TIDMPDZ
RNS Number : 0843Z
Prairie Mining Limited
10 March 2017
PRAIRIE MINING LIMITED
Interim Financial Report for the Half-Year Ended
31 December 2016
ABN 23 008 677 852
CORPORATE DIRECTORY
DIRECTORS: SHARE REGISTRIES:
Mr Ian Middlemas Chairman Australia:
Mr Benjamin Stoikovich Computershare Investor
Director and CEO Services Pty Ltd
Ms Carmel Daniele Non-Executive Level 11
Director 172 St Georges Terrace
Mr Thomas Todd Non-Executive Perth WA 6000
Director Tel: 1300 557 010
Mr Mark Pearce Non-Executive Int: +61 8 9323 2000
Director Fax: +61 8 9323 2033
Mr Todd Hannigan Alternate
Director United Kingdom:
Computershare Investor
Services UK
COMPANY SECRETARY: The Pavilions
Mr Dylan Browne Bridgewater Road
Bristol BS13 8AE
PRINCIPAL OFFICES: Telephone: +44 370 702
London: 0003
38 Jermyn Street
London SW1Y 6DN STOCK EXCHANGE LISTINGS:
United Kingdom Australia:
Australian Securities
PD Co sp. z. o.o. (Warsaw): Exchange
Ul. Wspolna Home Branch - Perth
35 lok. 4 2 The Esplanade
00-519 Warsaw Perth WA 6000
ASX Code: PDZ
Karbonia S.A. (Czerwionka United Kingdom:
- Leszczyny) London Stock Exchange -
Ul. 3 Maja 44, Main Board
44-230 Czerwionka - Leszczyny 10 Paternoster Square
London ECM 7LS
Australia (Registered Office): LSE Code: PDZ
Level 9, BGC Centre
28 The Esplanade Poland:
Perth WA 6000 Warsaw Stock Exchange
Ksi ca 4
Tel: +61 8 9322 6322 00-498 Warsaw
Fax: +61 8 9322 6558 WSE Code: PDZ
BANKERS:
Australia and New Zealand
Banking Group Limited
AUDITOR:
Ernst & Young
SOLICITORS:
DLA Piper
CONTENTS
Directors' Report
Consolidated Statement of Profit or Loss
and other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
The following sections are available in the full
version of the Interim Financial Report on our
website at www.pdz.com.au
Directors' Declaration
Notes to the Consolidated Financial Statements
Auditor's Independence Declaration
Independent Auditor's Review Report
The Directors of Prairie Mining Limited present their report on
the Consolidated Entity consisting of Prairie Mining Limited
("Company" or "Prairie") and the entities it controlled during the
half-year ended 31 December 2016 ("Consolidated Entity" or
"Group").
DIRECTORS
The names and details of the Company's Directors in office at
any time during the half-year and until the date of this report
are:
Directors:
Mr Ian Middlemas Chairman
Mr Benjamin Stoikovich Director and CEO
Ms Carmel Daniele Non-Executive Director
Mr Thomas Todd Non-Executive Director
Mr Mark Pearce Non-Executive Director
Mr Todd Hannigan Alternate Director
Mr Emil Morfett Non-Executive Director (resigned 31 July 2016)
Unless otherwise shown, all Directors were in office from the
beginning of the half-year until the date of this report.
OPERATING AND FINANCIAL REVIEW
Operations
Highlights during, and subsequent to, the end of the half-year
include:
Debiensko Hard Coking Coal Project
-- Acquired the Debiensko Hard Coking Coal Project ("Debiensko"
or "Project"), a fully permitted, hard coking coal project located
in the Upper Silesian Coal Basin in the south west of the Republic
of Poland.
-- Transformational acquisition marking Prairie's entry into the
hard coking coal sector, complementing Prairie's advanced Jan
Karski Mine, and creating a multi-project coal development company
based in Poland to supply European industry.
-- Commenced a scoping study ("Scoping Study") for Debiensko
which will evaluate options for the near term development of
profitable coal seams whilst minimising upfront capital costs.
Results for the Scoping Study are expected to be finalised in the
coming days.
-- Completed a Maiden Coal Resource Estimate ("CRE") of 301
million tonnes of hard coking coal at Debiensko.
-- Results from a fully cored borehole drilled at Debiensko
during 2015/16 confirmed historical data indicating that Debiensko
hosts a range of premium quality hard coking coals comparable to
internationally traded benchmark coking coals.
Jan Karski Mine
-- Prairie and China Coal signed a landmark Strategic
Co-operation Agreement to advance the financing and construction of
Prairie's Jan Karski Mine in Poland.
-- Under the terms of the agreement, China Coal No.5
Construction Company Ltd ("China Coal") and Prairie intend to
complete a Bankable Feasibility Study ("BFS") in the second half of
2017, which will provide the basis for an EPC contract and a
construction-funding package for the Jan Karski Mine.
-- The Strategic Co-operation Agreement demonstrates the
increasing economic collaboration between Poland and China
following China's proposed "One Belt, One Road" development
strategy and highlights Poland's importance as a "One Belt Economy"
for accessing key European markets.
-- Permitting process for the mining concession application continues.
Other
-- Coking coal continues to be classified by the European
Commission as the third most economically important "critical raw
material" for the European economy.
-- Cash on hand of $13.1 million and CD Capital's right to
invest a further A$68 million as a strategic partner places Prairie
in an excellent financial position to progress with its planned
development activities at Debiensko and the Jan Karski Mine.
