,495 51,572 622 - 3,373 3,995 (26,665) 28,902 28,902

Profit / (loss) for the year - - - - - - - (5,187) (5,187) (5,187)

Issue of shares 457 863 1,320 - - - - - 1,320 1,320Share based payments - - - - - 2,794 2,794 - 2,794 2,794

Transfer between reserves - - - - - (39) (39) 39 - -

457 863 1,320 - - 2,755 2,755 (5,148) (1,073) (1,073)

Balance at 30 June 2012 17,534 35,358 52,892 622 - 6,128 6,750 (31,813) 27,829 27,829

Note 10 10 10 12

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GROUP


Audited Restated

Note A$’000 A$’000

Cash flows from operating activities

Cash used in operations 19 (7,110) (4,600)

Net cash used in operating activities (7,110) (4,600)

Cash flows from investing activities

Acquisition of property, plant and equipment 4 (130) (52)

Proceeds from disposal of property, plant and equipment 3 -

Acquisition of intangible assets 5 (1,374) (1,731)

Investment in associated undertakings 7 (3,644) (3,314)

Finance income 283 458

Net cash used in investing activities (4,862) (4,639)

Cash flows from financing activities

Proceeds of share issue 10 1,320 21,863

Proceeds from issue of Converting Notes 13 7,000 -

Finance expense 16 (69) (2)

Net cash generated from financing activities 8,251 21,861

TOTAL CASH MOVEMENT FOR THE YEAR (3,721) 12,622

Cash at the beginning of the year 9 12,830 255

Effect of exchange rate movement on cash balances (283) (47)

TOTAL CASH AT END OF THE YEAR 9 8,826 12,830


Consolidated Statement of Cash Flows

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COMPANY STATEMENT OF CASH FLOWS

29

Company Statement of Cash Flows

GROUP


Audited Restated

Note A$’000 A$’000

Cash flows from operating activities

Cash used in operations 19 (4,305) (4,461)

Net cash used in operating activities (4,305) (4,461)

Cash flows from investing activities

Acquisition of property, plant and equipment 4 (6) -

Investment in subsidiary 6 (12,318) (7,051)

Finance income 204 445

Net cash used in investing activities (12,120) (6,606)

Cash flows from financing activities

Proceeds of share issue 10 1,320 21,863

Proceeds from issue of Converting Notes 13 7,000 -

Finance expense (69) -

Net cash generated from financing activities 8,251 21,863

Total cash movement for the year (8,174) 10,796

Cash at the beginning of the year 9 10,607 104

Effect of exchange rate movement on cash balances 45 (293)

TOTAL CASH AT END OF THE YEAR 9 2,478 10,607


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NOTES TO THE CONSOLIDATED AND COMPANY ANNUAL FINANCIAL STATEMENTS

30


1. Significant Accounting PoliciesGeneral informationThe Company is domiciled in the UK. The address of the registered office is One America Square, Crosswall, London EC3N 2SG. The registered number of the company is 4482856.

Basis of preparationThe 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 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 (IFRS).

The Company has taken advantage of the exemption allowed 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 loss after tax of A$ 5,187,502 (2011: loss of A$ 6,192,653) which is dealt with in the financial statements of the parent Company.

Going concernThe accounts have been prepared on the going concern basis. At the year end the Group had A$ 8,825,686 (2011: A$12,829,956) of cash reserves. The Directors are therefore satisfied that the Group has adequate resources to continue in business for the foreseeable future.

Notes to the Consolidated and Company Annual Financial Statements

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Change in Accounting PolicyDuring the current financial period the Company effected a change in accounting policy in accordance with IFRS 6: Exploration for and Evaluation of Mineral Resources, whereby exploration and development costs have been capitalised. The change in accounting policy is anticipated to produce reliable and more relevant information about the effects of transactions, other events or conditions on the Company’s financial position, financial performance and future cash flows. This adjustment has been reflected retrospectively in the financial statements. In the past these costs were expensed through the statement of comprehensive income.

Effect of the Prior Year Adjustment (PYA)

Previous result A$’000

After PYA result

A$’000

Effect of PYA

A$’000

30 June 2011

Intangible assets 5,082 7,037 1,955 Investments in associates 8,000 8,672 672 Foreign currency translation reserve (3,673) (3,414) 259

Retained deficit 32,557 29,634 (2,923) Non-controlling interest 512 548 36 Effect on basic and diluted loss per share (cents) (1.9)

30 June 2010

Intangible assets 5,000 5,870 870 Investments in associates 4,985 5,047 62 Foreign currency translation reserve (4,253) (4,235) 18

Retained deficit 26,110 24,875 (1,234) Non-controlling interest 185 469 284Effect on basic and diluted loss per share (cents) (3.8)

Functional and presentation currencyItems 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 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.

The accounts are presented in A$’000 unless otherwise stated.

Basis of consolidation(a) 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 given, 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.

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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.

(b) SubsidiariesSubsidiaries are entities that are directly or indirectly controlled by the Group. Control exists where the Group has the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities. In assessing control, potential voting rights are taken into account. Subsidiaries are fully consolidated from the date on which control is transferred until the date that the control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. Inter-company transactions, balances and unrealised gains on transactions between Group entities are eliminated.

The consolidated financial statements have been prepared in accordance with IAS 27 ‘Consolidated and Separate Financial Statements’ and IFRS 3 ‘Business Combinations’.

The company’s investment in its subsidiary is carried at cost, less any impairment recognised.

(c) AssociatesAn associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

The degree of control and contractual ability to direct the use of funding provided by the Group are taken into consideration.

Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost plus any goodwill arising. Any premium paid for an associate above the fair value of the Group’s share of the identifiable assets, liabilities and contingent liabilities acquired is capitalised and included in the carrying amount of the associate. The carrying amount of investment in an associate is subject to impairment in the same way as described below.

An increase in the holding of an entity already classified as an associate, which does not result in control being passed to the company, is accounted for by determining the fair value of the consideration paid to acquire the additional interest and the fair value of the share of net assets. The difference between the two is recognised as goodwill. Any negative goodwill is taken to the profit and loss as a gain on step up.

The Group’s share of its associates’ post-acquisition profits or losses is recognised in the consolidated Statement of Comprehensive Income, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate no further losses are recognised.

Finance incomeFinance income is 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. The only finance income in the year related to bank interest received in the year. The impact of discounting was immaterial.

Interest income and expense are reported on an accrual basis.

Intangible assets Exploration and evaluation assetsDuring the current financial period the Company effected a change in accounting policy in accordance with IFRS 6: Exploration for and Evaluation of Mineral Resources, whereby exploration and development costs have been capitalised.

The Group capitalises the fair value of the consideration paid for exploration and prospecting rights together with all other costs incurred provided they meet the recognition criteria. The Group has taken into consideration the degree to which expenditure can be associated with finding specific mineral resources. Once all relevant mining and operating licences have been granted, the intangible assets will be reclassified to an item of property, plant and equipment and will be amortised over the expected life of the mining licences. The amortisation expense will be included within the administration expenses in the Statement of Comprehensive Income.

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Computer softwareAmortisation is provided to write down the intangible assets, on a straight line basis, to their residual values as follows:

Item Useful life

Computer software 2 years

Impairment of assets Where appropriate the Group reviews the carrying amounts of its property, plant and equipment, intangible assets and investments to determine whether there is any indication that those assets have suffered an impairment.

If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the Statement of Comprehensive Income, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount. However, the increased carrying amount will not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years.

Property, plant and equipmentProperty, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment. Depreciation is charged so as to write off the costs of assets, over their estimated useful lives, using the straight line method on the following basis:

Item Useful life

Computer equipment 3 yearsFurniture and fittings 5 years

The residual value, useful life and depreciation method of each asset are 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 de-recognition 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.

Financial instrumentsFinancial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument.

Financial assets and liabilities are initially recognised and subsequently measured based on their classification as “loans and receivables” or “financial liabilities measured at amortised costs”.

Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets. The Group’s loans and receivables comprise of trade and other receivables 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 equivalentsCash and cash equivalents comprise cash on hand and fixed-term deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash. These are initially and subsequently recorded at fair value.

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Other financial liabilitiesOther financial liabilities, including trade and other payables, are initially measured at fair value, net of transaction costs and are subsequently measured at amortised cost using the effective interest method.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

Converting NotesOn initial recognition the converting notes have been split into a financial liability and a derivative financial liability. The financial liability is subsequently recognised at amortised cost and the derivative financial liability measured at fair value through the profit and loss.

LeasesA lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.

Operating leases – lesseeOperating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset or liability. This asset or liability is not discounted.

Any contingent rents are expensed in the period in which they are incurred.

Current TaxationCurrent 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 taxDeferred tax is calculated using the balance sheet liability method, which requires provision for temporary differences between the tax bases of assets and liabilities and their carrying amounts on the Statement of Financial Position. Tax rates enacted at the end of the reporting period are used to determine the deferred tax balances. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the asset can be utilised.

Foreign currenciesCompanyAssets and liabilities in foreign currencies are translated into Australian Dollar (“A$”) at the rates of exchange ruling at the end of the reporting period. Transactions in foreign currencies are translated into Australian Dollar (“A$”) at the rate of exchange ruling at the date of transaction. Such exchange differences are taken into account in arriving at the operating result.

Exchange gains and losses arising on the retranslation of monetary available for sale financial assets are treated as a separate component of the change in fair value and recognised in profit or loss. Exchange gains and losses on non-monetary available for sale financial assets form part of the overall gain or loss recognised in respect of that financial instrument.

When a gain or loss on a non-monetary item is recognised to other comprehensive income and accumulated in equity, any exchange component of that gain or loss is recognised to other comprehensive income and accumulated in equity. When a gain or loss on a non-monetary item is recognised in profit or loss, any exchange component of that gain or loss is recognised in profit or loss.

GroupThe Group translates its foreign operations using the closing rate method.

At the end of the reporting period:

› foreign currency monetary items are translated using the closing rate;

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› non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction; and

› non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

Exchange differences arising from the translation of the net assets of foreign operations are taken to the foreign exchange reserve. Other exchange differences are taken to the Statement of Comprehensive Income.

Share-based paymentsThe Company has granted equity-settled share-based payments. 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 by reference to the fair value of the equity instrument granted.

Where outstanding share options have been modified in the year under review, the full expenditure is accounted for immediately.

Employee benefitsShort-term employee benefitsThe 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 profit sharing, share options and bonus payments is recognised as an expense when there is a legal or constructive obligation to make such payments as a result of past performance.

Judgements made in applying accounting policies and key sources of estimation uncertaintyThe significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation were:

(a) 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.

On review during the year, the Directors have noted no circumstances which would suggest that at this time any impairment is necessary given the preliminary results on surveys obtained to date. The situation will be closely monitored and adjustments made in future periods if there are indications that the assets held are not recoverable.

(b) Share-based payments (note 12)In determining the fair value of equity settled share based payments and the related charge to the Statement of Comprehensive Income, the Group must make assumptions about inputs into valuation models, future events and market conditions. Judgement is made as to the likely number of shares that will vest, and inputs into valuation models, the fair value of each award granted.

Share options are measured at fair value at the grant date using the Black-Scholes model. The fair value is expensed on a straight line basis over the vesting period, based on an estimate of the number of options that will eventually vest.

(c) Associated undertakings (note 7)The Directors believe, after careful consideration of the contractual earn-in arrangements, that the Group, as a matter of fact, exercises significant influence over the activities and operations of Universal Coal Development II (Pty) Ltd, Universal Coal Development IV (Pty) Ltd, Universal Coal Development V (Pty) Ltd and Universal Coal Development VI (Pty) Ltd. Therefore, the associated undertakings are accounted for on the equity basis.

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2. New Standards and Interpretations The financial statements have been drawn up on the basis of accounting standards, interpretations and amendments effective at the beginning of the accounting period. There following new standards, interpretations and amendments to published standards effective in the year have not been adopted by the Group:

Standards Details of amendment Annual periods beginning on or after

IFRS 9: Financial Instruments

New standard that forms the first part of a three part project to replace IAS 39 Financial Instruments: Recognition and Measurement 1 January 2015

IFRS 10: Consolidated Financial Statements

New standard that replaces the consolidation requirements in SIC 12 Consolidation—Special Purpose Entities and IAS 27 Consolidated and Separate Financial Statements. Standard builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company and provides additional guidance to assist in the determination of control where this is difficult to assess

1 January 2013

IFRS 11: Joint Arrangements

New standard that deals with the accounting for joint arrangements and focuses on the rights and obligations of the arrangement, rather than its legal form. Standard requires a single method for accounting for interests in jointly controlled entities

1 January 2013

IFRS 12: Disclosure of Interests in Other Entities

New and comprehensive standard on disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles

1 January 2013

IFRS 13: Fair Value Measurement

New guidance on fair value measurement and disclosure requirements 1 January 2013

IAS 1: Presentation of Financial Statements

New requirements to group together items within OCI that may be reclassified to the profit or loss section of the income statement in order to facilitate the assessment of their impact on the overall performance of an entity.

