Final Results
28/04/2011 07:00
BISICHI MINING PLC
Results for the year ended 31 December 2010
DIFFICULT TRADING CONDITIONS IN SOUTH AFRICA
RESULT IN
A CHALLENGING YEAR
* Losses at Black Wattle arose from a strong SA Rand against the US Dollar, a
shortage of railway trucks for the export coal and generally lower coal
prices
* Prospects for 2011 in South Africa will benefit from:
*
+ Better stripping ratios
+ Higher yields from the washing plant
+ Significantly improved coal prices
+ Reduced dependency on rail transport
+ Cost cutting
* Property portfolio independently revalued to 12.1 million (2009: 11.9
million)
* Cash reserves of 5.4 million and very little net debt
* New Black Empowerment Partner, Vunani Ltd, concluded purchase of 37.5% of
Black Wattle
* Final Dividend proposed of 3p per share payable in shares or cash in
addition to the interim dividend of 1p per share
For further information, please call:
Andrew Heller, Robert Corry or Garrett Casey, Bisichi Mining PLC 020 7415 5030
CHAIRMANS STATEMENT
2010 has been a very challenging year for your Company and particularly for its
direct coal mining subsidiary in South Africa, Black Wattle, which operated at
a loss during 2010.
The reasons for the loss are as follows:
* the strengthening of the SA Rand against the US Dollar;
* a shortage of railway trucks at our coal loading siding; and
* lower prices for our coal.
To overcome the effect of the strong SA Rand, we increased production by
expanding our washing plant and buying in high quality coal. Our railway siding
was also expanded and markets were found for this increased production.
However, the shortage of railway trucks to deliver this coal to our customers
meant that during the second half of the year we built up unacceptable levels
of stock. In order to reduce these stock levels we had to stop buying in coal,
which in turn had a material effect on our earnings. Despite this, the
investments that we have made in 2010 in terms of mine expansion and new
reserve acquisitions will reap substantial benefits in years to come.
At the 31 December 2010, Bisichi had very little net debt and cash balances of
5.4 million which can be used to expand Group activities.
By the second half of 2011 I believe that we will return to an acceptable level
of profitability. The reasons for this are:
* the reserves that we are mining in 2011 have a lower average stripping
ratio than the reserves we mined in 2010;
* the washing plant yield is higher than the yield on the reserves that we
mined throughout 2010;
* coal prices have gone up significantly in all our markets - so far we have
seen an average increase in the export price in 2011 of 28% and an average
increase in the domestic price of 12% free on mine;
* the markets that we are now selling into are less reliant on rail
performance, although the supply of trains to our coal loading siding has
recently improved; and
* we are in the process of building up production and we have undertaken a
substantial and successful cost cutting programme.
As previously announced, Vunani Limited has concluded the purchase of a 37.5%
shareholding in Black Wattle. Vunani Limited is a leading, publicly listed,
black-owned and managed company and we are very pleased that they have joined
us as a partner in Black Wattle.
On the subject of health and safety, I am very pleased to report that Black
Wattle had another very good year having made significant investment in this
area over a number of years. A more detailed report on health and safety is
included in the Mining Review.
Bisichi's UK property portfolio, managed by London and Associated Properties
PLC, continues to perform well. It showed a small increase in external
valuation at year end and - as in previous years when the mine has
under-performed - the income from the property portfolio has underwritten many
of our costs and so provided the company with a stable financial cushion. Voids
in the portfolio have continued to remain low, even during the difficult
retailing conditions that have been experienced over the last 18 months.
As recently announced, Michael Stevens, who held the position of Group Company
Secretary for twenty five years, has retired. I would like to thank Michael on
behalf of the Board, for his extremely valuable contribution during the years
of substantial growth for the company and to wish Michael a very enjoyable
retirement.
The Board paid an interim cash dividend of 1p during the year. The Directors
recommend the payment of a final dividend of 3p (2009: 3p). The final dividend
will be payable on 8 August 2011 to shareholders registered at the close of
business on 1 July 2011. It will be proposed that shareholders are given the
opportunity of electing to receive all or part of the final dividend in the
form of fully paid ordinary shares rather than cash.
Although the company made a loss in 2010, the Board felt it was appropriate to
maintain the dividend but to pay it in a form that will give shareholders the
opportunity to either take cash or to take new shares and receive the benefit
of the investment we have made in the mine during the year, which will be
realised in years to come. Your directors, and London & Associated Properties
PLC have agreed to elect to take their full entitlement in new shares in lieu
of cash, representing over 51% of the ordinary share capital of the company.
On behalf of the Board I would like to thank all of our staff for their hard
work during the course of the year.
Michael Heller Chairman 15 April 2011
MINING REVIEW
As noted in the Chairman's statement, the challenging environment experienced
in the first half of 2010 by Black Wattle our direct mining subsidiary,
continued into the second half of 2010. Although Black Wattle continued to mine
opencast coal, buy-in coal was stopped and overall production was limited as a
result of a shortage of railway trucks in the second half of the year. This
together with the strong South African Rand and lower market priceshad a
material effect onBlack Wattle's profitability.
As we continue into 2011, the effect of these factors has been mitigated by the
significant improvement in market prices and the commencement of mining of
higher quality opencast reserves.
Production
Although production through the washing plant increased in 2010, with total run
of mine production of 1.46 million metric tonnes for the year (2009: 1.26
million metric tonnes), overall monthly production through the washing plant
decreased from 135,000 metric tonnes in the first eight months of 2010 to
94,000 metric tonnes in the last four months. As stated above, this decrease in
production was a direct result of a shortage of railway trucks in the second
half of the year.
As noted in our previous annual report, Black Wattle's remaining opencast
permissions were granted in February 2010. This represented an important
landmark in the mine's development and, going forward, gives Black Wattle the
ability to mine strategically and more flexibly its remaining reserves.
In addition to its existing reserves, Black Wattle has concluded an agreement
to purchase run of mine coal from an opencast reserve of coal contiguous to
Black Wattle's existing opencast mine. The reserve, which is expected to make
up approximately half of Black Wattle's overall monthly production is made up
of high quality run of mine coal with a lower average stripping ratio and a
higher yield than the reserves we mined in 2010.
We are pleased to report that mining of this reserve commenced at the end of
last year and overall production is steadily being increased. Much of the new
reserve comprises very low phosphorous coal, which we can sell at a premium
into the domestic metallurgical industry and delivery of this coal is not
reliant on the performance of the rail provider as the coal is supplied by road
transport.
Markets
International coal prices remained relatively stable in 2010 in comparison to
the extreme volatility seen in the international coal market in 2009. The
average weekly price of Free on Board (FOB) Coal from Richards Bay Coal
Terminal (API4) remained in a range of US$85.00 to US$95.00 per metric tonne
for the most of 2010. However, over the same period, the South African Rand
continued to appreciate by over 10% against the US Dollar. This is in addition
to the 21% appreciation of the Rand experienced in 2009. In addition to the
downturn in the Rand denominated international coal price, domestic prices
continued to decrease in 2010 resulting in a reduction in prices in all our
domestic steam coal markets.
Going forward into 2011, the international coal price has significantly
improved with the price of FOB coal from Richards Bay Coal Terminal increasing
to approximately US$120 per metric tonne at the time of writing this report. In
addition, the domestic price has increased over 12% from the prices we achieved
in 2010. Our ability to diversify our product will allow us to sell to markets
which give the highest return and we look forward to taking advantage of this
as production from our new opencast reserve increases in 2011.
Shareholding
As noted in the Chairman's statement, we are very pleased to report that Vunani
Limited has concluded the purchase of a 37.5% shareholding in Black Wattle. We
are proud of our longstanding commitment to Black Economic Empowerment in South
Africa and we see this transaction with Vunani as the first of many we will do
together in South Africa. Vunani Limited is a publicly listed, black owned
and managed company.
Health, Safety & Environment (HSE)
Black Wattle is committed to creating a safe and healthy working environment
for its employees and the health and safety of our employees is of the utmost
importance. In addition to the required personnel appointments and assignment
of direct health and safety responsibilities on the mine, a system of Hazard
Identification and Risk Assessments has been designed, implemented and
maintained at Black Wattle.
Health and Safety training is conducted on an ongoing basis. Supervisors and
about 95 percent of employees to date have received training in hazard
identification and risk assessment in their work areas.
A medical surveillance system is also in place which provides management with
information used in determining measures to eliminate, control and minimise
employee health risks and hazards and all Occupational Health hazards are
monitored on an ongoing basis.
Various systems to enhance the current HSE strategy have been introduced as
follows:
* In order to improve hazard identification before the commencing of tasks,
mini risk assessment booklets have been distributed to all mine employees
and long term contractors on the mine.
* A Job Safety Analysis form has been introduced to ensure effective
identification of hazards in the workplace.
* In order to improve the current reporting practice of incidents on the
mine, initial reporting of incidents booklets were handed out to all
employees and contractors.
* In order to capture and record investigation findings from incidents, an
incident recording sheet was introduced to line management and contractors.
* Hazard Identification and Risk Assessment training was given to all levels
of employees, line management, Head of Departments, contractor
representatives and contractor employees.
* In order to control jobs effectively over weekends that require additional
risk assessments to safely perform tasks, a weekend work register was
introduced on the mine.
HSE performance in 2010:
* Black Wattle had a 64 percent reduction in the Lost Time Injury Frequency
Rate compared to 2009.
* No new cases of Occupational Diseases Certified were recorded.
* Zero cases for the Compensation for Occupational Diseases were submitted.
* Zero machines operating at Black Wattle exceeded the regulatory noise
level.
Environment Management Programme
Under the terms of the mine's Environmental Management Programme approved by
the Department of Mineral Resource ("DMR"), Black Wattle undertakes a host of
environmental protection activities to ensure that the approved Environmental
Management Plan is fully implemented. In addition to these routine activities,
Black Wattle regularly carries out environmental monitoring activities on and
around the mine, including evaluation of ground water quality, air quality,
noise and lighting levels, ground vibrations, air blast monitoring, and
assessment of visual impacts.
Black Wattle Colliery has improved its water management tremendously by
erecting a new pollution control dam as well as upgrading existing dams in
consultation with the Department of Water Affairs and Forestry.
Black Wattle Colliery Social and Labour Plan (SLP) progress
Black Wattle Colliery is committed to true transformation and empowerment
within the company as well as poverty eradication within the surrounding and
labour providing communities.
Black Wattle is committed to providing opportunities for the sustainable
socio-economic development of the company's stakeholders:
* Employees and their families, through Skills Development, Education
Development, Human Resource Development, Empowerment and Progression
Programmes.
* Surrounding and Labour sending communities, through Local Economic
Development, Rural and Community Development, Housing and Living Condition,
Enterprise Development and Procurement programmes.
* Empowerment partners, through Broad-Based Black Economic Empowerment
(BBBEE) and Joint Ventures with Historically Disadvantaged South African
(HDSA) new mining entrants and enterprises.
* The Company, through ongoing consultation with stakeholders to develop
strong company-employee relationships, strong company-community
relationships and strong company-HDSA enterprise relationships.
The key focus areas in terms of the detailed SLP programmes were updated as
follows:
* New implementation action plans, projects, targets and budgets were
established through regular workshops with all stakeholders.
* A comprehensive desktop socio-economic assessment was undertaken on
baseline data of the Steve Tshwete Local Municipality (STLM) and Nkangala
District Municipality (NDM).
* The current Black Wattle Colliery Local Economic Development (LED)
programmes were upgraded, and new LED projects were selected in
consultation with the key stakeholders from the STLM.
* An appropriate forum was established on the mine and a process initiated
for the consultation, empowerment and participation of the employee
representatives in the Black Wattle Colliery SLP process.
Procurement
In compliance with the Mining Charter and the Mineral and Petroleum Resource
Development Act, Black Wattle has implemented a BEE-focussed procurement policy
which strongly encourages our suppliers to establish and maintain BEE
credentials. At present, BEE companies provide approximately 52 percent of
Black Wattle's equipment and services. We closely monitor our monthly
expenditure and welcome potential BEE suppliers to compete for equipment and
service contracts at Black Wattle. Black Wattle also sells much of its coal
products to empowered companies as evidenced by our long term sales agreement
with a BEE company for the purchase of our discard product which is then sold
to Eskom, the national power utility.
Employment Equity
Black Wattle is committed to achieving the goals of the Employment Equity Act
and is pleased to report the following:
* Black Wattle Colliery has exceeded the 10 percent women in management and
core mining target.
* Black Wattle Colliery has achieved 15 percent women in middle to top
management.
* Black Wattle Colliery has achieved 15.1 percent women in core mining.
* 86.2 percent of the women at Black Wattle Colliery are HDSA females.
* Black Wattle Colliery has achieved a 40 percent participation level of
HDSA's in overall management.
Prospects
Black Wattle is a fully operational opencast mine with strong management,
existing infrastructure and markets in place. Along with the expansion of the
washing plant and upgrade of the railway siding, various cost cutting and
operational programmes have been undertaken at Black Wattle in order to ensure
maximum productivity; yield and profitability. As a result, the group is in a
strong position to take advantage of the improvement in market prices and the
increased production.
Going forward, I am confident that 2011 should be a successful year for our
South African operations.
Andrew Heller
Managing Director
15 April 2011
BUSINESS REVIEW
Review of the group's development and performance
The Chairman's Statement and the Mining Review on the preceding pages 2 to 10
give a comprehensive review and assessment of the group's activities during the
past year and prospects for the forthcoming year.
Risk
Coal price risk: The group's mining operational earnings are largely dependent
on movements in the coal price. It does have the flexibility in terms of
markets where it can sell its coal domestically (to local industrial consumers
and the power industry) or to export to various international markets.
Coal washing: The group's mining operation's earnings are highly sensitive to
coal washing, therefore a stoppage or disruption to the process could
significantly impact earnings. However, there is scope to raise earnings
substantially if the yield from the washing process is improved even
marginally.
Mining risk: Attached to mining there are inherent health and safety risks. Any
such safety incidents disrupt operations, and can slow or even stop production.
The group has a comprehensive Health and Safety programme in place to mitigate
this. There is scope to increase production by buying in coal to compensate for
disruptions in production.
As with many mining operations, the reserve that is mined has the risk of not
having the qualities expected from geological analysis.
Currency risk: The group's South African operations are sensitive to currency
movements, especially those between the South African Rand, US Dollar and
British Pound.
New reserves and mining permissions: The acquisition of additional reserves,
permissions to mine and new mining opportunities in South Africa generally are
contingent on a number of factors outside of the group's control, e.g. approval
by the Department of Mineral Resources.