Debiensko Hard Coking Coal Project
During the half-year, the Company acquired Debiensko, a fully
permitted, hard coking coal project located in the Upper Silesian
Coal Basin in the south west of the Republic of Poland. The Project
is located approximately 40 km from the city of Katowice and 30 km
from the Czech Republic. The transaction was completed by Prairie
purchasing all of the issued shares in Karbonia S.A.
("Karbonia")
Debiensko is bordered by the Knurow-Szczyglowice mine in the
north west and the Budryk mine in the north east, both owned and
operated by Jastrz bska SpĆ³ ka W glowa S.A. ("JSW"), Europe's
leading producer of hard coking coal.
The Debiensko mine was originally opened in 1898 and was
operated by various Polish mining companies until 2000 when mining
operations were suspended due to a major government led
restructuring of the coal sector caused by a downturn in global
coal prices. In early 2006 New World Resources Plc ("NWR") acquired
Debiensko and commenced planning in order for the Project to comply
with Polish mining standards and with the aim of accessing and
mining hard coking coal seams. In 2007, the Minister of Environment
of Poland approved the development plan and in 2008 granted NWR a
50-year mine license for Debiensko.
Debiensko is fully permitted with established on-site facilities
including rail, road and power infrastructure, comprehensive
historical drilling data and all environmental consents. As a
brownfield development project with significant historical capital
investment Debiensko is positioned to become a meaningful, regional
hard coking coal producer in the near-term.
Scoping Study Underway
During the half-year, Prairie commenced work on a scoping study
("Scoping Study") in accordance with the JORC Code (2012) at
Debiensko which is expected to be completed in the coming days. The
Scoping Study will be completed to international standards and will
focus on near term production opportunities with minimal upfront
capital.
Prairie has appointed Royal HaskoningDHV to complete the Scoping
Study given their extensive and recent track record of successful
involvement in European underground coal projects in the UK,
Kazakhstan and Poland, including Prairie's Jan Karski Mine.
Maiden Coal Resource Estimate
Subsequent to the end of the half-year, Prairie completed a
maiden CRE at Debiensko which will be used by the Company to
support the Scoping Study which will target the highest quality,
most laterally extensive and most readily accessible coal
seams.
The CRE is reported in accordance with the JORC Code (2012) and
comprises 93 million tonnes ("Mt") in the Indicated Category as
part of a total CRE of 301Mt. The CRE is based on seven of the
thicker, more consistent hard coking coal seams within the
Debiensko licence area.
Debiensko Hard Coking Coal Resource Estimate (air dried basis)
---------------------------------------------------------------------
Seam Indicated (Mt) Inferred (Mt) Total Coal Resource
In-Situ (Mt)
------- ------------------ ---------------- ----------------------
401/1 20 22 42
======= ================== ================ ======================
402/1 - 53 53
======= ================== ================ ======================
403/1 - 34 34
======= ================== ================ ======================
403/2 - 39 39
======= ================== ================ ======================
404/1 - 30 30
======= ================== ================ ======================
404/9 35 20 55
======= ================== ================ ======================
405 38 10 48
------- ------------------ ---------------- ----------------------
Total 93 208 301
------- ------------------ ---------------- ----------------------
* Rounding errors may occur
* The Indicated and Inferred Resource tonnage calculations are
reported with geological uncertainty of +/-10% and +/-15%
respectively
Coal Quality
Debiensko has attractive coal quality parameters, within all
seams, with the proven potential to produce high quality hard
coking coal. The resource estimate does not present washed coal
quality results but instead presents only raw unwashed coal
parameters.
Prairie has scrutinised the historical data and incorporated
data from the recently drilled Debiensko 12 borehole to produce
this estimate and confirm the hard coking coal quality.
Furthermore, the CRE focuses on seven of the thicker, more
laterally extensive coals. Further seams of potentially workable
thickness occur but are generally not laterally extensive enough to
warrant inclusion at this stage. Coal qualities for the target
seams are given in the table below.