1 July 2012

IAS 19: Employee Benefits

Amendments to the accounting for current and future obligations resulting from the provision of defined benefit plans 1 January 2013

IAS 27: Consolidated and Separate Financial Statements

Consequential amendments resulting from the issue of IFRS 10,11 and 12 1 January 2013

IAS 28: Investments in Associates

Consequential amendments resulting from the issue of IFRS 10,11 and 12 1 January 2013

IAS 32: Financial Instruments : Presentation

› Amendments require entities to disclose gross amounts subject to rights of set-off, amounts set off in accordance with the accounting standards followed, and the related net credit exposure. This information will help investors understand the extent to which an entity has set off in its balance sheet and the effects of rights of set-off on the entity’s rights and obligations.

› Annual Improvements 2009–2011 Cycle: Amendments to clarify the tax effect of distribution to holders of equity instruments.

1 January 2013

IAS 34: Interim Financial Reporting

Annual Improvements 2009–2011 Cycle: Amendments to improve the disclosures for interim financial reporting and segment information for total assets and liabilities

1 January 2013

IFRIC 20: Stripping Costs in the Production Phase of a Surface Mine

Capitalisation of stripping costs in the production phase of a surface mine until they meet the definition of inventory in IAS 2 : Inventories 1 January 2013For

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The Group have not yet assessed the impact of IFRS 9. Except for the amended disclosure requirements of IAS24 Revised, the above new standards, amendments and interpretations are not expected to materially affect the Group’s reporting or reported numbers.

New IFRS issued by the IASB and applied in these financial statements are as follows:

The amendments as set out below are considered not to be material:

Standards Details of amendment Annual periods beginning on or after

IAS 1: Presentation of Financial Statements

› Current/non current classification of convertible instruments 1 January 2010

› Clarification of statement of changes in equity 1 January 2011

› New requirements to group together items within OCI that may be reclassified to the profit or loss section of the income statement in order to facilitate the assessment of their impact on the overall performance of an entity.

1 July 2012

› Annual Improvements 2009–2011 Cycle: Amendments clarifying the requirements for comparative information including minimum and additional comparative information required.

1 January 2013

IAS 7: Statement of Cash Flows Classification of expenditures on unrecognised assets 1 January 2010

IAS 16: Property, Plant and Equipment

Annual Improvements 2009–2011 Cycle: Amendments to the recognition and classification of servicing equipment. 1 January 2013

IAS 24: Related Party Disclosures

› Simplification of the disclosure requirements for government related entities

› Clarification of the definition of a related party 1 January 2011

IAS 27: Amendment – Consolidated and separate financial statements

Transition requirements for amendments arising as a result of IAS 27 Consolidated and Separate Financial Statements 1 July 2010

IFRS3: Revised – Business Combinations

› Amendments to transition requirements for contingent consideration from a business combination that occurred before the effective date of the revised IFRS

› Clarification on the measurement of non-controlling interests

› Additional guidance provided on un-replaced and voluntarily replaced share-based payment awards

1 January 2011

IFRS 2: - Amendment - Group Cash -settled Share-based Payment Transactions

› Clarification of scope of IFRS 2 and IFRS 3 revised 1 July 2009

› Amendments relating to group cash-settled share-based payment transactions – clarity of the definition of the term “Group” and where in a group share based payments must be accounted for.

1 January 2010

IFRS 7: Financial Instruments: Disclosures

› Amendments require additional disclosure on transfer transactions of financial assets, including the possible effects of any residual risks that the transferring entity retains. The amendments also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period.

1 July 2011

› Amendments require entities to disclose gross amounts subject to rights of set-off, amounts set off in accordance with the accounting standards followed, and the related net credit exposure. This information will help investors understand the extent to which an entity has set off in its balance sheet and the effects of rights of set-off on the entity’s rights and obligations.

1 January 2013

IAS 12: Income Taxes Rebuttable presumption introduced that an investment property will be recovered in its entirety through sale. 1 January 2012

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3. Segmental Report All investments in associates and subsidiaries operate in one geographical location being South Africa, and are organised into one business unit from which the Group’s expenses are incurred and future revenues are expected to be earned, being for the exploration for and extraction of coal and production of Coal. The reporting on these investments to the Chief Operating Decision Makers, the Board of Directors, focuses on the use of the profit and loss and capitalisation of the coal projects.

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.

For the year ended 30 June 2012

Indirect Interest in Exploration and

development of coal

Corporate (Unallocated) Total

A$’000 A$’000 A$’000

Admin expenses (excl share based payments) (64) (4,667) (4,731)Share based payments expense - (2,371) (2,371)Share of operating profit of associate undertakings 3 - 3Gain arising on step-up of interest in associated undertaking 8,778 - 8,778Foreign exchange loss - (13) (13)Gain arising on step up of associated undertaking to subsidiary 899 - 899Net finance income - 214 214

PROFIT / (LOSS) BEFORE AND AFTER TAXATION 9,616 (6,837) 2,779

TOTAL NON-CURRENT ASSETS 35,133 114 35,247

TOTAL ASSETS 36,111 9,614 45,725

TOTAL LIABILITIES (472) (5,790) (6,262)

For the year ended 30 June 2011 - Restated

Indirect Interest in Exploration and

development of coal

Corporate (Unallocated) Total

A$’000 A$’000 A$’000

Admin expenses (excl share based payments) - (5,642) (5,642)Share based payments expense - (3,750) (3,750)Share of operating loss of associate 6 - 6Gain arising on step-up of interest in associated undertaking 567 - 567Foreign exchange gain - 1,558 1,558Net finance income - 456 456

LOSS BEFORE AND AFTER TAXATION 573 (7,378) (6,805)

TOTAL NON-CURRENT ASSETS 15,709 56 15,765

TOTAL ASSETS 16,148 12,886 29,034

TOTAL LIABILITIES (600) (257) (857)

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4. Property Plant and EquipmentGroup 2012

Cost Accumulated depreciation Carrying value

A$’000 A$’000 A$’000

Furniture and fixtures 31 8 23

Computer equipment 38 13 25

Capital work in progress 118 - 118

TOTAL 187 21 166

Reconciliation of property, plant and equipment - Group - 2012

Opening balance Additions Disposals

Foreign exchange

movements Depreciation Total

A$’000 A$’000 A$’000 A$’000 A$’000 A$’000

Furniture and fixtures 30 5 (4) - (8) 23

Computer equipment 26 9 - (1) (9) 25

Capital work in progress - 118 - - - 118

56 132 (4) (1) (17) 166

Group 2011


A$’000 A$’000 A$’000

Furniture and fixtures 34 (4) 30Computer equipment 29 (3) 26

TOTAL 63 (7) 56



Foreign exchange


A$’000 A$’000 A$’000 A$’000 A$’000 A$’000

Furniture and fixtures 11 23 - (1) (3) 30Computer equipment - 29 - - (3) 26

11 52 - (1) (6) 56

Group 2010


A$’000 A$’000 A$’000

Furniture and fixtures 13 (2) 11

TOTAL 13 (2) 11

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Foreign exchange


A$’000 A$’000 A$’000 A$’000 A$’000 A$’000

Furniture and fixtures 6 7 - - (2) 11

5. Intangible AssetsGroup 2012


A$’000 A$’000 A$’000

Mining & Prospecting Rights

Universal Coal Development I (Pty) Ltd 8,024 - 8,024

Universal Coal Development III (Pty) Ltd 11,709 - 11,709

Other Intangible Assets

Computer software 113 (47) 66

TOTAL 19,846 (47) 19,799

Reconciliation of intangible assets Group – 2012


Foreign exchange


A$’000 A$’000 A$’000 A$’000 A$’000 A$’000


Universal Coal Development I (Pty) Ltd

6,970 1,058 - (4) - 8,024

Universal Coal Development III (Pty) Ltd

- 11,619 - 90 - 11,709


Computer software 67 46 - - (47) 66

7,037 12,723 - 86 (47) 19,799

The acquisition of Universal Coal Development III (Pty) Ltd reflects the acquisition of the assets of the subsidiary and de-recognition of the associated undertaking.

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Group 2011 2010

Cost Accumulated amortisation

Carrying value Cost Accumulated

amortisationCarrying

value

A$’000 A$’000 A$’000 A$’000 A$’000 A$’000


Universal Coal Development I (Pty) Ltd 6,970 - 6,970 5,242 - 5,242Universal Coal Development II (Pty) Ltd - - - 628 - 628


Computer software 67 - 67 - - -

TOTAL 7,037 - 7,037 5,870 - 5,870



Foreign exchange

movements Total

A$’000 A$’000 A$’000 A$’000 A$’000


Universal Coal Development I (Pty) Ltd 5,242 2,292 - (564) 6,970Universal Coal Development II (Pty) Ltd 628 - (628) - -


Computer software - 67 - - 67 5,870 2,359 (628) (564) 7,037

The disposal of Universal Coal Development II (Pty) Ltd reflects the de-recognition of the assets of the subsidiary as a result of the dilution from a 100% owned subsidiary to a 7% owned associate.



Foreign exchange

movementsTotal

A$’000 A$’000 A$’000 A$’000 A$’000


Universal Coal Development I (Pty) Ltd 5,181 870 (650) (159) 5,242Universal Coal Development II (Pty) Ltd - 628 - - 628

5,181 1,498 (650) (159) 5,870

The disposal amount in Universal Coal Development I (Pty) Ltd reflects transfer of a prepaid amount for the 2010 year which was reversed in the 2011 year.

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Supplementary information on Intangible AssetsThe following detailed schedule provides additional information pertaining specifically to the interest’s held by Universal Coal plc in the identifiable Mining & Prospecting Rights as at year end:

Project and Entity AssetRegistration

Number Permit NumberInterest

(%)

Licence Expiry Date

Renewal submitted

Area (ha)

Kangala Project: Universal Coal Development I (Pty) Ltd

Middelbult 235 IR, Portions 40 & 82

588/2006 PR MP30/5/1/1/640PR 70.5% 06/11/2011 12/08/2011 942


Wolvenfontein 244 IR, Portion 1 and RE of Portion 2#

In process MP30/5/1/2/2/429MR 70.5% 02/05/2032 - 951


Modderfontein 236 IR, Portion 1 93/2007 PR MP30/5/1/1/2/639PR 70.5% 06/11/2011 15/08/2011 127

Roodekop Project: Universal Coal Development IV (Pty) Ltd

Roodekop 63 IS IR, the whole farm

191/2009 PR MP30/5/1/1/2/1980PR 50% 20/04/2012 30/03/2012 860

Brakfontein Project: Universal Coal Development III (Pty) Ltd

Brakfontein 264 IR, Portions 6, 8, 9, 10, 20, 26, 30 and RE of 264 IR

245/2008 PR MP30/5/1/1/2/1879PR 50.29% 09/07/2011 12/04/2011 879

Berenice and Somerville Project: Universal Coal Development II (Pty) Ltd

Berenice and Somerville Projects, several farms

342/2009 PR LP30/5/1/1/2/376PR 40% 24/07/2011

20/04/2011 Granted

– to be executed

39,484

Cygnus Project: Universal Coal Development V (Pty) Ltd Cygnus Project 227/2008 PR LP30/5/1/1/2/1276PR 10% 06/05/2013 - 12,299

Donkin Project: Universal Coal Development VI (Pty) Ltd Donkin Project 16/2010 PR LP30/5/1/1/2/2074PR 15% 08/12/2014 - 1,178

Arnot South Project: Universal Coal Development VII (Pty) Ltd

Arnot South Project#### 54/2007 PR MP30/5/1/1/2/360PR 50% 29/10/2011 02/06/2011 15,532

Twin Cities Trading 374 (Pty) Ltd

Darwina Louw 254 IR### MP30/5/1/1/2/5196PR 74% - 693

Twin Cities Trading 374 (Pty) Ltd

Strehla 261 IR, Portions 3(RE), 6, 8, 9, 12, 13 & RE###

MP30/5/1/1/2/5176PR 74% - 1,337

Episolve (Pty) Ltd

Goedgedacht 228 IR, Portion 14 (RE) and portion of Portion 26##

- MP30/5/1/1/2/4842PR 74% - - 216

Epsimax (Pty) LtdVlakvarkfontein 213 IR, Portion 4 (RE) ###

- MP30/5/1/1/2/4876PR 74% - - 261

Bold Moves 1765 (Pty) Ltd

Langsloot 99 IS, Portions 3, 4, 8, 13, 14, 15 and 16##

- MP30/5/1/1/2/4966PR 74% - - 1,647

# On 03 May 2012, UCD I executed a Mining Right to mine for coal, in respect of Wolvenfontein No. 244 IR. ## In Application ### Under appeal #### Subject to conditions precedent (refer note 8)

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6. Investment in Subsidiaries

Name of company

% holding

2012% holding

2011% holding

2010

Carrying amount

2012

Carrying amount

2011

Carrying amount

2010

A$’000 A$’000 A$’000

Universal Coal and Energy Holdings South Africa (Pty) Ltd (“UCEHSA”) 100% 100% 100% 30,811 18,208 13,029

