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Caledon Resources plc
Annual Report and Accounts
for the year ended 31 December 2008
Contents
2 Chairman’s Statement
4 Review of Operations
7 Financial Review
9 Directors' Biographies
11 Company Information
12 Directors’ Report
16 Corporate Governance Statement
18 Report of the Remuneration Committee
19 Statement of Directors’ Responsibilities
20 Report of the Independent Auditors
21 Consolidated Income Statement
22 Consolidated Balance Sheet
23 Company Balance Sheet
24 Consolidated Statement of Changes in Equity
25 Company Statement of Changes in Equity
26 Consolidated Cash Flow Statement
27 Company Cash Flow Statement
28 Notes to the Financial Statements
51 Notice of Annual General Meeting
1
Chairman’s Statement
Financial
The second half of 2008 saw Caledon post its first ever profit from operations of A$28.2m which recouped the A$8.3m loss
from operations of the first half and resulted in a full year profit from operations of A$19.9m. This improvement has also
enabled the Group to build a healthy treasury balance at a time when raising debt or equity finance is extremely difficult.
Cash on hand at year end stood at A$44.2m. Caledon does not have any refinancing needs during the year ahead, and
while the Board is conscious of the Company’s obligations to repay its outstanding loan notes in July 2010, these needs are
more than covered by the current treasury balance.
Despite this healthy performance, by year end the global economic crisis in the financial markets had firmly taken hold in the
wider economy. It became clear that the robust demand for raw materials experienced in 2008 would be dramatically
reversed in 2009. Steel mills were quick to respond to this changing demand by cutting back production and consequently
their intake of metallurgical coal. This rapid change required the Group to reset its sales targets for 2009 from 900kt to a
minimum of 400kt. This has, in turn, necessitated a reduction in the workforce of approximately 30% in the first quarter of
2009.
The Board is saddened at having to take this decision, particularly for those employees directly impacted. Our employees
have demonstrated dedication and stamina in overcoming significant technical challenges at the Cook mine and contributed
to a very positive working culture.
In addition, we have had to take an impairment charge of A$8.6m on our investment in MTP in recognition of a much lower
likelihood of achieving royalty income from the Magatar agency agreement in the current economic environment.
Health & Safety
The safety and care of all employees is paramount to the success of the Group’s operations. The Board is grateful to all
those involved for their efforts in continually improving Health and Safety standards and attitudes at Cook.
Environment
The Group has continued to increase its proactive focus on environmental awareness and is pleased to report that there
were no complaints or infringement warnings from authorities during the year.
Financing
In May 2008 Caledon concluded its public offer ahead of schedule and listed on the ASX on 4 June. Including the asso-
ciated A$15m public placing, Caledon raised a total of A$22m from Australian retail and institutional investors. These
funds were used to fund the final consideration payment of the Minyango acquisition and to continue the upgrade of the
Cook mine and associated coal handling and preparation plant.
The Company now has in issue a total of £18m of 8.5% unsecured 2010 convertible Loan Notes, a reduction of 35% in
the amount outstanding at the beginning of 2008. During the year, £7.5m of Loan Notes were converted into ordinary
shares in the Group and on 31 December the Group repurchased for cancellation a further £2m Loan Notes for a
consideration of £1.5m.
Corporate
Further to the Press Release of 19 January 2009 regarding a possible offer, the Company has engaged RBC Capital
Markets to conduct a strategic review which includes soliciting further interest in the Company and its assets (the
“Process”). Prior to commencement of the Process the Company had discussions with several parties, one of which
provided the Company with a non-binding, conditional written indication of interest at a level significantly in excess of the
current market price. There is no certainty as to the terms and structure of any such transaction nor that an offer will be
made for the Company as a result of the Process. Shareholders are advised to take no action at this time. Any further
announcement will be made as soon as appropriate.
Board & Management
In March 2008, Caledon announced the resignation of Paul Ingram, a Non-executive Director, from the Board. In July
2008 Stephen Dattels and I joined the Board as Non-executive Directors. In late December I was appointed interim
Chairman due to the ill health of Robert Alford who subsequently retired on 23 January 2009 following medical advice.
Robert joined Caledon’s Board at the time of its original admission to trading on AIM in 2000 and became Non-executive
Chairman in February 2005. In September 2006 he became Executive Chairman in order to manage the Group’s transi-
tion from China-focused gold explorer to Australian coking coal producer. As part of that process, Robert drove several
successful fundraisings, culminating in our ASX listing last year. We thank him for his efforts and dedication and wish him
well for the future.
2
Mark Trevan was appointed Group Managing Director in April 2008 following George Salamis’ resignation as Chief Ex-
ecutive Officer in 2007 and, together with other executives, will assume most of Mr Alford’s executive responsibilities fol-
lowing his resignation.
Conclusion
On behalf of shareholders, I would like to take this opportunity to thank members of the Board, the management team
and all the Group’s employees for their tireless efforts during a challenging 2008.
David de Jongh Weill
Interim Chairman
3
Review of operations
Cook Mine
Bowen Basin, Queensland, Australia
Overview
Mine development has continued to satisfy the objectives of providing adequate resources for improvement in the output
and reliability of the Magatar mining system as well as providing for a relocation of mining operations from the current
Northern location to a Southern area adjacent to pit bottom.
During 2008, virtually all operations were conducted in development and primary extraction modes. By the end of 2008,
the mine had been set up to allow a more balanced mix of development, primary extraction and secondary extraction on
retreat.
Safety
Despite a very strong commitment to safety, an underground miner suffered a severe injury in May when a loader came
down on his right foot which eventually required amputation below the knee. Through a praiseworthy and positive attitude
from the employee concerned and substantial effort from dedicated site personnel, Caledon is pleased to report that the
employee returned to surface duties in early 2009 and is once again contributing to the mine’s development.
This incident was an unfortunately stark reminder of the hazardous environment in which our people operate. It has
reinvigorated our efforts to target zero lost time injuries and we are pleased to report that at the time of writing no more
had occurred.
Environment
A proactive approach to environmental management resulted in a number of successful initiatives being implemented
during the year with the most significant being the introduction of water recycling at the coal processing plant.
Hydrocarbon management was also an area of focus with the introduction of double bunded storage systems and the
establishment of triple interceptor pits to prevent runoff waters from contamination.
Caledon enjoys an open and frank dialogue with the relevant authorities and its immediate neighbours which in turn
facilitates a quick resolution of any issues that arise.
Mine Development
Development driveage designed to access resources in the North Argo area was completed in 2007, allowing the first
Magatar panel to be developed in this area from January 2008. Access to the North Argo area had been developed by the
previous operators of the colliery and was the only area available for immediate production when Caledon commenced
operations in 2007. As this area is almost 4km away from pit bottom, it incurs very high levels of maintenance and overhead
costs, and is therefore not suitable for long term production.
A new stone access driveage was therefore required to be developed to exploit the Argo resource. This was completed
during the second half of 2008. The work involved the completion of a drift between the Castor and Argo seams at the
existing pit bottom location and in seam driveage to complete ventilation circuits, provide access for miners and materials
and permit establishment of a new drift conveyor. Installation of the new drift conveyor feeding the existing underground bin
was completed by year end.
By the end of 2008, setup of the first Magatar panel in the new South Argo area had commenced. Some refurbishment of
old workings remains to be completed to provide for long term ventilation needs in the area.
Meanwhile, in the Northern mining area, the first panel designed for primary and secondary extraction had virtually
completed the primary extraction phase. The mining of this shuttle car panel will now be completed on retreat, using one of
the colliery's owned narrow head continuous miners.
Magatar System Development
The Magatar system implemented at Cook comprises a state of the art, wide head, bolter miner, a Prairie continuous
haulage system, a self-deploying low frame conveyor structure and a cassette type belt extension system. The Magatar
mining methodology also embodies a mining layout that takes advantage of, but is also limited by, the characteristics of the
mining equipment.
The Magatar system has been developed for use in highly competent, typically unfaulted geological conditions. The Argo
seam at Cook, in common with many Australian underground coal mines, requires substantial roof and rib support to sustain
even moderate roadway and intersection widths. It exhibits seam floor conditions that require constant attention to avoid
4
bogging equipment. Mining is often impacted by minor faults and sequence layout can sometimes require the crossing of
major faults. Two such fault crossings were required in the second and third quarters of 2008 although none are anticipated
in 2009.
Each successive Magatar panel has been laid out with the benefit of experience gained in the previous panel, and a mining
method designed to maximise the productivity of the system in the conditions pertaining in the Argo seam at Cook is being
developed. The cycle time for panel development is significant, so the conventional shuttle car mining system is also being
used to develop Magatar panel layout alternatives and secondary extraction techniques.
Development, Primary and Secondary Extraction
In order to economically operate a bord and pillar mine, operations should be conducted via a balanced mix of high cost
development, moderate cost primary extraction and low cost secondary extraction modes. When operations commenced in
2007 all mining was in development mode as virtually all primary and secondary extraction opportunities had been fully
exploited. In late 2007 and throughout 2008 operations have been conducted in a mix of development and primary
extraction modes. As at the end of 2008 the mine has been set up to allow a balanced mix of extraction modes going
forward.
Workforce
One of the major success factors for any business is the quality of the workforce. Nowhere is this more true than in
underground mining.
A major challenge for any new operation, particularly one implementing a new mining system, is to develop a competent and
well trained workforce capable of operating safely and effectively that is also flexible enough to accommodate the constant
changes to working methods required.
Caledon acquired its workforce from its principal mining contractor, Titan Mining, in December 2007. Training modules have
been developed and deployed to ensure safe and effective operations. Cook has become a preferred employer for many,
owing to its strong safety culture and "firm but fair" management practices, facilitating recruitment of additional and
replacement personnel in what has been a highly competitive mining workforce market. It was with considerable regret
therefore that we had to reduce our workforce in March 2009 due to the severe downturn in the coking coal market.
Equipment and Capital Expenditure
During the year, Cook's own Joy 1212D miner was overhauled and converted to a wide head bolter miner configuration at a
cost of A$1.4m. At the end of the year, this unit was operational in the new Southern Argo mains development panel.
Cook's Joy 12CM11 miner was also recommissioned for the stone driveage from Castor to Argo at pit bottom and will be
used in a secondary extraction role in 2009.
Two hired ABM 20 continuous miners were utilised during the year. One was released from hire in May 2008 and the other
in February 2009. Two new shuttle cars were acquired on hire, with an option to buy, in March 2008. A decision with
respect to their purchase will be made shortly.
Expenditure of A$2.8m was incurred to develop the pit bottom access to Southern Argo reserves. A$3.4m was expended
on supplementary equipment to support the Magatar system and other new equipment and major refurbishments to support
ongoing operations.
A total of A$3.3m of capital expenditure was incurred on the coal processing plant, A$2.8m of which was to re-establish the
collapsed thermal coal reclaim tunnel.
2008 production and sales
Production and sales figures for the year ended 31 December 2008 at the Cook Mine were as follows:
Year ended 31 December 2008 tonnes
Coal mined 548,000
Produced
Coking coal 378,000
Thermal coal 66,000
Sold
Coking coal 397,000
Thermal coal 66,000
5
2008 production was substantially below the 1.1-1.2Mt originally forecast due to commissioning problems associated with
the new continuous miner in the first half of the year and the much slower than expected crossing of two faults in the
second half. On the positive side, the coking coal to thermal coal split of 85% to 15% was considerably higher than the
originally expected 80% to 20%.The commissioning issues are now resolved and there are no known major fault
crossings planned for 2009.
Outlook for 2009
In December 2008, Caledon announced that due to the rapidly deteriorating market outlook, it was revising its sales forecast
down from 900kt in 2009 to a minimum of 400kt. Unfortunately the first quarter of 2009 has shown no marked improvement
in the market outlook and this guidance currently remains the Group’s best estimate . This downward revision has brought
the issue of cost containment into sharp focus with all efforts continuing to be centred on reducing unit costs.
Minyango
Bowen Basin, Queensland, Australia
Minyango is an underground coking and thermal coal resource located approximately 15km from the Cook coal preparation
plant. The prospect was purchased in 2006 for approximately A$42m which included extended settlement terms. The final
payment of A$5.4m was made to the vendors in May 2008 and Minyango is now 100% owned by Caledon.
The Group completed its second drilling programme at Minyango during the first half of 2008, resulting in a 52Mt increase in
the resource estimate.
In October 2008 the Company commissioned SMG Consultants Pty Ltd (SMG) to undertake a concept level study on the
development of an underground coal mine on Minyango EPC699. Due to the level of detail in the final report, SMG con-
cluded that it had progressed beyond the concept stage and was close to pre-feasibility level. The final report is due
shortly.
During their work SMG identified the south-eastern corner of EPC699 as the preferred location for the proposed mine ac-
cess portal and surface infrastructure. This area is included in the 2004 hectare cattle property known as Tantallon. Tan-
tallon was put up for public auction in late February with Caledon being the successful bidder at a price of A$3.3m. Own-
ing this property will be a significant advantage in any mine approval process and ongoing access regime. As most of the
land will not be required (or impacted) it is intended to lease the property for continued cattle grazing.
Expenditure on Minyango during 2008 amounted to A$0.66m, bringing the total costs since acquisition to $2.48m.
Resources¹
Resource (Mt)
Measured Indicated Inferred Total
Cook 93 83 - 176
Minyango 53 94 145 292
146 177 145 468
¹The information in this report relating to Cook and Minyango Coal Resources is based on information compiled by Mr Patrick Hanna who is a Fellow of
the Australasian Institute of Mining and Metallurgy. Mr Hanna is the Principal of Hanna Consulting Services Pty Ltd. Mr Hanna has sufficient
experience, which is relevant to the style of mineralisation and the type of deposit under consideration and to the activity which he is undertaking, to
qualify as a Competent Person as defined in the 2004 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and
Ore Reserves" and consents to the inclusion in this report of the matters based on his information in the form and context in which it appears.
Mark Trevan
Managing Director
6
Financial Review
Results from operations
The Group made a profit for the year of A$8.2m compared to a loss of A$34.5m for the previous financial year. The basic
earnings per share for the year were 4.3 cents compared with a loss per share of 23.0 cents for the same period in 2007.
The Group generated a profit from operations of A$19.9m on revenue of A$122m, compared to an operating loss of
A$39.5m and revenue of A$15.2m for the previous financial year.
The revenue recognised for the year was generated from the sale of 397kt (2007: 149kt ) of coking and 66kt (2007: 19kt)
of thermal product, representing revenue generated from the Cook Mine, based in Queensland, Australia. The average
price achieved during the year was US$183/tonne (2007: US$75/tonne).
Costs of sales were A$82.5m (2007: A$37.8m) and were significantly higher than last year due to the increase in coal
production at the Cook mine. Cost of sales on a unit basis was A$178/tonne, down 21% over the unit cost achieved in
2007 of A$224/tonne. The decrease in unit costs has been achieved despite significant increases in costs of inputs and
in royalty costs, which were driven higher by the high selling prices in 2008. The decrease has been realised through
increased productivity and initiatives to reduce mining costs. The group continues to seek opportunities to improve oper-
ating efficiencies and production effectiveness to further drive unit costs down to sustainable levels
Costs of sales in US dollar terms fell 37% from US$195/tonne in 2007 to US$123/tonne in 2008, partly as a result of re-
duced A$ unit cost and partly as a result of the weakening A$:US$ exchange rate.
Administrative expenses were A$20m compared with A$17m for 2007 and included A$9m for impairment charges. For
more information see note 4 to the financial statements.
Fundraising activities
In June 2008 the Company successfully completed a secondary listing of its shares on the Australian Securities Ex-
change (‘ASX’) issuing a total of 20m shares at a price of A$1.10 (£0.52) per share and raising a total of A$20.2m net of
costs from Australian institutional and retail investors.
In March 2008 the Group sourced a A$9m asset finance facility in respect of the ABM25 continuous miner and Prairie
haulage system. A$3.5m of the sum advanced was required to be held in an interest bearing security deposit with West-
pac Banking Corp and the balance of A$5.5m was released.
The funds raised during the year were primarily used to fund the Group’s operations at the Cook mine and the final con-
sideration payment for the Minyango project.
Financing costs
The interest charged on borrowing for the year was A$11.5m (2007: A$6.4m) and comprised interest charged on the
2010 convertible loan and asset finance loan.
The interest charged on the 2010 convertible loan has been calculated in accordance with IAS 39 (‘Financial Instruments:
recognition and measurement’) and results in a higher amount being charged to the income statement of A$8.4m com-
pared to A$4.2m being the actual amount paid during the year. See note 15 for further details.
During the year A$15.6m (£7.5m) loan notes were converted into ordinary shares and A$4.1m (£2m) loan notes were
repurchased and cancelled at a 25% discount to face value. A$37m (£18m) loan notes were outstanding at the year end.
The reduction in the number of loan notes outstanding will result in a saving of A$1.6m per annum on interest payable.
Financial Position
The Group’s balance sheet at 31 December 2008 and comparatives at 31 December 2007 are summarised below:
2008 2007
A$’000 A$’000
Non-current assets 142,810 143,066
Current assets 62,212 31,402
Total assets 205,022 174,468
Current liabilities (23,575) (28,390)
Non-current liabilities (41,045) (51,806)
Total liabilities (64,620) (80,196)
Net assets 140,402 94,272
Non current assets did not move significantly during the year as increases in property plant and equipment and deferred
tax totalling A$7.7m were offset by an almost equivalent decrease in intangible assets and financial assets – available for
sale. The decrease in both intangible assets and financial assets – available for sale resulted from impairments made to
the Group’s wholly owned subsidiary Mining Technology Partnerships Pty Limited and to its investment in Dynasty Gold
Corporation.
7
Total borrowings have decreased from A$46.7m to A$37.3m. The movement is attributable to the repurchase and con-
versions of loan notes (decrease of A$16.6m), foreign exchange gains (decrease of A$4.7m), unwinding expense (in-
crease of A$4.9m) and the asset finance loan (increase of $A7m). Refer to note 15 for details.