Coal Quality Parameters at Debiensko
---------------------------------------------------------------------------------------------
Seam Parameters Indicated Inferred
------ ----------- ----------------------------------- -----------------------------------
Range Weighted Average Range Weighted Average
------ ----------- ---------------- ----------------- ---------------- -----------------
From To From To
------ ----------- ------- ------- ----------------- ------- ------- -----------------
401/1 Moisture% 0.33 1.24 0.68 0.45 1.25 0.60
------
Ash% 3.15 24.24 9.24 5.89 24.03 7.47
------
VM% 24.69 31.51 27.75 20.86 31.92 25.42
Sulphur% 0.37 1.60 0.74 0.48 1.58 0.63
GCV 26,478 34,082 31,416 26,543 33,584 32,881
------ ----------- ------- ------- ----------------- ------- ------- -----------------
402/1 Moisture% - - - 0.10 1.02 0.62
------
Ash% - - - 3.47 29.68 11.49
------
VM% - - - 19.36 31.61 25.28
Sulphur% - - - 0.27 2.18 0.72
GCV - - - 23,547 33,797 30,538
------ ----------- ------- ------- ----------------- ------- ------- -----------------
403/1 Moisture% - - - 0.35 1.02 0.66
------
Ash% - - - 3.73 23.74 11.52
------
VM% - - - 16.73 32.13 25.83
Sulphur% - - - 0.29 0.75 0.49
GCV - - - 27,511 32,627 31,017
------ ----------- ------- ------- ----------------- ------- ------- -----------------
403/2 Moisture% - - - 0.35 1.12 0.73
------
Ash% - - - 3.25 33.36 11.38
------
VM% - - - 23.64 31.28 26.75
Sulphur% - - - 0.40 1.87 0.67
GCV - - - 22,328 33,760 30,581
------ ----------- ------- ------- ----------------- ------- ------- -----------------
404/1 Moisture% - - - 0.25 1.10 0.65
------
Ash% - - - 6.50 27.38 12.89
------
VM% - - - 17.81 31.58 25.04
Sulphur% - - - 0.35 0.81 0.54
GCV - - - 25,432 33,025 30,012
------ ----------- ------- ------- ----------------- ------- ------- -----------------
404/9 Moisture% 0.56 0.76 0.68 0.53 0.86 0.69
------
Ash% 9.45 19.54 11.75 9.65 19.89 13.80
------
VM% 20.97 32.95 26.80 15.57 31.05 23.20
Sulphur% 0.20 1.14 0.60 0.20 1.14 0.41
GCV 29,145 32,516 31,269 29,067 32,748 30,604
------ ----------- ------- ------- ----------------- ------- ------- -----------------
Coal Quality Parameters at Debiensko
--------------------------------------------------------------------------------------------
Seam Parameters Indicated Inferred
----- ----------- ----------------------------------- -----------------------------------
Range Weighted Average Range Weighted Average
----- ----------- ---------------- ----------------- ---------------- -----------------
From To From To
----- ----------- ------- ------- ----------------- ------- ------- -----------------
405 Moisture% 0.35 1.09 0.65 0.48 0.87 0.65
-----
Ash% 5.63 17.40 9.61 5.42 12.47 9.17
-----
VM% 19.40 28.33 23.52 15.33 28.70 22.47
Sulphur% 0.29 0.48 0.35 0.27 0.93 0.37
GCV 29,760 34,137 32,198 31,538 34,113 32,427
----- ----------- ------- ------- ----------------- ------- ------- -----------------
All analyses are given on an air dried basis except for volatile
matter which is on a dry ash free basis.
A fully cored borehole was drilled by the previous owners in
2015/2016 and a suite of modern coking tests were performed on
select seams. Preliminary coal quality analysis from this borehole
indicates that a range of premium hard coking coals can be produced
from the Project that will be in high demand from European
steelmakers. Two premium hard coking coal specifications have been
delineated at Debiensko, namely Medium volatile matter hard coking
coal ("Mid-vol HCC") and Low volatile matter hard coking coal
("Low-vol HCC").
The borehole was fully cored to 30 m below seam 407/4. All core
was subject to detailed logging and core photography. Seam
thicknesses and depths have been confirmed by a suite of
geophysical logs while coal seams were analysed by accredited
laboratories in Poland.
Medium Volatile Matter Hard Coking Coal
The quality of Mid-vol HCC from Debienkso compares favourably
with the Australian Goonyella hard coking coal brand, and with
medium volatile coals produced in Poland today by JSW. This coal
features good rheological properties and coke yield, with
reasonably low sulphur levels. Prairie's assessment is that Mid-vol
HCC from the Debiensko project would receive premium pricing in
European and international markets.
Debiensko Medium Volatile Matter Hard Coking Coal Comparison
to International Benchmarks
-------------------------------------------------------------------------------------------------------------------
Quality Debiensko* Goonyella Oaky Elkview Tuhup Pittston Borynia-JSW Pniowek-JSW
(Poland) (Australia) Creek (Canada) (Indonesia) (USA) (Poland) (Poland)
(Australia)
-------------- ---------- ------------ ------------ --------- ------------ -------- ----------- -----------
Ash (%) 3.2 8.9 9.5 9.5 7.0 8.0 8.5 8.5
-------------- ---------- ------------ ------------ --------- ------------ -------- ----------- -----------
Volatile
Matter
(%) 25.0 23.8 24.5 23.5 26.5 26.0 24.8 27.0
-------------- ---------- ------------ ------------ --------- ------------ -------- ----------- -----------
Sulphur
(%) 0.56 0.56 0.60 0.50 0.70 0.85 0.65 0.60
-------------- ---------- ------------ ------------ --------- ------------ -------- ----------- -----------
Phosphorous
(P) in
Coal (%) 0.025 0.025 0.070 0.07 0.02 0.019 0.059 0.050
-------------- ---------- ------------ ------------ --------- ------------ -------- ----------- -----------
Free Swelling
Index (FSI) 8 1/2 8 8 1/2 7 1/2 9 8 7 1/2 8 1/2
-------------- ---------- ------------ ------------ --------- ------------ -------- ----------- -----------
CSR (%) 63 66 67 70 60 - - -
-------------- ---------- ------------ ------------ --------- ------------ -------- ----------- -----------
Fluidity up to up to
(ddpm) 1200 1100 5000 150 450 - 2300 3000
-------------- ---------- ------------ ------------ --------- ------------ -------- ----------- -----------
C daf (%) 86 88.4 86.8 81.2 - 88.0 - -
-------------- ---------- ------------ ------------ --------- ------------ -------- ----------- -----------
Rv Max 1.23 1.17 1.10 1.22 1.18 1.10 1.20 1.10
-------------- ---------- ------------ ------------ --------- ------------ -------- ----------- -----------
Vitrinite
(%) 78 58 75 55 96 76 - -
-------------- ---------- ------------ ------------ --------- ------------ -------- ----------- -----------
Low Volatile Matter Hard Coking Coal
Debiensko's Low-vol HCC is similar to other internationally
traded low volatile matter hard coking coals, including brands such
as Peak Downs (BHP Billiton Mitsubishi Alliance - BMA) and Hail
Creek (Rio Tinto) produced in Australia. Whilst the Coke Strength
after Reaction (CSR) is anticipated to be slightly lower than these
Australian coals, the quality of Debiensko Low-vol HCC is
anticipated to be in-line with coal produced at JSW's Jas-Mos mine
in Poland, which is used as a stabilizing and leaning component of
nearly every coal blend for production of blast furnace coke in the
region.