Universal Coal Development I (Pty) Ltd* 70.5% 70.5% 70.5%

Universal Coal Development II (Pty) Ltd# n/a n/a 100%

Universal Coal Development III (Pty) Ltd*^ 50.29% n/a n/a

Twin Cities Trading 374 (Pty) Ltd* 74% 74% 74%

Episolve (Pty) Ltd* 74% n/a n/a

Epsimax (Pty) Ltd* 74% n/a n/a

Bold Moves 1765 (Pty) Ltd* 74% n/a n/a

30,811 18,208 13,029

# in the 2010 period this entity was classified as a subsidiary and consolidated ^ in the prior period this entity was classified as an associated undertaking and equity accounted * held indirectly. All indirect subsidiaries are incorporated and operate in South Africa

Total

The investment in subsidiaries at 30 June 2012 were: A$’000

Country of incorporation: South AfricaClass of share: OrdinaryProportion held of the ordinary shares: 100%

Reconciliation of movements for the 2011 year

Balance at beginning of year 18,208

Investment in the period 12,603

Foreign exchange movement -

Disposal of investment in subsidiary -

TOTAL CARRYING VALUE AT THE END OF THE YEAR 30,811

Total

The investment in subsidiaries at 30 June 2011 were: A$’000

Country of incorporation: South AfricaClass of share: OrdinaryProportion held of the ordinary shares: 100%


Balance at beginning of year 13,029Investment in the period 7,051Foreign exchange movement (1,872)Disposal of investment in subsidiary -


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Balance at beginning of year 6,447Investment in the period 6,582


Universal Coal Development III (Pty) LtdUniversal Coal Development III (Pty) Ltd issued 20 ordinary shares to Universal Coal and Energy Holdings South Africa (Pty) Ltd, on the 8th of December 2011 and a further 29 ordinary shares to Universal Coal & Energy Holdings South Africa (Pty) Ltd on 7 June 2012 thus increasing the interest held by Universal Coal & Energy Holdings South Africa (Pty) Ltd from 30% to 50.29%, along with the related decrease in the interest held by Unity Rocks Mining (Pty) Ltd. Accordingly the investment is now accounted for as a subsidiary in the 2012 financial period in line with the Group’s accounting policy in note 1.

Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows:

A$’000 A$’000 A$’000

Book value Adjustment Fair value

Intangible asset 4,806 6,544 11,350

Total net assets 4,806 6,544 11,350

Fair value of consideration paid: A$’000

Fair value of previous share recognised as investment in associated undertaking 4,540

Cash consideration paid 269

Total consideration 4,809

Gain arising on step up of associated undertaking to subsidiary 899

Fair value of asset acquired 5,708 The gain arising on step up of associated undertaking to subsidiary has been recognised in the consolidated statement of comprehensive income.

Twin Cities Trading 374 (Pty) LtdTwin Cities Trading 374 (Pty) Ltd issued 74 ordinary shares to Universal Coal and Energy Holdings South Africa (Pty) Ltd, on 14 March 2010. Twin Cities Trading 374 (Pty) Ltd has applied to the Department of Mineral Resources for prospecting licenses over Darwina Louw 254 IR and Strehla 261 IR, Portions 3(RE), 6, 8, 9, 12, 13 (RE). The applications have been declined by the Department of Mineral Resources and Universal Coal and Energy Holdings South Africa (Pty) Ltd has lodged an appeal in this regard.

Epsimax (Pty) LtdEpsimax (Pty) Ltd issued 74 ordinary shares to Universal Coal and Energy Holdings South Africa (Pty) Ltd, on the 18th of November 2009. Epsimax (Pty) Ltd has applied to the Department of Mineral Resources for a prospecting license over Vlakvarkfontein 213 IR, portion 4. This application is currently under appeal with the Department of Mineral Resources. This investment has been accounted for as a subsidiary during the 2012 financial period.

Episolve (Pty) LtdEpisolve(Pty) Ltd issued 74 ordinary shares to Universal Coal and Energy Holdings South Africa (Pty) Ltd, on the 18th of November 2009. Episolve (Pty) Ltd has applied to the Department of Mineral Resources for a prospecting license over Goedgedacht 228 IR, portion 14 and portion of portion 26. This investment has been accounted for as a subsidiary during the 2012 financial period.

Bold Moves 1765 (Pty) LtdBold Moves 1765 (Pty) Ltd issued 74 ordinary shares to Universal Coal and Energy Holdings South Africa (Pty) Ltd, on the 18th of November 2009. Bold Moves 1765 (Pty) Ltd has applied to the Department of Mineral Resources for a prospecting license over Langsloot 99 IS, Portions 3, 4, 8, 13, 14, 15 & 16. This investment has been accounted for as a subsidiary during the 2012 financial period.

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7. Investment in Associated Undertakings

Name of company 2012 holding

2011 holding

2010 holding

Carrying Amount

2012

Carrying Amount

2011

Carrying Amount

2010

Restated Restated

A$’000 A$’000 A$’000

Universal Coal Development II (Pty) Ltd (“UCDII”) # 40%

7% n/a 11,702 2,293 -

Universal Coal Development III (Pty) Ltd (“UCDIII”) ̂

n/a

30%

15% - 2,922 2,676

Universal Coal Development IV (Pty) Ltd (“UCDIV”)

50%

50%

25% 3,278 3,300 2,371

Universal Coal Development V (Pty) Ltd (“UCDV”)

10%

10%

n/a 302 157 -

15,282 8,672 5,047^ in the 2012 period this entity is classified as a subsidiary and consolidated# in the 2010 period this entity was classified as a subsidiary and consolidated

Universal Coal Development II (Pty) LtdOn 27 July 2011, a further 55 shares of Universal Coal Development II (Pty) Ltd were issued to Universal Coal and Energy Holdings South Africa (Pty) Ltd in accordance with the earn in Acquisition and Option Agreement representing a total shareholding in Universal Coal Development II (Pty) Ltd of 40%. The investment continues to be accounted for as an associated undertaking in the 2012 financial period.

Universal Coal Development IV (Pty) LtdThere was no change in the ownership percentage in the year under review.

Universal Coal Development V (Pty) LtdThere was no change in the ownership percentage in the year under review.

Universal Coal Development VI (Pty) LtdOn 30 August 2011, Universal Coal & Energy Holdings South Africa (Pty) Ltd entered into an earn-in agreement with Universal Coal Development VI (Pty) Ltd “UCDVI”) and Pacific Breeze Trading 725 (Pty) Ltd, whereby after successful completion of a legal and technical due diligence and subject to Board approval, Universal Coal & Energy Holdings South Africa (Pty) Ltd will be granted 15% ownership in UCDVI. Universal Coal & Energy Holdings South Africa (Pty) Ltd will further achieve an additional 10% upon the confirmation of a an inferred resource, a further 10% on confirmation of an indicated resource and a further 15% on confirmation of a measured resource. Due to the significant influence Universal Coal & Energy Holdings South Africa (Pty) Ltd has in Universal Coal Development VI (Pty) Ltd, the acquisition has been accounted for as an associated undertaking during the 2012 financial period. There were no financial transactions during the period and UCDVI has no assets and liabilities at the end of the 2012 financial period and as such is not reflected in any tables below.

UCD II UCD III UCD IV UCD V TOTAL

The associated undertakings at 30 June 2012 were: A$’000 A$’000 A$’000 A$’000 A$’000

Country of incorporation: South Africa South Africa South Africa South AfricaClass of share: Ordinary Ordinary Ordinary OrdinaryProportion held of the ordinary shares: 40% 40% 50% 10%

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A$’000 A$’000 A$’000 A$’000 A$’000


Balance at beginning of year 2,293 2,922 3,300 157 8,672

Acquisition of investment in associate - - - - -

Investments in the period 2,485 475 532 152 3,644

Share of (loss) / profit of associated undertaking (3) (3) 10 (1) 3

Gain arising on step up of interest 7,028 1,750 - - 8,778

Movements in exchange rates (101) (338) (564) (6) (1,009)

Disposals (transfer to subsidiaries) - (4,806) - - (4,806)

TOTAL CARRYING VALUE AT THE END OF THE YEAR 11,702 - 3,278 302 15,282



Country of incorporation: South Africa South Africa South Africa South AfricaClass of share: Ordinary Ordinary Ordinary OrdinaryProportion held of the ordinary shares: 7% 30% 50% 10%


Balance at beginning of year - 2,676 2,371 - 5,047Acquisition of investment in associate 646 - - - 646Investments in the period 1,401 501 609 157 2,668Share of loss of associate (3) - 6 - 3Gain arising on step up of interest - - 540 - 540Movements in exchange rates 249 (255) (226) - (232)

TOTAL CARRYING VALUE AT THE END OF THE YEAR 2,293 2,922 3,300 157 8,672



Country of incorporation: South Africa South Africa South Africa South AfricaClass of share: Ordinary Ordinary Ordinary OrdinaryProportion held of the ordinary shares: -% 15% 25% -%


Balance at beginning of year - 394 238 - 632Investment in the period - 2,282 2,134 - 4,416Share of loss of associate - - (36) - (36)Movements in exchange rates - - 35 - (35)

TOTAL CARRYING VALUE AT THE END OF THE YEAR - 2,676 2,371 - 5,047

Financial information of Associated Undertakings:All the associated undertakings have prepared audited financial statements for the year ended 30 June 2012 and are accounted for in Universal Coal plc using the equity method of accounting.

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Summary financial information of associated undertakings is set our below:

Summary financial information – 2012: UCD II UCD III UCD IV UCD V

A$’000 A$’000 A$’000 A$’000

(Loss) / profit for the period (7) (7) 19 (5)

Non-current assets 4,456 3,056 2,892 273

Current assets 74 16 64 11

Total assets 4,530 3,072 2,956 284

Current liabilities 100 100 35 8

Non-current liabilities - - - -

Total liabilities 100 100 35 8

TOTAL EQUITY SHAREHOLDERS’ FUNDS 4,430 2,972 2921 276

Summary financial information – 2011 - Restated: UCD II UCD III UCD IV UCD V

A$’000 A$’000 A$’000 A$’000

(Loss) / profit for the period (3) - 20 -Non-current assets 2,802 2,963 2,768 157Current assets 175 14 - -Total assets 2,977 2,977 2,788 157

Current liabilities 710 60 - -Non-current liabilities - - - -Total liabilities 710 60 - -

TOTAL EQUITY SHAREHOLDERS’ FUNDS 2,267 2,917 2,788 157

Summary financial information – 2010 - Restated: UCD II UCD III UCD IV UCD V

A$’000 A$’000 A$’000 A$’000

Loss for the period - (3) (5) -Non-current assets - 2,416 2,138 -Current assets - - - -Total assets - 2,416 2,138 -Current liabilities - - - -Non-current liabilities - - - -Total liabilities - - - -

TOTAL EQUITY SHAREHOLDERS’ FUNDS - 2,416 2,138 -

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Associates with less than 20% holdingUniversal Coal & Energy Holdings South Africa (Pty) Ltd exercises significant influence over the entities above as it has significant operating influence, or has authority to influence the policies and procedures of the company.

8. Trade and Other ReceivablesGROUP COMPANY

2012 2011 2010 2012 2011 2010

Trade and other receivables consist of: A$’000 A$’000 A$’000 A$’000 A$’000 A$’000

Prepayments 1,454 161 672 138 137 7

Deposits 108 95 113 95 95 113

Value Added Taxation 90 183 44 18 23 29

1,652 439 829 251 255 149

Prepayments: Universal Coal Development VII (Pty) LtdOn 19 April 2012, Universal Coal & Energy Holdings South Africa (Pty) Ltd acquired 1 ordinary share (50%) of Universal Coal Development VII (Pty) Ltd, a special purpose entity formed with the intention of acquiring additional prospecting rights in South Africa. The contribution of A$ 1,315,996 has been treated as a prepayment during the 2012 financial period as certain conditions precedent still have to be concluded.

9. Cash and Cash EquivalentsGROUP COMPANY

2012 2011 2010 2012 2011 2010Cash and cash equivalents consist of: A$’000 A$’000 A$’000 A$’000 A$’000 A$’000

Cash at bank 492 3,643 149 478 2,532 -Fixed term deposits 8,334 9,187 106 2,000 8,075 104

8,826 12,830 255 2,478 10,607 104

Financial guaranteesCertain financial guarantees have been entered into by Universal Coal and Energy Holdings South Africa (Pty) Ltd in relation to rehabilitation bonds and are secured against the cash at bank balance.