Inventories
Included within inventories were coal stocks valued at A$4.8m (2007: A$2.7m), representing 17.1kt of run of mine coal
stocks and 19.8kt of product stocks held at year end.
Cash Flows
The net cash inflow from operating activities for the year was A$17.7m (2007: A$34.9m net cash outflow), resulting
mainly from the higher 2008 contract prices, higher sales volume and lower unit costs.
Net cash used in investing activities was A$26m (2007: A$29m), including amounts of A$11m paid for property, plant and
equipment; A$15.8m of consideration paid to the vendors of the Minyango project; A$0.7m of exploration expenditure
incurred on the Minyango project, less A$1.6m from interest received.
The Group generated A$29.5m from financing activities in the year, which comprised net cash proceeds of A$20.1m from
the issue of ordinary shares to Australian institutional and retail investors, A$7m from an asset finance loan and A$2.3m
from the exercise of share options and warrants.
The resulting year end cash and cash equivalents held totalled A$44.2m (2007: A$24.0m).
Manish Kotecha
Chief Financial Officer
8
Directors’ Biographies
David de Jongh Weill aged 50 - Non-Executive Chairman
Mr Weill started his professional career with Salomon Brothers in 1983 in derivative products sales and trading. He subsequently became
active in proprietary trading for Salomon Brothers in International Fixed Income and Foreign Exchange. Mr Weill left Salomon in 1989 to
develop an international proprietary trading activity with Greenwich Capital Markets.
Thereafter, in 1992, Mr Weill developed his own fund management activity with funds under management growing to over $1.2 billion. From
1998, he has focused on private equity investment, predominantly in natural resource and media and technology companies. Mr Weill has
acquired considerable experience in proprietary trading in international financial markets, investment management, corporate finance, and
corporate governance.
Mr Weill is a founder and partner of Chiliogon Partners LLP.
Mr Weill holds a Bachelor of Business Administration, magna cum laude in International Business from the University of Georgia, a Masters of
Business Administration from the London Business School, a Masters of Science in Law and Accounting from the London School of Economics
and a Masters of Science in Decision Sciences at the London School of Economics. Mr Weill was called to the Bar of England and Wales by
the Honourable Society of Lincoln’s Inn and is a member of the Honourable Society of the Middle Temple.
Mark Trevan aged 52 - Managing Director
Prior to joining Caledon in September 2006 Mr Trevan spent 25 years with Rio Tinto plc in senior executive roles in the areas of marketing,
general commercial, corporate strategy and project feasibility. He joined Rio Tinto's Queensland coal subsidiary in 1997 as General Manager
Marketing and through various corporate reorganisations also became responsible for the marketing of Rio Tinto's Coal and Allied subsidiary
and its Indonesian Kaltim Prima operations. Mr Trevan brings extensive coal industry contacts both within Queensland and the international
arena.
Mr Trevan is also a member of the Health, Safety and Environment (HSE) committee.
Peter Seear aged 56 - Chief Operating Officer
Mr Seear has been actively engaged in the coal mining industry since 1977. He commenced his career immediately upon graduation from
Coventry University in 1977. He became a Chartered Engineer in 1983 and he then proceeded to work for several contract coal mining
companies. Additionally, he spent time with underground coal mining equipment manufacturers as an engineer, including 10 years with Joy
Mining Machinery Ltd in South Africa and in North America. Mr Seear also holds a PMD degree from the Harvard School of Business and
brings a wealth of contacts in the contract coal mining, processing and marketing business.
Mr Seear is the Group’s Chief Operating Officer with overall responsibility for technical direction.
Stephen Dattels aged 61 - Non-executive Director
Mr Dattels has founded and/or financed a number of mining ventures with his most recent being UraMin Inc. which was sold in July 2007 for
$2.5 billion to Areva, the French government-owned fully integrated uranium company. Mr. Dattels was an executive at Barrick Gold
Corporation during its formative years when it grew from a capital base of $10 million to a market capitalisation of $2 billion when he left in early
1987. During his employment with Barrick, he was a Director and Executive Vice President of Corporate Finance. In the past decade, he has
completed several financings either directly or through his merchant bank, Regent Mercantile Bancorp Inc., in the natural resources sector.
This has included exploration, development or production projects in minerals, base metals and precious metals, with the main areas of focus
being Africa and Asia.
Mr Dattels was the Chairman and founder of Caledon Resources PLC and was the co-founder and Managing Director of AIM-listed Oriel
Resources PLC, a developer of nickel and chrome assets in Kazakhstan.
Mr. Dattels is Co Chairman of Regent Pacific Group Limited, a Hong Kong listed vehicle, with interests in a copper/zinc mine in Yunnan
Province, China and various coal interests in China and Indonesia.
Mr. Dattels is also Chairman on Polo Resources Limited with coal interests in Mongolia and Bangladesh as well as in Australia through its
investment in Caledon Resources PLC.
Nicholas Clarke aged 56 - Non-executive Director
Mr Clarke is a graduate of the Camborne School of Mines and is a Chartered Engineer. He has been involved in the mining industry since 1974
in a number of production and service capacities. He worked in South Africa, Ghana and Saudi Arabia on mines for 17 years. In 1992 he
commenced working in the consultancy industry and in 1996 was made Managing Director of CSMA Consultants Ltd which was subsequently
acquired by Wardell Armstrong International. During this period he managed numerous technical studies on mineral projects in Africa, Europe
and the former Soviet Union. He was author and project manager on a number of AIM and TSX CPR’s during this period and was most
specifically involved in the economic valuation of mineral assets. Mr Clarke has extensive experience in managing feasibility studies and how
they interrelate to finance requirements.
In 2004 he joined Oriel Resources plc an AIM and TSX quoted natural resources company with nickel and chrome assets in Kazakhstan as
Director of Mining, and was appointed Managing Director in 2005. In July 2006, Oriel sold its gold assets in Kyrgyzstan and Russia to Lero
Gold Corporation, a TSX-V listed company of which he was President and Chief Executive Officer. In May 2008 Oriel was acquired by Russian
mining company Mechel OAO for US$1.5 billion in cash. He is no longer involved with either Oriel or Lero.
Mr Clarke is a non-executive director of Obtala Resources plc and Sunkar Resources plc, both AIM listed resource companies.
Mr Clarke is the Chairman of Caledon’s remuneration committee and a member of both the audit and HSE committees.
9
Graham Mascall aged 62 - Non-executive Director
Mr Mascall has over 35 years' of commercial, financial and transaction experience in mergers and acquisitions, business development and
project management in mining and mining finance. He has worked as an executive for a number of companies in the mining and mine finance
sector; including Billiton plc where in 2000, as chief executive for mergers and acquisitions, Base Metals and New Business, he led the US$2.1
billion acquisition of Rio Algom Limited. He has also worked for BHP Billiton plc, Deutsche Morgan Grenfell, Outokumpu Metals and Resources
and Barclays Bank plc. Mr Mascall is a graduate in mining engineering from the Camborne School of Mines and holds a Master of Engineering
in Mineral Economics from McGill University. He is currently the CEO and director of Lubel Coal Company Ltd, a private, Ukrainian coal
development company and director of Gemfields Resources plc and Rio Alto Mining Limited.
Mr Mascall is the Chairman of Caledon’s audit committee and a member of both the remuneration and HSE committees.
George Salamis aged 42 - Non-executive Director
Mr Salamis is one of the founding shareholders of Caledon and held the position of Managing Director and Chief Executive Officer until August
2007. Following his resignation as CEO, the Company has asked Mr Salamis to remain as a Director in a Non-executive capacity.
Prior to this, he has held senior management positions with well-established mining companies most notably Placer Dome Inc. and Cameco
Corporation. His career in the mining industry spans over 20 years involving assignments in many different regions of the world, on various
resource commodities. In recent years, he has also played integral executive and non-executive roles, in several large M&A transactions and
major financing initiatives in the mining industry. Mr Salamis, currently President of junior gold producer Rusoro Mining Limited, holds a
graduate degree in Geology from the Universite de Montreal/Ecole Polytechnique.
Mr Salamis is a member of the HSE committee.
10
Company Information
Directors and advisers
Directors David de Jongh Weill (Interim Non-executive Chairman)
Mark Frederick Trevan (Managing Director)
Peter Kenneth Seear (Executive Director)
Stephen Roland Dattels (Non-executive Director)
Nicholas Royston Clarke (Non-executive Director)
Graham Edward Mascall (Non-executive Director)
George Gregory Salamis (Non-executive Director)
Company Secretary Jeremy Gorman
Registered Office Lacon House
84 Theobald's Road
London
WC1X 8RW
Company number 3993115
Nominated Adviser and RBC Capital Markets
Nominated Broker 71 Queen Victoria Street
London
EC4V 4DE
Registered Auditors BDO Stoy Hayward LLP
55 Baker Street
London
W1U 7EU
Solicitors to the Company Nabarro
(English law) Lacon House
84 Theobald’s Road
London
WC1X 8RW
Solicitors to the Company Blake Dawson
(Australian law) Riverside Centre
123 Eagle Street
Brisbane Queensland 4000
Australia
Registrars Computershare Services PLC
PO Box 82
The Pavilions
Bridgwater Road
Bristol
BS99 7NH
11
Directors’ Report
The Directors present their annual report and the audited Group financial statements for the year ended 31 December 2008.
Principal activities
The principal activity of the Group is coal mining and exploration and the principal activity of the Company is a holding company.
Business review and future developments
The purpose of this review is to show how the Group assesses and manages risk and uncertainty and adopts appropriate policies and targets.
Further details of the Group’s business and expected future developments are also set out in the Chairman’s Statement on pages 2 to 3 and in
the Review of Operations on pages 4 to 6.
Principal risks and uncertainties
The Group operates in an uncertain environment that may result in increased risk, costs pressures and schedule delays. The following are
some of the key risks that face the Group:
Exploration and development risk
There is no assurance that the Group’s exploration activities will be successful, and statistically few properties that are explored are ultimately
developed into producing mines. Accordingly, the Group is seeking to balance this risk by building a portfolio of projects and prospects that
carry a range of differing technical and commercial risks, and keeping under careful review the amount invested in any one project.
The Group’s operations may also be curtailed, delayed or cancelled as a result of economic, environmental and political conditions in the area
of operation.
Competition
There is strong competition within the mining industry for the identification and acquisition of suitable properties. The Group competes with
other exploration and production companies, some of which have greater financial resources than the Group, for the acquisition of properties,
leases and other interests as well as for the recruitment and retention of skilled personnel. The challenge for management is to secure
transactions without having to overpay.
Financing
The development of the Group’s properties will depend upon the Group’s ability to obtain financing primarily through the raising of new equity
capital, but also by means of joint venture of projects, debt financing, farm downs or other means. There is no assurance that the Group will be
successful in obtaining the required financing. If the Group is unable to obtain additional financing as needed some interests may be
relinquished and/or the scope of the operations reduced.
Environmental and other regulatory requirements
Existing and possible future environmental legislation, regulations and actions could cause additional expense, capital expenditures,
restrictions and delays in the activities of the Group, the extent of which cannot be predicted. Before exploration and production can commence
on any properties, the Group must obtain regulatory approval and there is no assurance that such approvals will be obtained. No assurance
can be given that new rules and regulations will not be enacted or existing rules and regulations will not be applied in a manner which could
limit or curtail the Group’s operations.
Key performance indicators
The key performance indicators of the Group are as follows:
2004 2005 2006 2007 2008
Coal mined in tonnes - - - 255,300 548,000
Sales in tonnes - - - 168,400 463,000
Revenue per tonne - - - US$75 US$183
Lost time injuries (number of injuries) - - - 2 6
Earnings/(loss) per share (9.8)cents 8.2cents (7.0)cents (23.0)cents 4.3cents
AIM share price at 31 December (pence) 28.0p 17.0p 36.0p 36.0p 8.5p
ASX share price at 31 December (cents) - - - - 20 cents
Cash at bank at 31 December A$6.6m A$18.3m A$27.8m A$24.0m A$44.2m
Results and dividends
The results of the Group for the year ended 31 December 2008 are set out on page 21. Further information is disclosed in the Financial Review
on pages 7 to 8.
The Directors do not recommend payment of a dividend for the year (2007: nil). The profit will be transferred to reserves.
12
Directors and Directors’ interests
The Directors at the date of these financial statements, who served throughout the year and their interests in the ordinary shares in the
Company are as follows:
Ordinary shares of Ordinary shares of Ordinary shares of
0.5p held at 0.5p held at 0.5p held at
27 March 2009 31 December 2008 1 January 2008
David Weill (appointed on 22 July 2008) – – –
Mark Trevan 60,000 60,000 60,000
Peter Seear 1 5,146,262 5,146,262 4,243,189
George Salamis 1,037,500 1,037,500 1,037,500
Stephen Dattels (appointed on 22 July 2008) – – –
Graham Mascall – – –
Nicholas Clarke – – –
1 The interest of Peter Seear comprises his proportion of the MTP Consideration shares whether held directly or via the Seear Family Trust.
2 R J Alford, who served as a director throughout the year, tendered his resignation on 23 January 2009. R J Alford held 522,500 Ordinary Shares at 1 January 2008 and December 2008, and at the date
of his resignation. 210,000 Ordinary Shares out of the interests of R J Alford are held by Portman Welbeck as trustees for R J Alford Guernsey Trust.
3 P A Ingram, who was a director on 1 January 2008, tendered notice of his resignation on 18 March 2008, and this was accepted with immediate effect. P A Ingram held 3,437,500 Ordinary shares at 1
January 2008 and at the date of his resignation. These shares were held by Siam Resources Limited, a company of which he is a director and shareholder.
The Directors’ interests in share options are as follows:
Options at Options granted Options lapsed Options at Exercise First date Final date
Scheme 01.01.08 during the year during the year 31.12.08 price Date of grant of exercise of exercise
M Trevan A 1,421,685 – – 1,421,685 40p 14.12.06 14.12.06 14.12.16
B – 425,241 (212,621) 212,620 74p 26.05.08 26.05.09 26.05.18
P Seear B – 314,024 (157,012) 157,012 74p 26.05.08 26.05.09 26.05.18
G Salamis A 250,000 – – 250,000 10p 11.04.03 11.04.04 11.04.13
A 600,000 – – 600,000 15p 29.04.03 29.04.04 29.04.13
A 350,000 – – 350,000 18.75p 22.11.05 22.11.06 22.11.15
A 1,777,106 – – 1,777,106 40p 14.12.06 14.12.06 14.12.16
G Mascall A 250,000 – – 250,000 10p 11.04.03 11.04.04 11.04.13
A 125,000 – – 125,000 40p 14.12.06 14.12.06 14.12.16
N Clarke A 250,000 – – 250,000 40p 14.12.06 14.12.06 14.12.16
P Ingram (see A 250,000 – – 250,000 10p 11.04.03 11.04.04 18,03,09
note above) A 300,000 – – 300,000 18.75p 22.11.05 22.11.06 18.03.09
A 200,000 – – 200,000 40p 14.12.06 14.12.06 18.03.09
R J Alford (see A 250,000 – – 250,000 10p 11.04.03 11.04.04 11.04.13
note above) A 300,000 – – 300,000 18.75p 22.11.05 22.11.06 22.11.15
A 2,132,527 – – 2,132,527 40p 14.12.06 14.12.06 14.12.16
B – 450,449 (225,224) 225,225 74p 26.05.08 26.05.09 26.05.18
Paul Ingram exercised his option over 250,000 ordinary shares at an exercise price of 10 pence per share. All his other options lapsed on 18
March 2009.
'A' Options
The above options marked 'A' have all been granted under the Finelot plc 1 unapproved 2000 Discretionary Share Option Scheme, and have no
performance conditions.
The right granted to subscribe for Ordinary Shares for options issued prior to 14 December 2006 is exercisable up to 10 years from the date of
grant with the right being exercisable in respect of one third of the Ordinary Shares to which it relates following the first, second and third
anniversary from the date of grant.
The right granted to subscribe for Ordinary Shares for options granted on 14 December 2006 is exercisable up to seven years from the date of
grant with the right being exercisable on 14 December 2006 in respect of one third of the Ordinary Shares to which it relates. The remaining
options will be exercisable in three equal amounts following the first, second and third anniversary from the date of grant.
'B' Options
The above options marked 'B' have all been granted under the Caledon Resources plc 2006 Share Option Scheme, and are exercisable
between 26 May 2009 and 25 May 2018, subject to meeting performance conditions in relation to an increase in production levels of saleable
coal; the reduction of unit production costs; and an increase in shareholder value.
Ordinary Shares resulting from the exercise of any such rights will rank pari passu in all respects with the Ordinary Shares in issue at the time
of such exercise.
Further information is provided in Note 19.
Annual General Meeting
Resolutions will be proposed at the forthcoming Annual General Meeting, as set out in the formal notice on pages 51 to 53. The following
resolutions, constituting Special Business, will be proposed to authorise the Directors to allot unissued Ordinary shares in the capital of the
Company, to allot Ordinary shares for cash otherwise than to existing shareholders pro rata to their holdings, and to repurchase Ordinary shares
1
The share option scheme was adopted when the Company was called Finelot plc. On 14 April 2003 the Company changed its name to Caledon Resources plc.
13
for cancellation:
Resolution 8 is proposed as an Ordinary Resolution to provide the Directors with authority to issue new Ordinary shares up to an aggregate
nominal value of £443,000, representing 42.19 per cent of the Company’s present issued Ordinary share capital, such authority replacing the
resolution passed on 22 July 2008 and to expire on whichever is the earlier of the conclusion of the Annual General Meeting of the Company to be
held in 2010 or the date falling fifteen months from the date of passing of this resolution. The Directors have no present intention of exercising this
authority.
Resolution 9 is to seek authority for the Directors to allot equity securities for cash up to a nominal value of £50,000 representing approximately
4.76 per cent of the Company’s present issued Ordinary share capital. The Act requires that, unless shareholders resolve otherwise, any Ordinary
shares allotted for cash must be offered to existing equity shareholders pro rata to their existing shareholdings. The Act permits this requirement to
be modified and the purpose of the resolution is to replace the resolution passed on 22 July 2008 and provide the Directors with the authority to
issue Ordinary shares of 0.5p for cash, as if such provisions did not apply in certain circumstances, when the Board considers it to be in the best
interests of shareholders. This authority would terminate on the date falling fifteen months after the passing of this resolution or the date of the
Annual General Meeting to be held in 2010, whichever is the earlier. The Board has no present intention of issuing Ordinary shares under this
authority.