Regulatory risk: The group's South African operations are subject to the
government Mining Charter and scorecard which primarily seeks to:
* Promote equitable access to South Africa's mineral resources for all people
in South Africa;
* Expand opportunities for historically disadvantaged South Africans
(HDSA's), including women, to enter the mining and minerals industry and
benefit from the extraction and processing of the country's resources;
* Utilise the existing skills base for the empowerment of HDSA's;
* Expand the skills base of HDSA's in order to serve the community;
* Promote employment and the social and economic welfare of mining
communities and areas supplying mining labour; and
* Promote beneficiation of South Africa's mineral commodities beyond mining
and processing, including the production of consumer goods.
The group continues to make good progress towards meeting the Charter
requirements. However any regulatory changes to these, or failure to meet
existing targets, could adversely affect the mine's ability to retain its
mining rights in South Africa.
Transport risk: At present the government owned Transnet Freight Rail (TFR) is
the sole rail freight provider for coal in South Africa. The group's South
African operations are therefore reliant on TFR for delivery of its export
quality coal directly or indirectly via the Southern African ports to its end
customers.
Power supply risk: The current utility provider for power supply in South
Africa is the government run Eskom. Eskom has recently undergone capacity
problems resulting in power cuts and lack of provision of power supply to new
projects. The group's mining operations have to date not been affected by power
cuts.
Flooding risk: The group's mining operations are susceptible to seasonal
flooding which could disrupt production. Management monitors water levels on an
ongoing basis and various projects have been completed, including the
construction of additional dams, to mitigate this risk.
Environmental risk: The group's South African mining operations are required to
adhere to local environmental regulations. Details of the groups Environment
Management Programme is disclosed in the Mining review on page 9.
Health & Safety risk: The group's South African mining operations are required
to adhere to local Health and Safety regulations. Details of the group's Health
and Safety Programme is disclosed in the Mining Review on page 6.
Labour risk: The group's mining operations and coal washing plant facility are
labour intensive and unionised. Any labour disputes, strikes or wage
negotiations may disrupt production and impact earnings.
We seek to balance the high risk of our mining operations with a dependable
cash flow from our UK property investment operations. Fluctuations in property
values, which are reflected in the Consolidated Income Statement and Balance
Sheet, are dependent on an annual valuation of commercial properties. A fall in
UK commercial property can have a marked effect on the profitability and the
net asset value of the group. However, due to the long term nature of the
leases, the effect on cash flows from property investment activities will
remain stable as long as tenants remain in operation.
Future development
The group seeks to expand its operations in South Africa through the
acquisition of additional coal reserves.
Environment and employment
The group's UK activities are principally property investment whereby we
provide premises which are rented to retail businesses. We seek to provide
those tenants with good quality premises from which they can operate in an
efficient and environmentally sound manner.
Our South African mining operations are regulated by and are operated in
compliance with all relevant prevailing national and local legislation.
Employment terms and conditions provided to mining staff meet or exceed the
national average.
Financial Position
The group continues to strengthen its asset base with strong cash generation
from its South African mining operations backed by UK retail property.
The group signed new borrowing facilities in both its UK and South African
operations.
In the UK, a term loan facility of 5million and an overdraft facility of
2million were signed in March 2010 with Royal Bank of Scotland. The term loan
facility will expire in December 2012 and is secured against the group's UK
retail property portfolio. The property portfolio was externally valued at 31
December 2010 and the value of UK investment properties attributable to the
group at year end was 12.1million (2009: 11.9million).
In South Africa, a structured trade finance facility of R60million (South
African Rand) was signed in March 2010 with Absa Bank Limited, a South African
subsidiary of Barclays Bank PLC. This facility comprises of a R40million
revolving loan to cover the working capital requirements of the group's South
African operations, and a R20million loan facility to cover Guarantee
requirements related to the group's South African mining operations. The
R60million facility is renewed annually and is secured against inventory,
debtors and cash that are held in the group's South African operations.
The group's cash and cash equivalents (excluding bank overdrafts) at year end
were 5.4million (2009: 6.6million). The net assets of the group at year end
were 18.3million (2009: 19.3million).
Further details on the group's financial position are stated in the
Consolidated Balance Sheet on page 30.
Cashflow
The group's cashflow position remains strong. Cash and cash equivalents
(including bank overdrafts) of the group at year end were 4.0million (2009:
5.1million).
Further details on the group's cashflow position are stated in the Consolidated
Cashflow Statement on page 32. Cash and cash equivalents as per the Cashflow
Statement comprise Cash and cash equivalents as presented in the balance sheet
and bank overdrafts (secured).
Performance indicators
The Key Performance Indicators for our South African mining activities are
* Profit before Tax (PBT);
* Earnings before Interest, Tax, Depreciation, and Amortisation (EBITDA); and
* Cashflows from operating, investing and financing activities.
The Key Performance Indicator for our UK property investment operations is the
Net Property Valuation as shown in note 10.
MANAGEMENT TEAM
Michael Heller
Chairman
Bisichi Mining PLC
Andrew Heller
Managing Director
Bisichi Mining PLC,
Managing Director
Black Wattle Colliery
Robert Corry
Chairman
Black Wattle Colliery
Robert Grobler
Director of Mining
Bisichi Mining PLC,
Director
Black Wattle Colliery
Christopher Joll
Senior Independent Director,
Chairman
Audit and Remuneration Committees
Garrett Casey
Finance Director
Bisichi Mining PLC,
Director
Black Wattle Colliery
Ethan Dube
Director
Black Wattle Colliery
Luis Pinel
General Manager
Black Wattle Colliery
DIRECTORS & ADVISORS
*Michael A Heller
MA, FCA (Chairman)
Andrew R Heller
MA, ACA
(Managing Director)
Garrett Casey
CA (SA)
(Finance Director)
Robert Grobler
Pr Cert Eng
(Director of mining)
O +Christopher A Joll
MA (Non-executive)
Christopher Joll was appointed a Director on 1 February 2001. He holds a number
of non-executive directorships of un-quoted companies. He is chairman of MJ2
Limited,, a financial public relations consultancy.
O John A Sibbald
BL (Non-executive)
John Sibbald has been a Director since 1988. After qualifying as a Chartered
Accountant he spent over 20 years in stockbroking, specialising in mining and
international investment.
* Member of the nomination committee
+ Senior independent director
O Member of the audit, remuneration and nomination committees.
Secretary & Registered office
Heather A Curtis ACIS
30-35 Pall Mall
London SW1Y 5LP
Black Wattle Colliery
Directors
Robert Corry (Chairman)
Andrew Heller
(Managing Director)
Robert Grobler
Ethan Dube
Garrett Casey
Director of Property
Mike J Dignan FRICS
Auditors
PKF (UK) LLP
Principal bankers
United Kingdom
Barclays Bank PLC
National Westminster Bank PLC
South Africa
Absa Bank (SA)
First National Bank (SA)
Standard Bank (SA)
Corporate solicitors
United Kingdom
Olswang LLP, London
Pinsent Masons LLP,London
South Africa
Routledge Modise in association with Eversheds, Johannesburg
Tugendhaft Wapnick Banchetti and Partners, Johannesburg
Stockbrokers
Numis Securities
Registrars and transfer office
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Telephone 0871 664 0300
(Calls cost 10p per minute + network extras) or
+44 208 639 3399 for overseas callers
Website: www.capitaregistrars.com
Email: ssd@capitaregistrars.com
Company registration
Company registration No. 112155
(Incorporated in England and Wales)
Website
www.bisichi.co.uk
E-mail
admin@bisichi.co.uk
FIVE YEAR FINANCIAL SUMMARY
2010 2009 2008 2007 2006
'000 '000 '000 '000 '000
Consolidated income statement
Revenue 32,824 29,016 25,979 16,693 13,239
Revenue
Operating (loss)/profit (1,705) 4,892 2,616 (191) 2,362
(Loss)/profit before tax (1,813) 5,003 2,117 (459) 2,172
Trading (loss)/profit before tax (2,209) 4,698 6,031 2,302 273
Revaluation profit/(loss) before 396 305 (3914) (2,761) 1,899
tax
Consolidated balance sheet
Investment properties 12,110 11,865 11,773 14,725 17,270
Fixed asset investments 3,757 3,755 3,406 2,991 3,028
15,867 15,620 15,179 17,716 20,298
Current asset investments 605 510 627 770 700
16,472 16,130 15,806 18,486 20,998
Other assets less liabilities 1,482 3,170 (160) (3,127) (5,668)
Consolidated shareholders funds 17,954 19,300 15,646 15,359 15,330
Net assets per ordinary share 171.8p 184.7p 149.7p 147.0p 146.7pp
Dividend per share 4.00p 4.00p 3.50p 3.0p 2.50p
FINANCIAL CALENDER
19 May 2011 First interim management statement
7 June 2011 Annual General Meeting
8 August 2011 Payment of final dividend for 2010 (if approved)
Late August 2011 Announcement of half-year results to 30 June 2011
18 November 2011 Second interim management report
Late April 2012 Announcement of results for the year ending 31 December 2011
DIRECTORS' REPORT
The directors submit their report together with the audited financial
statements
for the year ended 31 December 2010.
Activities and review of business
The company continues its mining activities. Income for the year was derived
from sales of coal from its South African operations. The company also has a
property investment portfolio for which it receives rental income.
The results for the year and state of affairs of the group and the company at
31 December 2010 are shown on pages 29 to 55 and in the Mining Review and
Business Review on pages 5 to 14. Future developments and prospects are also
covered in the Mining Review. Over 99 per cent of staff are employed in the
South African coal mining industry - employment matters and health and safety
are dealt with in the Mining and Business Reviews.
Corporate responsibility
Environment
The environmental issues of the group's South African coal mining operations
are covered in the Mining Review and Business Review on pages 5 to 14.
The group's UK activities are principally property investment whereby premises
are provided for rent to retail businesses.
The group seeks to provide those tenants with good quality premises from which
they can operate in an efficient and environmentally friendly manner. Wherever
possible, improvements, repairs and replacements are made in an environmentally
efficient manner and waste re-cycling arrangements are in place at all the
company's locations.
Employment
The group's policy is to attract staff and motivate employees by offering
competitive terms of employment. The group provides equal opportunities to all
employees and prospective employees including those who are disabled. The
Mining Review gives details of the group's activities and policies concerning
the employment, training, health and safety and community support and social
development concerning the group's employees in South Africa.
Dividend policy and scrip dividend
An interim dividend for 2010 of 1p was paid on 4 February 2011 (Interim 2009:
1p). The directors recommend the payment of a final dividend for 2010 of 3p per
ordinary share (2009: 3p) making a total dividend for 2010 of 4p (2009: 4p).
Subject to shareholder approval, the total dividend per Ordinary Share for 2010
will be 4p per Ordinary Share. The final dividend will be payable on Monday 8
August 2011 to shareholders registered at the close of business on 1 July 2011.
The directors feel it is appropriate to maintain the dividend despite the loss
made in 2010, but also wish to retain cash within the group to fund further
investment. The directors therefore recommend that a scrip dividend alternative
should be made available to shareholders which will give shareholders the
ability to receive part or all of their final dividend in the form of new fully
paid ordinary shares in the company rather than in cash. The retention of cash
within the company for future investment is an important consideration. Both
the directors and the Board of London & Associated Properties PLC have agreed
to elect to take up their full entitlement to new shares which represents over
51% of the ordinary share capital of the company.
The scrip dividend is conditional on, amongst other things shareholders'
approval at the AGM of the company to be held on 7 June 2011 of the granting of
authority to the directors to allot and issue new ordinary shares in
connection with the scrip dividend. The new issue of ordinary shares also
requires shareholders to authorise the capitalisation out of sums standing to
the credit of reserves to allow the new ordinary shares to be issued.
Investment properties
The investment property portfolio is stated at its open market value of
12,110,000, at 31 December 2010(2009: 11,865,000) as valued by professional
external valuers.
Financial instruments
Note 21 to the financial statements sets out the risks in respect of financial
instruments. The Board reviews and agrees overall treasury policies, delegating
appropriate authority to the managing director. Financial instruments are used
to manage the financial risks facing the group - speculative transactions are
not permitted. Treasury operations are reported at each Board meeting and are
subject to weekly internal reporting.
Directors
The directors of the company for the whole year were M A Heller, A R Heller, C
A Joll, R J Grobler (a South African citizen), and J A Sibbald. Mr G J Casey
was appointed to the board by the directors on 1 June 2010. A proposal for his
election will be made at the AGM, which is recommended by the directors.
Brief details of the proposed new director are:
Garrett Casey trained and qualified as a Chartered Accountant (SA) in South
Africa and was appointed Bisichi's Group Finance Manager on 1 April 2008. He
will continue to be based at the group head office in London, making regular
visits to the operating companies in South Africa.
The directors retiring by rotation are Mr C A Joll and Mr J A Sibbald who offer
themselves for re-election. The board recommends their re-election. Brief
details of the directors standing for re-election are:
Christopher Joll has been a director since 1 February 2001 and has a contract
of service determinable at three months notice. He holds a number of
non-executive directorships of un-quoted companies. He is chairman of MJ2
Limited, a financial public relations company.
John Sibbald has been a non-executive director since 1988. He is a retired
chartered accountant. For most of his career he was employed in stockbroking in
the City of London where he specialised in mining and international investment.
He has a contract of service determinable at three months notice.
No director had any material interest in any contract or arrangement with the
company during the year other than as shown in this report.
Directors' shareholdings
The interests of the directors in the shares of the company, including family
and trustee holdings where appropriate, were as follows:
Beneficial Non-beneficial
31.12.2010
1.1.2010 31.12.2010 1.1.2010
M A Heller 146,666 146,666 181,334 181,334
A R Heller 772,000 772,000 - -
C A Joll - 1,000 - -
J A Sibbald - - - -
R J Grobler - - - -
G J Casey - - - -
There have not been any changes in the above shareholdings since 31 December
2010 and 15 April 2011.
Details of the options to subscribe for new ordinary shares of the company
granted to the directors are contained under "Share option schemes" in the
remuneration report on page 25.
Substantial interests
The following have advised that they have an interest in 3 per cent or more of
the issued share capital of the company as at 15 April 2011:
London & Associated Properties PLC - 4,355,752 shares representing 41.68 per
cent of the issued capital. (M A Heller is a director and shareholder of London
& Associated Properties PLC).
M A Heller - 328,000 shares representing 3.14 per cent of the issued capital.
A R Heller - 772,000 share representing 7.39 per cent of the issued capital.
Neil Kirton - 382,000 shares representing 3.65 per cent of the issued capital.
Disclosure of information to auditors
The directors in office at 31 December 2010 have confirmed that they are aware
that there is no relevant audit information of which the auditors are unaware.