GROUP

2012 2011 2010

A summary of the guarantees is below: A$’000 A$’000 A$’000

Xakwa Investments (Pty) Ltd 6 6 -

Department of Minerals and Energy 1,000 33 -

1,006 39 -

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10. Share CapitalAuthorised:

Number Class

Nominal Value 2012

£Nominal Value 2011

£

Nominal Value 2010

£500,000,000 Ordinary 0.05 0.05 0.10

Allotted, issued and fully paid:

Number Class

Nominal Value

£

2012

A$’0002011

A$’000

2010

A$’0002012: 209,684,554 Ordinary 0.05 17,5342011: 203,684,554

2010: 43,779,487

Ordinary

Ordinary

0.05

0.10

17,077

7,730

GROUP COMPANY

2012 2011 2010 2012 2011 2010

Share Capital Reconciliation: A$’000 A$’000 A$’000 A$’000 A$’000 A$’000

Opening balance 17,077 7,730 5,051 17,077 7,730 5,051

Movements for the year 457 9,347 2,679 457 9,347 2,679

CLOSING BALANCE 17,534 17,077 7,730 17,534 17,077 7,730

GROUP COMPANY

2012 2011 2010 2012 2011 2010

Share Premium Reconciliation: A$’000 A$’000 A$’000 A$’000 A$’000 A$’000

Opening balance 34,495 18,218 12,100 34,495 18,218 12,100

Movements for the year 863 16,277 6,118 863 16,277 6,118

CLOSING BALANCE 35,358 34,495 18,218 35,358 34,495 18,218

Significant changes in the share capital of the Company during the 2012 financial year were as follows:

Shares: DateNumber of

shares issuedCumulative

shares issued

Opening Balance as at 30 June 2011 1 July 2011 - 203,684,554

Issue of shares 1 November 2011 6,000,000 209,684,554

209,684,554

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shares issued

Opening Balance as at 30 June 2010 1 July 2010 - 43,779,487Salary Sacrifice Agreement with Directors 2 September 2010 2,002,516 45,782,003Pre “IPO” fund raising share issue 7 September 2010 6,211,538 51,993,541Share split as per “ASX” listing requirements 9 September 2010 43,779,487 95,773,028Issue of shares in settlement of professional fees 29 September 2010 1,500,000 97,273,028Repriced option agreements 3 November 2010 5,592,642 102,865,670Issue of shares to acquire Kangala Project 16 November 2010 21,400,000 124,265,670Issue of shares to raise capital “IPO” 9 December 2010 78,544,962 202,810,632Issue of shares in settlement of consulting fees 5 January 2011 573,922 203,384,554Exercise of share options at A$0.26 per share 14 February 2011 200,000 203,584,554Exercise of share options at A$0.26 per share 8 March 2011 100,000 203,684,554

203,684,554




issued shares

Opening Balance as at 1 July 2009 1 July 2009 - 246,094,900Issue of shares to raise capital 1 July 2009 30,000,000 276,094,900Issue of shares to raise capital 4 August 2009 5,450,000 281,544,900Issue of shares to raise capital 3 November 2009 15,750,000 297,294,900Share split as per “AGM” 31 December 2009 (267,565,412) 29,729,488Issue of shares to raise capital 2 February 2010 4,016,666 33,746,154Issue of shares to raise capital 8 February 2010 33,333 33,779,487Issue of shares to raise capital 5 May 2010 10,000,000 43,779,487 43,779,487

11. ReservesShare capital relates to the nominal value of the shares issued. The share premium relates to the excess of consideration paid over the nominal value of the shares after deducting related expenses.

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 retained deficit 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.

The shares to be issued reserve, represents the fair value of shares to be issued as already approved by the Board but not yet issued.

The foreign exchange reserve relates to the foreign exchange effect of the retranslation of the Group’s overseas subsidiaries on consolidation into the Group’s financial statements. F

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12. Share Based PaymentsThe Company has share based payment arrangements relating to share options granted, which are as below:

Grant Date Expiry Date Exercise Price Number Issued Outstanding 2012

09/12/2010 09/12/2015 A$ 0.26 490,617 490,61709/12/2010 09/12/2015 A$ 0.20 4,400,000 4,400,00009/12/2010 09/12/2015 A$ 0.39 5,800,000 5,800,00009/12/2010 03/11/2015 A$ 0.26 4,618,000 4,618,00009/12/2010 31/12/2013 A$ 0.26 1,972,180 1,972,18009/12/2010 31/12/2013 A$ 0.286 1,972,180 1,972,18009/12/2010 31/12/2013 A$ 0.312 986,090 986,09009/12/2010 24/11/2015 A$ 0.26 3,007,110 3,007,110

09/12/2010 03/11/2015 A$ 0.34 3,200,000 3,200,000

07/01/2011 31/12/2011 A$ 0.26 500,000 -

09/01/2012 15/03/2014 A$ 0.40 8,000,000 8,000,00022/06/2012 31/12/2014 A$ 0.40 500,000 500,00004/06/2012 03/06/2017 A$ 0.263 16,855,735 16,855,73504/06/2012 03/06/2017 A$ 0.275 5,618,579 5,618,579

TOTAL 57,920,491 57,420,491


09/12/2010 09/12/2015 A$ 0.26 490,617 490,61709/12/2010 09/12/2015 A$ 0.20 4,400,000 4,400,00009/12/2010 09/12/2015 A$ 0.39 5,800,000 5,800,00009/12/2010 03/11/2015 A$ 0.26 4,618,000 4,618,00009/12/2010 31/12/2013 A$ 0.26 1,972,180 1,972,18009/12/2010 31/12/2013 A$ 0.286 1,972,180 1,972,18009/12/2010 31/12/2013 A$ 0.312 986,090 986,09009/12/2010 24/11/2015 A$ 0.26 3,007,110 3,007,11009/12/2010 03/11/2015 A$ 0.34 3,200,000 3,200,00007/01/2011 31/12/2011 A$ 0.26 500,000 200,000

TOTAL 26,946,177 26,646,177


07/10/2009 07/10/2014 £ 0.30 4,100,000 4,100,00007/10/2009 07/10/2014 £ 0.80 1,600,000 1,600,00001/03/2010 30/04/2015 £ 0.30 309,925 309,92501/03/2010 30/04/2015 £ 0.45 1,800,000 1,800,00001/03/2010 28/02/2015 £ 0.90 2,900,000 2,900,000

TOTAL 10,709,925 10,709,925

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.

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Group Share Options

Year ended

30 June 2012Year ended

30 June 2011

Year ended

30 June 2010

Outstanding at start of year 26,646,177 10,709,925 249,997

Weighted average exercise price A$ 0.29 £ 0.50 £ 0.05

Granted 30,974,314 26,946,177 10,709,925

Weighted average exercise price A$ 0.30 A$ 0.29 £ 0.50

Forfeited - - (249,997)

Weighted average exercise price - - £ 0.05

Cancelled (200,000) (10,709,925) -

Weighted average exercise price A$0.26 £ 0.50

Exercised - (300,000) -

Weighted average exercise price - A$ 0.26 -

OUTSTANDING AT END OF YEAR 57,420,491 26,646,177 10,709,925

Group Share Options

Year ended

30 June 2012Year ended

30 June 2011

Year ended

30 June 2010

Outstanding at the beginning of the year 26,646,177 10,709,925 249,997

Granted during the year 30,974,314 26,946,177 10,709,925

Forfeited during the year (200,000) - (249,997)

Cancelled during the year - (10,709,925) -

Exercised during the period - (300,000) -

Outstanding at the end of the year 57,420,491 26,646,177 10,709,925

Weighted average contractual life 4 years 4 years 5 years

Weighted average exercise price A$ 0.30 A$ 0.29 £ 0.50

Options outstanding as at 30 June 2012: Exercisable Exercise date

within one year

Exercise date between two

and five years Total

Options exercisable at A$0.20 on or before 9/12/2015 2,933,480 1,466,520 - 4,400,000Options exercisable at A$0.26 on or before 9/12/2015 490,617 - - 490,617Options exercisable at A$0.39 on or before 9/12/2015 3,866,860 1,933,140 - 5,800,000Options exercisable at A$0.26 on or before 3/11/2015 4,618,000 - - 4,618,000Options exercisable at A$0.26 on or before 31/12/2013 1,972,180 - - 1,972,180Options exercisable at A$0.286 on or before 31/12/2013 1,972,180 - - 1,972,180Options exercisable at A$0.312 on or before 31/12/2013 986,090 - - 986,090Options exercisable at A$0.26 on or before 24/11/2015 3,007,110 - - 3,007,110Options exercisable at A$0.34 on or before 3/11/2015 3,200,000 - - 3,200,000Options exercisable at A$0.40 on or before 15/03/2014 8,000,000 - - 8,000,000Options exercisable at A$0.40 on or before 31/12/2014 500,000 - - 500,000Options exercisable at A$0.263 on or before 03/06/2017 - 16,855,735 - 16,855,735Options exercisable at A$0.275 on or before 03/06/2017 - 5,618,579 - 5,618,579

TOTAL 31,546,517 25,873,974 - 57,420,491

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Information on options granted during the 2012 financial year:

Grant date 9 Jan 12 22 June 2012 4 June 2012 4 June 2012Number of options 8,000,000 500,000 16,855,735 5,618,579Expected volatility 80.03% 75.85% 75.80% 75.80%Risk-free interest rate 5.38% 5.38% 5.38% 5.38%Weighted average share price at grant date A$ 0.21 A$ 0.16 A$ 0.145 A$ 0.145Expected life 3 years 3 years 5 years 5 yearsExpected dividend - - - -

Fair Value per option $ 0.08 $ 0.04 $ 0.08 $ 0.08

Options outstanding as at 30 June 2011:

Exercisable from grant

dateExercise date

within one year

Exercise date between two

and five years Total

Options exercisable at A$0.20 on or before 9/12/2015 1,466,960 1,466,520 1,466,520 4,400,000Options exercisable at A$0.26 on or before 9/12/2015 490,617 - - 490,617Options exercisable at A$0.39 on or before 9/12/2015 1,933,720 1,933,140 1,933,140 5,800,000Options exercisable at A$0.26 on or before 3/11/2015 4,618,000 - - 4,618,000Options exercisable at A$0.26 on or before 31/12/2013 1,972,180 - - 1,972,180Options exercisable at A$0.286 on or before 31/12/2013 1,972,180 - - 1,972,180Options exercisable at A$0.312 on or before 31/12/2013 986,090 - - 986,090Options exercisable at A$0.26 on or before 24/11/2015 3,007,110 - - 3,007,110Options exercisable at A$0.34 on or before 3/11/2015 3,200,000 - - 3,200,000Options exercisable at A$0.26 on or before 31/12/2011 200,000 - - 200,000

TOTAL 19,846,857 3,399,660 3,399,660 26,646,177


Grant date 9 Dec 2010 9 Dec 2010 9 Dec 2010 9 Dec 2010 9 Dec 2010Number of options 490,617 4,400,000 5,800,000 4,618,000 3,200,000Expected volatility 59.41% 59.41% 59.41% 59.41% 59.41%Risk-free interest rate 5.34% 5.34% 5.34% 5.34% 5.34%Weighted average share price at grant date A$ 0.26 A$ 0.26 A$ 0.26 A$ 0.26 A$ 0.26Expected life 5 years 5 years 5 years 5 years 5 yearsExpected dividend - - - - -Fair Value per option $ 0.15 $ 0.16 $ 0.12 $ 0.15 $ 0.13

Grant date 9 Dec 2010 9 Dec 2010 9 Dec 2010 9 Dec 2010 7 Jan 2011Number of options 1,972,180 1,972,180 986,090 3,007,110 500,000Expected volatility 59.41% 59.41% 59.41% 59.41% 59.41%Risk-free interest rate 5.20% 5.20% 5.20% 5.34% 5.30%Weighted average share price at grant date A$ 0.26 A$ 0.26 A$ 0.26 A$ 0.26 A$ 0.425Expected life 3 years 3 years 3 years 5 years 1 yearsExpected dividend - - - - -Fair Value per option $ 0.12 $ 0.11 $ 0.10 $ 0.15 $ 0.20

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Options outstanding as at 30 June 2010:

Exercisable from grant

dateExercise date

within one yearExercise date

after five years Total

Options exercisable at GBP0.30 on or before 7/10/2014 4,100,000 - - 4,100,000Options exercisable at GBP0.80 on or before 7/10/2014 1,600,000 - - 1,600,000Options exercisable at GBP0.30 on or before 30/04/2015 309,925 - - 309,925Options exercisable at GBP0.45 on or before 30/04/2015 600,000 600,000 600,000 1,800,000Options exercisable at GBP0.90 on or before 1/03/2015 966,667 966,667 966,666 2,900,000

TOTAL 7,576,592 1,566,667 1,566,667 10,709,925


Grant date 7 Oct 2009 7 Oct 2009 1 Mar 2010 1 Mar 2010 1 Mar 2010Number of options 4,100,000 1,600,000 309,925 1,800,000 2,900,000Expected volatility 59.41% 59.41% 59.41% 59.41% 59.41%Risk-free interest rate 2.45% 2.45% 2.84% 2.84% 2.84%Weighted average share price at grant date £ 0.30 £ 0.30 £ 0.30 £ 0.30 £ 0.30Expected life 5 years 5 years 5 years 5 years 5 yearsDividend - - - - -Fair Value per option £ 0.30 £ 0.80 £ 0.30 £ 0.45 £ 0.90

Volatility has been based on the volatility of comparable listed Companies that are considered to be most comparable to Universal Coal plc. The risk-free rate has been determined with reference to similar period Government bond rates from the Reserve Bank of Australia.