Resolution 10 is proposed as a Special Resolution to authorise the Directors to make purchases of the Company’s Ordinary shares in the market
up to a total of 31,000,000 Ordinary shares of 0.5p each, having an aggregate nominal value of £155,000, representing 14.76 per cent of the
Company’s present issued Ordinary share capital at a price of not less than the nominal value of the Ordinary shares and not more than five per
cent above the average of the middle market quotations of the Company’s Ordinary shares derived from the London Stock Exchange Daily Official
list for the five business days before the purchase is made. Such authority will expire on whichever is the earlier of the conclusion of the Annual
General Meeting of the Company to be held in 2010 or the date falling fifteen months from the date of passing of this resolution. Purchases would
only be made if the effect would be expected to improve earnings per share and the Directors consider that it would be in the best interests of the
Company to do so.
As at 19 March 2009, there are outstanding share options in respect of 11,052,536 Ordinary shares of 0.5p pursuant to employees’ share
schemes, which represents 5.26 per cent of the issued Ordinary share capital. If the authority referred to in resolution 10 above to purchase
Ordinary shares were used in full, the share options would represent 6.18 per cent of the issued Ordinary share capital.
In accordance with the Company’s Articles of Association, David Weill and Stephen Dattels, who were appointed during the year, retire at the
forthcoming Annual General Meeting and, being eligible, offer themselves for re-election. Graham Mascall retires by rotation and, being eligible,
offers himself for re-election. David Weill and Stephen Dattels are engaged under letters of appointment which are terminable on three months’
notice and Graham Mascall is engaged under a letter of appointment which is terminable on one month's notice.
The directors consider that all the resolutions to be put to the Annual General Meeting are in the best interests of the Company and its
Shareholders as a whole. Your Board will be voting in favour of them and unanimously recommends that you do so as well.
Additional Information for ASX Investors
(i) As a public company incorporated in England and Wales, Caledon is subject to the City Code on Takeovers and Mergers (the Code). Subject to
certain exceptions and limitations, a mandatory offer may be required to be made under Rule 9 of the Code broadly where: (i) a bidder and any
persons acting in concert with it acquire shares carrying 30% or more of the voting rights of a target company; or (ii) if a bidder, together with
any concert parties, increases its holding where its holding is not less than 30% but not more than 50% of the voting rights. Rule 9 requires a
mandatory offer to be made in cash and at the highest price paid by the bidder (or any persons acting in concert with it) for any interest in
shares of the relevant class during the 12 months prior to the announcement of the offer.
In addition, save in certain specified circumstances, rule 5 of the code imposes restrictions on acquisitions which increase a person's total
number of voting rights in caledon (when aggregated with those of his concert parties) to 30% or more of the total voting rights of the company
or if he, together with his concert parties, having an interest in 30% or more of such voting rights, acquires more voting rights up to (and
including) a total of 50%.
Where a bidder obtains acceptances of at least 90% of the shares subject to a takeover offer (which excludes any shares held by it or its
concert parties) and acceptances of at least 90% of the voting rights carried by the shares subject to the offer, it can require the remaining
shareholders who have not accepted the offer to sell their shares on the terms of the offer.
(ii) Caledon is not subject to Chapters 6, 6A, 6B and 6C of the Australian Corporations Act (Corporations Act 2001 (Cth)) dealing with the
acquisition of shares (including substantial holdings and takeovers).
Corporate Governance
The Company’s compliance with the principles of corporate governance is explained in the corporate governance statement on pages 16 to 17.
Ordinary Share Capital
Details of issues of Ordinary share capital during the year are set out in note 18.
14
Significant shareholders
As at 2 March 2009, so far as the Directors are aware, the only persons (other than the interests held by Directors) who are directly or indirectly
interested in 3% or more of the nominal value of the Company’s share capital are as follows:
Number of Ordinary Ordinary Shares as % of
Shares held issued share capital
Polo Resources Ltd 54,405,196 25.94
Ingalls & Snyder LLC 30,418,762 14.50
Watami Trading Limited 12,046,175 5.74
J P Morgan Asset Management 9,704,700 4.63
Payments to suppliers
The Group and Company has no formal code or standard which deals specifically with the payment of suppliers. However, the Group's and
Company’s policy on the payment of all creditors is to ensure that the terms of payment, as specified and agreed with the supplier, are not
exceeded. Trade creditors as at 31 December 2008 for the Group represent 16.5 days (2007: 30 days), and for the Company represent 16
days (2007: 30 days) as a proportion of the total amount invoiced by suppliers during the year ended on that date.
Post balance sheet events
See note 26 for further information.
Financial instruments
Details of the use of financial instruments by the Company and its subsidiary undertakings are contained in note 24 of the financial statements.
Financial risk management
Financial risk factors
The Group’s multi-national operations expose it to a variety of financial risks: market risk (foreign currency exchange rates and interest rates),
liquidity risk, and credit risk.
(i) Market risk
A significant financial risk relates to the Group's £18 million convertible loan notes issued in 2007 as the Group does not hedge against non-
Australian dollar denominated interest-bearing liabilities. The Group has managed interest rate risk by borrowing at fixed interest rates. For
details on the £18 million convertible loan notes please see note 15.
(ii) Liquidity risk
Prudent liquidity risk management in the context of the Group implies maintaining sufficient cash or marketable securities in the necessary
currencies to be able to pay creditors as and when they fall due.
The bulk of the Group’s cash balances are held in Australian dollar denominated floating rate deposits as required to fund its short-term
requirements.
(iii) Credit risk
Cash balances are deposited with banks with a high credit rating.
Donations
The Company donated A$1,500 (2007: nil) to charitable causes in the vicinity of the Cook mine during the year. There were no political
donations in the current or prior year.
Disclosure of information to auditors
So far as each Director at the date of approval of this report is aware, there is no relevant audit information of which the Company’s auditors
are unaware and each Director has taken all steps that he ought to have taken to make himself aware of any relevant audit information and to
establish that the auditors are aware of that information.
Auditors
BDO Stoy Hayward LLP have expressed their willingness to continue in office as auditors, and a resolution to reappoint them will be proposed
at the Annual General Meeting.
By order of the Board
Jeremy Gorman
Company Secretary
27 March 2009
15
Corporate Governance Statement
The Company, which is listed on both AIM and the ASX, is not formally required to comply with the Combined Code on Corporate Governance
(as amended in June 2006) (the "Combined Code"), which applies to Companies which are Fully Listed on the London Stock Exchange.
However, the Board has given consideration to the provisions set out in Section 1 of the Combined Code.
The Directors support the objectives of the Combined Code and intend to comply with those aspects which they consider relevant to the
Group’s size and circumstances. Details of these are set out below. A statement of the Directors’ responsibilities in respect of the financial
statements is set out on page 19. Below is a brief description of the role of the Board and its committees, including a statement regarding the
Group’s system of internal financial control.
The workings of the Board and its committees
The Board of Directors
The Board currently comprises an Interim Non-executive Chairman, (David Weill), two Executive Directors (Mark Trevan and Peter Seear) and
four further Non-executive Directors (Stephen Dattels, Nick Clarke, Graham Mascall and George Salamis).
R J Alford served as Executive Chairman throughout the year, and resigned on 23 January 2009. P A Ingram served as an additional Non-
executive Director during the period 1 January 2008 to 18 March 2008.
The Board considers that Nick Clarke, Graham Mascall and George Salamis are independent of management and free from any business or
other relationships which could materially interfere with the exercise of their independent judgement.
An agreed procedure exists for Directors in the furtherance of their duties to take independent professional advice. Newly appointed Directors
are made aware of their responsibilities through the Company Secretary. The Company does not make any provision for formal training of new
Directors.
The Company has established properly constituted audit; remuneration; health, safety and environment; and nomination committees of the
Board with formally delegated duties and responsibilities.
Conflicts of Interest
Following the changes arising under the Companies Act 2008, the Board confirms that it has instituted a process for reporting and managing
any conflicts of interest held by Directors. Under the Company's Articles of Association, the Board has the authority to approve such conflicts.
Stephen Dattels is a Director of Polo Resources Limited ("Polo"), which holds 25.94% of the Company's present issued share capital. A
Shareholder Relationship Agreement has been instituted between the Company and Polo in order to manage inter alia potential conflicts of
interest in respect of Stephen Dattels. Under the terms of this agreement, Polo has the right to nominate two directors to the Board of the
Company, and has nominated David Weill in addition to Stephen Dattels.
Board Meetings
Board meetings are held on average every two months. Decisions concerning the direction and control of the business are made by the Board,
and a formal schedule of matters specifically reserved for the Board is in place.
The Board is responsible, inter alia, for setting and monitoring Group strategy, reviewing trading performance, ensuring adequate funding, ex-
amining major acquisition opportunities, formulating policy on key issues and reporting to the shareholders.
The Audit Committee
The Audit Committee comprised the following Directors during the year:
Graham Mascall
Nicholas Clarke
The Committee provides a forum for reporting by the Group’s external auditors. Meetings are held on average once a year and are also
attended, by invitation, by the executive Directors. The present Committee Chairman is Graham Mascall.
The Audit Committee is responsible for reviewing a wide range of financial matters including the annual and half year results, financial
statements and accompanying reports before their submission to the Board and monitoring the controls which ensure the integrity of the
financial information reported to the shareholders.
The Remuneration Committee
The Remuneration Committee comprised the following Directors during the year:
Nicholas Clarke
Graham Mascall
The present Committee Chairman is Nicholas Clarke.
The Committee is responsible for recommending to the Board the terms and conditions of employment of the executive Directors.
A report from the Remuneration Committee appears on page 18.
Health, Safety and Environment Committee
The Company’s Health, Safety and Environment Committee (‘HSE Committee’) is composed of four members and is chaired by Nicholas
Clarke, an independent non-executive Director. The other members of the Committee are Mark Trevan, an executive Director, and George
Salamis and Graham Mascall, both of whom are non-executive Directors.
The HSE Committee assists the Board in formulating the Group’s health, safety and environment policies as they affect the Group’s operations,
16
including monitoring compliance with national and international standards and reviewing management’s investigations of incidents or accidents
that occur in order to assess whether policy improvements are required.
The Nomination Committee
On 19 April 2008, the Board resolved to appoint a Nomination Committee, comprising Robert Alford (Committee Chairman), Graham Mascall
and Nicholas Clarke, and adopted Terms of Reference for this Committee. Robert Alford resigned from this Committee on 23 January 2009.
This Committee will make recommendations to the Board concerning, inter alia, the appointment of new Directors and proposals for the
reappointment of Directors at the Annual General Meeting. These decisions were previously undertaken by the full Board.
Internal financial control
The Board is responsible for establishing and maintaining the Group’s system of internal financial controls. Internal financial control systems
are designed to meet the particular needs of the group concerned and the risk to which it is exposed, and by its very nature can provide
reasonable, but not absolute, assurance against material misstatement or loss.
The Directors are conscious of the need to keep effective internal financial control, particularly in view of the limited cash resources of the Group.
Due to the relatively small size of the Group’s operations, the Directors are very closely involved in the day-to-day running of the business and as
such have less need for a detailed formal system of internal financial control. The Directors have reviewed the effectiveness of the procedures
presently in place and consider that they are still appropriate to the nature and scale of the operations of the Group.
Going concern
The financial statements have been prepared on a going concern basis. The Group’s cash and cash equivalent stood at A$44.2 million at 31 De-
cember 2008. The Group intends to operate within its cash resources.
17
Report of the Remuneration Committee
The Remuneration Committee (the ‘Committee’) comprised, during the year ended 31 December 2008, Nicholas Clarke (Chairman) and
Graham Mascall.
Remuneration packages are determined with reference to market remuneration levels, individual performance and the financial position of the
Company and the Group.
The Board determines the remuneration of non-executive Directors within the limits set by the Company’s Articles of Association. They have
letters of engagement with the Company and their appointments are terminable on one months’ written notice on either side.
None of the Directors has a service contract which is terminable on greater than one year’s notice.
On 21 September 2000 the Company adopted ‘The Finelot plc 2 Unapproved 2000 Discretionary Share Option Scheme’ in which the Directors
participate. This option scheme was closed on 14 December 2006 with the result that no further grants of options will be made under it (but
without prejudice to existing rights granted under it).
On 14 December 2006 the Board adopted the Caledon Resources plc 2006 Share Option Scheme (the ‘New Share Option Scheme’). The New
Share Option Scheme is not approved by HM Revenue & Customs, and provides incentives by way of options granted with an exercise price
equal to the market value of relevant shares (as at the date of grant).
For further information please refer to page 13 of the Directors’ Report.
The remuneration of the Directors during the year was as follows:
Non-cash
Salaries Fees Bonuses benefits Pension costs Total Total
2008 2008 2008 2008 2008 2008 2007
A$ A$ A$ A$ A$ A$ A$
David Weill 30,931 – – – – 30,931 –
Mark Trevan 421,250 – 205,804 27,000 25,275 679,329 367,033
Peter Seear 329,167 – 164,643 2,904 – 496,714 270,109
George Salamis 53,786 – – – – 53,786 222,572
Nicholas Clarke 53,786 42,496 – – – 96,282 47,640
Graham Mascall 53,786 42,496 – – – 96,282 47,640
Stephen Dattels – 30,931 – – – 30,931 –
Robert Alford (resigned 23
January 2009) 43,476 422,817 208,110 – – 674,403 297,750
Paul Ingram (resigned 18
March 2008) – – – – – – 149,132
986,182 538,740 578,557 29,904 25,275 2,158,658 1,401,876
The current terms of appointment of the Directors are as follows:
Pension
Salaries or fees contributions Date of Notice period
p.a. % contract (months)
Executive Directors
Mark Trevan A$490,000 6 31/08/06 12
Peter Seear A$350,000 – 25/09/06 12
Non-executive Directors
David Weill £30,000 – 22/07/08 3
Stephen Dattels £30,000 – 22/07/08 3
Nicholas Clarke £30,000 – 28/07/06 1
Graham Mascall £30,000 – 28/07/06 1
George Salamis £30,000 – 17/12/06 1
It should be noted that remuneration adjustments and bonus payments were made in mid 2008 after a remuneration benchmarking exercise
against peer coal producers had been undertaken by a recognised consultancy. In addition, they reflected prevailing share price performance,
the recent successful listing on the ASX and in the case of Mark Trevan his appointment to Group Managing Director.
On behalf of the Remuneration Committee
Nicholas Clarke
Remuneration Committee Chairman
27 March 2009
2
The share option scheme was adopted when the Company was called Finelot plc. On 14 April 2003 the Company changed its name to Caledon Resources plc
18
Statement of Directors’ Responsibilities
The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position
of the Company, for safeguarding the assets of the Company, for taking reasonable steps for the prevention and detection of fraud and other
irregularities and for the preparation of a Directors’ Report which complies with the requirements of the Companies Act 1985.
The Directors are responsible for preparing the annual report and the financial statements in accordance with the Companies Act 1985. The
directors are also required to prepare financial statements for the Group in accordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs) and the rules of the London Stock Exchange for companies trading securities on the Alternative
Investment Market. The Directors have chosen to prepare financial statements for the company in accordance with IFRSs.
International Accounting Standard 1 requires that financial statements present fairly for each financial year the Company’s financial position,
financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in
accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting
Standards Board’s ‘Framework for the preparation and presentation of financial statements’. In virtually all circumstances, a fair presentation
will be achieved by compliance with all applicable IFRSs. A fair presentation also requires the Directors to:
• consistently select and apply appropriate accounting policies;
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable
information; and
• provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the
impact of particular transactions, other events and conditions on the entity’s financial position and financial performance.
Financial statements are published on the Group's website in accordance with legislation in the United Kingdom governing the preparation and
dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Group's
website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements
contained therein.
19
Report of the Independent Auditors
To the shareholders of Caledon Resources plc
We have audited the Consolidated and parent company financial statements (the ‘financial statements’) of Caledon Resources plc for the year
ended 31 December 2008 which comprise the Consolidated Income Statement, the Consolidated and Company Statement of Changes in
Equity, the Consolidated and Company Balance Sheets, the Consolidated and Company Cash Flow Statements and the related notes. These
financial statements have been prepared under the accounting policies set out therein.
Respective responsibilities of Directors and auditors
The Directors’ responsibilities for preparing the Annual Report and the financial statements in accordance with applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union are set out in the Statement of Directors’ Responsibilities.
Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards
on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true and fair view and have been properly prepared in accordance
with the Companies Act 1985 and whether the information given in the Directors’ Report is consistent with those financial statements. We also
report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all the information and
explanations we require for our audit, or if information specified by law regarding Directors’ remuneration and other transactions is not
disclosed.
We read other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. The other
information comprises only the Directors’ Report, the Chairman’s Statement, Operational Highlights, the Review of Operations, Directors'
Biographies, Directors and advisers, the Financial Review, the Corporate Governance Statement and the Report of the Remuneration Committee.
We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial
statements. Our responsibilities do not extend to any other information.
Our report has been prepared pursuant to the requirements of the Companies Act 1985 and for no other purpose. No person is entitled to rely
on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of the Companies Act 1985 or
has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other
person or for any other purpose and we hereby expressly disclaim any and all such liability.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An
audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an
assessment of the significant estimates and judgements made by the Directors in the preparation of the financial statements, and of whether
the accounting policies are appropriate to the Group’s and Company’s circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us
with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by
fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation
of information in the financial statements.
Opinion
In our opinion:
the Group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the
Group’s affairs as at 31 December 2008 and of its profit for the year then ended;
the parent company financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union as applied in
accordance with the provisions of the Companies Act 1985, of the state of the parent company’s affairs as at 31 December 2008;
the financial statements have been properly prepared in accordance with the Companies Act 1985; and
the information given in the Directors’ Report is consistent with the financial statements.