Each of the directors has confirmed that they have taken all reasonable steps
they ought to have taken as directors to make themselves aware of any relevant
audit information and to establish that it has been communicated to the
auditor.
Corporate governance
The company has adopted the Guidance for Smaller Quoted Companies (SQC)
published by the Quoted Companies Alliance. The Alliance provides guidance to
SQC and their guidance covers the implementation of The UK Corporate Governance
Code for SQC. The paragraphs below set out how the company has applied this
guidance during the year. The company has complied with the Quoted Companies
Alliance guidance throughout the year, except insofar that non-executive
directors are not appointed for fixed terms (section A.7.2).
Principals of corporate governance
The group's Board appreciates the value of good corporate governance not only
in the areas of accountability and risk management, but also as a positive
contribution to business prosperity. The Board endeavours to apply corporate
governance principals in a sensible and pragmatic fashion having regard to the
circumstances of the group's business. The key objective is to enhance and
protect shareholder value.
Board structure
During the year the Board comprised the executive chairman, the managing
director, one other executive director (appointed on 1 June 2010), and two
non-executive directors. Their details appear on page 16. The Board is
responsible to shareholders for the proper management of the group. A statement
of directors' responsibilities in respect of the accounts is set out on page
27. The non-executive directors have a particular responsibility to ensure that
the strategies proposed by the executive directors are fully considered. To
enable the Board to discharge its duties, all directors have full and timely
access to all relevant information and there is a procedure for all directors,
in furtherance of their duties, to take independent professional advice, if
necessary, at the expense of the group. The Board has a formal schedule of
matters reserved to it and meets bi-monthly.
The Board is responsible for overall group strategy, approval of major capital
expenditure projects and consideration of significant financing matters.
The following Board committees, which have written terms of reference, deal
with specific aspects of the group's affairs:
? The nomination committee is chaired by Christopher Joll and comprises the
non-executive directors and the executive chairman. The committee is
responsible for proposing candidates for appointment to the Board, having
regard to the balance and structure of the Board. In appropriate cases
recruitment consultants are used to assist the process. Each director is
subject to re-election at least every three years.
? The remuneration committee is responsible for making recommendations to the
Board on the company's framework of executive remuneration and its cost. The
committee determines the contractual terms, remuneration and other benefits for
each of the executive directors, including performance related bonus schemes,
pension rights and compensation payments. The Board itself determines the
remuneration of the non-executive directors. The committee comprises the
non-executive directors. It is chaired by Christopher Joll. The company's
executive chairman is normally invited to attend meetings. The report on
directors' remuneration is set out on pages 24 and 25.
? The audit committee comprises the two non-executive directors and is chaired
by Christopher Joll. Its prime tasks are to review the scope of external audit,
to receive regular reports from the Company's auditors, PKF (UK) LLP, and to
review the half-yearly and annual accounts before they are presented to the
Board, focusing in particular on accounting policies and areas of management
judgment and estimation. The committee is responsible for monitoring the
controls which are in force to ensure the integrity of the information reported
to the shareholders. The committee acts as a forum for discussion of internal
control issues and contributes to the Board's review of the effectiveness of
the group's internal control and risk management systems and processes. The
committee also considers annually the need for an internal audit function. It
advises the Board on the appointment of external auditors and on their
remuneration for both audit and non-audit work, and discusses the nature and
scope of the audit with the external auditors. The committee, which meets
formally at least twice a year, provides a forum for reporting by the group's
external auditors. Meetings are also attended, by invitation, by the company
chairman, managing director and finance director.
The audit committee also undertakes a formal assessment of the auditors'
independence each year which includes:
? a review of non-audit services provided to the group and related fees;
? discussion with the auditors of a written report detailing all relationships
with the company and any other parties that could affect independence or the
perception of independence;
? a review of the auditors' own procedures for ensuring the independence of the
audit firm and partners and staff involved in the audit, including the regular
rotation of the audit partner; and
? obtaining written confirmation from the auditors that, in their professional
judgement, they are independent.
The audit committee report is set out on page 26.
An analysis of the fees payable to the external audit firm in respect of both
audit and non-audit services during the year is set out in Note 4 to the
financial statements.
Performance evaluation - board, board committees and directors
The performance of the board as a whole and of its committees and the
non-executive directors is assessed
by the chairman and the managing director and is discussed with the senior
independent director. Their recommendations are discussed at the nomination
committee prior to proposals for re-election being recommended to the Board.
The performance of executive directors is discussed and assessed by the
remuneration committee. The senior independent director meets regularly with
the chairman and both the executive and non-executive directors individually
outside of formal meetings. The directors will take outside advice in reviewing
performance but have not found this necessary to date.
Independent Directors
The senior independent non-executive director is Christopher Joll. The other
independent non-executive director is John Sibbald.
Christopher Joll has been a non-executive director for over ten years. As a
consequence he does not fully meet the criteria for independence set out in the
UK Corporate Governance Code (The Code).
John Sibbald has been a non-executive director of Bisichi for over twenty years
- the maximum set out in The Code criteria for independence is nine years. For
this reason he does not fully meet the criteria set out in The Code for
independence.
The Board encourages Christopher Joll and John Sibbald to act independently.
The criteria for independence on which they fail to meet The Code's criteria
for independence, namely length of service and a connection with the company's
public relations advisers, should not, and has not, resulted in their inability
of failure to act independently. In the opinion of the Board, Christopher Joll
and John Sibbald continue to fulfil their role as independent non-executive
directors.
The independent directors regularly meet prior to Board meetings to discuss
corporate governance issues.
Board and board committee meetings
The number of meetings during 2010 and attendance at regular Board meetings and
Board
committees was as follows:
Board and board committee meetings
The number of meetings during 2010 and attendance at regular Board meetings and
Board
committees was as follows:
Meetings held Meetings attended
M A Heller Board 5 5 Nomination committee 1 1
A R Heller Board 5 5
Audit committee 2 2
G J Casey Board (since appointment on 1 June 2010) 3 3
R J Grobler Board 5 1
C A Joll Board 5 5
Audit committee 2 2 Nomination committee 1 1 Remuneration committee 4 4
J A Sibbald Board 5 5 Audit committee 2 2 Nomination committee 1 1 Remuneration
committee 4 2
The audit committee had two meetings in 2010 with the external auditors
present, prior to release of the 2009 annual results. Members of the committee
discussed the 30 June 2010 half year results prior to their approval by the
full Board. The nomination committee held one meeting during the year.
Internal control
The directors are responsible for the group's system of internal control and
review of its effectiveness annually. The Board has designed the group's system
of internal control in order to provide the directors with reasonable assurance
that its assets are safeguarded, that transactions are authorised and properly
recorded and that material errors and irregularities are either prevented or
would be detected within a timely period. However, no system of internal
control can eliminate the risk of failure to achieve business objectives or
provide absolute assurance against material misstatement or loss.
The key elements of the control system in operation are:
? The Board meets regularly with a formal schedule of matters reserved to it
for decision and has put in place an organisational structure with clearly
defined lines of responsibility and with appropriate delegation of authority;
? There are established procedures for planning, approval and monitoring of
capital expenditure and information systems for monitoring the group's
financial performance against approved budgets and forecasts;
? UK property and financial operations are closely monitored by members of the
Board and senior managers to enable them to assess risk and address the
adequacy of measures in place for its monitoring and control. The South African
operations are closely supervised by the UK based executives through daily,
weekly and monthly reports from the directors and senior officers in South
Africa. This is supplemented by monthly visits by the UK based finance director
to the South African operations which include checking the integrity of
information supplied to the UK. The directors are guided by the internal
control guidance for directors issued by the Institute of Chartered Accountants
in England and Wales.
During the period, the audit committee has reviewed the effectiveness of
internal control as described above. The Board receives periodic reports from
its committees.
There are no significant issues disclosed in the Annual Report for the year
ended 31 December 2010 (and up to the date of approval of the report)
concerning material internal control issues. The directors confirm that the
Board has reviewed the effectiveness of the system of internal control as
described during the period.
Communication with shareholders
Communication with shareholders is a matter of priority. Extensive information
about the group and its activities is given in the Annual Report, which are
made available to shareholders. Further information is available on the
company's website, www.bisichi.co.uk. There is a regular dialogue with
institutional investors. Enquiries from individuals on matters relating to
their shareholdings and the business of the group are dealt with informatively
and promptly.
Payment of suppliers
The company agrees contract terms with suppliers when orders are placed.
Payments to suppliers are made in accordance with those terms, provided that
suppliers have complied with all relevant terms and conditions. Trade creditors
outstanding at the year-end represented 3.1 days trade purchases (2009 - 12.4
days).
Takeover Directive
The company has one class of share capital, ordinary shares. Each ordinary
share carries one vote. All the ordinary shares rank pari passu. There are no
securities issued in the company which carry special rights with regard to
control of the company. The identity of all substantial direct or indirect
holders of securities in the company and the size and nature of their holdings
is shown under the "Substantial interests" section of this report above.
A relationship agreement dated 15 September 2005 (the "Relationship Agreement")
was entered into between the company and London & Associated Properties PLC
("LAP") in regard to the arrangements between them while LAP is a controlling
shareholder of the company. The Relationship Agreement includes a provision
under which LAP has agreed to exercise the voting rights attached to the
ordinary shares in the company owned by LAP to ensure the independence of the
Board of directors of the company.
Other than the restrictions contained in the Relationship Agreement, there are
no restrictions on voting rights or on the transfer of ordinary shares in the
company. The rules governing the appointment and replacement of directors,
alteration of the articles of association of the company and the powers of the
company's directors accord with usual English company law provisions. Each
director is re-elected every three years or more frequently. The company is not
party to any significant agreements that take effect, alter or terminate upon a
change of control of the company following a takeover bid. The company is not
aware of any agreements between holders of its ordinary shares that may result
in restrictions on the transfer of its ordinary shares or on voting rights.
There are no agreements between the company and its directors or employees
providing for compensation for loss of office or employment that occurs because
of a takeover bid.
Annual General Meeting
The annual general meeting will be held at the Company's offices at 30-35 Pall
Mall, London SW1Y 5LP on Tuesday 7 June 2011 at 11.00 a.m. Resolutions 1 to 8
and 9 to 11 will be proposed as ordinary resolutions. More than 50 per cent of
shareholders' votes must be in favour for these resolutions to be passed.
Resolutions 12 to 14 will be proposed as special resolutions. At least 75 per
cent of shareholders' votes must be in favour for these resolutions to be
passed.
The directors consider that all of the resolutions to be put to the meeting are
in the best interests of the Company and its shareholders as a whole. The Board
recommends that shareholders vote in favour of all resolutions.
Authorisation of share option grant (Resolution 9)
On the recommendation of the remuneration committee, the board approved the
grant of a share option on 31 August 2010 to the company's new finance
director, Garrett Casey. The option was granted subject to authorisation by the
members - this resolution, if approved, will give that authorisation. An option
agreement relating to the grant of the option to subscribe for up to 80,000
ordinary shares of 10p each in the capital of the company at a price of 2.025p
per share was conditionally entered into between the company and Garrett Casey
on 31 August 2010. A summary of the principal terms of the agreement is set out
on in the explanatory notes to the AGM at pages 61 to 62 of this document.
The issue of scrip dividends (Resolution 10)
Members are to be offered, in accordance with Article 155 of the company's
Articles of Association the right to elect to receive all or part of the
recommended final dividend in lieu of cash by way of a new issue of ordinary
shares. In accordance with Article 155, an Ordinary Resolution is required form
the shareholders in order to permit a Scrip Dividend. In order to enable the
directors to effect the issue of new ordinary shares the shareholders are
required to give the directors authority to issue and allot the new ordinary
shares and permit the directors to capitalise out of such of the sums standing
to the credit of reserves equal to the nominal value of the new ordinary shares
of the company to be allotted pursuant to any elections made by the
shareholders in accordance with their respective entitlements.
Directors' authority to allot shares (Resolution 11)
Paragraph 13.1.1 of Resolution 13 would give the directors the authority to
allot shares in the company and grant rights to subscribe for or convert any
security into shares in the company up to an aggregate nominal value of
348,384. This represents approximately 33.3 per cent of the ordinary share
capital of the company in issue (excluding treasury shares) at 14 April 2011
(being the last practicable date prior to the publication of this Directors'
Report). In line with recent guidance issued by the Association of British
Insurers ('ABI') paragraph 13.1.2 of Resolution 13 would give the directors the
authority to allot shares in the company and grant rights to subscribe for or
convert any security into shares in the company up to a further aggregate
nominal value of 348,384, in connection with a rights issue. This amount
represents approximately 33.3 per cent. of the ordinary share capital of the
company in issue (excluding treasury shares) at 14 April 2011 (being the last
practicable date prior to the publication of this Directors' Report). The
directors' authority will expire at the conclusion of the next Annual General
Meeting. The directors have no present intention to make use of this authority.
However, if they do exercise the authority, the directors intend to follow
emerging best practice as regards its use as recommended by the ABI.
Disapplication of pre-emption rights (12)
A special resolution will be proposed at the Annual General Meeting in respect
of this disapplication of pre-emption rights.
Shares allotted for cash must normally first be offered to shareholders in
proportion to their existing shareholdings. The directors will, at the
forthcoming Annual General Meeting of the company seek power to allot shares as
if the pre-emption rights contained in Section 561 of the Companies Act 2006
did not apply up to a maximum of 10% of the company's issued share capital. The
authority will expire at the earlier of the conclusion of the company's next
annual general meeting and 15 months from the passing of Resolution 12.
Notice of General Meetings (Resolution 13)
The Shareholder Rights Directive was implemented in the UK in August 2009. One
of the requirements of the Directive is that all general meetings must be held
on 21 clear days' notice unless shareholders agree to a shorter notice period.
We are proposing a resolution at the AGM so that we are able to call general
meetings (other than annual general meetings) on 14 clear days' notice.
Purchase of own Ordinary Shares (Resolution 14)
The effect of Resolution 14 would be to renew the directors' current authority
to make limited market purchases of the company's ordinary shares of 10 pence
each. The power is limited to a maximum aggregate number of 1,045,150 ordinary
shares (representing approximately 10 per cent of the company's issued share
capital as at 14 April 2011 (being the latest practicable date prior to
publication of this Directors' Report)). The minimum price (exclusive of
expenses) which the company would be authorised to pay for each ordinary share
would be 10 pence (the nominal value of each ordinary share). The maximum price
(again exclusive of expenses) which the company would be authorised to pay for
an ordinary share is an amount equal to the higher of (i) 105% of the average
market price for an ordinary share for the five business days preceding any
such purchase and (ii) the higher of the last independent trade for an ordinary
share and the highest current independent bid for an ordinary share as derived
from the trading venue where the purchase is carried out. The authority
conferred by Resolution 14 will expire at the conclusion of the company's next
Annual General Meeting to be held in 2012 or 15 months from the passing of the
resolution, whichever is the earlier. Any purchases of ordinary shares would be
made by means of market purchase through the London Stock Exchange. If granted,
the authority would only be exercised if, in the opinion of the directors, to
do so would result in an increase in earnings per share or net asset value per
share and would be in the best interests of shareholders generally. In
exercising the authority to purchase ordinary shares, the directors may treat
the shares that have been bought back as either cancelled or held as treasury
shares (shares held by the company itself). No dividends may be paid on shares
which are held as treasury shares and no voting rights are attached to them.