Information on options granted during the yearFair value was determined by using the BlackScholes formula, a commonly used option pricing model. The calculation of volatility used in the model is based upon the share price and equity instrument movements during the financial period. The following factors are all taken into consideration when the option valuation as per the BlackScholes model is used:

› Weighted average share price

› Exercise price

› Expected volatility

› Option life

› Expected dividends

› The riskfree interest rate

Share based payments represent the value of unexercised share options to Directors and employees. The charge for share options in the year amounted to A$ 1,051,263 (2011: A$ 3,750,026).

13. Converting Notes GROUP COMPANY

Non-Current Principal

Amortisation due within

one year

Amortisation due within two to five

years

Non-Current Principal

Amortisation due within

one year

Amortisation due within two to five

years

A$’000 A$’000 A$’000 A$’000 A$’000 A$’000

Converting Notes 5,315 249 1,476 5,315 249 1,476

5,315 249 1,476 5,315 249 1,476

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On 5 April 2012, Universal Coal plc entered into a binding Converting Note Agreement with Susquehanna Pacific Pty Ltd for a maximum of 12,000,000 unlisted and secured Converting Notes at a coupon rate of 9.5% per annum and a maturity date of 7 years to be issued in two tranches together with a maximum of 38,527,394 share options as follows:

Tranche 1: 7,000,000 unlisted and secured Convertible Notes at a face value of A$ 1 each and a maximum of 22,474,314 options (“Tranche A”).

The Tranche A options will be issued at a maximum of:

› 16,855,735 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 12: Share Based Payments

Tranche 2: 5,000,000 unlisted and secured Convertible Notes at a face value of A$ 1 each and a maximum of 16,053,080 options (“Tranche B”) executable from 1 September 2012 at the election of Susquehanna Pacific Pty Ltd.

The Tranche B options will be issued at a maximum of:

› 12,039,810 options (low) at an exercise price of 112.5% of the Close Price per option with a grant date of the date on which the Tranche 2 Converting Notes are issued under the Converting Note Agreement and an expiry date of 3 June 2017

› 4,013,270 options (high) at an exercise price of 117.5% of the Close Price per option with a grant date of the date on which the Tranche 2 Converting Notes are issued under the Converting Note Agreement and an expiry date of 3 June 2017

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 8 week notice period the 5 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

7½ 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 rankling 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

› If by 3½ years all of the Converting Notes have not been converted or redeemed, then the Noteholder may on a monthly basis convert as many of or a proportion of the Converting Notes.

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 5, 10 and 30 day VWAP.

Reconciliation of Converting Notes GROUP COMPANY2012 2011 2010 2012 2011 2010

A$’000 A$’000 A$’000 A$’000 A$’000 A$’000Opening balance - - - - - -Convertible Notes issued 7,000 - - 7,000 - -Capitalised financing costs (1,744) - - (1,744) - -Accrued interest costs 41 - - 41 - -Amortised financing costs 18 - - 18 - - 5,315 - - 5,315 - -

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14. Trade and Other Payables

GROUP COMPANY

2012 2011 2010 2012 2011 2010

A$’000 A$’000 A$’000 A$’000 A$’000 A$’000

Trade payables 737 846 163 199 157 67

Accrued expense 204 11 48 203 11 48

Provisions 6 - - - - -

947 857 211 402 168 115

15. Operating Loss 2012 2011

The operating loss before tax is stated after charging: A$’000 A$’000

Fees paid to the Company’s Auditor for the audit of the Group’s 2011 annual accounts 123 -

Fees payable to the Company’s Auditor for the audit of the Group’s annual accounts – previous auditor - 136

Depreciation on property, plant and equipment 17 6

Depreciation on intangibles (software) 47 -

Employee costs 1,876 2,411

Operating lease rentals - land and buildings 86 81

Operating lease rentals – plant and equipment 17 16

Financial advisory fees 1,851 513

Share based payments 1,051 3,750

16. Finance Income and Expense2012 2011

A$,000 A$,000

Finance income

Bank & fixed term deposit interest 283 458

Finance expense

Credit facilities, convertible notes interest and amortisation (69) (2)

17. TaxationNo provision has been made for 2012 tax as the group has no taxable income. The estimated tax loss available for set off against future taxable income is A$ 35,688,907 (2011: loss of A$ 28,713,834).

No provision has been made for the 2012 deferred taxation as no taxable income has been received to date. The estimated deferred tax asset available for set off against future taxation liabilities is A$ 9,279,116 (2011: A$ 7,608,368) arising from the availability of tax losses but has not been recognised as there is no certainty that sufficient profits will arise in future accounting periods from which these losses could be offset.

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Analysis of the tax chargeNo liability to UK corporation tax arose on ordinary activities for the year ended 30 June 2012 or for the years ended 30 June 2011 and 30 June 2010.

Factors affecting the tax chargeThe tax assessed for the year is different to the standard rate of corporation tax in the UK. The difference is explained below:

2012 2011

A$’000 A$’000

PROFIT / (LOSS) ON ORDINARY ACTIVITIES BEFORE TAX 2,779 (6,805)

Profit / (loss) on ordinary activities multiplied by the standard rate 723 (1,905)

of corporation tax in the UK of 26 % (2011: 28%)

Effects of:

Non-deductible expenditure 273 1,164

Non-taxable income (2,516) (159)

Tax losses for which no deferred asset was recognised 1,520 900

Total tax - -

18. Operating Lease Committments2012 2011

A$’000 A$’000

Minimum lease payments due

› within one year 92 99

› in second to fifth year inclusive 87 199

179 298

19. Cash Used in OperationsGROUP Company

2012 2011 2012 2011

A$’000 A$’000 A$’000 A$’000

Profit / (loss) before taxation 2,779 (6,805) (5,187) (6,192)

Adjustments for:

Depreciation and amortisation 64 6 - -

Loss from equity accounted investments (3) (6) - -

Finance income (283) (458) (204) (445)

Finance expenses 69 2 69 -

Loss / (profit) from foreign currency transactions 13 (1,558) 13 (1,254)

Share based payment transactions 1,051 3,750 766 3,483

Gain arising on step up of interest (8,778) (567) - -

Gain arising on step up of associated undertaking to subsidiary (899) - - -

Changes in working capital:

(Increase) / decrease in trade and other receivables (1,213) 390 4 (106)

Increase / (decrease) in trade and other payables 90 646 234 53

(7,110) (4,600) (4,305) (4,461)

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20. Related PartiesRelationships:

Subsidiaries

Universal Coal & Energy Holdings South Africa (Pty) LtdUniversal Coal Development I (Pty) Ltd Universal Coal Development III (Pty) LtdTwin Cities Trading 374 (Pty) Ltd Epsimax (Pty) LtdEpisolve (Pty) LtdBold Moves 1765 (Pty) Ltd

Associates

Universal Coal Development II (Pty) LtdUniversal Coal Development IV (Pty) LtdUniversal Coal Development V (Pty) LtdUniversal Coal Development VI (Pty) LtdUniversal Coal Development VII (Pty) Ltd

Black Economic Empowerment Partners

Bono Lithihi Investments Group (Pty) LtdUnity Rocks Mining (Pty) LtdXakwa Investments (Pty) LtdMountain Rush Trading 6 (Pty) LtdSolar Spectrum Trading 365 (Pty) LtdProper Health (Pty) LtdPacific Breeze Trading 725 (Pty) LtdAzaramix Investments (Pty) LtdIdentity Coal (Pty) Ltd

Other related parties and connected persons

KEE Enterprises (Pty) LtdHendrik BonsmaShellbright LtdOfhani Phaswana

Related party transactions: 2012 2011

A$’000 A$’000

Consulting fees paid to related parties:

Ofhani Phaswana 150 203

Rent paid to related parties

KEE Enterprises (Pty) Ltd 80 51

Loans to related party:

Xakwa Investments (Pty) Ltd Loan balance at the beginning of the year 301 141

Loans granted in the period - 139

Interest 25 21

Foreign exchange loss on loan translation (30) -

Loan balance at the end of the year 296 301

Loan to related party:

Loan by Universal Coal Development IV (Pty) Ltd granted to Xakwa Investments (Pty) Ltd.

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The following terms and conditions are applicable as per the loan agreement:

› Interest is accrued for at the First National Bank Prime Interest rate throughout the period.

› Repayment of the loan will occur at the earlier of:

› The date Universal Coal & Energy Holdings South Africa (Pty) Ltd exercises their option to acquire an additional 24% in Universal Coal Development IV (Pty) Ltd from Xakwa Investments (Pty) Ltd, reducing the option exercise price with the fair value of the loan granted on vesting date, or

› At any time decided by Xakwa Investments (Pty) Ltd before the purchase option has been exercised.

Related Party Disclosures:During the year ended 30 June 2009, Universal Coal plc had entered into agreements to issue 107m shares satisfying liabilities of A$ 3,462,353 (£2,140,000) in order for Universal Coal Development I (Pty) Ltd to acquire prospecting rights. Universal Coal Development I (Pty) Ltd is a related party by virtue of being a subsidiary of Universal Coal plc. In addition, Universal Coal plc agreed to issue 1.5m shares satisfying a liability of A$ 455,397 (£301,200) upon a dual listing on the Johannesburg Stock Exchange and pay A$ 688,865 (£455,615) in order for Universal Coal Development I (Pty) Ltd to optimise its working relationships. The 1.5.m shares were not issued during the year and the liability of A$ 455,397 (£301,200) was settled in cash as the dual listing on the Johannesburg Stock Exchange was not achieved.

During the year ended 30 June 2010, Universal Coal plc paid A$ 475,187 (£314,289) in cash (2009: A$ 302,389 (£200,000)) and 700,000 shares at an issue price of A$ 2.52 (£ 1.43) per share as settlement of a liability for facilitation fees for the introduction of partners relating to the Roodekop project agreement for Universal Coal Development III (Pty) Ltd. Universal Coal plc also paid A$ 343,116 (£226,937) in cash (2009: A$ 181,433 (£120,000)) and 700,000 shares at an issue price of A$ 2.52 (£ 1.43) per share as settlement of a liability for facilitation fees for the introduction of partners relating to the Brakfontein project agreement for Universal Coal Development IV (Pty) Ltd. Both entities are related parties by virtue of them being associated undertakings of Universal Coal plc.

As part of the above transactions, during the year ended 30 June 2010, Universal Coal plc loan facility increased with Universal Coal and Energy Holdings South Africa (Pty) Ltd whereby the subsidiary could borrow at an interest free rate the amounts necessary to invest in the Group companies. At the year end, Universal Coal and Energy Holdings South Africa (Pty) Ltd owed Universal Coal plc A$ 30,810,904(2011:A$ 18,208,567). This amount is repayable on demand according to the agreement and has been treated as a capital contribution and is held within investments in subsidiaries as the Board expects returns through future profits as dividend income rather than loan repayments over a fixed term.

All of the amounts noted above have been classified as investments as the balances are not expected to be recovered by repayment of the loans, including the amount due from Universal Coal and Energy Holdings South Africa (Pty) Ltd. In the year ended 30 June 2009, a provision of A$ 183,000 (£101,836) had been made against the investments relating to Universal Coal and Energy Holdings South Africa (Pty) Ltd as a result of the aborted projects in Universal Coal Development II (Pty) Ltd. This amount of A$ 183,000 (£101,836) was refunded during the year ended 30 June 2010.

In the year ended 30 June 2010, a loan from Shellbright Limited had been converted to equity and there was A$ nil outstanding (2011: A$ nil). No interest was charged on the loan. Shellbright Limited is a related party by virtue of the fact that one of the previous directors of Universal Coal plc, Alastair Clayton, is a shareholder of Shellbright Limited. In addition, Universal Coal plc granted share options to Shellbright Limited in order to incentivise investment, as detailed in note 12.

A consultancy agreement was entered into with a Ofhani Phaswana, a director of Bono Lithihi Investments Group (Pty) Ltd on 15 February 2010 for facilitation services in the mining sector in South Africa and to represent Universal Coal plc as a “Black-Economic-Empowerment” partner. Monthly fees of A$ 12,500 are payable, the last of which will be settled on 30 September 2012.

A lease agreement was entered into with KEE Enterprises on 31 May 2011 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 three years at a market related rental of A$ 6,800 per month with an annual escalation clause of 8% per annum. This transaction is considered to be at “arms-length”.

A consultancy agreement was entered into on 1 July 2010 with Zander Investments Limited for the provision of the executive services of Antony Harwood and Anton Weber. The expiry date of the contract is 30 June 2013. Annual consultancy fees of A$ 160,979 for Antony Harwood and A$ 160,979 for Anton Weber were payable by Universal Coal plc. Effective 1 July 2011, the agreement with Zander Investments limited was amended in respect of the services of Anton Weber who was directly employed by Universal Coal plc from that date. The consultancy agreement with Zander Investments Limited was terminated on 18 April 2012 in accordance with the resignation of Antony Harwood.

Universal Coal plc entered into various “arms-length” transactions with Black Economic Empowerment Partners as identified above in relation to the application, acquisition and earn-in of coal prospecting licences in South Africa. Refer to note 6, 7 and 8 for details of the transactions.