Debiensko Low Volatile Matter Hard Coking Coal
Comparison to International Benchmarks
---------------------------------------------------------------------------------------------------------
Quality Debiensko* Peak German Hail Blue Buchanan Neryungri Jas-Mos
(Poland) Downs Creek Creek Creek (USA) (Russia) (Poland)
(Australia) (Australia) (Australia) - No.7
(USA)
---------- ---------- ------------ ------------ ------------ ------- -------- --------- ---------
Ash (%) 9.5 10.0 9.5 8.9 9.0 5.3 10.0 7.8
---------- ---------- ------------ ------------ ------------ ------- -------- --------- ---------
Volatile
Matter
(%) 20.5 20.5 19.0 20.5 19.9 18.7 19.3 21.4
---------- ---------- ------------ ------------ ------------ ------- -------- --------- ---------
Sulphur
(%) 0.30 0.60 0.54 0.4 0.71 0.73 0.21 0.56
---------- ---------- ------------ ------------ ------------ ------- -------- --------- ---------
Free
Swelling
Index 7 1/2 8 1/2 8 1/2 7 8 1/2 8 1/2 8 7 1/2
---------- ---------- ------------ ------------ ------------ ------- -------- --------- ---------
Fluidity
(ddpm) 128 275 400 300l 1113 100 18 200
---------- ---------- ------------ ------------ ------------ ------- -------- --------- ---------
C daf
(%) 80 89.1 88.6 88.2 91 - 80.8 -
---------- ---------- ------------ ------------ ------------ ------- -------- --------- ---------
Rv Max 1.5 1.40 1.45 1.26 1.48 1.63 1.50 1.40
---------- ---------- ------------ ------------ ------------ ------- -------- --------- ---------
Vitrinite
(%) 59 68 73 54 70 76 81 -
---------- ---------- ------------ ------------ ------------ ------- -------- --------- ---------
Jan Karski Mine
China Coal Strategic Co-operation Agreement
In November 2016, Prairie and China Coal, the second largest
coal mining company in China and one of the world's most advanced
and prolific shaft sinking and total underground coal mine
construction companies, signed a landmark Strategic Co-operation
Agreement to advance the financing and construction of Prairie's
Jan Karski Mine in Poland.
Under the terms of the agreement, China Coal and Prairie intend
to complete a BFS by mid-2017, which will provide the basis for an
Engineering, Procurement, Construction ("EPC") contract and a
construction-funding package for the Jan Karski Mine.
Prairie and China Coal have been in discussions since 2014
regarding the potential for collaboration in designing and
constructing the Jan Karski Mine.
The Strategic Co-operation Agreement was signed confirming the
intention of the parties to, on a best efforts basis:
(i) complete a BFS by mid-2017, which will form the basis of
Chinese bank credit approval for project finance;
(ii) based on the results of the BFS, enter into a complete EPC
contract under which China Coal will construct the Jan Karski Mine;
and
(iii) incorporate relevant Polish content into the design and
construction phases, which will include working with a range of
Polish specialists, sub-contractors and business partners.
It is the intention of the parties to enter into future binding
agreements for China Coal to construct the Jan Karski Mine once the
Bankable Feasibility Study is completed successfully and indicative
financing terms are given by financing institutions.
Mining Concession Application & Project Permitting
Prairie is currently working towards completing a mining
concession application which, in Poland, comprises the submission
of a Deposit Development Plan ("DDP"), an Environmental Social
Impact Assessment ("ESIA") that is to be approved by regional
authorities and approval of a spatial development plan (rezoning of
land for mining use). The DDP is a Polish standard mine
technical-economic study as prescribed in the Polish mining
regulations. Under Polish law, the environmental consent decision
must be obtained prior to granting of the mining concession. The
environmental consent decision is issued by a specialised
environmental authority (the Regional Director for Environmental
Protection).
The Company is currently progressing with the mining concession
application process and intends to formally lodge a mining
concession application for the Jan Karski Mine over the next 12
months.
Prairie Downs Base Metals Project ("BMP")
During the half-year, Prairie altered the terms of the farm-in
agreement ("Farm-In Agreement") with Marindi Metals Limited
("Marindi") for the sale of the BMP. Under the terms of the Farm-In
Agreement, Marindi can earn a 100% interest in the BMP by electing
to pay Prairie in three cash instalments as follows: (i) $0.5
million (received on 27 May 2015); (ii) $0.325 million (received 30
September 2016); and (iii) $0.325 million on or before 31 March
2017.
The Farm-In Agreement allows Prairie to focus 100% of its time
and resources on its Polish coal operations. Upon completion,
Prairie will retain a 2.5% Net Smelter Royalty.