BDO Stoy Hayward LLP
Chartered Accountants
and Registered Auditors
London
27 March 2009
20
Consolidated Income Statement
for the year ended 31 December 2008
2008 2007
Note A$’000 A$’000
Revenue 121,949 15,221
Cost of sales (82,488) (37,830)
Gross profit\(loss) 39,461 (22,609)
Impairment of assets (8,978) (1,977)
Other administrative expenses (10,549) (14,882)
Administrative expenses 4 (19,527) (16,859)
Profit\(loss) from operations 19,934 (39,468)
Finance income 5 1,989 941
Finance expense 5 (11,483) (6,377)
Profit\(loss) for the year before taxation 10,440 (44,904)
Tax expense 6 (2,200) 11,955
Profit\(loss) for the year from continuing operations 8,240 (32,949)
Profit\(loss) from discontinued activities for the year 9 - (1,553)
Profit\(loss) for the year 8,240 (34,502)
Earnings\(loss) per share expressed in cents per share 21
– Basic 4.3 (23.0)
– Diluted 4.1 (23.0)
The notes on pages 28 to 50 form part of these financial statements.
21
Consolidated Balance Sheet
as at 31 December 2008
2008 2007
Note A$’000 A$’000
Assets
Non-current assets
Intangible assets 7 43,202 50,682
Property, plant and equipment 8 80,791 74,416
Financial asset – available for sale investment 10 154 581
Deferred tax asset 11 18,663 17,387
142,810 143,066
Current assets
Inventory 12 6,843 3,397
Trade and other receivables 13 11,204 4,051
Cash and cash equivalents 14 44,165 23,954
62,212 31,402
Total assets 205,022 174,468
Liabilities
Current liabilities
Current tax payable 6 1,099 1,622
Borrowings 15 2,342 -
Provisions 16 898 527
Trade and other payables 17 19,236 26,241
23,575 28,390
Non-current liabilities
Borrowings 15 34,949 46,688
Provisions 16 1,691 1,566
Deferred tax liability 11 4,405 3,552
41,045 51,806
Total liabilities 64,620 80,196
Capital and reserves attributable to shareholders
Share capital 18 2,338 1,930
Share premium 20 145,266 108,611
Other reserves 20 (206) (206)
Option premium on convertible loan 20 10,229 14,101
Foreign currency translation reserve 20 11,414 11,414
Retained earnings 20 (28,639) (41,578)
140,402 94,272
Total equity and liabilities 205,022 174,468
The financial statements were approved by the Board of Directors and authorised for issue on 27 March 2009.
Mark Trevan
Director
The notes on pages 28 to 50 form part of these financial statements.
22
Company Balance Sheet
as at 31 December 2008
2008 2007
Note A$’000 A$’000
Assets
Non-current assets
Property, plant and equipment 8 11 20
Investment – available for sale investment 10 154 581
Deferred tax asset 11 168 168
Amounts due from Group companies 13 189,484 144,964
189,817 145,733
Current assets
Trade and other receivables 13 285 396
Cash and cash equivalents 14 4,298 20,525
4,583 20,921
Total assets 194,400 166,654
Liabilities
Current liabilities
Current tax payable 6 1,099 1,623
Trade and other payables 17 3,457 309
4,556 1,932
Non-current liabilities
Borrowings 15 30,243 46,688
Total liabilities 34,799 48,620
Capital and reserves attributable to shareholders
Share capital 18 2,338 1,930
Share premium 20 145,266 108,611
Option premium on convertible loan 20 10,229 14,101
Foreign currency translation reserve 20 964 964
Retained earnings 20 804 (7,572)
159,601 118,034
Total equity and liabilities 194,400 166,654
The financial statements were approved by the Board of Directors and authorised for issue on 27 March 2009.
Mark Trevan
Director
The notes on pages 28 to 50 form part of these financial statements.
23
Consolidated Statement of Changes in Equity
for the year ended 31 December 2008
Foreign Options
currency premium on
Share Share Capital translation convertible Revaluation Retained
capital premium Reserve reserve loan reserve earnings Total
A$'000 A$'000 A$'000 A$'000 A$'000 A$'000 A$'000 A$'000
At 1 January 2007 7,154 83,258 (206) 95 1,204 (426) (15,732) 75,347
Changes in Equity
Revaluation of available for
sale investment – – – – – (405) – (405)
Transfer to income state-
ment on impairment of
available for sale invest-
ment – – – – – 1,014 – 1,014
Deferred tax on revaluation
of investment – – – – – (183) – (183)
Foreign exchange on trans-
lation of foreign operations – – – 8,295 – – – 8,295
Foreign exchange on
change in presentation
currency – – – 3,024 – – – 3,024
Net income recognised
directly in equity – – – 11,319 – 426 – 11,745
Loss for the year – – – – – – (34,502) (34,502)
Total recognised income
and expense for the year – – – 11,319 – 426 (34,502) (22,757)
Cancellation of Deferred
Shares (5,580) – – – – – 5,580 –
Issue of shares 356 25,353 – – – – – 25,709
Exercise of convertible loan
note – – – – (1,204) – 1,204 –
Issue of convertible loan
notes – – – – 14,799 – – 14,799
Issue costs of convertible
loan notes – – – – (698) – – (698)
Equity settled share based
payments – – – – – – 1,872 1,872
At 1 January 2008 1,930 108,611 (206) 11,414 14,101 – (41,578) 94,272
Profit for the year – – – – – – 8,240 8,240
Total recognised income
and expense for the year – – – – – – 8,240 8,240
Issue of shares 408 38,510 – – – – – 38,918
Cost of share issue – (1,855) – – – – – (1,855)
Exercise of convertible loan
notes – – – – (3,846) – 3,846 –
Repurchase of convertible
loan notes – – – – (26) – – (26)
Equity settled share based
payments – – – – – – 853 853
At 31 December 2008 2,338 145,266 (206) 11,414 10,229 – (28,639) 140,402
The notes on pages 28 to 50 form part of these financial statements.
24
Company Statement of Changes in Equity
for the year ended 31 December 2008
Foreign Options
currency premium on
Share Share Capital translation convertible Revaluation Retained
capital premium Reserve reserve loan reserve earnings Total
A$'000 A$'000 A$'000 A$'000 A$'000 A$'000 A$'000 A$'000
At 1 January 2007 7,154 83,258 – – 1,204 (426) (6,246) 84,944
Changes in Equity
revaluation of available for
sale investment – – – – – (405) – (405)
Transfer to income state-
ment on impairment of
available for sale invest-
ment – – – – – 1,014 – 1,014
Deferred tax on revaluation
of investment – – – – – (183) – (183)
Foreign exchange on
change in presentation
currency – – – 964 – – – 964
Net income recognised
directly in equity – – – 964 – 426 – 1,390
Loss for the year – – – – – – (9,982) (9,982)
Total recognised income
and expense for the year – – – 964 – 426 (9,982) (8,592)
Cancellation of Deferred
Shares (5,580) – – – – – 5,580 –
Issue of shares 356 25,353 – – – – – 25,709
Exercise of convertible loan
note – – – – (1,204) – 1,204 –
Issue of convertible loan
notes – – – – 14,799 – – 14,799
Issue costs of convertible
loan notes – – – – (698) – – (698)
Equity settled share based
payments – – – – – – 1,872 1,872
At 1 January 2008 1,930 108,611 – 964 14,101 – (7,572) 118,034
Profit for the year – – – – – – 3,677 3,677
Total recognised income
and expense for the year – – – – – – 3,677 3,677
Issue of shares 408 38,510 – – – – – 38,918
Cost of share issue – (1,855) – – – – – (1,855)
Exercise of convertible loan
notes – – – – (3,846) – 3,846 –
Repurchase of convertible
loan notes – – – – (26) – – (26)
Equity settled share based
payments – – – – – – 853 853
At 31 December 2008 2,338 145,266 – 964 10,229 – 804 159,601
The notes on pages 28 to 50 form part of these financial statements.
25
Consolidated Cash Flow Statement
for the year ended 31 December 2008
2008 2007
Note A$’000 A$’000
Cash flow from operating activities
Profit\(loss) before taxation 10,440 (44,904)
Adjustments for:
Finance income 5 (1,989) (941)
Finance expense 5 11,483 6,377
Depreciation 8 4,600 1,923
Loss on disposal of subsidiary undertaking - (934)
Disposal of property plant and equipment 3 -
Impairment of intangible asset 8,551
Impairment of available for sale investment 427 1,977
Equity settled share-based payment expense 19 853 1,872
Foreign exchange differences (3,618) 2,062
Net cash flow from operating activities before changes in working capital 30,750 (32,568)
Decrease\(increase) in inventories 12 (3,445) (2,957)
Increase\(decrease) in payables 17 6,311 2,192
(Increase)\decrease in receivables 13 (7,176) 1,622
Net cash flow from operating activities before interest and taxation paid 26,440 (31,711)
Interest paid 5 (5,596) (3,217)
Taxation paid 6 (3,139) -
Net cash flow from operating activities 17,705 (34,928)
Investing activities
Payments for property, plant and equipment 8 (10,979) (23,774)
Payments for patents and trademarks 7 (5) -
Interest received 5 1,567 894
Proceeds from the disposal of subsidiary undertaking - 174
Exploration costs capitalised 7 (660) (1,054)
Deferred consideration on acquisition of subsidiary (15,810) (4,862)
Net cash flow from investing activities (25,887) (28,622)
Financing activities
Issue of ordinary shares 18 24,271 310
Cost of share issue (1,855) -
Asset finance loan 15 7,048 -
Issue of convertible loan notes 15 - 62,219
Cost of issue of convertible loan notes - (2,923)
Net cash flow from financing activities 29,464 59,606
Net (decrease)\ increase in cash and cash equivalents in the year 21,282 (3,944)
Cash and cash equivalents at the beginning of the year 14 23,954 27,820
Effect of foreign exchange rate changes on cash and cash equivalents (1,071) 78
Cash and cash equivalents at the end of the year 14 44,165 23,954
26
Company Cash Flow Statement
for the year ended 31 December 2008
2008 2007
Note A$’000 A$’000
Cash flow from operating activities
Profit\(loss) before taxation 4,869 (8,273)
Adjustments for:
Finance income (15,254) (9,723)
Finance expense 9,110 5,769
Depreciation 8 12 15
Loss on disposal of subsidiary undertaking - 10,586
Impairment of available for sale investment 427 1,977
Equity settled share-based payment expense 19 853 1,872
Foreign exchange differences (3,619) 1,305
Net cash flow from operating activities before changes in working capital (3,602) 3,528
Increase/(decrease) in payables 17 25 (837)
(Increase)/decrease in receivables 13 126 91
Net cash flow from operating activities before interest and taxation paid (3,451) 2,782
Interest paid 5 (4,221) (2,767)
Taxation paid 6 (1,709) -
Net cash flow from operating activities (9,381) 15
Investing activities
Payments for property, plant and equipment 8 (3) -
Loan issued (28,719) (63,630)
Interest received 5 532 738
Net cash flow from investing activities (28,190) (62,892)
Financing activities
Issue of ordinary shares 18 24,271 310
Cost of share issue (1,855) -
Issue of convertible loan notes 15 - 62,219
Cost of issue of convertible loan notes - (2,923)
Net cash flow from financing activities 22,416 59,606
Net (decrease)\increase in cash and cash equivalents in the period (15,155) (3,271)
Cash and cash equivalents at the beginning of the year 14 20,525 23,796
Effect of foreign exchange rate changes on cash and cash equivalents (1,072) -
Cash and cash equivalents at the end of the year 14 4,298 20,525
27
Notes to the Financial Statements
for the year ended 31 December 2008
1. Principal accounting policies
The Company is a limited liability company incorporated and domiciled in the United Kingdom. The address of its registered office is Lacon
House, 84 Theobald's Road, London, WC1X 8RW. The principal accounting policies applied in the preparation of these consolidated financial
statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
Basis of preparation
The financial statements for the year ended 31 December 2008 have been prepared on the basis of all IFRS and interpretations adopted by the
European Union that are mandatory for periods ending 31 December 2008.
The IFRS financial information has been drawn up on the basis of accounting policies consistent with those applied in the financial statements
for the year to 31 December 2007. The following standards, interpretations and amendments to existing standards have been adopted for the
first time in 2008:
International Accounting Standards (IAS/IFRS) Effective date
• IAS39 & IFRS7- Amendment - Reclassification of Financial Instruments 1 July 2008
International Financial Reporting Interpretations (IFRIC) Effective date
• IFRIC 11 - (IFRS 2) Group and treasury share transactions 1 January 2008
• IFRIC 13 - Customer loyalty programmes 1 July 2008
• IFRIC 14 - IAS 19 - The limit on a defined benefit asset, minimum funding requirements and
their interaction 1 January 2008
The adoption of these standards, interpretations and amendments did not affect the Group results of operations or financial positions.
The IASB and IFRIC have issued the following standards and interpretations which are effective for reporting periods beginning after the date
of these financial statements:
International Accounting Standards (IAS/IFRS) Effective date
• IAS 1 - Amendment - Presentation of financial statements: a revised presentation 1 January 2009
• IFRS 8 - Operating segments 1 January 2009
• IAS 23 - Amendment – Borrowing costs 1 January 2009
• IFRS 2 - Amendment - Share based payment: vesting conditions and cancellations 1 January 2009
• IAS 27* - Amendment - Consolidated and separate financial statements 1 July 2009
• IFRS 3* - Revised - Business combinations 1 July 2009
• IFRS 1* - Revised - First time adoption of IFRS 1 January 2009
• IAS32 & IAS1* - Amendment - Puttable financial instrument and obligations arising on liquidation
Improvements to IFRSs* 1 January 2009
• IFRS1 & IAS27* - Amendment - Cost of an investment in a subsidiary, jointly-controlled entity
or associate 1 January 2009
• IAS39* - Amendment - Financial Instruments: recognition and measurement:
eligible hedged Items 1 July 2009
• IAS39* - Amendment -Reclassification of financial assets: effective date and transition 1 July 2009
• IFRS7* - Amendment - improving disclosures about financial instruments 1 January 2009
International Financial Reporting Interpretations (IFRIC) Effective date
• IFRIC 12* - Service concession arrangements 1 January 2008
• IFRIC 15* - Agreements for the construction of real estate 1 January 2009
• IFRIC 16* - Hedges of a net investment in a foreign operation 1 October 2008
• IFRIC 17* - Distributions of non-cash assets to owners 1 July 2009
• IFRIC 18* - Transfers of assets from customers 1 July 2009
* These have not been endorsed by the EU. The group is evaluating the impact of the above pronouncements but they are not expected to be
material to the Group’s earnings or to shareholders’ funds.
Effective 1 January 2008, the Company’s functional currency changed from Pounds sterling ('£') to the Australian dollar (‘A$’). This change was
made as, due to significant balances being denominated in A$, the directors considered the A$ to most faithfully represent the economic
effects of the underlying transactions, events and conditions in the Company. Concurrent with this change in functional currency, the Group
adopted the A$ as its presentation currency and consequently the financial information for the year ended 31 December 2007 has been re-
presented in A$.
In accordance with International Accounting Standards, this change in functional currency has been accounted for prospectively by translating
all items using the A$:£ exchange spot rate on that date, being A$2.2625:£1. In the parent company accounts the resulting translated amounts
for non monetary items at this date have been treated as their historic cost. Additionally the comparatives for the year ended 31 December
2007 have been translated at this rate.
For the purposes of changing the Group’s presentation currency, the comparatives for the year ended 31 December 2007 were translated for
28
Notes to the Financial Statements
for the year ended 31 December 2008
the balance sheet using A$:£ exchange spot rate on that date, being A$2.2625:£1, for the income statement using the average A$:£ exchange
rate during the year being A$2.382:£1, and for the opening the balances as at 1 January 2007 using the A$:£ spot rate on that date being
A$2.4835:£1. Resulting exchange differences have been taken to the Foreign currency translation reserve.
The Group financial information is presented in Australian dollars (‘A$’) and values are rounded to the nearest thousand dollars (A$’000).
Profit\(loss) from operations is stated after charging and crediting all operating items excluding finance income and expense.
Reclassification
In the prior year, certain costs such as rail, port, third party selling expenses, state royalties, depreciation of mining assets and staff costs were
included in administrative expenses. However, the Directors have decided to now include these costs in cost of sales as they feel that this
provides a more accurate presentation. The reclassification has resulted in A$8 million being reclassified from the administrative expenses line
item to the cost of sales line item for the year ended 31 December 2007. There has been no change in the loss from operations, net loss before
and after tax or net assets in the prior year as a result of the reclassification.
Going concern
Having considered the relevant budgets and operational forecasts the Directors are of the opinion that the Group has sufficient working capital
to meet its liabilities for the next twelve months. In July 2010 convertible loan notes amounting to £18m (A$37m) potentially fall due if the
holders elect not to exercise the conversion rights. The Directors continue to consider a number of options for financing this liability should it fall
due.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its
subsidiaries). The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the
effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. All intra-Group
transactions, balances, income and expenses are eliminated on consolidation.
Caledon Resources plc is the ultimate parent and ultimate controlling party of the Group.
The Company has taken advantage of the exemption provided under section 230 of the Companies Act 1985 not to publish its individual
income statement and related notes.
Segmental reporting
A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in
providing products or services within a particular environment (geographic segment), which is subject to risks and rewards that are different
from those of other segments.
Inter-segment pricing is determined on an arm’s length basis. Segment results included items directly attributable to a segment as well as
those that can be allocated on a reasonable basis.
Revenue
Revenue from the sale of coal is recognised upon the delivery of goods to customers.
Interest income is recognised on a proportional basis taking into account the effective interest rates applicable to the financial assets.
All revenue is stated net of the amount of sales tax.
Property, plant and equipment
Property, plant and equipment are stated at cost on acquisition less depreciation. Depreciation is provided on a straight-line basis at rates
calculated to write off the cost less the estimated residual value of each asset over its expected useful economic life. The residual value is the
estimated amount that would currently be obtained from disposal of the asset if the asset were already of the age and in the condition expected
at the end of its useful life.