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21. Risk Management Financial risk managementThe Group’s activities expose it to a variety of financial risks: in particular market risk (including currency risk, fair value interest rate risk and price 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.

2012 2011 2010

The financial instruments of the Group are:

Loans and receivables

Financial liabilities





A$’000 A$’000 A$’000 A$’000 A$’000 A$’000

Financial assets

Trade and other receivables 198 - 278 - 157 -

Cash and cash equivalents 8,826 - 12,830 - 255 -


Trade payables - 752 - 857 - 211

Converting Notes - 5,315 - - - -

9,024 6,067 13,108 857 412 211

Prepaid expenses of A$ 1,454,339 (2011: A$ 160,869) and provisions of A$ 194,157 (2011: A$ nil) have been excluded.

2012 2011 2010

The financial instruments of the Company are:







A$’000 A$’000 A$’000 A$’000 A$’000 A$’000

Financial assets

Trade and other receivables 113 - 117 - 142 -

Cash and cash equivalents 2,478 - 10,607 - 104 -


Trade payables - 208 - 168 - 115

Converting Notes - 5,315 - - -

2,591 5,523 10,724 168 246 115

Prepaid expenses of A$ 138,342 (2011: A$ 138,342) and provisions of A$ 194,157 (2011: A$ nil) have been excluded.

The fair value of the Group and Company’s financial assets and financial liabilities is not considered to be materially different to the book value disclosed above.

(a) Capital risk managementThe 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 capital, equity and retained deficit and debt comprising of converting notes.

The Group does not enter into derivative or hedging transactions and it is the Group’s policy that no trading in financial instruments will be undertaken.

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.

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The Group finances its operations through equity and debt. During the current year the Group raised finance through the issuing of converting notes (refer to note 13). During the prior year the Group raised finance through a successful listing on the ASX. No subsidiary company of the Group is permitted to enter into any borrowing facility or lease agreement without prior consent of the Company.

(b) Market risk

(i) Foreign exchange risk

Universal Coal plc operates internationally and is exposed to foreign exchange risk arising from various currency exposures primarily with respect to the Australian Dollar, South African Rand and British Pound. Universal Coal plc is exposed to currency risk on cash reserves, deposits paid, trade receivables, converting notes and trade payables.

However the majority of the Group’s exposure is indirect resulting from those transactions entered into by its associates consequently the direct currency risk facing the Group is not considered to materially affect its financial position and operating results.

Exchange rates used for conversion of foreign transactions and balances were:

2012 % Change 2011 % Change 2010 % Change 2009

ZAR:AUD (Average) 8.0120 16.82% 6.8962 2.89% 6.7024 5.90% 6.3291

ZAR:AUD (Spot) 8.3717 15.67% 7.2360 10.57% 6.5445 3.18% 6.3431

GBP:AUD (Average) 0.6516 4.89% 0.6212 11.61% 0.5566 9.57% 0.4609

GBP:AUD (Spot) 0.6506 (1.63)% 0.6614 16.79% 0.5663 16.24% 0.4872

The table below classifies the Group’s foreign currency risk between the different functional currencies as at year end, and the respective balance thereof:

The Group’s financial assets and liabilities are denominated in the different currencies as set out below:

British Pound

South African

RandAustralian

Dollar Total

A$’000 A$’000 A$’000 A$’000

Current assets – 2012

Trade and other receivables 18 86 94 198

Cash and cash equivalents 40 6,348 2,438 8,826

Liabilities – 2012


Converting Notes - - 5,315 5,315

Current assets – 2011Trade and other receivables 107 171 - 278Cash and cash equivalents 209 2,223 10,398 12,830Current liabilities – 2011 Trade and other payables 110 689 58 857Current assets – 2010 Trade and other receivables 142 15 - 157Cash and cash equivalents 104 151 - 255Current liabilities – 2010 Trade and other payables 115 96 - 211

Prepaid expenses of A$ 1,454,339 (2011: A$ 160,869) and provisions of A$ $ 194,157 (2011: A$ nil) have been excluded.

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The Company’s financial assets and liabilities are denominated in the different currencies as set out below:

British Pound

South African

RandAustralian

Dollar Total

A$’000 A$’000 A$’000 A$’000

Current assets – 2012

Trade and other receivables 18 - 95 113

Cash and cash equivalents 40 - 2,438 2,478

Liabilities – 2012

Trade and other payables 72 - 136 208

Converting Notes - - 5,315 5,315

Current assets – 2011Trade and other receivables 117 - - 117Cash and cash equivalents 209 - 10,398 10,607Current liabilities – 2011 Trade and other payables 110 - 58 168Current assets – 2010 Trade and other receivables 142 - - 142Cash and cash equivalents 104 - - 104Current liabilities – 2010 Trade and other payables 115 - - 115

Prepaid expenses of A$ 138,343 (2011: A$ 138,343) and provisions of A$ 194,157 (2011: A$ nil) have been excluded.

Foreign Currency Risk Sensitivity Analysis:

2012 2011 2010

A$’000 A$’000 A$‘000

Change in profit/ (loss) – (AUD: ZAR)

Improvement in AUD to ZAR by 10% (727) 235 134

Decline in AUD to ZAR by 10% 888 (287) (164)

Change in profit/ (loss) – (AUD: GBP)

Improvement in AUD to GBP by 10% - 563 325

Decline in AUD to GBP by 10% - (688) (397)

(i) Price risk

Prices ultimately received for minerals 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. Increase in prices may have significant and leveraged effect to the current and future values of projects and shares held, the converse will apply where prices fall.

(ii) Interest rates on financial assets and liabilities

The Group and Company’s financial assets consist of cash and cash equivalents and other receivables. The Group and Company earn interest on its cash and cash equivalents, consequently the Group and Company are 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 and Company are 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 and Company require.

The Group’s interest rate risk arises from cash held, short term deposits and interest on converting notes.

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At 30 June 2012, if interest rates on Australian Dollardenominated cash balances had been 1% higher/(lower) with all other variables held constant, posttax profit for the year would have been A$ 24,380 (2011: A$128,229) higher/(lower), mainly as a result of higher/(lower) interest rates.

At 30 June 2012, if interest rates on Randdenominated cash balances had been 1% higher/(lower) with all other variables held constant, posttax profit for the year would have been A$ 63,480 (2011: A$ 23,325) higher/(lower), mainly as a result of higher/(lower) interest rates.

At 30 June 2012, if interest rates on Australian Dollardenominated Converting Notes balances had been 1% higher/(lower) with all other variables held constant, posttax profit for the year would have been (A$ 4,432) (2011: A$ nil) (lower)/higher, 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:

2012 GroupFixed interest

rateFloating

interest rate

Fixed interest maturing

within one yearNon-interest

bearing Total

A$’000 A$’000 A$’000 A$’000 A$’000

Financial assets

Trade and other receivables - 1,454 - 198 1,652

Cash and cash equivalents - 492 8,334 - 8,826

Weighted average interest rate 0% 2.50% 4.65% 0%


Trade and other payables 947 947

Converting Notes 5,315 - - - 5,315

Weighted average interest rate 9.5% 0% 0% 0%

2011 GroupFloating interest

rate

Fixed interest maturing within

one yearNon-interest

bearing TotalA$’000 A$’000 A$’000 A$’000

Financial assets

Trade and other receivables - - 439 439Cash and cash equivalents 3,643 9,187 - 12,830Weighted average interest rate 4.65% 3.65% 0%


Trade and other payables 857 857Weighted average interest rate 0%

2010 GroupFloating interest

rate




Financial assets

Trade and other receivables - - 829 829Cash and cash equivalents 149 106 - 255Weighted average interest rate 0.05% 0% 0%


Australian Dollar - - 211 211Weighted average interest rate 0%

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2012 CompanyFixed interest

rateFloating

interest rate

Fixed interest maturing

within one yearNon-interest

bearing Total

A$’000 A$’000 A$’000 A$’000 A$’000

Financial assets

Trade and other receivables - - - 251 251

Cash and cash equivalents - 478 2,000 - 2,478

Weighted average interest rate 0% 2.50% 4.73% 0%


Trade and other payables - - - 402 402

Converting Notes 5,315 - - - 5,315

Weighted average interest rate 9.5% 0% 0% 0%

2011 CompanyFloating interest

rate




Financial assets

Trade and other receivables - - 255 255Cash and cash equivalents 2,532 8,075 - 10,607Weighted average interest rate 4.65% 3.65% 0%


Trade and other payables - - 168 168Weighted average interest rate 0%

2010 Company Floating interest

rate

Fixed interest maturing in

more than one year

Non-interest bearing Total

A$’000 A$’000 A$’000 A$’000

Financial assets

Trade and other receivables - - 149 149Cash and cash equivalents 104 - - 104Weighted average interest rate 0.05% 0% 0%


Trade and other payables - - 115 115Weighted average interest rate 0%

(c) Credit riskThe carrying amount of the Group’s financial assets represents its maximum exposure to credit risk.

The Group is exposed to credit risk on cash deposits however it does not consider that it has significant exposure because it banks with reputable institutions in various locations, including HSBC Bank Australia Ltd, ANZ Bank Australia, ABSA Bank Ltd and Investec Ltd.

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Financial assets exposed to credit risk at year end were as follows:

Financial instruments Group Company

2012 2011 2010 2012 2011 2010

A$’000 A$’000 A$’000 A$’000 A$’000 A$’000

Trade & other receivables 198 278 157 113 117 142

Cash & cash equivalents 8,826 12,830 255 2,478 10,607 104

(d) Liquidity riskPrudent 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.

Less than 1 year

Greater than 1 year

GROUP A$’000 A$’000

At 30 June 2012

Trade and other payables 947 -

Converting Notes - 6,667

At 30 June 2011


At 30 June 2010


COMPANY

At 30 June 2012


Converting Notes - 6,667

At 30 June 2011


At 30 June 2010


22. Employees and DirectorsGroup Group

2012 2011

Average number of employees are as follows:

Staff (Operational resources) 9 9

Directors 3 3

12 12

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Group Group

2012 2011

A$’000 A$’000

Wages and salaries 1,585 1,450

Social security costs - -

Termination payments 186 167

Share based payments 1,051 892

2,822 2,509

There are no pension contributions paid by the Group in the current or prior year.

The Directors and key management personnel are listed on page 15. Their remuneration and the details of the highest paid director is also listed on page 15.

Directors’ remuneration was paid in cash. In addition all Directors have received options to purchase Ordinary Shares of the Company at exercise prices that vary in accordance to the year of grant (see note 12).

23. Earnings / (Loss) Per Share2012 2011

A$ A$

Numerator

Profit / (loss) used in basic earnings per share 2,900,175 (6,726,150)

Adjusted for convertible loan interest 69,000 -

Adjusted profit / (loss) used in basic and diluted EPS / LPS 2,969,175 (6,726,150)

2012 2011

Denominator

Weighted average number of shares used in basic EPS / LPS 207,668,161 156,352,540

Potential ordinary shares that could dilute EPS in future: 2012 2011

Weighted average number of shares used in basic EPS / LPS 207,668,161 156,352,540

Adjusted for effect of converting notes in issue 7,060,424 -

Weighted average number of shares used in diluted EPS / LPS 214,728,585 156,352,540

All share options have not been included in the calculation of diluted EPS / LPS because they are out of the money. The total number of options issued is disclosed in note 12.

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24. Going ConcernThe accounts have been prepared on the going concern basis. At the year end the Group had A$ 8,825,686 (2011: A$12,829,956) of cash reserves. The Directors are therefore satisfied that the Group has adequate resources to continue in business for the foreseeable future.

25. Events Subsequent to Reporting DateOn 2 July 2012 Universal Coal plc appointed Emma Lawler as joint company secretary effective 1 July 2012, upon the resignation of Dan Robinson.

On 2 July 2012, the Company issued 343 431 Chess Depositary Interests (CDI’s) at an issue price of A$ 0.119 to Susquehanna Pacific Pty Ltd pursuant to the Converting Note Agreement dated 4 April 2012 between the Company and Susquehanna Pacific Pty Ltd.

On 17 July 2012, Universal Coal plc entered into a binding Private Placement Deed with Power Origin Developments Ltd for up to 19.99% of the issued share capital of Universal Coal plc in two tranches. The first tranche being executed on 13 August 2012 whereby 12,264,521 CDI’s have been issued to Power Origin Developments Ltd at an issue price of A$ 0.163072 for A$ 2,000,000. The Company had agreed to grant Power Origin Developments Ltd an extension to satisfy certain conditions precedent for the issue of the further tranche of CDI’s, this extension has now lapsed, though the company continues talks with Power Origin to complete the proposed transaction.

On 17 September 2012, Universal Coal plc announced a 65% project financing arrangement with a leading South African bank for the funding of the Kangala Project. The financing arrangement is subject to several conditions precedent which are anticipated to be met by Q1 2013.