As at 14 April 2011 (being the last practicable date prior to the publication
of this Directors' Report) the total number of options to subscribe for new
ordinary shares in the company as at 31 December 2010 was 718,000 shares
representing 6.9% of the company's issued share capital as at 31 December 2010.
Such number of options to subscribe for new ordinary shares would represent
approximately 6.25% of the reduced issued share capital of the company assuming
full use of the authority to make market purchases sought under Resolution 14.
Donations
No political or charitable donations were made during the year (2009:Nil).
Going concern
The group's business activities, together with the factors likely to affect its
future development are set out in the Chairman's Statement on the preceding
page 2 and the Mining Review on pages 5 to 10. In addition Note 21 to the
financial statements includes the group's treasury policy, interest rate risk,
liquidity risk and hedging profile.
The group has considerable financial resources which, together with the long
term leases with the majority of its tenants of its property portfolio. The
directors have a reasonable expectation of improved market conditions in 2011
and a return to profitability for Black Wattle Colliery, its direct mining
asset. As a consequence, the directors believe that the company is well placed
to manage its business risks successfully despite the loss for the year.
The directors have a reasonable expectation that the company has adequate
resources to continue in operational existence for the foreseeable future. Thus
they continue to adopt the going concern basis of accounting in preparing the
annual financial statements.
Other matters
PKF (UK) LLP has expressed its willingness to continue in office as auditors. A
proposal will be made at the annual general meeting for its re-appointment, and
for its remuneration to be determined by the directors.
By order of the board
Heather Curtis
Secretary
30-35 Pall Mall
London SW1Y 5LP
15 April 2011
REMUNERATION REPORT
The remuneration committee is pleased to present its report for the year ended
31 December 2010
The remuneration committee is a formally constituted committee and is comprised
exclusively of non-executive directors.
The members of the committee are Christopher Joll (chairman) and John Sibbald.
Remuneration policy for executive directors and non-executive directors
The principal function of the remuneration committee is to determine, on behalf
of the Board, the remuneration and other benefits of the executive directors
and senior executives, including pensions, share options and service contracts.
The company's policy is to ensure that the executive directors are rewarded
competitively in relation to other companies in order to retain and motivate
them. The emoluments of each executive director comprises basic salary, a bonus
at the discretion
of the remuneration committee, provision of a car, premiums paid in respect of
individual defined contribution pension arrangements, health insurance premium
and share options.
The remuneration committee receives updates on pay and employment conditions
applying to other group employees. These are taken into consideration when
setting executive directors' remuneration consistent with the group's general
aim of seeking to reward all employees fairly according to the nature of their
role, their performance and market forces.
The remuneration of non-executive directors is determined by the board, and
takes into account additional remuneration for services outside the scope of
the ordinary duties of non-executive directors. No pension costs are incurred
on behalf of non-executive directors and they do not participate in the share
option schemes.
Service and employment contracts
All executive directors have full time contracts of employment with the
company. Non-executive directors have contracts of service. No director has a
contract of employment or contract of service with the company, its joint
venture or associated companies with a fixed term which exceeds six months. All
directors' contracts, as amended from time to time, have run from the date of
appointment. Details of the directors standing for re-election are given under
'Directors' in the Directors' report. The policy of the committee is not to
grant employment contracts or contracts of service in excess of six months and
there are no provisions for termination payments. A summary of terms of service
and employment is as follows:
Start date Unexpired Notice
of contract term period
Executive directors
M A Heller November 1972 Continuous 6 months
A R Heller January 1994 Continuous 3 months
G J Casey* June 2010 Continuous 3 months
R J Grobler April 2008 Continuous 3 months
Non-executive directors
C A Joll February 2001 Continuous 3 months
J A Sibbald October 1988 Continuous 3 months
* G J Casey with effect from 1 June 2010
The following information has been audited:
Directors' remuneration
Salaries Bonus Benefits Total Pension Total Total
and fees before Contributions 2010 2009
Pensions
'000 '000 '000 '000 '000 '000 '000
Executive Directors
M A Heller 75 - - 75 - 75 150
A R Heller 350 150 38 538 30 568 817
G J Casey * 59 40 8 107 12 119 -
R Grobler 184 73 23 280 10 290 281
T M Kearney ? - - - - - - 134
668 263 69 1,000 52 1,052 1,382
Non- Executive
Directors
C A Joll 20 - - 20 - 20 20
J A Sibbald 2 - 3 5 - 5 5
22 - 3 25 - 25 25
Total 690 263 72 1,025 52 1,077 1,407
* G J Casey with effect from 1 June 2010
? T M Kearney resigned 31 July 2009
Pension schemes and incentives
Three (2009: three) directors have benefits under money purchase pension
schemes. Contributions in 2010 were 52,000 (2009: 49,000), see table above.
Directors are not entitled to benefits under any bonus or incentive schemes
apart from the share option schemes details of which are set out below. Bonuses
are awarded by the remuneration committee when merited.
Performance bonuses were awarded by the remuneration committee to three
executive directors during 2010 (2009:3).
Remuneration report continued
Share option schemes
The company has three "Unapproved" Share Option Schemes which are not subject
to HM Revenue and Customs (HMRC) approval. The "First Scheme" was approved by
shareholders on 15 June 1999. The "Second Scheme" was approved by shareholders
on 23 June 2005, options having been provisionally granted under it on 23
September 2004, and the "2006 Scheme" was approved by shareholders on 29 June
2006. Shareholder approval will be sought for the grant of an option, the "2010
scheme" also not subject to HMRC approval, at the Annual General Meeting to be
held on Tuesday 7 June 2011, the option having been conditionally granted on 31
August 2010. All available options under each of the Schemes have been granted.
Number of share
options
Option 1 Options 31 Exercisable Exercisable
price* January Granted December from to
2010 in 2010 2010
First Scheme
A R Heller 34p 233,000 - 233,000 30/9/2005 29/9/2012
Employee 34p 80,000 - 80,000 30/9/2005 29/9/2012
Second Scheme
A R Heller 149p 80,000 - 80,000 23/9/2007 22/9/2014
The 2006 Scheme
A R Heller 237.5p 275,000 - 275,000 4/10/2009 3/10/2016
Employee 237.5p 50,000 - 50,000 4/10/2009 3/10/2016
The 2010 Scheme
G J Casey 202.5p - 80,000- 80,000 31/08/2013 30/08/2020
The grant of the option to G J Casey on 31 August 2010 is conditional on
shareholder approval at the Annual General Meeting to be held on Tuesday 7 June
2011.
*Middle market price at date of grant
No consideration is payable for the grant of options under the Unapproved Share
Option Scheme or for the option granted under the 2010 Scheme, if approved by
members on 7 June 2011.The exercise of options under the Unapproved Share
Option Schemes is subject to the satisfaction of objective performance
conditions specified by the remuneration committee, which will conform to
institutional shareholder guidelines and best practice provisions in force from
time to time. The remuneration committee has not yet set these guidelines for
the First Scheme and the 2006 Scheme. The performance conditions for the Second
Scheme, agreed by members on 23 June 2005, requires growth in net assets over a
three year period to exceed the growth in the retail price index by a scale of
percentages. The performance conditions for the option granted under the 2010
Scheme, if approved by members on 7 June 2011, requires growth in group net
assets over a three year period to exceed growth in the retail price index by a
scale of percentages more information on this can be found in the explanatory
notes to the AGM at pages 61 to 62 of this document.
The middle market price of Bisichi Mining PLC ordinary shares at 31 December
2010 was 200p (2009-175p). During the year the share price ranged between 171p
and 204p.
The following information is unaudited:
The board's policy is to grant options to executive directors, managers and
staff at appropriate times to provide them with
an interest in the longer term development of the group.
The following graph illustrates the company's performance compared with a broad
equity market index over a five year period. Performance is measured by total
shareholder return. The directors have chosen the FTSE All Share - Total Return
Index as a suitable index for this comparison as it gives an indication of
performance against a large spread of quoted companies.
Christopher Joll
Chairman - remuneration committee
30-35 Pall Mall
London SW1Y 5LP
15 April 2011
AUDIT COMMITTEE REPORT
The committee's terms of reference have been approved by the board and follow
published guidelines, which are available from the company secretary. The audit
committee comprises the two non-executive directors, Christopher Joll
(chairman), an experienced financial PR executive and John Sibbald, a retired
chartered accountant.
The Audit Committee's prime tasks are to :
Review the scope of external audit, to receive regular reports from PKF (UK)
LLP and to review the half-yearly and annual accounts before they are presented
to the board, focusing in particular on accounting policies and areas of
management judgment and estimation;
Monitor the controls which are in force to ensure the integrity of the
information reported to the shareholders;
Assess key risks and to act as a forum for discussion of risk issues and
contribute to the board's review of the effectiveness of the group's risk
management control and processes;
Act as a forum for discussion of internal control issues and contribute to the
board's review of the effectiveness of the group's internal control and risk
management systems and processes;
Consider each year the need for an internal audit function;
Advise the board on the appointment of external auditors and rotation of the
audit partner every five years, and on their remuneration for both audit and
non-audit work, and discuss the nature and scope of their audit work;
Participate in the selection of a new external audit partner and agree the
appointment when required;
Undertake a formal assessment of the auditors' independence each year which
includes:
? a review of non-audit services provided to the group and related fees;
? discussion with the auditors of a written report detailing all relationships
with the company and any other parties that could affect independence or the
perception of independence;
? a review of the auditors' own procedures for ensuring the independence of the
audit firm and partners and staff involved in the audit, including the regular
rotation of the audit partner; and
? obtaining written confirmation from the auditors that, in their professional
judgement, they are independent.
Meetings
The committee meets prior to the annual audit with the external auditors to
discuss the audit plan and again prior to the publication of the annual
results. These meetings are attended by the external audit partner, managing
director, director of finance and company secretary. Prior to bi-monthly board
meetings the members of the committee meet on an informal basis to discuss any
relevant matters which may have arisen. Additional formal meetings are held as
necessary.
During the past year the committee:
Met with the external auditors, and discussed their report to the Audit
Committee;
Approved the publication of annual and half-year financial results;
Considered and approved the annual review of internal controls;
Decided that due to the size and nature of operation there was not a current
need for an internal audit
function;
Agreed the independence of the auditors and approved their fees for both audit
and not-audit services
as set out in note 5 to the financial statements.
External Auditors
PKF (UK) LLP held office throughout the year. In the United Kingdom the company
is provided with extensive administration and accounting services by London &
Associated Properties PLC which has its own audit committee and employs a
separate firm of external auditors, Baker Tilly UK Audit LLP. In South Africa
PKF (Jhb) Inc. is the external auditor to the South African companies, and the
work of that firm is reviewed by PKF (UK) LLP.
Christopher Joll
Chairman - audit committee
30-35 Pall Mall
London SW1Y 5LP
15 April 2011
VALUERS' CERTIFICATES
To the directors of Bisichi Mining PLC
In accordance with your instructions we have carried out a valuation of the
freehold property interests held as at 31 December 2010 by the company as
detailed in our Valuation Report dated 26 January 2011.
Having regard to the foregoing, we are of the opinion that the open market
value as at 31 December 2010 of the interests owned by the Company was
9,110,000 being made up as follows:
000
Freehold 9,110
9,110
Leeds BNP Paribas Real Estate Advisory and Property
Management UK Limited
26 January 2011 Regulated by Royal Institution of Chartered
Surveyors
To the directors of Bisichi Mining PLC
In accordance with your instructions we have carried out a valuation of the
leasehold property interests held as at 31 December 2010 by the company as
detailed in our Valuation Report dated 2 February 2011.
Having regard to the foregoing, we are of the opinion that the open market
value as at 31 December 2010 of the interests owned by the Company was
3,000,000 being made up as follows:
000
Leasehold 3,000
3,000
Leeds Carter TowlerLLP
2 February 2011 Chartered Surveyors
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors are responsible for preparing the directors' report, the
directors' remuneration report and the financial statements in accordance with
applicable law and regulations. They are also responsible for ensuring that the
annual report includes information required by the Listing Rules of the
Financial Services Authority.
Company law requires the directors to prepare financial statements for each
financial year. Under that law the directors are required to prepare the group
financial statements in accordance with International Financial Reporting
Standards as adopted by the European Union and have elected to prepare the
parent company financial statements in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting Standards and
applicable law). 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 company and the group and of the profit or loss of the
group for that period. In preparing these financial statements the directors
are required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent;
-state, with regard to the parent company financial statements, whether
applicable accounting standards have been followed, subject to any material
departures disclosed and explained in the financial statements;
-state whether the group financial statements have been prepared in accordance
with IFRSs as adopted by the European Union
- subject to any material departures disclosed and explained in the parent
company financial statements;
- prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the group and 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 the
group and enable them to ensure that the group financial statements comply with
the Companies Act 2006 and Article 4 of the IAS Regulation and the parent
company financial statements comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the company and the group and hence
for taking reasonable steps for the prevention and detection of fraud and other
irregularities.
The directors are responsible for the maintenance and integrity of the
corporate and financial information included on the company's website.
Legislation in the United Kingdom governing the preparation and dissemination
of the financial statements and other information included in annual reports
may differ from legislation in other jurisdictions.
The directors confirm, to the best of their knowledge:
(a) that the group financial statements, which have been prepared in accordance
with IFRS as adopted by the EU, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the group; and
(b) the management report included in the directors report includes a fair
review of the development and performance of the business and the position of
the company and the group taken as a whole, together with a description of the
principal risks and uncertainties that they face.
The names and functions of all the directors are stated on page 16.
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF BISICHI MINING PLC
We have audited the financial statements of Bisichi Mining PLC for the year
ended 31 December 2010 which comprise the consolidated income statement, the
consolidated statement of comprehensive income, the consolidated and parent
company balance sheets, the consolidated statement of changes in shareholders'
equity, the consolidated cash flow statement and the related notes. The
financial reporting framework that has been applied in the preparation of the
group financial statements is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union. The financial
accounting framework that has been applied in the preparation of the parent
company financial statements is applicable law and United Kingdom Accounting
Standards (United Kingdom Generally Accepted Accounting Practice).