Proven mining properties are depreciated using a unit of production method based on estimated economically recoverable reserves, which
results in a depreciation charge proportional to the depletion of reserves. Buildings, plant and equipment unrelated to production are
depreciated using the straight-line method based on estimated useful lives.
The annual rate of depreciation for each class of depreciable asset is:
Buildings 5%–10%
Plant and equipment 7%–100%
Computers and related hardware 33%
Fixtures, fittings and office machinery 20%
Motor vehicles 20%
The carrying value of property plant and equipment is assessed annually and any impairment is charged to the income statement.
Assets in the course of construction are capitalised in the construction in progress account. Costs capitalised include the purchase price of the
asset and any costs directly attributable to bringing it into working condition for its intended use. On completion, the cost of construction is
transferred to the appropriate category of property, plant and equipment. Construction in progress is not depreciated.
Investments in subsidiaries
Fixed asset investments in subsidiary undertakings held by the Company (note 9) are shown at cost less provisions for impairment. The cost of
29
Notes to the Financial Statements
for the year ended 31 December 2008
acquisition includes directly attributable professional fees and other expenses incurred in connection with the acquisition.
Impairment
The carrying amounts of non-current assets are reviewed for impairment if events or changes in circumstances indicate the carrying value may
not be recoverable. If there are indicators of impairment, an exercise is undertaken to determine whether the carrying values are in excess of
their recoverable amount. Such review is undertaken on an asset by asset basis, except where such assets do not generate cash flows
independent of other assets, in which case the review is undertaken at the cash generating unit level.
If the carrying amount of an asset or its cash-generating unit exceeds the recoverable amount, a provision is recorded to reflect the asset or
cash-generating unit at the lower amount.
The recoverable amount of assets is the greater of their value in use and fair value less costs to sell. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate of 12% that reflects current market assessments of the
time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from
other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs. The Group’s cash-generating units
are the smallest identifiable groups of assets that generate cash inflows that are largely independent of the cash inflows from other assets or
groups of assets.
An impairment loss is recognised in respect of mining properties where the assessed estimate of the quantum of mineable resources indicates
a reduction from the previous estimate.
Impairment losses recognised in respect of cash-generating units are allocated to reduce the carrying amount of assets in the unit on a pro rata
basis. A cash generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash
inflows from other assets or groups of assets.
Impairment losses and reversals of impairment losses previously included in the income statement under the same category are included
within other operating expenses in the income statement.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if no impairment loss had been recognised.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the FIFO method. Net realisable value is the
estimated selling price in the ordinary course of business less applicable variable selling expenses.
Leased assets
Finance leases
Where substantially all of the risks and rewards incidental to ownership of a leased asset have been transferred to the group (a "finance lease"),
the asset is treated as if it had been purchased outright. The amount initially recognised as an asset is the lower of the fair value of the leased
property and the present value of the minimum lease payments payable over the term of the lease. The corresponding lease commitment is shown
as a liability. Lease payments are analysed between capital and interest. The interest element is charged to the consolidated income statement
over the period of the lease and is calculated so that it represents a constant proportion of the lease liability. The capital element reduces the
balance owed to the lessor.
Operating leases
Where substantially all of the risks and rewards incidental to ownership are not transferred to the Group (an 'operating lease') amounts payable
under the lease are charged to the income statement on a straight-line basis over the lease term.
Borrowing costs
Borrowing costs are recognised in profit or loss as they accrue, using the effective interest method.
Foreign currency
The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity
operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each entity are
expressed in Australian dollars, which is the functional currency of the Company, and the presentation currency for the consolidated financial
statements.
In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency (foreign
currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary items
denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date.
Exchange differences arising on the settlement of monetary items and on the retranslation of monetary items is included in profit or loss for the
period.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations (including comparatives) are
expressed in Australian dollars using exchange rates prevailing on the balance sheet date. Income and expense items are translated at the
average exchange rates for the period. Exchange differences arising, if any, are classified as equity and transferred to the Group’s translation
reserve. Such translation differences are recognised in profit or loss in the period in which the foreign operation is disposed of.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation
and translated at the closing rate.
30
Notes to the Financial Statements
for the year ended 31 December 2008
Provisions
Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an
outflow of economic resources will result and that outflow can be reliably measured.
Mine rehabilitation
Provisions are made for the estimated rehabilitation costs relating to areas disturbed during the mines’ operation up to reporting date but not
yet rehabilitated. Provision has been made in full for all disturbed areas at the reporting date based on current estimates of costs to rehabilitate
such areas, discounted to their present value based on expected future cash flows.
The estimated cost of rehabilitation includes the current cost of recontouring, topsoiling and revegetation employing legislative requirements.
Changes in estimates are dealt with on a prospective basis as they arise.
Significant uncertainty exists as to the amount of rehabilitation obligations which may be incurred due to the impact of possible changes in
environmental legislation.
The amount of the provision relating to rehabilitation of mine infrastructure and dismantling obligations is recognised at the commencement of
the mining project and/or construction of the assets where a legal or constructive obligation exists at that time. The provision is recognised as a
liability with a corresponding asset included in mining property and development assets.
At each reporting date the rehabilitation liability is remeasured in line with changes in discount rates and timing or amount of costs to be incurred.
Changes in the liability relating to rehabilitation of the mine infrastructure or dismantling obligations are added to or deducted from the related
asset, other than the unwinding of the discount which is recognised as a finance cost in the income statement as it occurs.
If the change results in a liability that exceeds the carrying amount of the asset, the asset is written down to nil and the excess is recognised
immediately in the income statement. If the change in the liability results in an addition to the cost of the asset, the recoverability of the new
carrying amount is considered. Where there is an indication that the new carrying amount is not fully recoverable, an impairment test is
performed with the write-down recognised in the income statement in the period in which it occurs.
Unproven mining properties and royalty agreements
Unproven mining properties, including mineral licences which are acquired by the Group and which have finite useful lives, are stated at cost
less accumulated amortisation and impairment losses. Intangible assets acquired as part of an acquisition of a business are capitalised
separately from goodwill if the fair value can be measured reliably on initial recognition, subject to the constraint that, unless the asset has a
readily ascertainable market value, the fair value is limited to an amount that does not create or increase any negative goodwill arising on the
acquisition.
Exploration and evaluation assets
All costs associated with mining development and investment are capitalised on a project-by-project basis pending determination of the feasibility
of the project. Costs incurred include appropriate technical and administrative expenses but not general overheads. When a decision is made to
proceed to development, the related expenditures will be transferred to proven mining properties. Where a licence is relinquished, a project is
abandoned, or is considered to be of no further commercial value to the company, the related costs will be written off.
The recoverability of deferred mining costs and mining interests is dependent upon the discovery of economically recoverable reserves, the ability
of the company to obtain necessary financing to complete the development of reserves and future profitable production or proceeds from the
disposition of recoverable reserves.
Related party transactions
IAS 24, ‘Related Party Disclosures’, requires the disclosure of the details of transactions between the reporting entity and related parties. In the
consolidated financial statements, all transactions between Group companies are eliminated.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because
it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or
deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance
sheet date.
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the
corresponding tax bases used in the computation of taxable profit, and are 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.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all or part of the asset to be recovered.
31
Notes to the Financial Statements
for the year ended 31 December 2008
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax
is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred
tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities
and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities
on a net basis.
Financial instruments
In relation to the disclosures made in note 14 and note 24:
The Group does not hold or issue derivative financial instruments for trading purposes.
Financial assets
The group classifies its financial assets into one of the categories discussed below, depending on the
purpose for which the asset was acquired. The Group did not have any financial assets designated as held to maturity, held for trading nor has
it designated any financial assets as being at fair value through profit and loss. Unless otherwise indicated, the carrying amounts of the
Group's financial assets are a reasonable approximation of their fair values.
The group's accounting policy for each category is as follows:
• Loans and receivables
Trade receivables are measured at initial recognition at fair value and subsequently measured at amortised cost.
Cash and cash equivalents comprise cash on hand and demand, deposits and other short-term highly liquid investments that are readily
convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
• Available-for-sale
Financial assets designated as available for sale are initially recognised at fair value, being the consideration given including, where
appropriate, acquisition costs associated with the investment. The Group’s investments in the funds that it manages are designated as
‘available-for-sale’ financial assets and are included in non-current assets. Such investments are subsequently carried at fair value, with any
gains or losses arising from changes in fair value being recognised in equity. Financial assets are derecognised when the rights to receive cash
flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of
ownership. Fair value is based on market value at the balance sheet date.
The Group assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired.
In the case of a financial asset classified as available for sale, a significant or prolonged decline in the fair value of the financial asset below its
cost is considered as an indicator that the financial asset is impaired. If any such evidence exists for available-for-sale financial assets, the
cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial
asset previously recognised in profit or loss – is removed from equity and recognised in the income statement. Impairment losses recognised in
the income statement on financial assets are not reversed through the income statement.
Financial liabilities
Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements
entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual
interest in the assets of the Group after deducting all its liabilities. Equity instruments issued by the Company are recorded at the proceeds
received, net of direct issue costs.
The Group classified its financial liabilities into the one category discussed below. The Group has not classified any of its financial liabilities as
fair value through profit or loss.
• Held at amortised cost
Trade payables are measured at fair value and subsequently measured at amortised cost.
Borrowings are initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument. Such interest
bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensures that any interest ex-
pense over the period to repayment is at a constant rate on the balance of the liability carried in the balance sheet.
Share-based payments
The Group issues equity-settled share-based payments to its employees. Equity-settled share-based payments are measured at fair value
(excluding the effect of non market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-
settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of the shares that
will eventually vest and adjusted for the effect of non market-based vesting conditions.
Fair value is measured using the binomial model. The expected life used in the model has been adjusted, based on management’s best
estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
32
Notes to the Financial Statements
for the year ended 31 December 2008
Convertible debt
The proceeds received on issue of the Group’s convertible debt are allocated into their liability and equity components. The amount initially
attributed to the debt component equals the discounted cash flows using a market rate of interest that would be payable on a similar debt
instrument that did not include an option to convert. Subsequently, the debt component is accounted for as a financial liability measured at
amortised cost (see above).
The difference between the net proceeds of the convertible debt and the amount allocated to the debt component is credited direct to equity
and is not subsequently remeasured. On conversion, the debt and equity elements are credited to share capital and share premium as
appropriate.
Share capital
Financial instruments issued by the Group are treated as equity only to the extent that they do not meet the definition of a financial liability. The
Groups ordinary shares are classified as equity instruments.
For the purposes of the disclosures given in note 18, the Group considers its capital to be total equity. There have been no changes in what the
Group considers to be capital since the previous period.
The Group is not subject to any externally imposed capital requirements.
2. Critical accounting estimates and judgements
The Group makes estimates and assumptions concerning the future, which by definition will seldom result in actual results that match the
accounting estimate. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amount of
assets and liabilities within the next financial year are discussed below.
(i) Impairment of mining properties
In accordance with the accounting policy stated above, the Group tests annually to see whether mining properties have suffered any
impairment. The recoverable amount of cash generating units is determined based on value-in-use calculations, which require the
use of estimates.
The estimated future cashflows from proven mining properties are based on the mine operating above 93% of capacity, the weighted average
coal price remaining above US$108 per tonne, an average US$/A$ exchange rate of 0.70, an average annual inflation of 3% and a discount
rate of 12%.
(ii) Income taxes
The Group is subject to income taxes in two jurisdictions and has significant carried forward tax losses. Significant judgement is required in
determining provisions for income taxes and in determining deferred tax assets based on assessment of probability that taxable profits will be
available against which carried forward losses can be utilised.
Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income
statement in the period in which such determination is made.
(iii) Provisions for liabilities
As a result of exploration activities the Group is required to make provision for the restoration of mining sites. Refer to note 16.
(iv) Intangible assets arising on acquisition
To the extent that intangible assets arise on acquisition, the Group estimates the economic life of these assets and amortises them over the
relevant period. Refer to note 7.
(v) Share-based compensation
In order to calculate the charge for share-based compensation as required by IFRS 2, the Group makes estimates principally relating to the
assumptions used in its option-pricing model as set out in note 19.
(vi) Depreciation on proven mining properties
In order to calculate depreciation on proven mining properties on a unit of production basis, the Group estimates commercially recoverable
reserves to be 40 million tonnes. The recoverable reserves to be used in the calculation are assessed annually. The Cook Mine currently has
JORC compliant resources of 176 million tonnes. Refer to note 8.
(vii) Convertible loan note
In order to calculate the fair value of the liability component of the convertible loan the Group had to estimate the market interest rate for an
equivalent non-convertible bond. The estimated rate used was 20%.
33
Notes to the Financial Statements
for the year ended 31 December 2008
3. Segmental analysis
Caledon Resources plc is engaged in one business segment only, namely mining. Therefore only an analysis by geographic segment has been
presented.
Following the disposal of the Group's Chinese assets in October 2007 there is now only one main geographic segment. The Group operates a
UK-based head office operation and one other operation of a holding company nature.
The segment results for the year ended 31 December 2008 are as follows:
China Australia Head Office Group
A$’000 A$’000 operations A$’000
Year ended 31 December 2008 A$’000
Revenue - 121,949 - 121,949
Segment result before allocation of central costs - 21,163 (1,229) 19,934
Segment result after allocation of central costs - 21,163 (1,229) 19,934
Interest expense - (2,373) (9,110) (11,483)
Interest income 1,989
Loss before taxation 10,440
Taxation (2,200)
Loss for the year from continuing operations 8,240
Loss from discontinued operations -
Loss for the year 8,240
The segment results for the year ended 31 December 2007 are as follows:
Head Office
China Australia Group
operations
A$’000 A$’000 A$’000
Year ended 31 December 2007 A$’000
Revenue – 15,221 – 15,221
Segment result before allocation of central costs – (29,727) (9,741) (39,468)
Segment result after allocation of central costs – (29,727) (9,741) (39,468)
Interest expense – (608) (5,769) (6,377)
Interest income 941
Loss before taxation (44,904)
Taxation 11,955
Loss for the year from continuing operations (32,949)
Loss from discontinued operations (1,553) (1,553)
Loss for the year (34,502)
Other segment items included in the income statement are as follows:
Head Office
China Australia Group
operations
A$’000 A$’000 A$’000
Year ended 31 December 2008 A$’000
Depreciation – (4,588) (12) (4,600)
Impairments of assets – (8,551) (427) (8,978)
Share based compensation charges – – (853) (853)
– (13,139) (1,292) (14,431)
Head Office
China Australia Group
operations
A$’000 A$’000 A$’000
Year ended 31 December 2007 A$’000
Depreciation (14) (1,894) (15) (1,923)
Impairment of assets – – (1,977) (1,977)
Share based compensation charges – – (1,872) (1,872)
(14) (1,894) (3,864) (5,772)
The segment assets and liabilities at 31 December 2008 and capital expenditure for the year then ended are as follows:
Head Office
China Australia Group
operations
A$’000 A$’000 A$’000
Year ended 31 December 2008 A$’000
Segment assets – 201,739 3,283 205,022
Segment liabilities – (29,822) (34,798) (64,620)
Segment net assets – 171,917 (31,515) 140,402
Capital expenditure – 10,979 – 10,979
The segment assets and liabilities at 31 December 2007 and capital expenditure for the year then ended are as follows:
Head Office
China Australia Group
operations
A$’000 A$’000 A$’000
Year ended 31 December 2006 A$’000
Segment assets – 154,411 20,057 174,468
Segment liabilities – (31,575) (48,621) (80,196)
Segment net assets – 122,836 (28,564) 94,272
Capital expenditure – 23,774 - 23,774
34
Notes to the Financial Statements
for the year ended 31 December 2008
4. Expense by nature
Administrative expenses:
2008 2007
A$’000 A$’000
Auditors’ remuneration 429 283
Depreciation of property, plant and equipment1 102 72
Operating lease rentals 234 126
Staff costs 3,358 4,240
Share based payments 853 1,872
Professional and consultancy 1,213 1,246
Marketing and promotion 150 161
Third party selling costs 3,820 531
Loss on disposal of property, plant and equipment 3 -
Insurance 1,752 1,980
Environment and safety 431 195
Training and development 149 65
Travel and accommodation 437 690
Communication and IT 245 378
Property costs 449 505
Foreign exchange (gains)/losses (4,339) 2,227
Other expenses 1,263 311
Other administrative expenses 10,549 14,882
Impairment of investment – available for sale 427 1,977
Impairment of intangible asset2 8,551 -
Impairment of assets 8,978 1,977
Total administrative expenses 19,527 16,859
1. A$4.5m (2007: A$1.8m) of depreciation on property, plant and equipment was charged to cost of sales.
2. Reflects a write down in the carrying value of MTP in recognition of a much lower likelihood of achieving royalty income from the Magatar agency agreement in the current economic environment.
Audit services:
2008 2007
A$’000 A$’000
Fee for the audit of annual accounts 102 107
Auditing of accounts of associates of the Company under legislation 105 38
Other fees to auditors:
Services relating to corporation finance transactions entered into or proposed to be entered into by or on behalf
of the Company or any of its Associates 10 81
Other taxation services 212 57
429 283
Staff costs:
Group Company
2008 2007 2008 2007
A$’000 A$’000 A$’000 A$’000
Wages and salaries 19,261 4,168 1,259 1,282
Equity settled share based payment expense 853 1,872 853 1,872
Social security costs 2,202 455 73 74
22,316 6,495 2,185 3,228
The average monthly number of employees (including executive Directors) of the Group and Company during the period is:
Group Company
2008 2007 2008 2007
Number Number Number Number
Operational 205 91 - -
Administration 15 14 8 8
220 105 8 8
Key management compensation:
2008 2007
A$’000 A$’000
Salaries 2,048 1,513
Fees 539 574
Bonus 618 -
Equity settled share based payment expense 743 1,844
Non-cash benefits 49 52
Pension costs 25 19
Social security costs 202 155
4,224 4,157
35
Notes to the Financial Statements
for the year ended 31 December 2008
The key management figures given above include Directors.