Results of Operations
The net loss of the Consolidated Entity for the half-year ended
31 December 2016 was $5,337,988 (31 December 2015: $6,922,405).
Significant items contributing to the current half-year loss and
the substantial differences from the previous half-year include to
the following:
(i) Exploration and evaluation expenses of $2,595,437 (31
December 2015: $2,357,273), which is attributable to the Group's
accounting policy of expensing exploration and evaluation
expenditure incurred by the Group subsequent to the acquisition of
rights to explore and up to the commencement of a bankable
feasibility study for each separate area of interest. As a direct
result of exploration and evaluation activities conducted during
the half-year, the Group achieved key milestones including (i)
commencement of a scoping study at Debiensko; (ii) signing a
landmark Strategic Co-operation Agreement to advance the financing
and construction of the Jan Karski Mine; and (iii) progression of
the mining concession application for the Jan Karski Mine;
(ii) Business development expenses of $484,478 (31 December
2015: $954,178) which includes expenses relating to the Group's
investor relations activities during the six months to 31 December
2016 including brokerage fees, travel costs, attendances at
conferences and business development consultant costs;
(iii) Expenses incurred in acquiring Karbonia of $500,236 (31
December 2015: nil) which relates to legal, accounting and other
consultant costs in relation to the extensive due diligence and
legal process conducted by the Company to effectively execute the
transaction;
(iv) Non-cash share-based payment expenses of $167,060 (31
December 2015: $706,221) due to incentive securities issued to key
management personnel and other key employees and consultants of the
Group as part of the long-term incentive plan to reward key
management personnel and other key employees and consultants for
the long term performance of the Group. The expense results from
the Group's accounting policy of expensing the fair value
(determined using an appropriate pricing model) of incentive
securities granted on a straight-line basis over the vesting period
of the options and rights. The decrease in share-based payment
expenses in 2016 compared to 2015 is attributable to the fact that
there was no grant of incentive securities during the six months to
31 December 2016 coupled with forfeiture of 1.2 million unvested
performance rights;
(v) Non-cash fair value loss of $1,847,018 (31 December 2015:
$2,385,080) which is attributable to a $1,847,018 loss (31 December
2015: nil) on the conversion right of the Convertible Notes
accounted as a financial liability at fair value through profit and
loss. There was a nil (31 December 2015: $2,385,080) fair value
loss on the B2Gold Corp financial assets at fair value through
profit and loss as the Company sold its entire holding during the
30 June 2016 financial year; and
(vi) Other income of $519,849 (31 December 2015: nil) is
attributable to the receipt of $325,000 (31 December 2015: nil)
pursuant to the Farm-In Agreement with Marindi and the receipt of
$194,849 (31 December 2015: nil) of gas and property income derived
since acquiring Karbonia in October 2016.
Financial Position
At 31 December 2016, the Group had cash reserves of $13,076,770
(30 June 2016: $18,063,119) and with CD Capital's right to invest a
further A$68 million in the Company as a strategic partner, this
places the Group in a strong financial position to continue with
its planned development activities at Debiensko and the Jan Karski
Mine.
At 31 December 2016, the Company had net assets of $12,492,235
(30 June 2016: $17,815,760) a decrease of 30% compared with 30 June
2016. This is largely attributable to the investment made in
Karbonia coupled with the loss for the six months to 31 December
2016.
Business Strategies and Prospects for Future Financial Years
Prairie's strategy is to create long-term shareholder value by
creating synergies and developing both Debiensko and the Jan Karski
Mine in Poland.
To date, the Group has not commenced production of any minerals.
To achieve its objective, the Group currently has the following
business strategies and prospects:
-- complete and publish the Scoping Study on Debiensko, which is
scheduled for completion in the coming weeks;
-- Commence a focused in-fill drill program to increase JORC
measured and indicated resources to support future feasibility
studies for Debiensko;
-- Deliver a re-engineered mine plan to produce a feasibility
study to international standards with a focus on near term
production at Debiensko;
-- Continue to advance financing discussions with global project
finance banks and potential offtakers to structure a development
financing package for the Jan Karski Mine;
-- Progress with the mining concession process and formally
lodge a mining concession application for the Jan Karski Mine;
-- Continue other required project development activities
including land acquisition at the Jan Karski Mine;
-- Continue with Bankable Feasibility Study at the Jan Karski
Mine which is scheduled to be completed in the second half of the
year; and
-- based on the results of the BFS, enter into a complete EPC
contract under which China Coal will construct the Jan Karski
Mine.
All of these activities are inherently risky and the Board is
unable to provide certainty of the expected results of these
activities, or that any or all of these likely activities will be
achieved. The material business risks faced by the Group that could
have an effect on the Group's future prospects, and how the Group
manages these risks, include the following:
-- The Company's activities will require further capital in
future years - The Company currently has cash in excess of $13
million which places it in an excellent position to conduct its
current planned development activities at Debiensko and the Jan
Karski Mine. However, the ability of the Company to finance capital
investment in future years for the construction and future
operation of the Company's projects is dependent, among other
things, on the Company's ability to raise additional future funding
either through equity or debt financing. Any failure to obtain
sufficient financing in the future may result in delaying or
indefinite postponement of any future construction of the projects
or even a loss of property interest (in the future). The key items
which the Company would require further funding in future years
would be for the construction of the mines at each project. In this
regard however, and pursuant to the CD Capital investment
agreement, CD Capital has a first right to invest a further $55
million in any future fund raise conducted by the Company, plus CD
Capital will have the ability to inject a further $13 million
through the exercise of $0.60 options in the Company. There is
however no guarantee that CD Capital would take up this right in
the future (or exercise their options). There is also a risk that
the Company's obligation to offer CD Capital a first right of
refusal on any future fund raising could prejudice the Company's
ability to raise funds from investors other than CD Capital.