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IntroductionThe Board of Directors is responsible for the overall strategy, governance and performance of the Universal Coal Group (the Company). The Company is an exploration company whose strategy is to add substantial shareholder value through the acquisition, exploration, development and commercialisation of coal projects in the Republic of South Africa. The Board has adopted a corporate governance framework which it considers to be suitable given the size, history and strategy of the Company.

Principles of Best Practice RecommendationsIn accordance with the ASX Listing Rules, Universal Coal plc is required to disclose the extent to which it has followed ASX’s Corporate Governance Principles and Recommendations (ASX Recommendations) during the financial year. Where the Company has not followed an ASX Recommendation, this has been identified and an explanation for the departure has been given.

Further details relating to the Company’s corporate governance practices can be found on the Company’s website at www.universalcoal.com under “Corporate Governance”.

Principle 1: Lay solid foundations for management and oversightThe Board of Directors is responsible for the overall strategy, governance and performance of the Company.

Board CharterThe Board has adopted a formal Board Charter which clearly details its functions and responsibilities and delineates the role of the Board from that of the senior executives. The Board’s function and responsibilities include strategy and planning, corporate governance, appointment of the Chief Executive Officer (CEO), remuneration, capital expenditure and financial reporting, performance monitoring, risk management, audit and compliance, developing and monitoring diversity policies and objectives.

Executive Directors are provided with executive contracts of employment and Non-executive Directors are provided with service agreements setting out the key terms and conditions relative to that appointment.

A copy of the Board Charter is available on the Universal Coal website under “Corporate Governance”.

Corporate Governance Statement

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Delegation to Chief Executive Officer and senior executivesDay to day management of the Company’s affairs and the implementation of the corporate strategy and policy initiatives have been formally delegated by the Board to the CEO and senior executives as set out in the authority of delegation policy.

Performance of senior executivesThe CEO and Chief Financial Officer (CFO) have employment contracts describing their term of office, rights and responsibilities and entitlements on termination. Induction programmes are in place to allow new senior executives to participate fully and actively in management decision-making.

The performance of senior executives is reviewed regularly by the CEO. On an annual basis, the Board reviews the performance of the CEO. A performance evaluation of the CEO and other senior executives was undertaken during the year ended 30 June 2012 following this process.

Principle 2: Structure the board to add value

Structure of the BoardThe Board currently consists of four directors including, an Independent Chairman, an additional Independent Non-executive Director and two Executive Directors:

Mr John Hopkins, Chair – Independent, Non-executive Director

Mr Hendrik Bonsma – Independent, Non-executive Director

Mr Shammy Luvhengo – Executive Director

Mr Anton Weber – CEO and Executive Director

The skills, experience and expertise of each Director are set out on page 4.

Director rotation requirements in the Company’s Articles of Association require that one-third of Directors, or if the number is not a multiple of three, a number nearest to one-third but not exceeding one-third must retire from office. Subject to the provisions of the Company’s Articles of Association, prior to the Board proposing re-election of Non-executive Directors, their performance will be evaluated by the Board to ensure that they continue to contribute effectively to the Board.

Chairman’s responsibilities and independenceThe Board Charter provides that the Chairman of the Board is responsible for the leadership of the Board, ensuring the Board is effective, setting the agenda of the Board, conducting the Board meetings and conducting the shareholder meetings.

The Chairman of the Board, John Hopkins, is an Independent Non-executive Director.

Board independenceAn independent Director is one who is independent of management and free from any business or other relationship, which could, or could reasonably be perceived to, materially interfere with, the exercise of independent judgement. Any independent Director will meet the definition of what constitutes independence as set out in the ASX Recommendations and set out in Annexure A to the Board Charter (available on the Company’s website). The materiality thresholds are assessed on a case-by-case basis, taking into account the relevant Director’s specific circumstances, rather than referring to a general materiality threshold.

At this time there are two Directors the Board has classified as independent - the Non-Executive Chairman Mr John Hopkins and Mr Bonsma.

The Board Charter states that, where practical, the majority of the Board is comprised of Non-executive Directors and where practical, at least 50% of the Board will be independent. At this stage only two of the four Directors can be considered independent and the Board has assessed that this is appropriate for the current stage of development and size of the business and that the current Board members have the skills, expertise and experience required to effectively oversee the Company’s business. The Board will review its composition at regular intervals.

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Board committeesTo assist the Board in carrying out its functions, the Board has established:

› an Audit and Risk committee; and

› a Remuneration committee.

Each Committee is established according to a Charter that is approved by the Board. Each Committee is entitled to the resources and information it requires to discharge its responsibilities, including direct access to senior executives, employees and advisers as needed.

Nominations committeeThe accountabilities and responsibilities of the Nominations committee are carried out by the Board. At this time, based on the Company’s size and stage of development, it is not considered necessary to establish a separate nominations committee. The nomination related responsibilities of the Board include reviewing Non-executive Director remuneration, assessing the skills, diversity and necessary industry, technical or functional experience required by the Board, recommending directors for re-election and conducting searches for new Board members when required.

Director selection process and Board renewalThe composition of the Board is reviewed regularly to ensure the appropriate mix of skills, diversity and expertise is present to facilitate successful strategic direction.

As detailed in the Board Charter, in appointing new members to the Board, consideration is given to the ability of the appointee to contribute to the ongoing effectiveness of the Board, to exercise sound business judgement, to commit the necessary time to fulfil the requirements of the role effectively and to contribute to the development of the strategic direction of the Company. Consideration will also be given to achieving a Board with a diverse range of backgrounds.

The process used for selecting new members for the Board, as set out in the Board Charter, may be assisted by the use of external search organisations as appropriate. An offer of a Board appointment will be made by the Chairman of the Board only after having consulted all Directors. Detailed background information in relation to a potential candidate is provided to all Directors.

Board and Director performance evaluationThe Board has not undertaken a review of its performance during the year ended 30 June 2012 due to the stage of development of the Company and that the Board has been updating and implementing its policies during the year. It is now timely for the Board to implement an appropriate process for Board and Director performance review and this will be undertaken during 2013. The review will:

› compare the performance of the Board with the requirements of its Charter;

› critically review the composition of the Board; and

› suggest any amendments to the Charter as are deemed necessary or appropriate.

InductionThe Company Secretary facilitates an induction program for new Directors. This has not been required during the year ended 2012 with no new directors appointed, however the program will include meetings with senior executives, briefings on the Company’s strategy and operations, provision of all relevant corporate governance material and policies and discussions with the Chairman and other Directors.

Continuing educationDirectors are provided with continuing education opportunities to update and enhance their skills and knowledge. This consists of regular updates for the Board from management, separate to Board meetings to ensure Non-executive Directors are well-informed of the Company’s operations and any recent developments.F

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Access to information, indemnification and independent adviceThe Company Secretary provides assistance to the Board, and Directors also have access to senior executives at any time to request any relevant information. The Board Charter provides that:

› all Directors have unrestricted access to company records and information except where the Board determines that such access would be adverse to the Company’s interests;

› all Directors may consult management and employees as required to enable them to discharge their duties as Directors; and

› the Board, Board Committees or individual Directors may seek independent external professional advice as considered necessary at the expense of the Company, subject to prior consultation with the Chairman. A copy of any such advice received is made available to all members of the Board.

Conflicts of interest The Constitution and Code of Conduct set out the obligations of Directors in dealing with any conflicts of interest. Pursuant to the Constitution and Code of Conduct, Directors are obliged to:

› disclose to the Board any actual or potential conflicts of interest which may exist as soon as they become aware of the issue;

› take any necessary and reasonable measures to resolve the conflict; and

› comply with all law in relation to disclosure of interests 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.

Principle 3: Promote ethical and responsible decision making

Corporate Code of conduct The Company has implemented a Corporate Code of Conduct (the Code) which applies to Directors and employees. The Code provides a framework for decisions and actions in relation to ethical conduct in employment. It underpins the Company’s commitment to integrity and fair dealing in its business affairs and to a duty of care to all employees, clients and stakeholders. The Code sets out the principles covering appropriate conduct in a variety of contexts and outlines the minimum standard of behaviour expected from Directors and employees.

Employees are encouraged to raise any matters of concern in good faith with the head of their business unit without fear of retribution. Where the matter is inappropriate to be raised with the head of their business unit, employees are able to raise the matter with the CEO or CFO as appropriate.

The CFO reviews and reports directly to the Board on any material breaches of the Code. The Audit and Risk Committee oversees procedures for whistleblower protection.

A copy of the Code is available on the Company’s website at www.universalcoal.com.

Dealings in securitiesThe Company has implemented a Securities Trading Policy which covers dealings in the Company’s securities by its Key Management Personnel (Directors and those employees reporting to the CEO). The Securities Trading Policy sets out the guidelines for trading in the Company’s securities, including closed periods, exceptions and approval and notification requirements.

A copy of the Securities Trading Policy is available on the Company’s website at www.universalcoal.com.

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DiversityThe Board did not have a Diversity Policy in place for the year ended 30 June 2012. The Board will develop a Diversity Policy for implementation during 2013. It is the Board’s view that diversity in the Company has not been affected by the absence of a formal policy. When developed, the policy will be available on the Company’s website at www.universalcoal.com.

At this stage the Company only employs a small number of staff (10). The Board will consider appropriate objectives and strategies for diversity over the next one to two years as the Company’s staff levels grow. Measurable objectives and progress towards achieving them will be disclosed in the 2013 Corporate Governance Statement. Any recruitment will be subject to the Diversity Policy.

Until the Board has reviewed and approved the Diversity Policy, the Company will not disclose its proportion of female employees at each level of the Company.

Principle 4: Safeguard integrity in financial reporting

Audit and Risk CommitteeThe Board has established an Audit and Risk Committee governed by the Audit and Risk Committee Charter, which is available on the Company’s website at www.universalcoal.com.

The objective of the Audit and Risk Committee is to assist the Board in monitoring and reviewing any matters of significance affecting financial reporting and compliance. The Audit and Risk Committee’s responsibilities include:

› review of financial reports;

› review and monitoring of risk management systems, practices and procedures;

› external audit,; and

› any special reviews or investigations requested by the Board.

Audit and Risk Committee compositionThe Audit and Risk Committee consists only of Independent Non-executive Directors and the Chair is not the Chair of the Board. The members of the Audit and Risk Committee are Mr Henri Bonsma, Chair of the Committee and Mr John Hopkins. Both Mr Bonsma and Mr Hopkins are Independent Non-executive Directors.

The composition does not comply with the ASX Recommendations in that the Audit and Risk Committee does not have three members. There are only 2 Independent Non-executive Directors on the Board at this time and the Board has determined that it is inappropriate to have executive directors as Audit and Risk Committee members.

The Board is satisfied that the composition of the Audit and Risk Committee is appropriate for the size and stage of development of the Company and the issues the Company is facing in this area. The composition will be reviewed on a regular basis as circumstances change.

Details of meeting attendance of members of the Committee are contained in the following table:

Director No. of meetings held No. of meetings attended

Hendrik Bonsma, Independent Non-executive Director 3 3

John Hopkins, Independent Non-executive Director 3 3

Antony Harwood, Executive Director

(resigned from the Board and the Committee on 18 April 2012)2 2

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AuditThe Audit and Risk Committee is responsible for:

› the performance of the external auditor;

› ensuring rotation of the lead engagement partner;

› approving the audit plans and proposed fees for audit work;

› meeting with the external auditors as required without management present; and

› monitoring independence of the external auditor.

Principle 5: Make timely and balanced disclosureThe Company is committed to ensuring:

compliance with the requirements of the ASX Listing Rules, all relevant regulations and the ASX Recommendations;

accountability at Chief Executive Officer level for that compliance; and

facilitation of an efficient and informed market in the Company’s securities by keeping the market appraised through ASX announcements of all material information.

The Company has implemented a Continuous Disclosure Policy which is designed to support the commitment to a fully informed market in the Company’s securities by ensuring that announcements are:

› made to the market (via the ASX Company Announcements platform) in a timely manner, are factual and contain all relevant material information; and

› expressed in a clear and objective manner that allows investors to assess the impact of the information when making investment decisions.

A copy of the Continuous Disclosure Policy is available on the Company’s website at www.universalcoal.com.

Principle 6: Respect the rights of shareholdersThe Company has adopted a Shareholder Communications Policy which aims to ensure that shareholders are informed of all major developments affecting the Company’s state of affairs. Information is communicated to shareholders through:

1. quarterly and Annual Reports;

2. disclosures and announcements made to the Australian Securities Exchange (ASX);

3. notices and explanatory memoranda of Annual General Meetings and Extraordinary General Meetings and addresses or presentations made at those meetings;

4. the Company’s website; and

5. the auditor’s lead engagement partner being present at the AGM to answer questions from shareholders about the conduct of the audit and the preparation and content of the auditor’s report.

The Board also encourages participation by shareholders at all shareholder meetings.

A copy of the Shareholder Communications Policy is available on the Company’s website at www.universalcoal.com.

Principle 7: Recognise and manage riskThe Company is committed to ensuring that:

› its culture, processes and structures facilitate realisation of the Company’s business objectives whilst material risks are identified, managed, monitored and wherever appropriate and possible, mitigated; and

› to the extent practicable, its systems of risk oversight, management and internal control complies with the ASX Recommendations.F

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The Board determines the Company’s risk profile and is responsible for overseeing and approving the Company’s risk management strategy and policies, internal compliance and internal control.

