BISICHI MINING PLC ANNUAL REPORT 2017

STRATEGIC REPORT PRINCIPAL RISKS & UNCERTAINTIES
PRINCIPAL RISK
PERFORMANCE AND MANAGEMENT OF THE RISK
ENVIRONMENTAL RISK
The group’s South African mining operations are required to adhere to
local environmental regulations. Any failure to adhere to local environmental
regulations, could adversely affect the mine’s ability to mine under its mining
right in South Africa.
In line with all South African mining companies, the management of this risk
is based on compliance with the Environment Management Plan. In order to
ensure compliance, the group strives to provide adequate resources to this area
including the employment of personnel and the utilisation of third party consultants
competent in regulatory compliance related to environmental management.
To date, Black Wattle is fully compliant with the regulatory requirements of
the Department of Water Affairs and Forestry and has an approved water use
licence. Further details of the group’s Environment Management Programme
are disclosed in the Sustainable development report on page 9.
HEALTH & SAFETY RISK
Attached to mining there are inherent health and safety risks. Any such
safety incidents disrupt operations, and can slow or even stop production.
In addition, the group’s South African mining operations are required to
adhere to local Health and Safety regulations.
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.
CASHFLOW RISK
Commodity price risk, currency volatility and the uncertainties inherent in
mining may result in favourable or unfavourable cashflows.
PROPERTY VALUATION RISK
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 as well as impact on covenants and other loan agreement
obligations.
The economic performance of the United Kingdom, including the
potential impact of the United Kingdom leaving the European Union
(“Brexit”), may impact the level of rental income, yields and associated
property valuations of the group’s UK property assets.
The group has a comprehensive Health and Safety programme in place
to mitigate this risk. Management strive to create an environment where
Health and safety of our employees is of the utmost importance. Our Health
& Safety programme provides clear guidance on the standards our mining
operation is expected to achieve. In addition, management receive regular
updates on how our mining operations are performing. Further details of
the group’s Health and Safety Programme are disclosed in the Sustainable
development report on page 8.
In order to mitigate this risk, the group strives to ensure open and transparent
dialogue with employees across all levels. In addition, appropriate channels
of communication are provided to all employment unions at Black Wattle to
ensure effective and early engagement on employment matters, in particular
wage negotiations and disputes.
Refer to the ‘Employment’ section on page 12 for further details.
In order to mitigate this, we seek to balance the high risk of our mining
operations with a dependable cash flow from our UK property investment
operations which are actively managed by London & Associated Properties
PLC. Due to the long term nature of the leases, the effect on cash flows
from property investment activities are expected to remain stable as long
as tenants remain in operation. Refer to page 22 for details of the property
portfolio performance.
The group utilises the services of London & Associated Properties PLC
whose responsibility is to actively manage the portfolio to improve rental
income and thus enhance the value of the portfolio over time. In addition,
management regularly monitor banking covenants and other loan agreement
obligations as well as the performance of our property assets in relation to
the overall market over time.
Management continue to monitor and evaluate the impact of Brexit on the
future performance of the Group’s existing UK portfolio. In addition, the group
assesses on an ongoing basis the impact of Brexit on the group’s banking
covenants, loan obligations and future investment decisions.
Refer to page 22 for details of the property portfolio performance.
Bisichi Mining PLC
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