BISICHI MINING PLC ANNUAL REPORT 2017

STRATEGIC REPORT FINANCIAL & PERFORMANCE REVIEW
Overall, the group’s South African mining
operations achieved an adjusted EBITDA of
£4.9million (2016: £0.8million) attributable to
the increase in mining production for the year
and higher prices achievable for our coal
offsetting the higher mining cost per tonne of
our new opencast reserves.
The group’s EBITDA for mining activities of
£2.8million (2016: £1.2million) for the year, in
comparison to the result achieved for adjusted
EBITDA were negatively impacted by the share
of loss in joint ventures of £1.8million (2016:
£nil) related to the write off of our investment in
Ezimbokodweni Mining (Pty) Ltd as well as an
exchange rate loss of £0.3million in the current
year compared to an exchange rate gain of
£0.4million incurred during the prior year. These
exchange movements can mainly be attributable
to the retranslation of Rand denominated
inter-company trade receivable balances with
our South African mining operations that are
held within the UK.
A further explanation of the mines operational
performance can be found in the Mining Review
on page 6.
Other mining Investments
During the year the group wrote off its £1.8million
investment in Ezimbokodweni Mining (Pty) Limited
(“Ezimbokodweni”) made up of a £1.4million loan
(2016: £1.4million) and a £0.4million (2016:
£0.4million) joint venture investment.
The carrying value of the investment was
dependent upon the completion of the acquisition
of the Pegasus coal project (“the project”) in
South Africa. Although a proposed sale and
purchase agreement had been negotiated and
a deposit paid for the project, the conclusion of
the transaction had been delayed pending the
commercial transfer of the prospecting right
from the current owners of the project to
Ezimbokodweni.
Although the group has always remained
committed to completing the transaction,
previous negotiations to complete the commercial
acquisition of the project had been beset by
various delays outside of its control and at the
beginning of 2017, the current owners of the
project notified Ezimbokodweni that they no
longer wished to divest the project. More
recently, the group was notified that an
agreement was reached between the current
owners of the project and the directors of
Ezimbokodweni for the deposit for the project
to be returned and any further negotiations with
Ezimbokodweni to acquire the project to be
terminated. Although, a legal claim by the group
has been issued against Ezimbokodweni and
its representatives, in order for the group to
recover some of the investment, the Board has
considered it to be appropriate to write off the
investment in full in the 2017 year end.
UK property investment
Performance
The group’s portfolio is managed actively
by London & Associated properties plc and
continues to perform well with net property
revenue (excluding joint ventures) across the
portfolio increasing marginally during the year
to £1.125million (2016: £1.084million). The
property portfolio was externally valued at
31 December 2017 and the value of UK
investment properties attributable to the group
at year end remained unchanged at £13.25
million (2016: £13.25million).
Joint venture property investments
The group holds a £0.9million (2016: £0.9million)
joint venture investment in Dragon Retail
Properties Limited, a UK property investment
company. The open market value of the
company’s share of investment properties
included within its joint venture investment in
Dragon Retail Properties remained unchanged
at £1.3million (2016: £1.3million).
Overall, the group achieved net property
revenue of £1.21million (2016: £1.17million) for
the year which includes the company’s share of
net property revenue from its investment in joint
ventures of £83,000 (2016: £86,000).
Loans
South Africa
In July 2017, the group increased its South African
structured trade finance facility with Absa Bank
Limited from R80million (South African Rand) to
R100million. The facility is renewable annually at
30 June and is secured against inventory,
debtors and cash that are held in the group’s
South African operations. This facility comprises
of a R80million revolving facility to cover the
fluctuating working capital requirements of the
group’s South African operations, and a fully
drawn R20million loan facility to cover guarantee
requirements related to the group’s South
African mining operations. The Board anticipate
the facility will be renewed again this year.
United Kingdom
In December 2014, the group signed a £6 million
term loan facility with Santander. The Loan is
secured against the group’s UK retail property
portfolio. The facility has a five year term, and is
repayable at the end of the term. The interest
cost of the loan is 2.35% above LIBOR. No
covenants were breached during the year.
22 Bisichi Mining PLC