The Board has delegated to the Audit and Risk Committee responsibility for implementing the risk management system and reporting to the Board.

The responsibility for undertaking and assessing risk management and internal control effectiveness is delegated to management. Management is required to assess risk management and associated internal compliance and control procedures and report regularly to the Audit and Risk Committee.

A Strategic Risk Assessment has been undertaken by the Company, including a risk assessment workshop with management. This identified the Company’s strategic risks, root cause, consequence, likelihood of occurrence, inherent risk exposure, mitigating controls in place and residual risk exposure. An owner for each risk has been identified.

In addition, in accordance with the ASX Recommendations (recommendation 7.2), the CEO and CFO will state to the Board on an annual basis that the management of the Company’s material business risks is effective. This declaration has been received for year ended 30 June 2012.

As the Company is a foreign entity and is not subject to Section 295A of the Corporations Act, recommendation 7.3 is not applicable.

A copy of the Company’s risk management policy is available on the Company’s website at www.universalcoal.com.

Principle 8: Remunerate fairly and responsiblyThe Board has established a Remuneration Committee, which is governed by the Remuneration Committee Charter. The Charter is available on the Company’s website at www.universalcoal.com.

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 Chief Executive Officer, and as appropriate other senior executives and conducting an annual review of remuneration by gender; and

› reviewing and approving any equity based plans and other incentive schemes.

Further detail can be found in the Committee’s charter.

The Remuneration Committee consists only of Independent Non-executive Directors. The members of the Remuneration Committee are Mr John Hopkins, Chair of the Committee and Mr Henri Bonsma. Both Mr Bonsma and Mr Hopkins are Independent Non-executive Directors. The Committee does not have three members as the Board has determined that it is inappropriate to have Executive Directors as members of the Committee.

Details of meeting attendance of members of the Committee are contained in the following table:

Director No. of meetings held No. of meetings attended

Hendrik Bonsma, Independent Non-executive Director 3 3

John Hopkins, Independent Non-executive Director 3 3

Antony Harwood, Executive Director

(resigned from the Board and the Committee on 18 April 2012) 2 2

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Remuneration policyInformation on the Company’s remuneration policies and practices is set out in the remuneration report starting on page 13 in the Directors’ report.

The remuneration of Non-executive Directors is fixed. Non-executive Directors do not participate in other remuneration components such as performance related short-term or long-term incentives, options or variable remuneration and do not receive retirement benefits other than superannuation. Information relating to the remuneration of Non-executive Directors is disclosed in the remuneration report on pages 13 to 16.

Executive Directors participate in an Employee Share and Option Plan as part of rewards for performance.

ConclusionThe Board is satisfied with its level of compliance and corporate governance requirements for the current stage of development and size of Universal Coal. However, the Board recognises that processes and procedures require continual monitoring and improvement and this will continue to occur.

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CORPORATE RESPONSIBILITY REPORT

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Sustainable DevelopmentUniversal Coal subscribes to the belief that long-term success hinges on sustainable development which benefits everyone; the business, society and the environment. Universal Coal has adopted a policy of responsible, proactive environmental management and works hard to ensure compliance with relevant legislative obligations in the course of any of its exploration or development activity.

Through a proactive policy of self-regulation, legislative compliance and community involvement, Universal Coal is working hard to deliver on its short and long-term business objectives while ensuring that relevant social and environmental considerations are included as part of any decision-making process. The Company remains committed to delivering excellent results for shareholders while at the same time ensuring that its economic success is balanced by meeting its environmental and social responsibilities.

Environmental ManagementUniversal Coal takes a proactive approach towards environmental management. Prior to mining activity all environmental impacts are identified and an Environmental Management Plan (EMP) is developed to address the negative environmental impacts which could arise from exploration phase, during mining and at mine closure. The main environmental areas relate to water management, land management, waste management (hazardous materials), air quality management, energy consumption and greenhouse gas emissions. Our goal is to go beyond compliance with statutory requirements; these would be implemented by setting targets for the above listed indicators once Universal Coal is in production.

Socio Economic DevelopmentUniversal Coal acknowledges the fact that there will be negative social and environmental impacts on the hosting community as a result of mining in their vicinity. The Social and Labour Plan (SLP) which stipulates how the surrounding communities’ livelihood will be uplifted and improved has been developed for Brakfontein, Roodekop and the Kangala projects.

Safety and Health Safety and health of employees and contractors is a priority for Universal Coal. Appropriate risk management systems will be put in place for production facilities. Employees will be provided with appropriate training and protective equipment to prevent injuries and health risks. It has been established that the greatest future threat to the workforce will continue to be of that HIV/AIDS, comprehensive AIDS awareness programme will be implemented by means of workforce education and training, voluntary HIV counselling and testing and primary care wellness programmes.

Stakeholder EngagementUniversal Coal recognises the importance of community consultation and facilitates the involvement and awareness of relevant communities and their representatives when undertaking any exploration or development activity.

Accountability and transparency is important in interactions and collaboration with interested and affected parties, shareholders, regulatory authorities and communities. Universal Coal is in the process of identifying all stakeholders which will provide Universal Coal with an opportunity to explain at all levels (local, regional and national) the nature of its decisions and the financial, governance, environmental and social consequences of the operations. This process is crucial in that the stakeholders will obtain sustainable economic benefit from our operations and Universal Coal will in return receive direct feedback from all stakeholders.

Corporate Responsibility Report

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MINING AND PROSPECTING LICENCES

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The following detailed schedule provides additional information pertaining specifically to the interest’s held by Universal Coal plc in the identifiable Mining & Prospecting Licences as at 30 June 2012:

Project / (Holder) Asset

Registration Number Permit Number

Interest (%)

Licence Expiry Date

Renewal submitted

Area (ha)

Kangala Project: (Universal Coal Development I (Pty) Ltd)

Middelbult 235 IR, Portions 40 & 82

588/2006 PR MP30/5/1/1/640PR 70.5% 06/11/2011 12/08/2011 942

Wolvenfontein 244 IR, Portion 1 and RE of Portion 2#

In process MP30/5/1/2/2/429MR 70.5% 02/05/2032 - 951

Modderfontein 236 IR, Portion 1 93/2007 PR MP30/5/1/1/2/639PR 70.5% 06/11/2011 15/08/2011 127

Berenice and Somerville Project: (Universal Coal Development II (Pty) Ltd)

Berenice and Somerville Projects, several farms

342/2009 PR LP30/5/1/1/2/376PR 40% 24/07/2011

20/04/2011 Granted – to be

executed

39,484

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

Brakfontein 264 IR, Portions 6, 8, 9, 10, 20, 26, 30 and RE of 264 IR

245/2008 PR MP30/5/1/1/2/1879PR 50.29% 09/07/2011 12/04/2011 879

Roodekop Project: (Universal Coal Development IV (Pty) Ltd)

Roodekop 63 IS IR, the whole farm

191/2009 PR MP30/5/1/1/2/1980PR 50% 20/04/2012 30/03/2012 860

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

Cygnus Project 227/2008 PR LP30/5/1/1/2/1276PR 10% 06/05/2013 - 12,299

Donkin Project: (Universal Coal Development VI (Pty) Ltd)

Donkin Project 16/2010 PR LP30/5/1/1/2/2074PR 15% 08/12/2014 - 1,178

# On 03 May 2012, UCD I executed a Mining Right to mine for coal, in respect of Wolvenfontein No. 244 IR.

Mining and Prospecting Licences

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ASX ADDITIONAL INFORMATION

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ShareholdingsThe issued capital of the Company as at 10 October 2012 is 223,734,771 ordinary fully paid shares. There are 57,420,490 unlisted options.

Ordinary Shares at 10 October 2012:

Range Total holders Number of shares % of Issued Capital

1 - 1,000 77 34,476 0.02

1,001 - 10,000 721 4,571,464 2.06

10,001 - 100,000 1,048 37,273,144 16.77

100,001 - 1,000,000 170 43,631,835 19.63

1,000,001 - 9,999,999,999 19 138,223,852 61.53

Rounding -0.01

TOTAL 2,035 223,734,771 100.00%

As at 10 October 2012, the total number of shares on issue was 223,734,771. There were 262 shareholders (with a total of 480,799 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”.

ASX Additional Information

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Options at 10 October 2012:

Range Total Holders Number of Options % of Total Options

0 - 1,000 - - -%

1,001 - 10,000 - - -%

10,001 - 100,000 3 184,727 0.32%

100,001 - 1,000,000 5 2,235,389 3.89%

1,000,001 - 999,999,999 13 55,000,374 95.79%

TOTAL 21 57,420,490 100.00%

Top 20 Shareholders as at 10 October 2012:

Number of shares % of Issued Capital

1 Maple Leaf International Limited 20,000,000 8.94

2 Power Origin Developments Limited 12,264,521 5.48

3 JP Morgan Nominees Australia Pty Limited 9,390,462 4.20

4 Mr Geoffrey Robert Tarrant and Mrs Deborah Lee Tarrant 7,080,000 3.16

5 Bell Potter Nominees Limited 6,846,982 3.06

6 BNP Paribas Nominees Pty Limited 5,726,698 2.56

7 ABN Amro Clearing Sydney Nominees Pty Limited 4,827,998 2.16

8 Shellbright Limited 4,535,000 2.03

9 HSBC Custody Nominees (Australia) Limited 4,531,182 2.03

10 Anton Weber 4,502,268 2.01

11 Antony Harwood 4,268,373 1.91

12 Hendrik Willem Bonsma 4,109,726 1.84

13 National Nominees Limtied 4,048,387 1.81

14 Pieter Janeke 4,000,000 1.79

15 Marthinus Jacobus Malan 4,000,000 1.79

16 Pheasant Dime Investments Limited 3,850,000 1.72

17 Geoff Tarrant 3,833,332 1.71

18 Deborah Tarrant 3,724,042 1.66

19 Merrill Lynch (Australia) Nominees Pty Limited 2,968,127 1.33

20 Nathan Bruce McMahon 2,400,000 1.07

TOTAL 116,907,098 52.25%

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Top Option Holders as at 10 October 2012:

EXISTING UNLISTED OPTIONS

No Option Holder Number of Options % Options

1 Susquehanna Pacific Pty Limited 22,474,315 39.14

2 StoneBridge Securities Ltd 4,930,450 8.59

3 Antony Harwood 3,990,101 6.95

4 Anton Weber 3,802,405 6.62

5 Wychwood Estate Limited 3,364,000 5.86

6 Hendrik Willem Bonsma 3,164,899 5.51

7 Pursuit Capital Pty Ltd 3,007,110 5.24

8 Marthinus Jacobus Malan 2,733,744 4.76

9 Vitaliy Limited 2,270,000 3.95

10 Bruce Stewart 1,584,000 2.76

11 Shammy Luvhengo 1,303,805 2.27

12 Michael Seeger 1,239,675 2.16

13 John Hopkins 1,135,870 1.98

14 Shellbright Limited 600,000 1.04

15 Daryl Edwards 500,000 0.87

16 Duncan Craib 424,500 0.74

17 Tim Horgan 410,889 0.72

18 Michelle Durrant 300,000 0.52

19 Debbie Midlane 83,967 0.15

20 Marie Minnaar 83,967 0.15

TOTAL 57,403,697 99.97

Limitations on the acquisition of securitiesThe Company is incorporated in the United Kingdom.

The Company is not subject to the provisions of Chapter 6, 6A, 6B and 6C of the Corporations Act (Australia) dealing with the acquisition of securities (i.e. substantial holdings and takeovers).

In the United Kingdom, the City Code on Takeovers and Mergers (City Code) usually regulates takeovers and substantial shareholders for United Kingdom companies. However in this instance, although the Company is incorporated in the United Kingdom, none of the directors reside in the United Kingdom and the central management and control of the Company, for corporate law purposes, is currently outside of the United Kingdom, Channel Islands and the Isle of Man. Accordingly, the Company is currently not subject to the City Code. As a result, any takeover offer for the Company or consolidation of control in the Company will not be regulated by the Corporations Act, the City Code or any other takeover regime.

There are, however, certain limitations on the acquisition of securities imposed under the Company›s Articles of Association and as long as the City Code does not apply, the Articles of Association take precedence. Of relevance to takeover offers, the Articles of Association provide that the Board of Directors may disenfranchise a shareholder who does not make a takeover offer in circumstances where this would be required under rule 9 of the City Code. Under rule 9 of the City Code, there is a threshold of 30% ownership in the Company before a takeover offer must be made. This threshold is modified in the Articles from 30% ownership in the Company to 20% (in line with takeover provisions applying to Australian incorporated public companies listed on the ASX).

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UNIVERSAL COAL PLC For personal use only · 2012-10-25 · BANKERS HSBC Bank Australia Ltd Level 1,...

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Transcript of UNIVERSAL COAL PLC For personal use only · 2012-10-25 · BANKERS HSBC Bank Australia Ltd Level 1,...