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.
Respective responsibilities of directors and auditor
As explained more fully in the directors' responsibilities statement, the
directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view. Our responsibility is
to audit 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 Ethical Standards for
Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the
financial statements sufficient to give reasonable assurance that the financial
statements are free from material misstatement, whether caused by fraud or
error. This includes an assessment of: whether the accounting policies are
appropriate to the group's and the parent company's circumstances and have been
consistently applied and adequately disclosed; the reasonableness of
significant accounting estimates made by the directors; and the overall
presentation of the financial statements. In addition, we read all the
financial and non-financial information in the annual report and accounts to
identify material inconsistencies with the audited financial statements. If we
become aware of any apparent material misstatements or inconsistencies we
consider the implications for our report.
Opinion on financial statements
In 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 31 December 2010 and of the
group's loss for the year then ended;
* the group financial statements have been properly prepared in accordance
with IFRSs as adopted by the European Union;
* the parent company financial statements have been properly prepared in
accordance with United Kingdom Generally Accepted Accounting Practice; and
* the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006 and, as regards the group financial
statements, Article 4 of the IAS Regulation.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
* the part of the directors' remuneration report to be audited has been
properly prepared in accordance with the Companies Act 2006; and
* the information given in the directors' report for the financial year for
which the financial statements are prepared is consistent with the
financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required 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 and the part of the directors'
remuneration report to be audited 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.
Under the Listing Rules we are required to review:
* the directors' statement, set out on page 23, in relation to going concern;
and
* the part of the corporate governance statement relating to the company's
compliance with the nine provisions of the June 2008 Combined Code
specified for our review.
Stuart Barnsdall (Senior statutory auditor)
for and on behalf of PKF (UK) LLP,
Statutory auditor
London UK
15 April 2011
Consolidated income statement
for the year ended 31 December 2010
2010 2010 2010 2009
Notes Trading Revaluations Total
'000 '000 '000 '000
Group revenue 1 32,824 - 32,824 29,016
Operating costs 2 (34,864) - (34,864) (24,616)
Operating (loss)/profit 1 (2,040) - (2,040) 4,400
before fair value
adjustments
Increase in value of 3 - 245 245 67
investment properties
Gains on held for trading - 90 90 425
investments
Operating (loss)/profit 1 (2,040) 335 (1,705) 4,892
Share of profit in joint 13 - 61 61 101
ventures
(Loss)/profit before (2,040) 396 (1,644) 4,993
interest and taxation
Interest receivable 174 - 174 226
Interest payable 6 (343) - (343) (216)
(Loss)/profit before tax 4 (2,209) 396 (1,813) 5,003
Taxation 7 540 (13) 527 (1,330)
(Loss)/profit for the year (1,669) 383 (1,286) 3,673
Attributable to: (1,595) 383 (1,212) 3,673
Equity holders of the
company
Non-controlling interest 26 (74) - (74) -
(Loss)/profit for the year (1,669) 383 (1,286) 3,673
(Loss)/earnings per share - 9 (15.26)p 3.66p (11.60)p 35.14p
basic
(Loss)/earnings per share - 9 (15.26)p 3.66p (11.60)p 34.35p
diluted
Trading income reflects all the trading activity on mining and property
operations. Revaluation income reflects the revaluation of investment
properties and other assets within the group and any proportion of these
amounts within Joint Ventures. The total column represents the consolidated
income statement presented in accordance with IAS 1.
Consolidated statement of comprehensive income
for the year ended 31 December 2010
2010 2009
'000 '000
(Loss)/profit for the year (1,286) 3,673
Other comprehensive income:
Exchange differences on translation of 747 530
foreign operations
Taxation - -
Other comprehensive income for the year net (539) 4,203
of tax
Total comprehensive income for the year net (539) 4,203
of tax
Attributable to:
Equity shareholders (459) 4,203
Non-controlling interest (80) -
(539) 4,203
Company Registration No. 112155
Consolidated balance sheet
at 31 December 2010
2010 2009
Notes '000 '000
Assets
Non-current assets
Value of investment properties 10 12,110 11,865
Fair value of head lease 30 233 246
12,343 12,111
Mining reserves, plant and 11 9,615 8,057
equipment
Investments in joint ventures 12 3,607 3,259
Other investments 12 150 496
Total non-current assets 25,715 23,923
Current assets
Inventories 15 705 1,139
Trade and other receivables 16 4,719 2,060
Corporation tax recoverable 115 19
Held for trading investments 17 605 510
Cash and cash equivalents 5,399 6,609
Total current assets 11,543 10,337
Total assets 37,258 34,260
Liabilities
Current liabilities
Borrowings 19 (1,759) (4,593)
Trade and other payables 18 (7,865) (5,571)
Current tax liabilities (362) (260)
Total current liabilities (9,986) (10,424)
Non-current liabilities
Borrowings 19 (5,326) (533)
Provision for rehabilitation 20 (1,025) (772)
Finance lease liabilities 30 (233) (246)
Deferred tax liabilities 22 (2,340) (2,985)
Total non-current liabilities (8,924) (4,536)
Total liabilities (18,910) (14,960)
Net assets 18,348 19,300
Equity
Share capital 23 1,045 1,045
Translation reserve 68 (685)
Other reserves 24 485 480
Retained earnings 16,356 18,460
Total equity attributable to equity 17,954 19,300
shareholders
Non-controlling interest 26 394 -
Total equity 18,348 19,300
These financial statements were approved and authorised for issue by the board
of directors on15 April 2011 and signed on its behalf by:
A R Heller G J Casey
Director Director
Consolidated statement of changes in shareholders' equity
for the year ended 31 December 2010
Share Translation Other Retained Non-controlling Total
capital reserves reserves earnings Total interest equity
'000 '000 '000 '000 '000 '000 '000
Balance at 1 January 1,045 (1,215) 663 15,153 15,646 - 15,646
2009
Revaluation of - - - 67 67 - 67
investment properties
Other income statement - - - 3,606 3,606 - 3,606
movements
Profit for the year - - - 3,673 3,673 - 3,673
Exchange adjustment - 530 - - 530 - 530
Total comprehensive - 530 - 3,673 4,203 - 4,203
income for the year
Dividend - - - (366) (366) - (366)
Equity share options - - (183) - (183) - (183)
Balance at 1 January 1,045 (685) 480 18,460 19,300 - 19,300
2010
Revaluation of - - - 245 245 - 245
investment properties
Other income statement - - - (1,457) (1,457) (74) (1,531)
movements
Loss for the year - - - (1,212) (1,212) (74) (1,286)
Exchange adjustment - 753 - - 753 (6) 747
Total comprehensive - 753 - (1,212) (459) (80) (539)
income for the year
Dividend - - - (418) (418) - (418)
Equity share options - - 5 - 5 - 5
Disposal of shares in - - - (474) (474) 474 -
subsidiary
Balance at 31 December 1,045 68 485 16,356 17,954 394 18,348
2010
Consolidated cash flow statement
for the year ended 31 December 2010
Year ended Year ended
31 December 2010 31 December
2009
'000 '000
Cash flows from operating activities
Operating (loss)/profit (1,705) 4,892
Adjustments for:
Depreciation 2,414 2,541
Share based payment expense 5 (183)
Gain on investment held for trading (90) (425)
Unrealised gain on investment properties (245) (67)
Cash flow before working capital 379 6,758
Change in inventories 434 258
Change in trade and other receivables (2,150) 4,042
Change in trade and other payables 834 (1,478)
Change in provisions 253 201
Acquisitions of held for trading investments (6) (75)
Proceeds from held for trading investments - 617
Cash generated from operations (256) 10,323
Interest received 174 226
Interest paid (343) (216)
Income tax paid (112) (2,359)
Cash flow from operating activities (537) 7,974
Cash flows from investing activities
Acquisition of reserves, plant and equipment (2,639) (2,087)
Disposal/(acquisitions) of investments 405 (136)
Cash flow from investing activities (2,234) (2,223)
Cash flows from financing activities
Borrowings drawn 2,300 406
Borrowings repaid (231) (700)
Equity dividends paid (418) (366)
Cash flow from financing activities 1,651 (660)
Net (decrease)/increase in cash and cash (1,120) 5,091
equivalents
Cash and cash equivalents at 1 January 5,077 (116)
Exchange adjustment 20 102
Cash and cash equivalents at 31 December 3,977 5,077
Cash and cash equivalents at 31 December
comprise:
Cash and cash equivalents as presented in the 5,399 6,609
balance sheet
Bank overdrafts (secured) (1,422) (1,532)
3,977 5,077
Group accounting policies
for the year ended 31 December 2010
Basis of accounting
The results for the year ended 31 December 2010 have been prepared in
accordance with International Financial Reporting Standards (IFRS) as adopted
by the European Union and with those parts of the Companies Act 2006 applicable
to companies reporting under IFRS. The principal accounting policies are
described below:
The group financial statements are presented in sterling and all values are
rounded to the nearest thousand pounds (000) except when otherwise stated.
International Accounting Standards (IAS/IFRS)
The financial statements are prepared in accordance with International
Financial Reporting Standards and Interpretations in force at the reporting
date. These are prepared under the historic cost convention as modified by the
revaluation of investment properties and available for sale investments.
During 2010 the following accounting standards and guidance were adopted by the
group:
* IAS 27 (Revised): Consolidated and separate financial statements
The standard requires that transactions involving non-controlling interests,
where no change in control occurs should be accounted for as equity
transactions. Furthermore losses of the group, which are attributable to the
owners of non-controlling interest, are attributed to these owners, even if
this results in a deficit.
The impact on the results for the year is the disclosure of a 74,000 loss for
the year attributable to non-controlling interest.
During 2010 all other standards and interpretations that were mandatory for the
accounting period and were required to be adopted by the group either had no
material impact on the group's financial statements or were not relevant to the
operations of the group.
The group has not adopted any standards or interpretations in advance of the
required implementation dates. It is not expected that adoption of any
standards or interpretations which have been issued by the International
Accounting Standards Board but have not been adopted will have a material
impact on the financial statements.
Key Judgements and Estimates
The directors consider their judgements and estimates surrounding the life of
the mine and its reserves to have the most significant effect on the amounts
recognised in the financial statements and to be the area where the financial
statements are at most risk of a material adjustment due to estimation
uncertainty.
In addition the directors note that other areas, in particular the valuation of
the investment properties, are considered to be less judgemental due to the
nature of the underlying properties and the use of external valuers.
Basis of consolidation
The group accounts incorporate the accounts of Bisichi Mining Plc and all of
its subsidiary undertakings, together with the group's share of the results of
its joint ventures and associates. Non-controlling interests in subsidiaries
are presented separately from the equity attributable to equity owners of the
parent company. When changes in ownership in a subsidiary do not result in a
loss of control, the non-controlling shareholders' interest are initially
measured at the non-controlling interests' proportionate share of the
subsidiaries net assets. Subsequent to this, the carrying amount of
non-controlling interests is the amount of those interests at initial
recognition plus the non-controlling interests' share of subsequent changes in
equity. Total comprehensive income is attributed to non-controlling interests
even if this results in the non-controlling interests having a deficit balance.
Revenue
Revenue comprises sales of coal and property rental income. Revenue is
recognised when delivery of the product or service has been made and when the
customer has a legally binding obligation to settle under the terms of the
contract and has assumed all significant risks and rewards of ownership.
Revenue is only recognised on individual sales when all of the significant
risks and rewards of ownership have been transferred to a third party. In most
instances revenue is recognised when the product is delivered to the location
specified by the customer, which is typically when loaded into transport, where
the customer pays the transportation costs.
Rental income is recognised in the group income statement on a straight-line
basis over the term of the lease. This includes the effect of lease incentives.
Investment Properties
Investment properties comprise freehold and long leasehold land and buildings.
Investment properties are carried at fair value in accordance with IAS 40
`Investment Properties'. Properties are recognised as investment properties
when held for long-term rental yields, and after consideration has been given
to a number of factors including length of lease, quality of tenant and
covenant, value of lease, management intention for future use of property,
planning consents and percentage of property leased. Investment properties are
revalued annually by professional external surveyors and included in the
balance sheet at their fair value. Gains or losses arising from changes in the
fair values of assets are recognised in the consolidated income statement in
the period to which they relate. In accordance with IAS 40, investment
properties are not depreciated. Properties held for use in the business are not
recognised as investment properties and are held at depreciated historical
cost.
The fair value of the head leases is the net present value of the current head
rent payable on leasehold properties until the expiry of the lease.
Mining reserves, plant and equipment
The cost of property, plant and equipment comprises its purchase price and any
costs directly attributable to bringing the asset to the location and condition
necessary for it to be capable of operating in accordance with agreed
specifications. Freehold land is not depreciated. Other property, plant and
equipment is stated at historical cost less accumulated depreciation.
The life of mine remaining as at year end is currently estimated at 5 years. A
provision for rehabilitation of the mine is carried at fair value and is
provided for over the life of mine. The provision includes the restoration of
the underground, opencast and surface operations and is estimated to be
utilised at the end of the life of mine of the group. The timing and final cost
of the rehabilitation is uncertain and will depend on the duration of the mine
life and the quantities of coal extracted from the reserves.
Mine reserves and development cost
The purpose of mine development is to establish secure working conditions and
infrastructure to allow the safe and efficient extraction of recoverable
reserves. Depreciation on mine development is not charged until production
commences or the assets are put to use. On commencement of full production,
depreciation is charged over the life of the associated mine reserves on a
straight-line basis.
Surface mine development
Expenditure incurred prior to the commencement of working surface mine sites,
net of any residual value and taking into account the likelihood of the site
being mined, is capitalised within property, plant and equipment and charged to
the income statement over the life of the recoverable reserves of the scheme.
Other assets and depreciation
The cost, less estimated residual value, of other property, plant and equipment
is written off on a straight-line basis over the asset's expected useful life.
Residual values and useful lives are reviewed, and adjusted if appropriate, at
each balance sheet date. Changes to the estimated residual values or useful
lives are accounted for prospectively. Heavy surface mining and other plant and
equipment is depreciated at varying rates depending upon its expected usage.
The depreciation rates generally applied are:
Mining equipment The shorter of its useful life or the life of the mine
Mining reserves Over the expected life of the reserves
Motor vehicles 25-33 per cent per annum
Office equipment 10-33 per cent per annum
Employee Benefits
Share based remuneration
The company operates a share option scheme. The fair value of the share option
scheme is determined at the date of grant. This fair value is then expensed on
a straight-line basis over the vesting period, based on an estimate of the
number of shares that will eventually vest. The fair value of options granted
is calculated using a binomial or Black-Scholes-Merton model. Details of the
share options in issue are disclosed in the Directors' Remuneration Report on
page 25 under the heading Share option schemes which is within the audited part
of this report.