Directors’ emoluments
The Directors’ emoluments are disclosed in the Report of the Remuneration Committee on page 18. Non-cash benefits received by the
Directors are recognised above. No retirement benefits are accruing to Directors under pension schemes. The Directors receive
reimbursement for reasonable expenses.
The highest paid Director had emoluments totalling A$679,329.
A$53,786 (2007: A$174,932) was paid to Sierra Consulting in respect of services provided by George Salamis’. A$422,817 was paid to Liberty
Consulting in respect of services provided by Robert Alford (2007: A$250,110).
5. Finance income and expense
2008 2007
A$’000 A$’000
Interest expense on borrowings (9,887) (5,826)
Unwinding of discount on deferred consideration (1,460) (424)
Unwinding of discount on provision (136) (127)
Total finance expense (11,483) (6,377)
Interest income receivable on bank deposits 1,567 941
Gain on the repurchase of loan notes 422 -
Total finance income 1,989 941
Net finance costs (9,494) (5,436)
6. Taxation
Tax charged in the income statement
2008 2007
A$’000 A$’000
Current income tax
In respect of current year 2,530 1,708
In respect of prior year 93 –
2,623 1,708
Deferred income tax
In respect of current year (423) (13,663)
(423) (13,663)
Total tax charge 2,200 (11,955)
Reconciliation of the total tax charge
The tax assessed on the profit on ordinary activities for the period is different from the standard rate of corporation tax in the UK. The charge
for the period can be reconciled to the profit per the income statement as follows:
2008 2007
A$’000 A$’000
Profit\(loss) before taxation 10,440 (46,457)
At standard rate of Corporation tax at 28.5% (2007: 30%) 2,975 (13,937)
Non-deductible expenses 3,270 2,087
Double tax relief (408) -
Non-taxable income (120) -
Australian withholding tax suffered 1,430 -
Research and development tax concessions (5,024) -
Adjustments in respect of previous periods 93 -
Higher tax rates on overseas earnings (16) -
Utilisation of brought forward losses - (105)
2,200 (11,955)
The rate of UK Corporation tax changed from 30% to 28% with effect from 1 April 2008. The average applicable rate for the period is therefore
28.5% (2007: 30%).
36
Notes to the Financial Statements
for the year ended 31 December 2008
7. Intangible assets
Exploration
and Unproven
evaluation mining Royalty Trademarks
costs properties agreements and patents Total
A$’000 A$’000 A$’000 A$’000 A$’000
Cost
At 1 January 2007 2,161 35,691 7,803 – 45,655
Disposals – (459) – – (459)
Additions 1,054 – – – 1,054
Foreign exchange movements 210 3,470 752 – 4,432
At 1 January 2008 3,425 38,702 8,555 – 50,682
Disposals – – – – –
Additions 660 407 – 5 1,072
At 31 December 2008 4,085 39,109 8,555 5 51,754
Aggregate impairment/amortisation
At 1 January 2007 and 2008 – – – – –
Amortisation for the year – – (1) – (1)
Impairment for the year – – (8,551) – (8,551)
Total impairment/amortisation at 31 December 2008 – – (8,552) – (8,552)
Net book value 2008 4,085 39,109 3 5 43,202
Net book value 2007 3,425 38,702 8,555 – 50,682
Net book value 2006 2,161 35,691 7,803 – 45,655
The impairment loss of $A8.6 million shown under Royalty agreements relates to the Group's Australian subsidiary Mining Technology
Partnerships Pty Limited. The Directors have revised expected forecasts due to the lack of take-up of the Magatar system to date and the
timeline to which royalties from the Magatar agency agreement are exactable. Based upon the significantly lower likelihood of achieving royalty
income within the set timeline, the Directors have recalculated the asset's value in use and determined that a full impairment is appropriate.
8. Property, plant and equipment
Proven Office and Furniture
Land and mining Plant and computer and fix- Motor Construction
buildings properties equipment equipment tures vehicles in progress Total
Group A$’000 A$’000 A$’000 A$’000 A$’000 A$’000 A$’000 A$’000
Cost
At 1 January 2007 1,155 39,425 7,214 232 76 88 38 48,228
Additions - 6,464 - 36 - - 17,274 23,774
Transferred from construction in progress 316 319 8,060 106 4 - (8,805) -
Disposals - - - - - - - -
Disposal on sale of subsidiary undertaking - - - (52) - (52) - (104)
Net exchange adjustment 113 3,878 704 (1) - (5) 4 4,693
At 1 January 2008 1,584 50,086 15,978 321 80 31 8,511 76,591
Additions - - - 17 - - 10,962 10,979
Transferred from construction in progress 3 1,658 16,380 174 - 31 (18,246) -
Disposals - - (6) - - - - (6)
At 31 December 2008 1,587 51,744 32,352 512 80 62 1,227 87,564
Depreciation
At 1 January 2007 - - - 120 75 29 - 224
Depreciation charge 95 310 1,435 62 1 20 - 1,923
Disposals - - - - - - - -
Disposal on sale of subsidiary undertaking - - - (26) - (37) - (63)
Net exchange adjustment 4 16 76 (5) - - - 91
At 1 January 2008 99 326 1,511 151 76 12 - 2,175
Depreciation charge 143 714 3,649 77 - 17 - 4,600
Disposals - - (2) - - - - (2)
At 31 December 2008 242 1,040 5,158 228 76 29 - 6,773
Net Book value 2008 1,345 50,704 27,194 284 4 33 1,227 80,791
Net book value 2007 1,485 49,760 14,467 170 4 19 8,511 74,416
Net book value 2006 1,155 39,425 7,214 112 1 59 38 48,004
37
Notes to the Financial Statements
for the year ended 31 December 2008
Office and
computer Furniture
equipment and fixtures Total
Company A$’000 A$’000 A$’000
Cost
At 1 January 2007 and 2008 130 76 206
Additions 3 - 3
Disposals - - -
At 31 December 2008 133 76 209
Depreciation
At 1 January 2007 95 76 171
Depreciation charge 15 - 15
At 1 January 2008 110 76 186
Depreciation charge 12 - 12
At 31 December 2008 122 76 198
Net book value 2008 11 – 11
Net book value 2007 20 – 20
Net book value 2006 35 – 35
9. Investments in subsidiaries
The investment in Caledon Overseas Holdings Limited is held at the nominal value of £1 (2007: £1)
The Group has the following subsidiary undertakings:
% interest Country of incorporation Activity
Caledon Overseas Holdings Limited 100 England Holding company
Caledon Coal Pty Limited 100 Australia Holding company
CC Pty Limited 100 Australia Mining production
Mining Technology Partnerships Pty Limited 100 Australia Mining technology
Blackwater Coal Pty Limited 100 Australia Mining exploration
Caledon MC Jersey Limited 100 Channel Islands Holding company
Hazelhurst Holdings Limited 100 British Virgin Islands Mining exploration
Blackwatch Overseas Limited 100 British Virgin Islands Non-trading
Finelot Trading Company Limited 100 England Non-trading
Disposal
Blackwatch Resources Limited and Blackwatch Mining Limited
On 31 October 2007 the Group disposed of Blackwatch Resources Limited and Blackwatch Mining Limited for A$30,000 and 1,000,000 shares
(‘Consideration Shares’) in Indochina Minerals Limited ('Indochina'). The Board did not allocate any value to the Consideration Shares, as at
the date of disposal Indochina’s shares were unlisted and had limited trading history. The management of Indochina has informed the Group
that it intends to list its shares on a recognised stock exchange in the near future. As part of this transaction the disposal group repaid
intercompany balances of A$220,000.
2008 2007
A$’000 A$’000
Revenue - -
Expenses - (984)
Loss before tax - (984)
Tax - -
Loss after tax - (984)
Loss on disposal of subsidiaries - (569)
Loss from discontinued activities for the year - (1,553)
Basic and diluted loss per share expressed in cents per share - (1)
The cash flow statement includes the following amounts relating to discontinued operations:
2008 2007
A$’000 A$’000
Operating activities - (849)
Financing activities - 216
Net cash from/(used in) discontinued operations - (633)
38
Notes to the Financial Statements
for the year ended 31 December 2008
10. Available-for-sale investments
A$’000
Carrying value
At 1 January 2007 1,851
Revaluation (405)
Impairment of investment (865)
At 1 January 2008 581
Impairment of investment (427)
At 31 December 2008 154
As at 31 December 2008 the market value of the Group's investment in Dynasty was A$154,000. In 2007 the Group had assessed that the
Dynasty investment was impaired as the decline in its value was both prolonged and significant.
11. Deferred tax
2008 2007
A$’000 A$’000
Deferred tax assets:
Arising on employee share options 168 168
Impairment of Property, plant and equipment 2,565 -
Other temporary differences 15,930 17,219
Total deferred tax assets 18,663 17,387
Deferred tax liabilities:
Fair value gains/losses - -
Other temporary differences (4,405) (3,552)
Total deferred tax liabilities (4,405) (3,552)
Net deferred tax asset/(liability) 14,258 13,835
A deferred tax asset has been recognised for the benefit of losses carried forward based upon projections prepared by management using
assumptions for future commodity prices and production volumes.
Movement on deferred tax
2008 2007
A$’000 A$’000
At 1 January 13,835 352
Amount charged to profit and loss 423 13,663
Foreign exchange movements - (685)
Amount charged to equity - 505
At 31 December 14,258 13,835
12. Inventory
Group Company
2008 2007 2008 2007
A$'000 A$'000 A$'000 A$'000
At cost:
Raw materials and stores 2,080 656 – –
2,080 656 – –
At net realisable value:
Work in progress 2,484 29 – –
Finished goods 2,279 2,712 – –
4,763 2,741 – –
6,843 3,397 – –
The amount of inventories that were recognised in cost of sales in the year was A$2 million (2007: A$2.3 million).
39
Notes to the Financial Statements
for the year ended 31 December 2008
13. Trade and other receivables
Group Company
2008 2007 2008 2007
A$'000 A$'000 A$'000 A$'000
Current assets:
Trade receivables 10,087 2,975 - -
Other receivables 534 700 161 178
Other tax recoverable - - - -
Prepayments 583 376 124 218
11,204 4,051 285 396
Non-current assets:
Amounts owed by subsidiary undertakings - - 189,484 144,964
- - 189,484 144,964
Total debtors 11,204 4,051 189,769 145,360
The fair value of receivables is not significantly different from the carrying value.
Amounts owed by subsidiary undertakings relates solely to Caledon Overseas Holdings Limited which pays an interest rate of 9.5% on all
outstanding intercompany balances. This approximates to the market rate of interest.
14. Cash and cash equivalents
Group Company
2008 2007 2008 2007
A$'000 A$'000 A$'000 A$'000
Cash at bank and in hand 44,165 23,954 4,298 20,525
44,165 23,954 4,298 20,525
The Group’s cash and cash equivalents balances may be analysed between fixed and floating rates by currency as follows:
2008 2007
A$’000 A$’000
Floating rate cash and cash equivalents
Australian dollars 18,650 3,744
Sterling 4,168 20,071
US dollars 1 2
Canadian dollars 6 7
22,825 23,824
Fixed rate cash and cash equivalents
Australian dollars 21,340 -
Sterling - 130
44,165 23,954
The interest rate in respect of floating rate assets is based on bank base rates such as LIBOR while the effective interest rate on the fixed rate
cash and cash equivalents was 6.67%. Cash is deposited with reputable financial institutions with a high credit rating.
15. Loans and borrowings
Group Company
2008 2007 2008 2007
A$'000 A$'000 A$'000 A$'000
Current loans and borrowings
Convertible loan - - - -
Asset finance loan 2,342 - - -
2,342 - - -
Non-current loans and borrowings
Convertible loan 30,243 46,688 30,243 46,688
Asset finance loan 4,706 - - -
Total loans and borrowings 37,291 46,688 30,243 46,688
Asset finance loan
In March 2008 the Group sourced a A$9 million asset finance facility secured against the ABM25 continuous miner and Prairie haulage system
from Australian Structured Finance. A$3.5 million of the sum advanced was required to be held in an interest bearing security deposit with
Westpac Banking Corp and the balance of A$5.5 million was released. The principal terms are as follows:
• Interest is payable at 9.95% per annum
• 24 month term
• A$4.5 million residual
40
Notes to the Financial Statements
for the year ended 31 December 2008
£27.5 million 2010 8.5% unsecured convertible loan notes
Conversion of loan notes
During the year A$15.6 million (£7.5 million) loan notes were converted into 15 million ordinary shares at a conversion price of 50 pence.
Repurchase of loan notes
On 31 December 2008 the Company repurchased and cancelled A$4.1 million (£2 million) loan notes. The total consideration paid was A$3.1
million (£1.51 million) including a commission of A$15,250 (£7,500). The repurchase of the loan notes resulted in a gain of A$422,000. This
was calculated as follows:
A$’000
Carrying value of the debt element of the loan notes at repurchase 3,462
Consideration paid to repurchase debt element (3,040)
Net gain 422
Background
In 2007 the Company issued a total of A$62.2 million (£27.5 million) of unsecured loan notes. A$28.3 million (£12.5 million) were issued on 6
July 2007 and a further A$33.9 million (£15 million) were issued on 8 November 2007. The principal terms are as follows:
• Interest is payable at 8.5% per annum, payable semi annually
• The principal is to be repaid on 5 July 2010
• The holder of the unsecured convertible loans may convert ay any time during the period at a strike price of 50 pence.
The convertible loan notes are listed on the Luxembourg stock exchange.
The convertible loan recognised in the balance sheet is calculated as follows:
A$’000
Face value of convertible loan issued during 2007 62,218
Equity component (14,799)
Liability component on initial recognition 47,419
Interest expense 2,842
Interest paid (1,597)
Issue costs (2,226)
Amortisation of issue costs 251
Liability component at 31 December 2007 46,689
Interest expense 8,351
Interest paid (4,221)
Amortisation of issue costs 759
Loan note conversion (13,147)
Loan notes repurchased (3,462)
Foreign exchange movements (4,726)
Liability component at 31 December 2008 30,243
The fair value of the liability component of A$47,419,000, was calculated using a market interest rate for an equivalent non-convertible bond.
The estimated rate used was 20%.
A$15 million 2007 9% secured convertible loan
The A$15 million 2007 9% secured convertible loan issued in December 2006 was exercised and converted in full on 6 November 2007. The
Company issued 16,195,995 ordinary shares at an exercise price of 93.2 cents (41.2 pence) per ordinary share to the convertible note holder.
41
Notes to the Financial Statements
for the year ended 31 December 2008
16. Provisions
Group Employee Rehabilitation Total
A$’000 A$’000 A$’000
At 1 January 2008 392 1,702 2,094
Additional provisions raised 359 - 359
Unwinding of discount - 136 136
Acquired - - -
Amounts used - - -
At 31 December 2008 751 1,838 2,589
In accordance with Queensland state government legislative requirements, a provision for mine rehabilitation has been recognised in relation to
the Group’s coal mining operations. The basis of accounting for mine rehabilitation is shown in the principal accounting policies.
Employee provisions relate to annual leave entitlements for employees based in Australia.
Provisions can be allocated as follows:
Group Company
2008 2007 2008 2007
A$'000 A$'000 A$'000 A$'000
Current liabilities 898 527 – –
Non-current liabilities 1,691 1,566 – –
2,589 2,093 – –
17. Trade and other payables
Group Company
2008 2007 2008 2007
A$'000 A$'000 A$'000 A$'000
Trade payables 2,649 3,030 126 63
Other payables 4,226 15,390 3,072 -
Other taxation and social security 781 552 21 18
Accruals and deferred income 11,580 7,269 238 228
19,236 26,241 3,457 309
The fair value of payables is not significantly different from the carrying value. The deferred consideration of A$15.4 million included in 'Other
payables' as at 31 December 2007 for the acquisition of Hazelhurst Holdings Limited was settled during the year.
Included in 'Other payables' as at 31 December 2008 is the A$3.1m consideration payable for the repurchase of £2m of loan notes. This amount
was settled on 6th January 2009.
18. Share capital
2008 2007
No. No.
Authorised:
Ordinary Shares of 0.5 pence each 306,745,231 306,745,231
Issued and fully paid:
Ordinary Shares of 0.5 pence each 209,323,849 170,558,461
2008 2007
£'000 A$’000 £'000 A$’000
Authorised:
Ordinary Shares of 0.5 pence each 1,534 - 1,534 -
Issued and fully paid:
Ordinary Shares of 0.5 pence each 1,047 2,338 853 1,930
Broker warrants
The Broker Warrants issued to Canaccord Adams Limited in 2006 were exercised in full during the year.
42
Notes to the Financial Statements
for the year ended 31 December 2008
Share issues during the year
Ordinary shares
Exercise/share
issue price
No. A$ A$’000
At 1 January 2007 139,236,578 1,576
Options exercised 166,667 0.34 2
Options exercised 350,000 0.45 4
Options exercised 66,667 0.42 1
Acquisition of subsidiary 12,546,175 0.71 141
Acquisition of subsidiary 1,763,046 0.80 20
Options exercised 166,667 0.23 2
Options exercised 66,666 0.42 1
Conversion of loan 16,195,995 0.93 183
At 1 January 2008 170,558,461 1,930
Options exercised 66,667 0.42 1
Private placing 6,360,000 1.10 69
Warrants exercised 1,649,540 0.84 17
Convertible note exercised 2,600,000 1.05 28
Placing and offer 13,640,000 1.10 144
Placing and offer to employees 102,000 0.10 1
Acquisition of subsidiary 913,848 1.64 9
Warrants exercised 1,000,000 0.83 10
Convertible note exercised 10,000,000 1.04 104
Options exercised 33,333 0.39 -
Convertible note exercised 2,400,000 1.04 25
At 31 December 2008 209,323,849 2,338
As described in note 1 the Group considers its capital to comprise total equity. In managing its capital, the Group’s primary objective is to
ensure its continued ability to provide a consistent return for its equity shareholders through capital growth in the short term and both capital
growth and distributions in the medium to long term. In order to achieve this objective, the Group seeks to maintain a gearing ratio that
balances risks and returns at an acceptable level and also to maintain a sufficient funding base to enable the Group to meet its working capital
and strategic investment needs. In making decisions to adjust its capital structure to achieve these aims, either through altering its dividend
policy, new share issues, or the reduction of debt, the Group considers not only its short-term position but also its long-term operational and
strategic objectives.