However, the Company considers that it would not be necessary to
undertake such development actions until it has secured financing
to do so and the timing for commencement of such actions would
accordingly depend on the date that such financing is secured. If,
in the unlikely event that future financing cannot be secured, the
Group has the flexibility and ability to significantly reduce its
ongoing expenditure.
Furthermore, the Company's board of directors has a successful
track record of fundraising for natural resources projects,
including large scale coal projects, and has completed successful
financing transactions with strategic partners, large institutional
fund managers, off-take partners and traders and project finance
lenders.
There is however no guarantee that the then prevailing market
conditions will allow for a future fundraising or that new
investors will be prepared to subscribe for ordinary shares or at
the price at which they are willing to do so in the future. Failure
to obtain sufficient future financing may result in delaying or
indefinite postponement of appraisal and any development of the
Company's projects in the future, a loss of the Company's personnel
and ultimately a loss of its interest in the projects. There can be
no assurance that additional future capital or other types of
financing will be available, if needed, or that, if available, the
terms of such future financing will be favourable to the
Company.
If the Company obtains debt financing in the future, it will be
exposed to the risk of leverage and its activities could become
subject to restrictive loan and lease covenants and undertakings.
If the Company obtains future equity financing other than on a pro
rata basis to existing Shareholders, the future percentage
ownership of the existing Shareholders may be reduced, Shareholders
may then experience subsequent dilution and/or such securities may
have preferred rights, options and pre-emption rights senior to the
Ordinary Shares. There can be no assurance that the Company would
be successful in overcoming these risks in the future or any other
problems encountered in connection with such financings.
-- Risk of failure to amend Debiensko mining concession - The
Company's mining exploration and development activities at
Debiensko are dependent upon the alteration of, or as the case may
be, the maintenance of appropriate licences, concessions, leases,
claims, permits and regulatory consents which may be withdrawn or
made subject to limitations. The maintaining of concessions,
obtaining renewals, or attaining concessions alterations, often
depends on the Company being successful in obtaining required
statutory approvals for its proposed activities and that the
licences, concessions, leases, claims, permits or consents it holds
will be renewed and altered as and when required. In this regard
the Company has made an application to the Polish Ministry of
Environment to amend the Debiensko mining concession to alter the
commencement of production from 2018 to 2025. There is no assurance
that such applications (or renewals or alterations) of the
concession will be granted or that such applications, renewals,
alterations, rights and title interests will not be revoked or
significantly altered. If such applications, renewals or
alterations of concessions applied for are not granted or are in
fact revoked in the future, there is a risk that this may have a
material adverse effect on the financial performance and operations
of Debiensko, the Company and on the value of the Company's
securities.
-- Risk of further challenges by Bogdanka - Since April 2015,
Lubelski Wegiel Bogdanka ("Bogdanka") has made a number
applications and appeals to the Polish Ministry of Environment
("MoE") seeking a mining concession application over the Company's
K-6-7 exploration concession and priority right (only one
exploration concession which comprises of the Jan Karski Mine). All
applications and appeals previously made by Bogdanka have been
outright rejected. However Bogdanka has made a further appeal to
the Supreme Administrative Court (with no court hearing being
scheduled to date). The Supreme Administrative Court has no
authority to grant Bogdanka a mining concession but it may however
cancel the MoE's previous rejection decision. If the Supreme
Administrative Court does cancel the MoE decision, the MoE will be
required to re-assess Bogdanka's mining concession application.
These proceedings do not relate to the Prairie's valid and existing
priority right to apply for a mining concession over the K-6-7
area. As discussed above Bogdanka has in the past raised several
appeals challenging the Company's title to the exploration
concessions comprising the Jan Karski Mine. There is therefore no
guarantee that Bogdanka will not seek to file further appeals to
future decisions taken by government departments in the course of
the Jan Karski Mine development timeline.
-- The Company has a limited operating history - The Company has
limited operating history on which it can base an evaluation of its
prospects. Despite this, members of the Company's Board of
Directors and management team have considerable experience in the
exploration, appraisal, funding development and mining of coal
projects both globally and in Poland. The future success of the
Company is dependent upon a number of factors, including the
successful: (i) completion of positive technical and feasibility
studies which demonstrates that mining of coal can be economically
undertaken; (ii) design, construction and commissioning of the
infrastructure required; (iii) progression of permitting and
maintenance of title; and (iv) identification of, and agreement
with, strategic partners, offtakers and other financiers to fund
and assist with the development and operation of mining.
The prospects of the Company must be considered in light of the
risks, expenses and difficulties frequently encountered by
companies in their early stage of development, particularly in the
mineral exploration sector, which has a high level of inherent
uncertainty.
-- Operations conducted in an emerging market - The Company's
operations are located in Poland and will be exposed to related
risks and uncertainties associated with this jurisdiction. Changes
in mining or investment policies, laws or regulations (or the
application thereof) or shifts in political attitude in Poland, in
particular to mining, use of coal, and foreign ownership of coal
projects may adversely affect the operation or profitability of the
Company. The Company continues to consult with the various levels
of Government but there can be no assurances that the future
political developments in Poland will not directly impact the
Company's operations or its ability to attract funding for its
operations. The Company also competes with many other companies in
Poland, including companies with established mining operations.