Pensions
The group operates a defined contribution pension scheme. The contributions
payable to the scheme are expensed in the period to which they relate.
Foreign Currencies
Monetary assets and liabilities are translated at year end exchange rates and
the resulting exchange rate differences are included in the consolidated income
statement within the results of operating activities if arising from trading
activities and within finance cost/income if arising from financing.
For consolidation purposes, income and expense items are included in the
consolidated income statement at average rates, and assets and liabilities are
translated at year end exchange rates. Translation differences arising on
consolidation are taken directly to reserves. Where foreign operations are
disposed of, the cumulative exchange differences of that foreign operation are
recognised in the consolidated income statement when the gain or loss on
disposal is recognised.
Transactions in foreign currencies are translated at the exchange rate ruling
on transaction date.
Financial Instruments
The group classifies financial instruments, or their component parts, on
initial recognition as a financial asset, a financial liability or an equity
instrument in accordance with the substance of the contractual arrangement.
Bank loans and overdrafts
Bank loans and overdrafts are included as financial liabilities on the group
balance sheet at the amounts drawn on the particular facilities net of the
unamortised cost of financing. Interest payable on those facilities is expensed
as finance cost in the period to which it relates.
Finance lease liabilities
Finance lease liabilities arise for those investment properties held under a
leasehold interest and accounted for as investment property. The liability is
initially calculated as the present value of the minimum lease payments,
reducing in subsequent reporting periods by the apportionment of payments to
the lessor.
Interest rate derivatives
The group uses derivative financial instruments to manage the interest rate
risk associated with the financing of the group's business. No trading in such
financial instruments is undertaken. At each reporting date, these interest
rate derivatives are recognised at fair value, being the estimated amount that
the group would receive or pay to terminate the agreement at the balance sheet
date, taking into account current interest rates and the current credit rating
of the counterparties. The gain or loss at each fair value re-measurement is
recognised immediately in the income statement.
Held for trading investments
Financial assets/liabilities held for trading or short-term gain are measured
at fair value and movements in fair value are charged/credited to the income
statement in the period.
Trade receivables
Trade receivables do not carry any interest and are stated at their nominal
value as reduced by appropriate allowances for estimated recoverable amounts as
the interest that would be recognised from discounting future cash payments
over the short payment period is not considered to be material.
Trade payables
Trade payables are not interest bearing and are stated at their nominal value,
as the interest that would be recognised from discounting future cash payments
over the short payment period is not considered to be material.
Other Financial assets and liabilities
The groups other financial assets and liabilities not disclosed above are
accounted for as shown below.
Financial assets:
- Cash and cash equivalents are measured at cash value.
- Other receivables at amount owed
- Other loans receivable at amount owed
Finance liabilities:
- Other payables at amount owing
Joint Ventures
Investments in joint ventures, being those entities over whose activities the
group has joint control, as established by contractual agreement, are included
at cost together with the group's share of post acquisition reserves, on an
equity basis.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost
includes materials, direct labour and overheads relevant to the stage of
production. Net realisable value is based on estimated selling price less all
further costs to completion and all relevant marketing, selling and
distribution costs.
Other Investments
Other investments that do not have a quoted market price in an active market
and whose fair value cannot be reliably measured are recognised at cost less
any provision for impairment.
Impairment
Whenever events or changes in circumstance indicate that the carrying amount of
an asset may not be recoverable an asset is reviewed for impairment. An asset's
carrying value is written down to its estimated recoverable amount (being the
higher of the fair value less cost to sell and value in use) if that is less
than the asset's carrying amount.
Deferred Tax
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the tax computations, and is
accounted for using the balance sheet liability method. Deferred tax
liabilities are generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary
differences can be utilised. In respect of the deferred tax on the revaluation
surplus, this is calculated on the basis of the chargeable gains that would
crystallise on the sale of the investment portfolio as at the reporting date.
The calculation takes account of indexation on the historical cost of the
properties and any available capital losses.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the group income statement, except when it relates to
items charged or credited directly to equity, in which case it is also dealt
with in equity.
Dividends
Dividends payable on the ordinary share capital are recognised as a liability
in the period in which they are approved.
Cash and Cash Equivalents
Cash comprises cash in hand and on-demand deposits. Cash and cash equivalents
comprises short-term, highly liquid investments that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes
in value and original maturities of three months or less. The cash and cash
equivalents shown in the cashflow statement are stated net of bank overdrafts.
Segmental Reporting
For management reporting purposes, the group is organised into business
segments distinguishable by economic activity. The group's only business
segments are mining activities and investment properties. These business
segments are subject to risks and returns that are different from those of
other business segments and are the primary basis on which the group reports
its segment information. This is consistent with the way the group is managed
and with the format of the group's internal financial reporting. Significant
revenue from transactions with an individual customer, which makes up 10
percent or more of the total revenue of the group, is separately disclosed
within each segment.
Notes to the financial statements
for the year ended 31 December 2010
1. Segmental reporting
Business analysis
2010
Mining Property Other Total
'000 '000 '000 '000
Significant revenue 11,265 - - 11,265
customer A
Significant revenue 8,456 - - 8,456
customer B
Significant revenue 3,398 - - 3,398
customer C
Other revenue 8,707 975 23 9,705
Segment revenue 31,826 975 23 32,824
Operating (loss)/profit (2,664) 616 8 (2,040)
before fair value
adjustments
Revaluation of - 245 90 335
investments
Operating (loss)/profit (2,664) 861 98 (1,705)
and segment result
Segment assets 15,061 12,557 606 28,224
Unallocated assets
- Non-current assets 28
* Cash & cash 5,399
equivalents
Total assets 33,651
Segment liabilities (7,769) (2,473) (15) (10,257)
Borrowings (663) (5,000) - (5,663)
(8,432) (7,473) (15) (15,920)
Unallocated liabilities (2,990)
Total liabilities (18,910)
Net assets 14,741
Investment in joint 3,607
ventures non segmental
Net assets as per 18,348
balance sheet
Geographic analysis
United South Other Unallocated Total
Kingdom Africa
'000 '000 '000 '000 '000
Revenue 998 31,826 - - 32,824
Operating profit/(loss) 959 (2,664) - - (1,705)
and segment result
Non-current assets 12,343 9,586 - 29 21,958
excluding investments
Total net assets 5,637 6,604 63 6,044 18,348
Capital expenditure 2 2,637 - - 2,639
Notes to the financial statements
for the year ended 31 December 2010
1. Segmental reporting
Business analysis
2009
Mining Property Other Total
'000 '000 '000 '000
Significant revenue 10,524 - - 10,524
customer A
Significant revenue 6,991 - - 6,991
customer B
Significant revenue 3,747 - - 3,747
customer C
Other Revenue 6,544 1,005 205 7,754
Segment revenue 27,806 1,005 205 29,016
Operating profit before 3,873 621 (94) 4,400
fair value adjustments
Revaluation of investments - 67 425 492
Operating profit and 3,873 688 331 4,892
segment result
Segment assets 11,587 12,236 509 24,332
Unallocated assets
- Non-current assets 60
* Cash & cash equivalents 6,609
Total assets 31,001
Segment liabilities (5,568) (2,736) (117) (8,421)
Borrowings (894) (2,700) - (3,594)
(6,462) (5,436) (117) (12,015)
Unallocated liabilities (2,945)
Total liabilities (14,960)
Net assets 16,041
Investment in joint 3,259
ventures non segmental
Net assets as per balance 19,300
sheet
Geographic analysis
United South Other Unallocated Total
Kingdom Africa
'000 '000 '000 '000 '000
Revenue 1,210 27,806 - - 29,016
Operating profit and 1,019 3,873 - - 4,892
segment result
Non-current assets 12,111 7,997 - 60 20,168
excluding investments
Total net assets 7,151 5,112 55 6,982 19,300
Capital expenditure 25 2,062 - - 2,087
2. Operating costs
2010 2009
'000 '000
Mining 26,979 16,462
Property 120 81
Share dealing - -
Cost of sales 27,099 16,543
Administration 7,765 8,073
Operating costs 34,864 24,616
The direct property costs are:
Ground rent 9 15
Direct property expense 81 63
Bad debts 30 3
120 81
3. Gain on revaluation and sale of investment properties
The reconciliation of the investment surplus to the gain on revaluation of
investment properties
in the income statement is set out below:
2010 2009
'000 '000
Investment surplus 258 55
(Gain)/loss on valuation movement in respect of head (13) 12
lease payments
Gain/(loss) on revaluation of investment properties 245 67
4. (Loss)/profit before taxation
(Loss)/profit before taxation is arrived at after charging/(crediting):
2010 2009
'000 '000
Staff costs (see note 28) 6,036 6,661
Depreciation 2,414 2,541
Exchange gain (526) (237)
Fees payable to the company's auditor for 40 45
the audit of the company's annual accounts
Fees payable to the company's auditor and
its associates for other services:
The audit of the company's subsidiaries, pursuant to 32 28
legislation
Other services 5 1
The directors consider the auditors were best placed to provide the above
non-audit services.
The audit committee reviews the nature and extent of non-audit services to
ensure that independence is maintained.
5. Directors' emoluments
Directors' emoluments are shown in the Directors' remuneration report on pages
24 and 25 under the heading Directors' remuneration which is within the audited
part of this report.
6. Interest payable
2010 2009
'000 '000
On bank overdrafts and bank loans 291 94
Other interest payable 52 122
Interest payable 343 216
7. Taxation
2010 2009
'000 '000
(a) Based on the results for the year:
Corporation tax at 28% (2009: 28%) 352 1,203
Adjustment in respect of prior years - UK 6 -
Current tax 358 1,203
Deferred tax - current year (885) 127
Total tax in income statement (527) 1,330
(b) Factors affecting tax charge for the year:
The corporation tax assessed for the year is different
from that at the standard rate of corporation tax in the
United Kingdom of 28% (2009: 28%)
The differences are explained below:
(Loss)/profit on ordinary activities before taxation (1,813) 5,003
Tax on profit on ordinary activities at 28% (2009: 28%) (508) 1,401
Effects of:
Expenses not deductible for tax purposes 84 67
Capital gains in excess of profit on disposal 13 -
Other differences (127) (119)
Adjustment to smaller companies rates - (19)
Adjustment in respect of prior years 11 -
Total tax (527) 1,330
(c) Analysis of United Kingdom and Overseas tax
United Kingdom tax included in above:
Corporation tax 300 -
Adjustment in respect of prior years 6 -
Current tax 306 -
Deferred tax 113 242
419 242
Overseas tax included in above:
Corporation tax 52 1,203
Current tax 52 1,203
Deferred tax (998) (115)
(946) 1,088
8. Dividends paid
2010 2010 2009 2009
Per share '000 Per share '000
Dividends paid during the year 4.00 p 418 3.50 p 366
relating to the prior period
Dividends to be paid:
Interim dividend for 2010 paid on the 1.00 p 105 1.00p 105
4 February 2011
Proposed final dividend for 2010 3.00 p 313 3.00p 313
4.00 p 418 4.00p 418
The dividends to be paid are not accounted for until they have been approved at
the Annual General Meeting. The amount will be accounted for as an
appropriation of retained earnings in the year ending 31 December 2011.
9. (Loss)/earnings and diluted (loss)/earnings per share
Both the basic and diluted (loss)/earnings per share calculations are based on
a loss of 1,286,000 (2009: profit 3,673,000). The basic (loss)/earnings per
share have been calculated on 10,451,506 (2009: 10,451,506) ordinary shares
being in issue during the period. The diluted (loss)/earnings per share have
been calculated on the number of shares in issue of 10,451,506 (2009:
10,451,506) plus the dilutive potential ordinary shares arising from share
options of nil (2009: 241,313) totalling 10,451,506 (2009: 10,692,819).
Dilutive potential ordinary shares of 279,790 were excluded from the
calculation of diluted ordinary shares in 2010 as there was no dilutive effect
due to the loss for the year.
10. Investment properties
Long
Freehold Leasehold Total
'000 '000 '000
Valuation at 1 January 2010 8,865 3,000 11,865
Additions - - -
Revaluation 245 - 245
Valuation at 31 December 9,110 3,000 12,110
2010
Valuation at 1 January 2009 8,673 3,100 11,773
Additions 25 - 25
Revaluation 167 (100) 67
Valuation at 31 December 8,865 3,000 11,865
2009
Historical cost
At 31 December 2010 4,801 728 5,529
At 31 December 2009 4,801 728 5,529
Long leasehold properties are those for which the unexpired term at the balance
sheet date is not less than 50 years.
All investment properties are held for use in operating leases and all
properties generated rental income during the period.
Freehold and Long Leasehold properties were externally professionally valued at
31 December on an open market basis by:
2010 2009
'000 '000
BNP Paribas Real Estate 9,100 8,865
Carter Towler LLP, Chartered Surveyors 3,000 3,000
12,100 11,865
The valuations were carried out in accordance with the Statements of Asset
Valuation and Guidance Notes published by
The Royal Institution of Chartered Surveyors.
11. Mining reserves, plant and equipment
Mining Mining Motor Office Total
Reserves equipment Vehicles equipment
'000 '000 '000 '000 '000
Cost at 1 January 2010 1,911 12,581 387 119 14,998
Exchange adjustment 318 2,094 42 12 2,466
Additions - 2,637 - 2 2,639
Disposals (17) (2,372) - (5) (2,394)
Cost at 31 December 2010 2,212 14,940 429 128 17,709
Accumulated depreciation 1,407 5,195 271 68 6,941
at 1 January 2010
Exchange adjustment 267 829 31 6 1,133
Charge for the year 111 2,245 43 15 2,414
Disposals in year (17) (2,372) - (5) (2,394)
Accumulated depreciation 1,768 5,897 345 84 8,094
at 31 December 2010
Net book value at 31 444 9,043 84 44 9,615
December 2010
Cost at 1 January 2009 1,705 11,360 346 103 13,514
Exchange adjustment 225 1,500 23 7 1,755
Additions - 2,000 50 12 2,062
Disposals (19) (2,279) (32) (3) (2,333)
Cost at 31 December 2009 1,911 12,581 387 119 14,998
Accumulated depreciation 1,151 4,523 232 54 5,960
at 1 January 2009
Exchange adjustment 156 593 21 3 773
Charge for the year 119 2,358 50 14 2,541
Disposals in year (19) (2,279) (32) (3) (2,333)
Accumulated depreciation 1,407 5,195 271 68 6,941
at 31 December 2009
Net book value at 31 504 7,386 116 51 8,057
December 2009
12. Investments held as non-current assets
2010 2009 2009
Joint Other Joint Other
Ventures Ventures
Assets Assets
'000 '000 '000 '000
At 1 January 2,343 779 2,363 617
Disposals - (405) - -
Transfer - - (121) 137
Exchange adjustment - 59 - 25
Share of gain/(loss) in joint 61 - (101) -
ventures
Net assets at 31 December 2,404 433 2,343 779
Loan to joint venture:
At 1 January 916 - 709 -
Additions 287 - 207 -
At 31 December 1,203 - 916 -
At 31 December 3,607 433 3,259 779
Provision for diminution in value:
At 1 January - (283) - (283)
Write down of investment - - - -
At 31 December - (283) - (283)
Net book value at 31 December 3,607 150 3,259 496
Included in other investments are: 2010 2009
'000 '000
Net book value of unquoted 133 133
investments
Rehabilitation fund - 348
Net book value of investments 17 15
listed on overseas Stock Exchanges
150 496
Market value of the overseas listed 17 15
investments
13. Joint ventures
The company owns 50% of the issued share capital of Dragon Retail Properties
Limited, an unlisted property investment company. The remaining 50% is held by
London & Associated Properties PLC. Dragon Retail Properties Limited is
incorporated in England and Wales. It has issued share capital of 500,000
(2009: 500,000) ordinary shares of 1 each.