The Group’s gearing ratio at the balance sheet date is shown below:
2008 2007
A$’000 A$’000
Cash and equivalents (44,165) (23,954)
Convertible loan 30,243 46,688
Asset finance loan 7,048 -
Net debt (6,874) 22,734
2008 2007
A$’000 A$’000
Share capital 2,338 1,930
Share premium 145,266 108,611
Other reserves (206) (206)
Option premium on convertible loan 10,229 14,101
Foreign currency translation reserve 11,414 8,376
Retained earnings (28,639) (38,540)
Total capital 140,402 94,272
Gearing ratio (5)% 24%
The decrease in gearing has been brought about by the conversion and repurchase of £9.5m 2010 loan notes and an increase in the Group's
cash.
19. Share based payments
The Finelot 3 plc Unapproved 2000 Discretionary Share Option Scheme ("Option Scheme") was adopted on 21 September 2000 and is not
approved by the Inland Revenue under Schedule 9 of the Income and Corporation Taxes Act 1988. The Option Scheme is governed by Rules and is
administered by the Directors of the Company, or a duly authorised committee thereof. The principal terms of the Share Option Scheme were
amended pursuant to a resolution of the Directors dated 17 March 2003. The amendments made to the scheme were: (1) amending the definition
3
The share option scheme was adopted when the Company was called Finelot plc. On 14 April 2003 the Company changed its name to Caledon Resources plc
43
Notes to the Financial Statements
for the year ended 31 December 2008
of ‘Employee’ so that it includes Directors and non-executive Directors; and (2) amending rule 2.2 of the scheme so that in relation to the grant of
options over a total of 1,750,000 shares to certain Directors and employees the price at which such option could be exercised should be
determined by the Directors rather than being fixed by the rules of the Share Option Scheme.
On 14 December 2006 this scheme was closed. On the same date the Company adopted the Caledon Resources PLC 2006 Share Option
Scheme (the "New Share Option Scheme"). The New Share Option Scheme was not approved by HM Revenue & Customs, and provides
incentives by way of options granted with an exercise price equal to market value of the relevant shares (as at the date of grant). A summary of
the principal terms of the New Share Option Scheme is set out below.
Administration
The Company's remuneration committee (the "Committee") is responsible for administering the New Share Option Scheme. Grant of options
and eligibility Options to acquire shares in the Company may be granted under the New Share Option Scheme to any employee or executive
director of the Company or its subsidiaries.
Period for the grant of options
Options can be granted within 42 days following the announcement of the Company's interim and/or final results for any period. In exceptional
circumstances, options may be granted at other times.
Exercise price
The option exercise price per Ordinary Share is determined by the Committee but will be no less than the market value (or its nominal value, if
higher) of the Ordinary Shares on the date of grant (with market value being taken as the average midmarket closing price for the three
immediately preceding dealing days).
Performance test
The Committee shall impose objective conditions on the exercise of options based on corporate financial performance.
On 26 May 2008 the Company granted 2,779,714 share options to the directors and senior management under the New Share Option
Scheme. The share options were granted at an exercise price of 74 pence and were granted subject to certain performance conditions. Subject
to these being satisfied the share options will vest and may be exercised as follows:
• as to one-third of the total number of ordinary shares originally subject to the share options granted on the first anniversary of the date
of grant;
• as to one-third of the total number of ordinary shares originally subject to the share options granted on the second anniversary of the
date of grant; and
• as to the remainder, on the third anniversary of the date of grant.
As at 31 December 2008 certain performance conditions had not been met. As a result 1,389,857 of the share options granted on 26 May 2008
lapsed. A further 200,000 share options lapsed as a result of an employee based in Australia leaving the Group.
The following options are outstanding for Ordinary Shares:
First date Final date
Option at Options Options at Options Options Options Options at Exercise Date of of of
01.01.07 exercised 01.01.08 granted lapsed exercised 31.12.08 price grant exercise exercise
Directors 750,000 – 750,000 – – – 750,000 10.00p 11.04.03 11.04.04 11.04.13
Directors 600,000 – 600,000 – – – 600,000 15.00p 29.04.03 29.04.04 29.04.13
Directors 650,000 – 650,000 – – – 650,000 18.75p 22.11.05 22.11.06 22.11.15
Directors 5,706,318 – 5,706,318 – – – 5,706,318 40.00p 14.12.06 14.12.06 14.12.13
Directors – – – 1,189,714 (594,857) – 594,857 74.00p 26.05.08 26.05.09 26.05.18
Staff 166,667 (166,667) – – – – – 10.00p 11.04.03 11.04.04 11.04.13
Staff 140,000 – 140,000 – – – 140,000 16.25p 19.08.05 19.08.06 19.08.15
Staff 250,000 (66,667) 183,333 – – (33,333) 150,000 18.75p 22.11.05 22.11.06 22.11.15
Staff 426,505 – 426,505 – – – 426,505 40.00p 14.12.06 14.12.06 14.12.13
Staff 120,000 – 120,000 – – – 120,000 63.75p 22.09.03 22.09.04 22.09.13
Staff – – – 1,590,000 (995,000) – 595,000 74.00p 26.05.08 26.05.09 26.05.18
Other 250,000 – 250,000 – – – 250,000 10.00p 11.04.03 11.04.04 18.03.09
Other 166,667 (166,667) – – – – – 15.00p 29.04.03 29.04.04 18.03.09
Other 350,000 (350,000) – – – – – 20.00p 13.06.03 13.06.04 18.03.09
Other 410,000 – 410,000 – – – 410,000 16.25p 19.08.05 19.08.06 18.03.09
Other 750,000 (66,666) 683,334 – – (66,667) 616,667 18.75p 22.11.05 22.11.06 18.03.09
Other 200,000 – 200,000 – – – 200,000 40.00p 14.12.06 14.12.06 18.03.09
Other 160,000 – 160,000 – – – 160,000 63.75p 22.09.03 22.09.04 18.03.09
Total 11,096,157 (816,667) 10,279,490 2,779,714 (1,589,857) (100,000) 11,369,347
44
Notes to the Financial Statements
for the year ended 31 December 2008
The fair value of equity-settled share options granted is estimated as at the date of grant using a binomial model, taking into account the terms
and conditions upon which the options were granted. The table below lists the inputs to the model used for options granted during the year
ended 31 December 2008.
2008 2007
Share price at the date of grant (pence) 74 –
Dividend yield (%) NIL –
Volatility (%) 78 –
Expected life (years) 10
Risk-free interest rate (%) 4.85 –
Weighted average option price (pence) 40 –
The total fair value of options issued is spread over the vesting period of the options. The share-based payment charge for the year was
A$853,000 (2007: A$1,872,000)
The expected life of the options is based on academic research and is not necessarily indicative of exercise patterns that may occur. Volatility
is calculated with reference to comparative entities share price volatility and reflects the assumption that the comparator’s volatility is indicative
of future trends, which may also not necessarily be the actual outcome. No other features of options granted were incorporated into the
measurement of fair value.
20. Reserves
The following describes the nature and purpose of each reserve within owners’ equity.
Share premium Amount subscribed for share capital in excess of nominal value.
Capital reserve Amounts resulting from the merger of subsidiary investments.
Foreign currency translation reserve Gains/losses arising on retranslating the net assets of overseas operations into sterling.
Option premium on convertible loan Amount of proceeds on issue of convertible debt relating to the equity component (i.e. option to
convert the debt into share capital).
Revaluation reserve Gains/losses arising on the revaluation of the Group’s investments available-for-sale.
Retained earnings Cumulative net gains and losses less distributions made.
The Company has not presented its own income statement as permitted by section 230 of the Companies Act 1985. The Company’s profit for
the year was A$3,677,000 (2007: loss A$9,982,000).
21. Earnings per Ordinary Share
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number
of Ordinary Shares outstanding during the year.
In order to calculate diluted earnings per share, the weighted average number of Ordinary Shares in issue is adjusted to assume conversion of all
dilutive potential Ordinary Shares according to IAS 33. Dilutive potential Ordinary Shares include the convertible loan notes and share options
granted to employees and Directors where the exercise price (adjusted according to IAS 33) is less than the average market price of the
Company’s Ordinary Shares during the year. In 2007 the potential Ordinary Shares are anti-dilutive and therefore diluted earnings per share has
not been calculated. At the balance sheet date there were 9,579,482 (2007: 2,817,089) potentially dilutive Ordinary Shares.
2008 2007
Weighted
Average Weighted
number of average number
Earnings shares Per share Earnings of shares Per share
A$'000 (thousands) amount (cents) A$'000 (thousands) amount (cents)
Basic EPS
Profit\(loss) attributable to ordinary share-
holders 8,240 193,421 4.3 (34,502) 153,072 (23.0)
Convertible loan 4,966 – – –
Options 4,614 – – –
Diluted EPS 8,240 203,001 4.1 (34,502) 153,072 (23.0)
22. Related party transactions
IAS 24, ‘Related Party Transactions’, requires the disclosure of the details of material transactions between the reporting entity and related
parties.
The only related party transaction during the year was in connection with the acquisition of MTP. One of the sellers of MTP was Peter Seear, a
Director of the Company. The total consideration payable to the sellers of MTP was A$8.5 million and had been fully paid as at 31 December
2008 (2007: A$1.5 million outstanding).
45
Notes to the Financial Statements
for the year ended 31 December 2008
23. Lease commitments
Operating lease commitments – minimum lease payments
The Group leased an office building under a non-cancellable operating lease agreement. The lease has various terms, escalation clauses and
renewal rights. The lease had a life of five years and terminated in August 2008. There were no restrictions placed upon the lessee by entering
into this lease.
In February 2008 the Group leased serviced offices with flexible cancellation terms for a 3 year term. Under the terms of the lease agreement
the Group can give notice and vacate the office at the end of years 1 and 2. In November 2008 the Group gave notice to terminate the lease
agreement on 25 March 2009.
Minimum lease payments recorded as an expense amounted to A$234,000 (2007: A$126,000) for the year.
Future minimum lease payments under non-cancellable operating leases as at 31 December 2008 are as follows:
2008 2007
A$’000 A$’000
Within one year 46 74
After one year but not more than five years - -
Minimum lease payments 46 74
Finance lease commitments - minimum lease payments
In March 2008 the Group sourced an A$9 million asset finance facility in respect to the ABM25 continuous miner and Prairie haulage system from
Australian Structured Finance. See note 15 for more information
Future minimum lease payments as at 31 December 2008 are as follows:
2008 2007
A$’000 A$’000
Within one year 2,914 -
After one year but not more than five years 4,743 -
Minimum lease payments 7,657 -
Less future finance charges (609) -
Present value of minimum lease payments 7,048 -
The present value of future lease payments are analysed as:
2008 2007
A$’000 A$’000
Current liabilities 2,342 -
Non-current liabilities 4,706 -
7,048 -
24. Financial instruments
In common with all other businesses, the Group and Company (the 'Group') is exposed to risks that arise from its use of financial instruments. This
note describes the Group’s objectives, policies and processes for managing those risks and the methods used to measure them. Further
quantitative information in respect of these risks is presented throughout these financial statements.
The significant accounting policies regarding financial instruments are disclosed in note 1.
There have been no substantive changes in the Group’s exposure to financial instrument risks, its objectives, policies and processes for
managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note.
46
Notes to the Financial Statements
for the year ended 31 December 2008
Principal financial instruments
The principal financial instruments used by the Group from which financial instrument risk arises, are as follows:
Group
2008 2007
A$’000 A$’000
Loans and receivables at amortised cost
Trade and other receivables 10,621 3,675
Cash and cash equivalents 44,165 23,954
Available for sale investment 154 581
Financial liabilities held at amortised cost
Trade and other payables 18,455 25,689
Borrowings 37,291 46,688
Company
2008 2007
A$’000 A$’000
Loans and receivables at amortised cost
Trade and other receivables 161 178
Cash and cash equivalents 4,298 20,525
Available for sale investment 154 581
Financial liabilities held at amortised cost
Trade and other payables 3,436 328
Borrowings 30,244 46,688
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group’s risk management objectives and polices and, whilst retaining ultimate
responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the
objectives and policies to the Group’s finance function. The Board receives monthly reports from the Chief Financial Officer through which it
reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets.
The overall objective of the Board is to set polices that seek to reduce risk as far as possible without unduly affecting the Group’s
competitiveness and flexibility. Further details regarding these policies are set out below:
Credit risk
Credit risk arises principally from the Group’s trade receivables and investments in corporate bonds. It is the risk that the counterparty fails to
discharge its obligation in respect of the instrument.
The Group holds its cash balances across more than 6 bank accounts with 2 different banks in the UK and Australia. The Group seeks to
deposit cash with reputable financial institutions with strong credit ratings.
Trade receivables
The Group generated the vast majority of its revenue from two customers. These customers are well established businesses with excellent
credit ratings, therefore no allowances for credit losses on trade receivables are made. On average trade receivables are settled within 30
days from the date the invoice is issued.
The maximum exposure to credit risk equals the carrying value of these items in the financial statements.
The Board receives monthly reports summarising the turnover and trade receivable balance of the Group's operating activities in Australia.
The following table illustrates the concentrations of credit risk within the Group as at the balance sheet date.
Revenue and trade receivables aging
Revenue Trade receivables
30 days 60 days
Total Current past due past due
A$’000 A$’000 A$’000 A$’000 A$’000
2008 121,949 10,087 10,087 - -
2007 15,221 2,975 2,975 - -
There are no revenue or trade receivables in the Company.
Liquidity risk
Liquidity risk arises from the Group’s management of working capital and the finance charges and principal repayments on its debt instruments.
It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.
The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. To achieve this
aim, it seeks to maintain cash balances (or agreed facilities) to meet expected requirements for a period of 1 year. The Group also seeks to
reduce liquidity risk by fixing interest rates (and hence cash flows) on its long-term borrowings, this is further discussed in the interest rate
section below.
47
Notes to the Financial Statements
for the year ended 31 December 2008
The Board receives cash flow projections on a monthly basis as well as information on cash balances.
Maturity analysis
Group
Between 1 Between 6
and 6 and 12 Between 1
2008 Total on demand in 1 month months months and 3 years
A$’000 A$’000 A$’000 A$’000 A$’000 A$’000
Trade and other payables 19,205 471 15,633 3,101 - -
Borrowings 37,291 - - - - 37,291
Between 1 Between 6
and 6 and 12 Between 1
2007 Total on demand in 1 month months months and 3 years
A$’000 A$’000 A$’000 A$’000 A$’000 A$’000
Trade and other payables 26,241 473 8,195 17,573 - -
Borrowings 46,688 - - - - 46,688
Company
Between 1 Between 6
and 6 and 12 Between 1
2008 Total on demand in 1 month months months and 3 years
A$’000 A$’000 A$’000 A$’000 A$’000 A$’000
Trade and other payables 3,427 - 3,219 208 - -
Borrowings 30,243 - - - - 30,243
Between 1 Between 6
and 6 and 12 Between 1
2007 Total on demand in 1 month months months and 3 years
A$’000 A$’000 A$’000 A$’000 A$’000 A$’000
Trade and other payables 307 - 133 174 - -
Borrowings 46,688 - - - - 46,688
The Group endeavours to match the maturity of its current assets with its current liabilities to mitigate liquidity risk.
Market risk
Market risk arises from the Group’s use of interest bearing financial instruments. It is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in interest rates (interest rate risk), foreign exchange rates (currency risk) or other market
factors (other price risk). A 0.5% increase in the interest rates will increase interest income and pre-tax profits by A$116,000 (2007:
A$126,000). Borrowings at fixed rates will not be affected by movements in interest rates.
Consistent with industry practice, the Group enters into contracts with customers for the supply of coal at fixed prices into the future. Inherently,
fluctuations in market prices may affect the profitability of these contracts.
Interest rate risk
It is the Group’s policy to eliminate interest rate risk over the cash flows on its long-term debt finance through the use of fixed rate instruments
(such as its 8.5% convertible loan).
48
Notes to the Financial Statements
for the year ended 31 December 2008
Fixed floating rate financial assets
Note 14 provides an analysis of the Group’s fixed and floating financial assets.
Interest rate risk profile and maturity analysis of financial liabilities
Note 15 provides an analysis of the Group’s fixed and floating financial liabilities. As at 31 December 2008 there were liabilities of A$37.3
million at fixed interest rates of which A$2.3 million fall due within one year and A$35 million falls due after more than one year. As at 31
December 2007 there were liabilities of A$46.7 million at a fixed interest rate and no liabilities without interest rates.
Currency risk
The Group is exposed to currency risk through its dealings with Group entities. The Group’s policy is, where possible, to allow group entities to
settle liabilities denominated in their functional currency (primarily Australian dollars) with the cash generated from their own operations in that
currency.
The Group has no formal policy in respect of foreign exchange risk, however, it reviews its currency exposures on a monthly basis. Currency
exposures relating to monetary assets held by foreign operations are included within the Group Income Statement. The Group also manages
its currency exposure by retaining the majority of its cash balances in Australian dollars and sterling, being relatively stable currencies.
The Group is exposed to currency risk on its revenues as the price of coal is denominated in US Dollars. The Group has not hedged against
this risk due to the lower than expected production and sales achieved during the year ended 31 December 2008. The Group will monitor the
exchange rate between the US and Australian Dollar on a monthly basis to determine whether there is a need to hedge against this risk.
A US10 cent increase in the value of the Australian dollar against the US dollar will decrease revenues and pre-tax profits by A$15.3m (2007:
A$1.9m).