Some of these companies have greater financial resources and
political influence than the Company and, as a result, may be in a
better position to compete with or impede the Company's current or
future activities.
-- The Company may be adversely affected by fluctuations in coal
prices - The price of coal fluctuates widely and is affected by
numerous factors beyond the control of the Company. Coal prices are
currently high compared to previous levels but there is no
guarantee that prices will remain at this level in the future.
Future production, if any, from the Company's mineral properties
and its profitability will be dependent upon the price of coal
being adequate to make these properties economic. The Company
currently does not engage in any hedging or derivative transactions
to manage commodity price risk. As the Company's operations change,
this policy will be reviewed periodically going forward.
SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD
(i) On 1 February 2017, the Company announced a maiden CRE of
301 million tonnes of hard coking coal at Debiensko; and
(ii) On 16 February 2017, the Company recouped PLN6.21 million
($1,985,490) in relation to a prepaid deposit held in escrow due to
the unwinding of a transaction entered into by Karbonia when under
control by the previous owners, NWR.
Other than the above, there were no significant events occurring
after balance date requiring disclosure.
AUDITOR'S INDEPENCE DECLARATION
Section 307C of the Corporations Act 2001 requires our auditors,
Ernst and Young, to provide the directors of Prairie Mining Limited
with an Independence Declaration in relation to the review of the
half-year financial report. This Independence Declaration forms
part of this Directors' Report.
Signed in accordance with a resolution of the Directors.
BEN STOIKOVICH
Director
9 March 2017
Forward Looking Statements
This report may include forward-looking statements. These
forward-looking statements are based on Prairie's expectations and
beliefs concerning future events. Forward looking statements are
necessarily subject to risks, uncertainties and other factors, many
of which are outside the control of Prairie, which could cause
actual results to differ materially from such statements. Prairie
makes no undertaking to subsequently update or revise the
forward-looking statements made in this release, to reflect the
circumstances or events after the date of that release.
Competent Person Statements
The information in this report that relates to Exploration
Results and Coal Resources was extracted from Prairie's ASX
announcement dated 1 February 2017 entitled 'Maiden 301 Million
Tonnes Hard Coking Coal Resource Confirmed At Debiensko' which is
available to view on the company's website at www.pdz.com.au
The information in in the original ASX announcements that
relates Coal Resources is based on, and fairly represents,
information compiled or reviewed by Mr Jonathan O'Dell, a Competent
Person who is a Member of The Australasian Institute of Mining and
Metallurgy who is a consultant of the Company. Mr O'Dell has
sufficient experience that is relevant to the style of
mineralisation and type of deposit under consideration and to the
activity which he is undertaking to qualify as a Competent Person
as defined in the 2012 Edition of the 'Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore
Reserves'
Prairie confirms that: a) it is not aware of any new information
or data that materially affects the information included in the
original ASX announcements and; b) all material assumptions and
technical parameters underpinning the Coal Resource included in the
original ASX announcement continue to apply and have not materially
changed; c) the form and context in which the relevant Competent
Persons' findings are presented in this report has not been
materially modified from the original ASX announcement.
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
FOR THE HALF-YEARED 31 DECEMBER 2016
Note Half-Year Half-Year
Ended Ended
31 December 31 December
2016 2015
$ $
------------------------------------- ----- -------------- --------------
Revenue 4(a) 208,330 113,950
Other income 4(b) 519,849 -
Exploration and evaluation
expenses (2,595,437) (2,357,273)
Employment expenses (68,774) (88,527)
Administration and corporate
expenses (238,129) (247,754)
Occupancy expenses (194,583) (297,322)
Share-based payment expenses (167,060) (706,221)
Business development expenses (484,478) (954,178)
Expenses incurred in acquiring
Karbonia (500,236) -
Remeasurement gain on contingent
consideration 14 29,548 -
Fair value movements 5 (1,847,018) (2,385,080)
Loss before income tax (5,337,988) (6,922,405)
Income tax expense - -
------------------------------------- ----- -------------- --------------
Net loss for the period (5,337,988) (6,922,405)
===================================== ===== ============== ==============
Net loss attributable to
members of Prairie Mining
Limited (5,337,988) (6,922,405)
===================================== ===== ============== ==============
Other comprehensive income
Items that may be reclassified
subsequently to profit or
loss:
Exchange differences on translation
of foreign operations (150,679) 24,942
------------------------------------- ----- -------------- --------------
Total other comprehensive
income/(loss) for the period (150,679) 24,942
------------------------------------- ----- -------------- --------------
Total comprehensive loss
for the period (5,488,667) (6,897,463)
===================================== ===== ============== ==============
Total comprehensive loss
attributable to members of
Prairie Mining Limited (5,488,667) (6,897,463)
===================================== ===== ============== ==============
Basic and diluted loss per
share (cents per share) (3.52) (4.67)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2016
31 December 30 June
2016
$ 2016
Note $
------------------------------- ------ ------------- -------------
ASSETS
Current Assets
Cash and cash equivalents 13,076,770 18,063,119
Trade and other receivables 6 2,531,418 265,635
Total Current Assets 15,608,188 18,328,754