The company owns 49% of the issued share capital of Ezimbokodweni Mining (pty)
Limited, an unlisted prospective coal production company. The company is
incorporated in South Africa. It has issued share capital of 100 (2009: 100)
ordinary shares of ZAR1 each.
Ezimbokodweni Dragon
49% 50% 2010 2009
'000 '000 '000 '000
Turnover - 103 103 101
Profit and loss
Profit before tax - 61 61 101
Taxation - - - -
Profit after taxation - 61 61 101
Balance sheet
Non-current assets 1,203 1,583 2,786 2,431
Current assets - 1,339 1,339 1,311
Current liabilities (1,203) (1,061) (2,264) (1,952)
Non-current liabilities - (140) (140) (130)
Share of net assets at 31 - 1,721 1,721 1,660
December
14. Subsidiary companies
The company owns the following ordinary share capital of the principal
subsidiaries which are included within the consolidated financial statements:
Activity Percentage of
share capital Country of
incorporation
Mineral Products Limited Share dealing 100% England and Wales
Black Wattle Colliery Coal mining 62.5% South Africa
(pty) Limited
Bisichi Coal Mining (pty) Coal mining 100% South Africa
Limited
Bisichi Mining Holding company 100% England and Wales
(Exploration) Limited
Ninghi Marketing Limited Dormant 90.1% England and Wales
Details on the non-controlling interest in subsidiaries are shown under note
26.
15. Inventories
2010 2009
'000 '000
Coal
Washed 540 1,048
Run of mine 122 57
Other 43 34
705 1,139
16. Trade and other receivables
2010 2009
'000 '000
Amounts falling due within
one year:
Trade receivables 3,791 1,875
Other receivables 112 98
Prepayments and accrued 816 87
income
4,719 2,060
17. Held for trading investments
2010 2009
'000 '000
Market value of Listed
Investments:
Listed in Great Britain 522 448
Listed outside Great Britain 83 62
605 510
Original cost of Listed 458 452
Investments
Unrealised surplus of market 147 58
value over cost
18. Trade and other payables
2010 2009
'000 '000
Trade payables 3,604 1,004
Amounts owed to joint 1,205 1,165
ventures
Other payables 687 569
Accruals and deferred 2,369 2,833
income
7,865 5,571
19. Financial liabilities - borrowings
Current Non-current
2010 2009 2010 2009
'000 '000 '000 '000
Bank overdraft (secured) 1,422 1,532 - -
Bank loan (secured) 337 3,061 5,326 533
1,759 4,593 5,326 533
2010 2009
'000 '000
Bank overdraft and loan
instalments by reference
to the balance sheet date:
Within one year 1,759 4,593
From one to two years 5,326 533
From two to five years - -
7,085 5,126
Bank overdraft and loan
analysis
by origin:
United Kingdom 5,000 2,700
Southern Africa 2,086 2,426
7,085 5,126
The United Kingdom bank loans and overdraft are secured by way of a first
charge over the investment properties in the UK which are included in the
financial statements at a value of 12,100,000. The South African bank loans
are secured by way of a first charge over specific pieces of mining equipment
and the debtors of the relevant company which holds the loan which are include
in the financial statements at a value of 6,507,000.
Consistent with others in the mining and property industry, the group monitors
its capital by its gearing levels. This is calculated as the net debt (loans
less cash and cash equivalents) as a percentage of the equity. During 2010 this
increased to 9.4% (2009: nil) which was calculated as follows:
2010 2009
'000 '000
Total debt 7,085 5,126
Less cash and cash (5,399) (6,609)
equivalents
Net debt 1,686 (1,483)
Total equity 17,954 19,300
Gearing 9.4% -
20. Provision for rehabilitation
2010 2009
'000 '000
As at 1 January 772 571
Additions 253 201
As at 31 December 1,025 772
21. Financial instruments
Treasury policy
The group enters into derivative transactions such as interest rate swaps and
forward exchange contracts as necessary in order to help manage the financial
risks arising from the group's activities. The main risks arising from the
group's financing structure are interest rate risk, liquidity risk, market
risk, credit risk, currency risk and commodity price risk. There have been no
changes during the year of the main risks arising from the groups finance
structure. The policies for managing each of these risks and the principal
effects of these policies on the results are summarised below.
Interest rate risk
Interest rate risk is the risk that the value of a financial instrument or
cashflows associated with the instrument will fluctuate due to changes in
market interest rates. Interest rate risk arises from interest bearing
financial assets and liabilities that the group uses. Treasury activities take
place under procedures and policies approved and monitored by the Board to
minimise the financial risk faced by the group. Interest bearing assets
comprise cash and cash equivalents which are considered to be short-term liquid
assets and loans to joint ventures. Interest bearing borrowings comprise bank
loans, bank overdrafts and variable rate finance lease obligations. The rates
of interest vary based on LIBOR in the UK and PRIME in South Africa.
As at 31 December 2010, with other variables unchanged, a 1% increase or
decrease in interest rates, on investments and borrowings whose interest rates
are not fixed, would respectively decrease or increase the profit for the year
by 27,000 (2009: 14,000). The effect on equity of this change would be an
equivalent decrease or increase for the year of 27,000 (2009: 14,000).
Liquidity risk
The group's policy is to minimise refinancing risk. Efficient treasury
management and strict credit control minimise the costs and risks associated
with this policy which ensures that funds are available to meet commitments as
they fall due. As at year end the group held borrowing facilities in the UK in
Bisichi Mining Plc and in South Africa in Black Wattle Colliery (Pty) Ltd. The
company was within its bank borrowing facilities and had not breached any of
its covenants. New borrowings were signed in March 2010 in both the UK and
South Africa. Further details are provided in borrowing facilities information
later in this note. Trade and other payables are all due within one year.
The table below shows the currency profiles of cash and cash equivalents:
2010 2009
'000 '000
Sterling 3,710 2,904
South African Rand 1,689 3,705
5,399 6,609
Cash and cash equivalents earn interest at rates based on LIBOR in Sterling and
Prime in Rand.
Market risk
The group is exposed to market price risk through interest rate and currency
fluctuations and commodity price risk.
Credit risk
The group is exposed to credit risk on its cash and cash equivalents and trade
and other receivables as per the balance sheet. At the balance sheet date there
was no significant concentration of credit risk. The maximum exposure to credit
risk is represented by the carrying amount of each financial asset in the
balance sheet which at year end amounted to 9,302,000 (2009: 8,582,000).
Trade debtor's credit ratings are reviewed regularly. The group only deposits
surplus cash with well-established financial institutions of high quality
credit standing. As at year end the amount of material receivables held past
due date was nil (2009: nil).
Financial assets maturity
On 31 December 2010, cash at bank and in hand amounted to 5,399,000 (2009:
6,609,000) which is invested in short term bank deposits maturing within one
year bearing interest at the bank's variable rates. Cash and cash equivalents
all have a maturity of less than 3 months.
Total financial assets and liabilities
The group's financial assets and liabilities are as follows, representing both
the fair value and the carrying value:
Loans and Financial Assets at 2010 2009
receivables Liabilities fair
measured at value
amortised through
cost profit
and loss
'000 '000 '000 '000 '000
Cash and cash 5,399 - - 5,399 6,609
equivalents
Investments held for - - 605 605 510
trading
Other Investments - - 150 150 496
Trade and other 3,903 - - 3,903 1,973
receivables
Bank Borrowings - (7,085) - (7,085) (5,126)
Finance leases - (233) - (233) (246)
Other Liabilities - (7,677) - (7,677) (5,403)
9,302 (14,995) 755 (4,938) (1,187)
Investments held for trading fall under level 1 of the fair value hierarchy
into which fair value measurements are recognised in accordance with the levels
set out in IFRS 7. Other investments are held at cost. The directors are of the
opinion that the difference in value between cost and fair value of other
investments is not significant or material. The comparative figures for 2009
fall under the same category of financial instrument as 2010.
Borrowing facilities
The group has signed new borrowing facilities in both its UK and South African
operations.
In the UK, a term loan facility of 5million and an overdraft facility of
2million were signed by Bisichi Mining Plc in March 2010 with Royal Bank of
Scotland. This facility will expire in December 2012 and is secured against the
group's UK retail property portfolio.
In South Africa, a structured trade finance facility of R60million (South
African Rand) was signed by Black Wattle Colliery (pty) Limited in March 2010
with Absa Bank Limited, a South African subsidiary of Barclays Bank PLC. The
facility is renewed annually and is secured against inventory, debtors and cash
that are held by Black Wattle Colliery (pty) Limited. This facility comprises
of a R40million revolving loan to cover the working capital requirements of the
group's South African operations, and a R20million loan facility to cover
guarantee requirements related to the group's South African mining operations.
At 31 December 2010 the group was within its bank borrowing facilities and had
not breached any of its covenants. Term loan repayments are as set out in Note
19. Details of other financial liabilities are shown in notes 18 and 19.
Commodity price risk
Commodity price risk is the risk that the group's future earnings will be
adversely impacted by changes in the market
of commodities. The group is exposed to commodity price risk as its future
revenues will be derived based on a contract with a physical off-take partner
at prices that will be determined by reference to market prices of coal at the
delivery date.
From time to time the group may manage its exposure to commodity price risk by
entering into forward sales contracts with the goal of preserving future
revenue streams.
Foreign exchange risk
All trading is undertaken in the local currencies. Funding is also in local
currencies other than inter-company investments
and loans and it is not the group's policy to obtain forward contracts to
mitigate foreign exchange risk on these amounts.
As a result of the group's mining assets being held in South Africa and having
a functional currency different than the presentation currency, the group
balance sheet can be affected significantly by movements in the pounds sterling
to the South African Rand. During 2009 and 2010 the group did not hedge its
exposure of foreign investments held in foreign currencies. There is no
significant impact on profit and loss from foreign currency movements
associated with these South African subsidiary assets and liabilities as the
effect of foreign currency gains or losses arising are recorded through the
translation reserve.
The effect of a movement in foreign currencies on the income statement and
equity of the group is shown in the sensitivity analysis below:
Profit and
loss Equity Equity
2010 2009 2010 2009
'000 '000 '000 '000
If there were a 10%
weakening
of the South African Rand
against
Sterling with all other (136) (185) (573) (598)
variables
held constant - (decrease)
If there were a 10%
strengthening
of the South African Rand
against
Sterling with all other 181 211 701 731
variables
held constant - increase
22. Deferred taxation
2010 2009
'000 '000
Balance at 1 January 2,985 2,625
Recognised in income (885) 127
Exchange adjustment 240 233
2,340 2,985
The deferred tax balance
comprises
the following:
Revaluation of properties 1,229 1,216
Capital allowances 552 1,969
Short-term timing 559 (200)
differences
2,340 2,985
23. Share capital
2010 2009
'000 '000
Authorised: 13,000,000 1,300 1,300
ordinary
shares of 10p each
Allotted and fully paid: 1,045 1,045
10,451,506 ordinary shares
24. Other reserves
2010 2009
'000 '000
Equity share options 399 394
Net premium on share 86 86
capital
in joint venture
485 480
25. Share based payments
Details of the share option scheme are shown in the Directors' remuneration
report on page 24 and 25 under the heading Share option schemes which is within
the audited part of this report. Further details of the share option schemes
are set out below.
The Bisichi Mining PLC Unapproved Option Schemes:
Year of Subscription Period within Number of Number of Number of
grant price per which options share share share
share exercisable for which options for which
options issued/ options
outstanding (cancelled) outstanding
at during year at
31 December 31 December
2009 2010
2002 34.0p Sep 2005 - Sep 313,000 - 313,000
2012
2004 149.0p Sep 2007 - Sep 80,000 - 80,000
2014
2006 237.5p Oct 2009 - Oct 325,000 - 325,000
2016
2010 202.5p Aug 2013 - Aug - 80,000 80,000
2020
The exercise of options under the Unapproved Share Option Schemes is subject to
the satisfaction of objective performance conditions specified by the
remuneration committee, which will conform to institutional shareholder
guidelines and best practice provisions in force from time to time. The
remuneration committee has not yet set these guidelines for the first scheme
and the 2006 scheme. The performance conditions for the 2004 and 2010 scheme,
agreed by members on 23 June 2005 and 31 August 2010 respectively, requires
growth in net assets over a three year period to exceed the growth of the
retail prices index by a scale of percentages.
The 2010 options were valued at 45,000 at date of grant using the
Black-Scholes-Merton model with the following assumptions:
Expected volatility 62.80%
Expected life 4.00 Years
Risk free rate 1.44%
Expected dividends 1.95%
Expected volatility was determined by reference to the historical volatility of
the share price over a period commensurate with the option's expected life. The
expected life used in the model is based on the risk-averse balance likely to
be
required by the option holders.