A 5 pence decrease in the value of the Australian dollar against pound sterling will increase the 2010 loan note liability and decrease pre-tax
profits by A$3.4m (2007: A$6.0 million decrease in pre-tax profits)
Currency exposures
In so far as is possible the Group manages its foreign currency exposures by minimising cross currencies and retaining cash balances in
strong, stable currencies.
Group 2008 2007
A$'000's A$'000's
Assets/(liabilities) held Assets/(liabilities) held
£GB US$ CA$ A$ £GB US$ CA$ A$
Functional currency
UK sterling – – – – – 2 590 360
Australian dollars (31,238) 9,837 159 – – – – –
(31,238) 9,837 159 – – 2 590 360
Company 2008 2007
£'000's £'000's
Assets/(liabilities) held Assets/(liabilities) held
£GB US$ CA$ A$ £GB US$ CA$ A$
Functional currency
UK sterling – – – – – 2 590 360
Australian dollars (31,238) 1 159 – – – – –
(31,238) 1 159 – – 2 590 360
Fair value
Fair value is the amount at which a financial instrument could be exchanged in an arm’s length transaction between informed and willing
parties, other than a forced or liquidation sale and excludes accrued interest. Where available, market values have been used to determine fair
values. Where market values are not available, fair values have been calculated by discounting expected cash flows at prevailing interest rates
and by applying year end exchange rates.
The fair values of short-term deposits, loans and overdrafts with a maturity of less than one year are assumed to approximate to their book
values. In the case of bank loans and other loans due in more than one year the fair value of financial liabilities for disclosure purposes is
estimated by discounting the future contractual cash flows at the current market interest rate available to the Group for similar financial
instruments.
The fair value of available for sale financial assets are determined by reference to the share price at the year end date.
Borrowing facilities
The Group had no undrawn committed borrowing facilities available at 31 December 2008 (2007: NIL).
25. Contingent liabilities
Payable under Service Arrangements
The Group has engaged a number of service providers under long term contracts. Except for the agreement for outbound logistics services
detailed below, none of these agreements include “take or pay” or specific guarantee provisions. Whilst the amount payable under these
agreements is substantial, those amounts are payable only in respect to the delivery of future services and do not therefore constitute a contingent
liability at this time.
49
Notes to the Financial Statements
for the year ended 31 December 2008
Marketing and Outbound Logistics Agreement
The Group has engaged an external agency to perform outbound logistics and marketing services on its behalf. The contract for delivery of
outbound logistics services includes a “take or pay” commitment requiring the Group to compensate the service provider for costs that may be
incurred by the service provider. The amount of such losses is inherently unpredictable. The contract calls for the Group to provide a bank
guarantee to cover potential liabilities to the extent of A$10 million.
Wiggins Island Coal Terminal Project
The Group has engaged as a participant in the Wiggins Island Coal Terminal Project. The participation contract provides that the cost of the
project will be borne by the ultimate participants in the project in the form of a fee for service, provided that the project proceeds. If the project does
not proceed then the Group will be required to finance its share of the feasibility and design costs incurred. As at 31 December 2008 the potential
liability amounted to A$1 million being 2.4% of project costs of A$41.7 million incurred to date.
Final cost of the feasibility and design project are estimated to be $140 million. If the design study proceeds to completion at this cost then the
economic entity will have incurred a potential liability of $3,360,000.
26. Post balance sheet events
On 10 February 2009, the Company issued 410,000 new Ordinary Shares of 0.5 pence each following the exercise of 410,000 options over
Ordinary Shares under the Company's share option scheme.
On 20 March 2009, the Company issued 250,000 new Ordinary Shares of 0.5 pence each following the exercise of 250,000 options over Ordinary
Shares under the Company's share option scheme.
50
Notice of Annual General Meeting
CALEDON RESOURCES PLC (THE “COMPANY”)
REGISTERED IN ENGLAND AND WALES NO 03993115
NOTICE is hereby given that the 2009 ANNUAL GENERAL MEETING of the Company will be held at the Offices of Nabarro LLP, Lacon House, 84
rd
Theobald's Road, London WC1X 8RW on 23 July 2009 at 10.00 a.m. for the purpose of considering the following:
ORDINARY BUSINESS
1. To receive and adopt the directors’ report and accounts for the year ended 31 December 2008, and the auditors' report on those accounts.
2. To re-appoint BDO Stoy Hayward LLP as the auditors of the Company and to hold office from the conclusion of the meeting until the conclu-
sion of the next annual general meeting of the Company.
3. To authorise the directors to fix the remuneration of BDO Stoy Hayward LLP as auditors of the Company.
4. To elect David de Jongh Weill (non-executive director and Interim Chairman) who retires by rotation pursuant to Article 81 of the Company’s
Articles of Association, as a non-executive director of the Company.
5. To elect Stephen Dattels (non-executive director) who retires by rotation pursuant to Article 81 of the Company’s Articles of Association, as a
non-executive director of the Company.
6. To re-elect Graham Mascall (non-executive director and a member of the Audit, Remuneration and Health, Safety and Environment Commit-
tees) who retires by rotation pursuant to Article 87 of the Company’s Articles of Association, as a non-executive director of the Company.
SPECIAL BUSINESS
As special business to consider and, if thought fit, to pass the following resolutions of which resolutions 7 and 8 will be proposed as ordinary resolutions
and resolutions 9 and 10 will be proposed as special resolutions.
ORDINARY RESOLUTIONS
7. THAT, subject to and conditional on the passing of resolutions 8 and 9 below, the authorised share capital of the Company be increased from
£2,033,726.16 to £2,233,726.16 by the creation of 40,000,000 ordinary shares of 0.5 pence each ranking pari passu in all respects with the
existing ordinary shares of 0.5 pence each in the capital of the company.
8. That the directors be and they are hereby generally and unconditionally authorised in substitution for all existing authorities:
8.1 to exercise all the powers of the Company to allot relevant securities (as defined in section 80 of the Companies Act 1985 (the "Act")) up to an
aggregate nominal amount of £443,000; and
8.2 to exercise all the powers of the Company to allot equity securities (as defined in section 94 of the Act) up to an additional aggregate nominal
amount of £443,000 provided that this authority may only be used in connection with a rights issue in favour of holders of ordinary shares and
other persons entitled to participate therein where the equity securities respectively attributable to the interests of all the ordinary shareholders
on the register of members at such record dates as the directors may determine and other persons entitled to participate therein are propor-
tionate (as nearly as may be) to the respective numbers of equity securities held (or deemed to be held) by them subject to such exclusions or
other arrangements as the directors may consider necessary or expedient to deal with fractional entitlements or legal difficulties under the
laws of any territory or the requirements of a regulatory body or stock exchange or by virtue of shares being represented by depositary re-
ceipts or any other matter whatsoever,
provided that the authorities in 8.1 and 8.2 shall expire at the conclusion of the next annual general meeting of the Company after the passing
of this resolution, except that the Company may before such expiry make an offer or agreement which would or might require relevant securi-
ties to be allotted after such expiry and the directors may allot relevant securities in pursuance of such offer or agreement as if the authority
conferred hereby had not expired.
SPECIAL RESOLUTIONS
9. That, conditional on the passing of resolution number 8 above and the same becoming effective and in substitution for all such existing au-
thorities, the directors be and they are hereby empowered, pursuant to section 95(1) of the Act, to allot equity securities (as defined in section
94 of the Act) for cash pursuant to the authority conferred by resolution number 8 or by way of a sale of treasury shares as if section 89(1) of
the Act did not apply to any such allotment, provided that this power shall be limited to:
9.1 the allotment of equity securities in connection with a rights issue or other pro-rata offers (but, in the case of the authority granted under para-
graph 8.2, by way of a rights issue only) in favour of holders of ordinary shares and other persons entitled to participate therein where the eq-
uity securities respectively attributable to the interests of all the ordinary shareholders on the register of members at such record dates as the
directors may determine and other persons entitled to participate therein are proportionate (as nearly as may be) to the respective numbers of
equity securities held or deemed to be held by them subject in each case to such exclusions or other arrangements as the directors may con-
sider necessary or expedient to deal with fractional entitlements or legal difficulties under the laws of any territory or the requirements of a
regulatory body or stock exchange or by virtue of shares being represented by depositary receipts or any other matter whatsoever; and
9.2 the allotment (otherwise than pursuant to paragraph 9.1 above) of equity securities up to an aggregate nominal amount of £50,000,
and shall expire upon the expiry of the general authority conferred by resolution number 8 above, except that the Company may before such
expiry make an offer or agreement which would or might require equity securities to be allotted and/or shares held by the Company in treas-
ury to be sold or transferred after such expiry and the directors may allot equity securities and/or sell or transfer shares held by the Company
in treasury in pursuance of such offer or agreement as if the power conferred by this resolution had not expired.
10. THAT the Company be and is hereby generally and unconditionally authorised, in accordance with section 166 of the Act, to make market
purchases (within the meaning of section 163 of the Act) of ordinary shares of 0.5p each in the capital of the Company (“Ordinary Shares”) on
such terms and in such manner as the directors may from time to time determine provided that:
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(a) the maximum number of Ordinary Shares authorised to be purchased is 31,000,000 (representing 14.76 per cent of the Company’s
issued ordinary share capital at 19 March 2009;
(b) the minimum price which may be paid for an Ordinary Share is 0.5p (exclusive of expenses and advance corporation tax (if any)
payable by the Company);
(c) the maximum price which may be paid for an Ordinary Share is an amount equal to 105 per cent of the average of the middle mar-
ket quotations for an Ordinary Share derived from AIM, a market operated by the London Stock Exchange for the five business
days immediately preceding the day on which the ordinary share is contracted to be purchased (exclusive of expenses and ad-
vance corporation tax (if any) payable by the Company); and
(d) the authority conferred shall expire at the conclusion of the next annual general meeting of the Company except that the Company
may before such expiry make a contract to purchase its own shares which will or may be completed or executed wholly or partly af-
ter the expiry of such authority, and may make purchases of Ordinary Shares in pursuance of such a contract as if such authority
had not expired.
By order of the Board
JEREMY GORMAN
Company Secretary
REGISTERED OFFICE
Lacon House
84 Theobald's Road
London WC1X 8RW
27 March 2009
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EXPLANATION OF RESOLUTIONS 7 to 10
Resolution 7 – increase in the authorised share capital
Under resolution 7 it is proposed that, conditional on the passing of resolutions 8 and 9, the authorised share capital of the Company be increased from
£2,033,726.16 to £2,233,726.16 by the creation of 40,000,000 new ordinary shares. The passing of this resolution will allow the directors to take advan-
tage of the authorities, if granted, under resolutions 8 and 9.
Resolution 8 – authority to allot shares
Under the Companies Act 1985, the directors of a company may only allot unissued shares if authorised to do so by the shareholders in general meet-
ing.
Resolution 8 renews the directors’ authority approved by the Company’s shareholders at the 2008 Annual General Meeting and confers on the directors
of the Company an authority under section 80 to allot relevant securities with a nominal value of up to £443,000 being equivalent to 88,600,000 new
ordinary shares and approximately 42.19 per cent of the ordinary shares currently in issue. This figure is equivalent to approximately one third of the
Company’s current issued ordinary share capital as enlarged by the allotment of ordinary shares following the satisfaction of all the Company’s out-
standing contractual commitments to allot shares including, without limitation, the exercise of all outstanding employee share options and the conversion
of the loan notes issued by the Company on 5 July 2007 and 8 November 2007.
In addition, the Association of British Insurers (ABI) has said that it will now consider as routine a resolution to authorise the allotment of a further one-
third of a company's share capital for use in connection with a rights issue. Your Board considers it appropriate to seek this additional allotment authority
at this year's AGM in order to take advantage of the flexibility it offers. This will, therefore, give the directors authority to allot additional relevant securi-
ties up to an aggregate nominal amount of £443,000 (being equivalent to 88,600,000 new ordinary shares and approximately 42.19 per cent of the ordi-
nary shares currently in issue), provided that this authority is only used in connection with a rights issue. However, the Board has no present intention of
exercising either authority.
This authority will lapse at the conclusion of the annual general meeting of the Company to be held in 2010 unless previously expired, revoked or varied
by the Company in general meeting. These authorities will be in substitution for all existing authorities available to the directors.
Resolution 9 – limited authority to allot shares for cash
The directors may only allot shares for cash to persons who are not already shareholders in the Company if authorised to do so by the shareholders in
general meeting.
Resolution 9 will empower the directors to allot ordinary shares in the capital of the Company for cash on a non-pre-emptive basis:
• in connection with a rights issue or other pro-rata offer to existing shareholders.
• (otherwise than in connection with a rights issue) up to a maximum nominal value of £50,000, representing 10,000,000 ordinary shares of
0.5p each, being equivalent to approximately 4.76 per cent of the ordinary shares currently in issue.
The directors will only use such authority where it would be in the best interests of the Company to issue ordinary shares other than to existing share-
holders.
This authority will expire upon the expiry of the general authority conferred by resolution number 8, unless previously revoked or varied by the Company
in general meeting.
Resolution 10 – purchase of the Company’s own shares
This resolution renews and extends authority from shareholders for the Company to purchase up to 31,000,000 ordinary shares, an aggregate nominal
amount of £155,000, which is equivalent to approximately 14.76 per cent of the Company’s current issued ordinary share capital. The authority will ex-
pire at the end of the next annual general meeting of the Company and the resolution specifies the maximum and minimum prices at which the shares
may be bought. Other investment opportunities, appropriate gearing levels and the overall financial position of the Company will be taken into account
before deciding upon this course of action. Any shares purchased in this way will be held by the Company in treasury and may then be sold for cash,
transferred to an employee share scheme or cancelled. The Company’s board of directors has no immediate intention of exercising the proposed au-
thority when it becomes effective, but believes that the ability of the Company to buy its own shares when, in the board’s opinion, market prices do not
reflect the Company’s worth, will be in the best interests of the Company and its shareholders. The directors intend to exercise this power only when
they believe the effect of such purchases will increase earnings per ordinary share. Any purchases of ordinary shares would be by means of market
purchases through the London Stock Exchange.
Notes
1. Members are entitled to appoint a proxy to exercise all or any of their rights to attend and to speak and vote on their behalf at the meeting. A
shareholder may appoint more than one proxy in relation to the Annual General Meeting provided that each proxy is appointed to exercise the
rights attached to a different share or shares held by that shareholder. A proxy need not be a shareholder of the Company. A proxy form which
may be used to make such appointment and give proxy instructions accompanies this notice.
2. To be valid any proxy form or other instrument appointing a proxy must be received by post or (during normal business hours only) by hand to
the Company’s registrars, Computershare Investor Services plc of PO Box 82, The Pavilions, Bridgwater Road, Bristol BS99 7NH, no later than
10 a.m. on 22 July 2009.
3. The return of a completed proxy form, other such instrument or any CREST Proxy Instruction (as described in paragraph 7 below) will not pre-
vent a shareholder attending the Annual General Meeting and voting in person if he/she wishes to do so.
4. To be entitled to attend and vote at the Annual General Meeting (and for the purpose of the determination by the Company of the votes they
may cast), shareholders must be registered in the Register of Members of the Company at close of business on the day which is two days be-
fore the day of the meeting (or, in the event of any adjournment, at close of business on the day which is two days before the day of the ad-
journed meeting). Changes to the Register of Members after the relevant deadline shall be disregarded in determining the rights of any person
to attend and vote at the meeting.
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5. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so by using the pro-
cedures described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those CREST members who
have appointed a service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate
action on their behalf.
6. In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a “CREST Proxy
Instruction”) must be properly authenticated in accordance with CRESTCo’s specifications, and must contain the information required for such
instruction, as described in the CREST Manual. The message, regardless of whether it constitutes the appointment of a proxy or is an amend-
ment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received by the issuer’s agent
(ID 3RA50) by 10.00 a.m. on 22 July 2009. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp
applied to the message by the CREST Application Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in
the manner prescribed by CREST. After this time any change of instructions to proxies appointed through CREST should be communicated to
the appointee through other means.
7. CREST members and, where applicable, their CREST sponsors, or voting service providers should note that CRESTCo does not make avail-
able special procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in relation to the input
of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal
member, or sponsored member, or has appointed a voting service provider, to procure that his CREST sponsor or voting service provider(s)
take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In
this connection, CREST members and, where applicable, their CREST sponsors or voting system providers are referred, in particular, to those
sections of the CREST Manual concerning practical limitations of the CREST system and timings.
8. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5) (a) of the Uncertificated Securi-
ties Regulations 2001.
9. In order to facilitate voting by corporate representatives at the meeting, arrangements will be put in place at the meeting so that (i) if a corporate
shareholder has appointed the chairman of the meeting as its corporate representative to vote on a poll in accordance with the directions of all
of the other corporate representatives for that shareholder at the meeting, then on a poll those corporate representatives will give voting direc-
tions to the chairman and the chairman will vote (or withhold a vote) as corporate representative in accordance with those directions; and (ii) if
more than one corporate representative for the same corporate shareholder attends the meeting but the corporate shareholder has not ap-
pointed the chairman of the meeting as its corporate representative, a designated corporate representative will be nominated, from those corpo-
rate representatives who attend, who will vote on a poll and the other corporate representatives will give voting directions to that designated
corporate representative. Corporate shareholders are referred to the guidance issued by the Institute of Chartered Secretaries and Administra-
tors on proxies and corporate representatives (www.icsa.org.uk) for further details of this procedure. The guidance includes a sample form of
appointment letter if the chairman is being appointed as described in (i) above.
10. If the Chairman, as a result of any proxy appointments, is given discretion as to how the votes the subject of those proxies are cast and the
voting rights in respect of those discretionary proxies, when added to the interests in the Company’s securities already held by the Chairman,
result in the Chairman holding such number of voting rights that he has a notifiable obligation under the Disclosure and Transparency Rules, the
Chairman will make the necessary notifications to the Company and the Financial Services Authority. As a result, any member holding 3% or
more of the voting rights in the Company who grants the Chairman a discretionary proxy in respect of some or all of those voting rights and so
would otherwise have a notification obligation under the Disclosure and Transparency Rules, need not make a separate notification to the Com-
pany and the Financial Services Authority.
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