------------------------------- ------ ------------- -------------
Non-Current Assets
Property, plant and equipment 7 2,470,660 98,140
Exploration and evaluation
assets 8 2,483,436 530,000
Total Non-current Assets 4,954,096 628,140
------------------------------- ------ ------------- -------------
TOTAL ASSETS 20,562,284 18,956,894
------------------------------- ------ ------------- -------------
LIABILITIES
Current Liabilities
Trade and other payables 9 2,118,257 805,313
Provisions 11 968,528 -
Other financial liabilities 10 3,934,971 335,821
------------------------------- ------ ------------- -------------
Total Current Liabilities 7,021,756 1,141,134
------------------------------- ------ ------------- -------------
Non-current Liabilities
Provisions 11 1,048,293 -
------------------------------- ------ ------------- -------------
Total Non-current Liabilities 1,048,293 -
------------------------------- ------ ------------- -------------
TOTAL LIABILITIES 8,070,049 1,141,134
------------------------------- ------ ------------- -------------
NET ASSETS 12,492,235 17,815,760
=============================== ====== ============= =============
EQUITY
Contributed equity 12(a) 51,347,014 51,298,932
Reserves 13 3,009,874 3,043,493
Accumulated losses (41,864,653) (36,526,665)
------------------------------- ------ ------------- -------------
TOTAL EQUITY 12,492,235 17,815,760
=============================== ====== ============= =============
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE HALF-YEARED 31 DECEMBER 2016
Contributed Share-based Foreign Accumulated Total
Equity Payments Currency Losses Equity
Reserve Translation
Reserve
$ $ $ $ $
------------------------------ ------------ ------------ ------------- ------------- ------------
Balance at 1 July
2016 51,298,932 3,010,300 33,193 (36,526,665) 17,815,760
Net loss for the
period - - - (5,337,988) (5,337,988)
Other comprehensive
income for the
half-year
Exchange differences
on translation
of foreign operations - - (150,679) - (150,679)
------------------------------ ------------ ------------ ------------- ------------- ------------
Total comprehensive
income/(loss) for
the period - - (150,679) (5,337,988) (5,488,667)
Transactions with
owners recorded
directly in equity
Issue of ordinary
shares 50,000 - - - 50,000
Share issue costs (1,918) - - - (1,918)
Forfeiture of performance
rights - (396,001) - - (396,001)
Recognition of
share-based payments - 513,061 - - 513,061
------------------------------ ------------ ------------ ------------- ------------- ------------
Balance at 31 December
2016 51,347,014 3,127,360 (117,486) (41,864,653) 12,492,235
============================== ============ ============ ============= ============= ============
Balance at 1 July
2015 36,649,571 2,597,720 22,963 (29,870,996) 9,399,258
Net loss for the
period - - - (6,922,405) (6,922,405)
Other comprehensive
income for the
half-year
Changes in fair
value of available-for-sale
financial assets - - - - -
Deferred tax on
available-for-sale
financial assets - - - - -
Exchange differences
on translation
of foreign operations - - 24,942 - 24,942
------------------------------ ------------ ------------ ------------- ------------- ------------
Total comprehensive
income/(loss) for
the period - - 24,942 (6,922,405) (6,897,463)
Transactions with
owners recorded
directly in equity
Issue of ordinary
shares 321,248 - - - 321,248
Share issue costs (6,614) - - - (6,614)
Issue of convertible
notes (Note 12a) 15,000,000 - - - 15,000,000
Costs to issue
convertible notes (898,829)
Transfer from share-based
payments 649,300 (649,300) - - -
Lapse of performance
rights - (8,356) - 8,356 -
Recognition of
share-based payments - 706,220 - - 706,220
------------------------------ ------------ ------------ ------------- ------------- ------------
Balance at 31 December
2015 51,714,676 2,646,284 47,905 (36,785,045) 17,623,820
============================== ============ ============ ============= ============= ============
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE HALF-YEARED 31 DECEMBER 2016
Half-Year Half-Year
Ended Ended
31 December 31 December
2016 2015
$ $
----------------------------------- --- -------------- --------------
Cash flows from operating
activities
Payments to suppliers and
employees (4,890,288) (3,961,413)
Proceeds from property 94,849 -
and gas sales
Interest revenue from third
parties 231,437 63,416
Net cash outflow from operating
activities (4,564,002) (3,897,997)
---------------------------------------- -------------- --------------
Cash flows from investing
activities
Purchase of plant and equipment - (1,487)
Purchase of controlled (742,367) -
entity (note 14)
Proceeds from Farm-In Agreement 325,000 -
Net cash outflow from investing
activities (417,367) (1,487)
---------------------------------------- -------------- --------------
Cash flows from financing
activities
Proceeds from issue of - -
shares
Payments for share issue
costs - (13,237)
Proceeds from issues of
convertible note - 15,000,000
Payments for issue of convertible
note - (576,450)
Net cash inflow from financing
activities - 14,410,313
---------------------------------------- -------------- --------------
Net increase/(decrease)
in cash and cash equivalents (4,981,369) 10,510,829
Net foreign exchange differences (4,980) (799)
Cash and cash equivalents
at the beginning of the
period 18,063,119 2,076,409
Cash and cash equivalents
at the end of the period 13,076,770 12,586,439
======================================== ============== ==============
The following sections in the full version of the
Interim Financial Report, along with all figures
and illustrations, are available on our website
at www.pdz.com.au
Directors' Declaration
Notes to the Consolidated Financial Statements
Auditor's Independence Declaration
Independent Auditor's Review Report
For further information, contact:
Ben Stoikovich
Chief Executive
Officer
+44 207 478 3900
Artur Kluczny
Group Executive
- Poland
+48 22 351 73 80
Sapan Ghai
Corporate Development
+44 207 478 3900
info@pdz.com.au
This information is provided by RNS
The company news service from the London Stock Exchange
END
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