2010 2010 2009 2009
Number Weighted Number Weighted
average average
Exercise Exercise
price price
Outstanding at 1 January 718,000 138.9p 1,113,000 164.4p
Granted / (cancelled) 80,000 202.5p (395,000) 210.6p
during year
Outstanding at 31 December 798,000 145.2p 718,000 138.9p
Exercisable at 31 December 718,000 138.9p 718,000 138.9p
26. Non-controlling Interest
2010 2009
'000 '000
As at 1 January - -
Issue of shares in subsidiary 474 -
Share of loss for the year (74) -
Exchange adjustment (6)
As at 31 December 394 -
The issue of shares in subsidiary relates to the disposal of a 37.5%
shareholding in Black Wattle Colliery (pty) Ltd. The total issued share capital
in Black Wattle Colliery (pty) Ltd has been increased from 136 shares to 1000
shares at par of R1 (South African Rand) through the following shares issue:
* a subscription for 489 ordinary shares at par by Bisichi Mining
(Exploration) Limited increasing the number of shares held from 136
ordinary shares to a total of 675 ordinary shares;
* a subscription for 110 ordinary shares at par by Vunani Mining (pty) Ltd;
* a subscription for 265 "A" shares at par by Vunani Mining (pty) Ltd
Bisichi Mining (Exploration) Limited is a wholly owned subsidiary of Bisichi
Mining PLC incorporated in England and Wales.
Vunani Mining (pty) Ltd is a South African Black Economic Empowerment company
and minority shareholder in Black Wattle Colliery (pty) Ltd.
The "A" shares will rank pari passu with the ordinary shares save that they
will have no dividend rights until such time as the dividends paid by Black
Wattle Colliery (pty) Ltd on the ordinary shares subsequent to 30 October 2008
will equate to R832,075,000.
A non-controlling interest of 15% in Black Wattle Colliery (pty) Ltd is
recognised for all profits distributable to the 110 ordinary shares held by
Vunani Mining (pty) Ltd from the date of issue of the shares (18 October 2010).
An additional non-controlling interest will be recognised for all profits
distributable to the 265 "A" shares held by Vunani Mining (pty) Ltd after such
time as the profits available for distribution, in Black Wattle Colliery (pty)
Ltd, before any payment of dividends after 30 October 2008, exceeds
R832,075,000.
27. Related Party Transactions
At 31 During the
December year
Costs Cash paid
Amounts Amounts recharged (to)
owed owed (to) / by / by
to related by related related related
party party party party
'000 000 000 000
Related party:
London & Associated Properties 326 - 275 (92)
PLC (note (a))
Dragon Retail Properties 1,205 - (72) 72
Limited (note (b))
Ezimbokodweni Mining (pty) - (1,203) (287) -
Limited (note (c))
As at 31 December 2010 1,531 (1,203) (84) (20)
London & Associated Properties 143 - 300 (304)
PLC (note (a))
Dragon Retail Properties 1,205 - (40) (265)
Limited (note (b))
Ezimbokodweni Mining (pty) - (916) (208) -
Limited (note (c))
As at 31 December 2009 1,348 (916) 52 (569)
London & Associated Properties PLC is a substantial shareholder.
Dragon Retail Properties Limited is a joint venture and is treated as a
non-current asset investment.
Ezimbokodweni Mining (pty) Limited is a joint venture and is treated as a
non-current asset investment.
(a) London & Associated Properties PLC
Property management, office premises, general management, accounting and
administration services are provided for Bisichi Mining PLC and its UK
subsidiaries.
(b) Dragon Retail Properties Limited
Dragon Retail Properties Limited is owned equally by the company and London &
Associated Properties PLC.
(c) Ezimbokodweni Mining (pty) Limited
Ezimbokodweni Mining is a prospective coal production company based in South
Africa.
Details of key management personnel compensation and interest in share options
are shown in the Directors' Remuneration Report on pages 24 and 25 under the
headings Directors' remuneration, Pension schemes and incentives and Share
option schemes which is within the audited part of this report.
28. Employees
2010 2009
Number Number
The average weekly numbers of employees of the
group during
the year were as follows:
Production 257 325
Administration 18 18
275 343
'000 '000
Staff costs during the year
were as follows:
Salaries 5,666 6,462
Social security costs 111 129
Pension costs 254 253
Share based payments 5 (183)
6,036 6,661
29. Capital commitments
2010 2009
'000 '000
Commitments for capital expenditure approved 146 604
but not contracted for
at the year end
Share of commitment of capital expenditure in 2,451 2,101
joint venture
30. Head lease commitments and future property lease rentals
Present value of head leases on properties
Minimum Present value
lease of Minimum
payments lease payments
2010 2009 2010 2009
'000 '000 '000 '000
Within one year 14 15 14 15
Second to fifth year 56 59 52 55
After five years 1,708 1,978 167 176
1,778 2,052 233 246
Discounting (1,545) (1,806) - -
adjustment
Present value 233 246 233 246
Finance lease liabilities are in respect of leased investment property. Many of
the leases provide for contingent rents in addition to the rents above which
are a proportion of rental income. Finance lease liabilities are effectively
secured as the rights to the leased asset revert to the lessor in event of
default.
The group leases out its investment properties under operating leases. The
future aggregate minimum rentals receivable under non-cancellable operating
leases are as follows:
2010 2009
'000 '000
Within one year 805 727
Second to fifth year 2,707 2,384
After five years 10,650 9,910
14,162 13,021
31. Contingent liabilities
Bank guarantees have been issued by the bankers of Black Wattle Colliery (pty)
Limited on behalf of the company to third parties. The guarantees are secured
against the assets of the company and have been issued in respect of the
following:
2010 2009
'000 '000
Rail siding 3 -
Rehabilitation of mining land 1,732 1,734
Water & electricity 90 78
Company Registration No. 112155
Company balance sheet
at 31 December 2009
2010 2009
Notes '000 '000
Fixed assets
Tangible assets 33 12,138 11,925
Investment in joint ventures 34 846 846
Other investments 34 1,013 1,030
13,997 13,801
Current assets
Debtors 35 2,794 654
Bank balances 4,841 3,960
7,635 4,614
Creditors - amounts falling due within one year 36 (2,508) (5,139)
Net current assets/(liabilities) 5,127 (525)
Total assets less current liabilities 19,124 13,276
Creditors - amounts falling due within one year 36 (5,000) -
- medium term bank loan
Net assets 14,124 13,276
Capital and reserves
Called up share capital 23 1,045 1,045
Revaluation reserve 38 6,183 5,938
Other reserves 38 400 395
Retained earnings 38 6,496 5,898
Shareholders' funds 14,124 13,276
The company financial statements were approved and authorised for issue by the
board of directors on 15 April 2011
and signed on its behalf by:
A R Heller G J Casey
Director Director
Company accounting policies
for the year ended 31 December 2010
The following are the main accounting policies of the company:
Accounting convention
The financial statements have been prepared under the historical cost
convention, as modified by the revaluation of investment properties, and in
accordance with applicable UK Generally Accepted Accounting Practice.
Dividends received
Dividends are credited to the profit and loss account when received.
Depreciation
Provision for depreciation on tangible fixed assets is made in equal annual
instalments to write each item off over its useful life. The rates generally
used are:
Motor vehicles 25 - 33 per cent
Office equipment 10 - 33 per cent
Foreign currencies
Monetary assets and liabilities expressed in foreign currencies have been
translated at the rates of exchange ruling at the balance sheet date. All
exchange differences are taken to the profit and loss account.
Investment properties
The investment property portfolio is included in the financial statements at
open market valuation. An external professional valuation is carried out
annually by professional external surveyors. Surpluses and deficits arising on
valuations are taken direct to the revaluation reserve. No depreciation or
amortisation is provided in respect of freehold and leasehold investment
properties. The directors consider that this accounting policy, which is not in
accordance with the Companies Act 2006, results in the accounts giving a true
and fair view. Depreciation or amortisation is only one of many factors
reflected in the valuation and the amount which might otherwise have been shown
cannot be separately identified or quantified.
Investments
Investments of the company are stated in the balance sheet as fixed assets at
cost less provisions for impairment.
Financial Instruments
Bank loans and overdrafts
Bank loans and overdrafts are included in creditors on the company balance
sheet net of the unamortised cost of financing.
Interest payable on those facilities is expensed as a finance cost in the
period to which it relates.
Interest rate derivatives
The company uses derivative financial instruments to manage the interest rate
risk associated with the financing of the group's business. No trading in such
financial instruments is undertaken.
Debtors
Debtors do not carry any interest and are stated at their nominal value as
reduced by appropriate allowances for estimated recoverable amounts.
Creditors
Creditors are not interest bearing and are stated at their nominal value.
Joint Ventures
Investments in joint ventures, being those entities over whose activities the
group has joint control as established by contractual agreement, are included
at cost, less impairment.
Deferred taxation
As required by FRS 19 "Deferred Tax", full provision is made for deferred tax
arising from all timing differences between the recognition of gains and losses
in the financial statements and recognition in the tax computation, except for
those timing differences in respect of which the standard specifies that
deferred tax should not be recognised. Deferred tax assets and liabilities are
calculated at the tax rates expected to be effective at the time the timing
differences are expected to reverse.
Leased Assets and Obligations
All leases are "Operating Leases" and the annual rentals are charged to the
profit and loss account on a straight line basis over the lease term. Rent free
periods or other incentives received for entering into a lease are accounted
for over the period of the lease so as to spread the benefit received over the
lease term.
Pensions
The company makes contributions to a money purchase scheme and the costs are
charged to the profit and loss account in the period to which they relate.
Share based remuneration
The company operates a share option scheme. The fair value of the share option
scheme is determined at the date of grant. This fair value is then expensed on
a straight-line basis over the vesting period, based on an estimate of the
number of shares that will eventually vest. The fair value of options granted
is calculated using a binomial model or Black-Scholes-Merton model. Details of
the share options in issue are disclosed in the Directors' Remuneration Report
on pages 24 and 25 under the heading Share option schemes which is within the
audited part of this report.
Notes to the financial statements continued
For the year ended 31 December 2010
32. Dividends
The aggregate amount of dividends comprises:
2010 2009
'000 '000
Final dividends in respect of prior year but not 418 366
recognised as liabilities in that year:
The aggregate amount of dividends to be paid and not recognised as liabilities
as at year end is 418,000 (2009: 418,000).
33. Tangible fixed assets
Investment properties
Long Motor Office
Freehold leasehold vehicles Equipment Total
'000 '000 '000 '000 '000
Cost or valuation at 1 8,865 3,000 137 49 12,051
January 2010
Additions - - - 2 2
Disposals - - - - -
Revaluation 245 - - - 245
Cost or valuation at 31 9,110 3,000 137 51 12,298
December 2010
At valuation 9,110 3,000 - - 12,110
At cost - - 137 51 188
9,110 3,000 137 51 12,298
Accumulated depreciation - - 88 38 126
at 1 January 2010
Charge for the year - - 29 5 34
Disposals in year - - - - -
Accumulated depreciation - - 117 43 160
at 31 December 2010
Net book value at 31 9,110 3,000 20 8 12,138
December 2010
Net book value at 31 8,865 3,000 49 11 11,925
December 2009
Details of historical cost of investment properties are shown in note 10.
34. Investments
Joint Subsidiaries Other
ventures investments
Shares Shares Loans Total
'000 '000 '000 '000 '000
Cost at 1 January 2010 846 111 1,580 300 1,991
Invested during the year - 250 - - 250
Drawn in year - - (267) - (267)
Cost at 31 December 2010 846 361 1,313 300 1,974
Provision for impairment
As at 1 January - - (678) (283) (961)
Impaired during the year - - - - -
As at 31 December 2010 - - (678) (283) (961)
Net book value at 31 846 361 635 17 1,013
December 2010
Net book value at 31 846 111 902 17 1,030
December 2009
Other investments comprise 17,000 (2009: 17,000) shares and nil (2009: nil)
loans.
Investments in subsidiaries are detailed in note 14. In the opinion of the
directors the aggregate value
of the investment in subsidiaries is not less than the amount shown in these
financial statements.
35. Debtors
2010 2009
'000 '000
Amounts falling due within one
year:
Amounts due from subsidiary 2,578 527
undertakings
Other debtors 110 96
Prepayments and accrued income 106 31
2,794 654
36. Creditors
2010 2009
'000 '000
Amounts falling due within one year:
Bank loan (secured) - 2,700
Joint venture 1,205 1,165
Current taxation 292 -
Other taxation and social security 48 60
Other creditors 424 276
Accruals and deferred income 539 938
2,508 5,139
Amounts falling due in more than
one year:
Bank loan (secured) 5,000 -
Bank and other loan instalments by reference to the balance sheet date:
Within one year - 2,700
From one to two years 5 ,000 -
From two to five years - -
5,000 2,700
The bank loan of the company is secured by a charge over freehold and long
leasehold properties.
37. Provisions for liabilities
No provision has been made for the approximate taxation liability at 28% (2009:
28%) of 1,229,000 (2009: 1,216,000) which would arise if the investment
properties were sold at the stated valuation.
38. Share Capital & Reserves
Share Revaluation Other Retained Shareholders
Capital reserve reserve earnings funds
'000 '000 '000 '000 '000
Balance at 1 January 1,045 5,938 395 5,898 13,276
2010
Dividend paid - - - (418) (418)
Revaluation of - 245 - - 245
investment property
Share options - - 5 - 5
Retained profit for - - - 1,016 1,016
the year
Balance at 31 1,045 6,183 400 6,496 14,124
December 2010
A profit and loss account for Bisichi Mining PLC has not been presented as
permitted by Section 408(2) of the Companies Act 2006. The profit for the
financial year, before dividends, was 1,016,000 (2009: 938,000).
Details of share capital are set out in note 23 and details of the share
options are shown in the Directors' Remuneration Report on page 25 under the
heading Share option schemes which is within the audited part of this report
and note 25.
39. Related party transactions
At 31 During the year
December
Costs Cash paid
Amounts recharged (to)
owed (to) / by / by
by related related related
party party party
000 000 000
Related party:
Black Wattle Colliery (pty) Ltd (2,776) (2,501) -
(note (a))
Ninghi Marketing Limited (note (102) - -
(b))
As at 31 December 2010 (2,878) (2,501) -
Black Wattle Colliery (pty) Ltd (739) (1,443) 6,373
(note (a))
Ninghi Marketing Limited (note (102) - -
(b))
As at 31 December 2009 (841) (1,443) 6,373
(a) Black Wattle Colliery (pty) Ltd
Black Wattle Colliery (pty) Ltd is a coal mining company based in South Africa.
(b) Ninghi Marketing Limited
Ninghi Marketing Limited is a dormant coal marketing company incorporated in
England & Wales.
In addition to the above, the company has issued a company guarantee of
R17,000,000 (2009: nil) (South African Rand) to the bankers of Black Wattle
Colliery (pty) Ltd in order to cover bank guarantees issued to third parties in
respect of the rehabilitation of mining land.
Under Financial Reporting Standard 8 Related Party Disclosures, the Company has
taken advantage of the exemption from disclosing transactions with other wholly
owned Group companies.
Details of other related party transactions are given in note 27 of the Group
financial statements.
END