Notes to the Financial Statements

5 Revenue
Mining 44 292 950 32 274 013
Medical services 668 434 561 763
Estates 9 536 474 7 075 689
54 497 858 39 911 465


6 Segment reporting
For management purposes, the Company is organised into divisions based on its products and services and has three
reportable segments, as follows:
-The Mining Division, which mines and sells coal and coal products;
-The Medical services Division, which provides medical services; and
-The Estates Division, which leases property owned by the company.
No operating segments have been aggregated to form the above reportable operating segments.
Segment information for the reporting period is as follows

Medical  Services
2017 Revenue
From external customers 44 292 950 668 434 9 536 474 54 497 858
From other segments 1 327 596 540 728 1 868 324
Segment revenues 44 292 950 1 996 030 10 077 202 56 366 182
Other income 615 105 68 880 111 370 795 355
Cost of sales (42 626 226) (2 482 362) (8 041 472) (53 150 059)
Marketing costs (1 232 479) (1 232 479)
Other gains/losses ( 3 609) ( 3 609)
Redundancy costs (3 914 047) (159 418) (308 599) (4 382 064)
Loss on disposal of Treasury bills (6 521 040) (6 521 040)
Care and maintenance (3 988 663) (3 988 663)
Administration expenses (16 214 826) (332 744) (2 048 659) (18 596 229)
Segment operating (loss)/profit (29 592 836) (909 614) (210 158) (30 712 607)
Segment assets 106 838 702 3 740 106 842 442
2017 Revenue
From external customers 32 274 013 561 763 7 075 689 39 911 465
From other segments 1 891 206 729 371 2 620 577
Segment revenues 32 274 013 2 452 969 7 805 060 42 532 042
Other income 402 620 79 615 62 773 545 008
Cost of sales (69 810 282) (3 294 768) (4 637 650) (77 742 700)
Balance carried forward (37 133 649) ( 762 184) 3 230 183 (34 665 650)
Balance brought forward (37 133 649) ( 762 184) 3 230 183 (34 665 650)
Other income
Marketing costs (2 473 101) (2 473 101)
Administration expenses (38 978 873) (700 888) (1 914 535) (41 594 296)
Segment operating loss (78 585 623) (1 463 072) 1 315 648 (78 733 047)
Segment assets 118 254 986 20 867 985 509 119 261 362


Management currently identifies the Company’s three business lines as its operating segments. These operating segments are monitored by
the Company’s Board of Directors and strategic decisions are made on the basis of adjusted segment operating results.

The Company’s revenues from external customers are divided into
the following geographical areas:
Sales within Zimbabwe 51 970 674 38 619 198
Sales elsewhere in Sub-Saharan Africa 2 527 184 1 292 267
Total revenue 54 497 858 39 911 465
7 Other income
Insurance claims 129 33 500
Rental income 528 879 407 193
Sale of scrap metal 90 037 12 312
176 313 92 003
795 358 545 008
8 Other gains and losses
Foreign exchange loss 3 609
Fair value gains on investment property (note 15) 790 000
3 609 790 000
9 Finance costs
Interest on loans and overdrafts 12 884 362 1 872 844
Interest on leases 177 657 120 133
13 062 019 1 992 977
Interest on loans and overdraft comprise of interest charged on the Government of Zimbabwe treasury bills at a rate of 7% per annum , ZAMCO and EXIM loan and finance lease facilities at an interest rate of 7% and 5% per annum respectively.
10 Share of losses from equity accounted investments

Included in this amount is the Company’s share of loss after tax from:

Clay Products (Private) Limited ( 63 113) (168 035)
Hwange Coal Gasification Company (1 197 355)
( 63 113) (1 365 390)
The share of loss of Zimchem Refiners (Private) Limited amounting to USD 595 888 was not recorded in these financial statements as the cumulative share of losses exceeds the carrying amount of the investment in the associate.
The share of loss for Clay products of USD 189 704 was restricted to the balance of the carrying amount of the investment of USD 63 113.
Unaudited financial information for Clay Products (Private) Limited and Zimchem Refiners (Private) Limited has been included in these financial statements as the audited financial information was not available.
11 Loss before tax
Loss before tax for the year has been arrived at after charging the following:
Allowance for credit losses 2 891 699 10 787 450
Amortisation 269 530 269 530
Annual licence fees – mining rights 125 000 248 430
Audit fees 110 505 97 399
Depreciation on property, plant and equipment 13 399 288 17 035 805
Directors’ emoluments:
Executive Directors 439 606 327 451
Non-Executive Directors 143 319 113 827
Employee benefits expense (note 12.1) 26 783 564 28 466 494
Impairment loss on stripping activity asset (note 20) 4 849 819
Loss on disposal of assets 149 499
Retrenchment package 4 382 064 2 020 787
Loss on disposal of Treasury bills 6 521 040
11.1 Employee benefits expense
Salaries and other contributions 25 175 753 26 945 033
Contribution to Mining Industry Pension Fund 1 056 360 1 114 083
Contribution to National Social Security Authority 551 451 407 378
26 783 564 28 466 494
Employee benefit expense amounting to USD 11 558 294 (2016: USD 15 135 433)
was charged directly to cost of sales.
12 Income tax
12.1 Current tax:
Current tax
Deferred tax
Income tax (credit)/expense
12.2 Tax reconciliation:
Loss before tax (43 837 740) (89 909 990)
Notional tax thereon at a rate of 25.75% (11 288 218) (23 151 822)
Tax effect of:
Non deductible/(taxable) items
Income not subject to tax (128 217) (16 525)
Expenses not deductible in determining tax 9 068 174 4 692 003
Unrecognised tax losses 2 348 261 18 476 344
Tax (credit)/expense
12.3 Deferred tax movement
Balance at 1 January
Debit / (credit) to profit or loss
Balance at 31 December
12.4 Deferred tax liabilities:
Capital allowances and other
Balance at 1 January 22 541 304 29 718 259
(Credit)/debit to profit or loss (4 535 193) (7 176 955)
Balance at 31 December 18 006 111 22 541 304
12.5 Deferred tax assets:
Assessed loss
Balance at 1 January (22 541 304) (29 718 259)
Debit to profit or loss 4 535 193 7 176 955
Balance at 31 December (18 006 111) (22 541 304)
As at year end, the Company had assessed tax losses amounting to USD 238 224 811 (2016: USD 280 075 198). The Company has a history of recent losses and the deferred tax asset recognised in relation to the assessed loss has been limited to USD18 006 111, being the cumulative taxable temporary differences as at 31 December 2017.
The unrecognised assessed loss of USD 168 298 164 will be recognised in future when sufficient taxable profit will be available against which the unused tax losses or unused tax credits can be utilised by the Company. The unrecognised tax losses are carried forward indefinitely.
13 Loss per share
13.1 Basic
Loss attributable to shareholders (43 837 740) (89 909 990)
Weighted average number of ordinary shares in issue 183 720 699 183 720 699
Basic loss per share (0.24) (0.49)
Basic loss per share is calculated by dividing the loss attributable to shareholders by the weighted average number of ordinary shares in issue during the year, excluding the average number of ordinary shares purchased by the Company and held as treasury shares.

13.2 Diluted

For diluted loss per share the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The Company has one category of dilutive potential ordinary shares being share options granted to employees.
The loss used in the calculation of all diluted loss per share measures are the same as those for the equivalent basic loss per
share measures, as outlined above.
In diluted loss per share the share options calculation is done to determine the number of shares that could have been
acquired (determined as the average annual share price of the Company’s shares) based on the monetary value of the
subscription rights attached to outstanding share options. This calculation serves to determine the “ unpurchased “ shares
to be added to the ordinary shares outstanding for the purpose of computing the dilution; for the share option calculation no
adjustment is made to profit.
Loss used to determine diluted loss per share (43 837 740) (89 909 990)
Weighted average number of ordinary shares in issues 183 720 699 183 720 699
Diluted loss per share (0.24) (0.49)
13.3 Headline loss per share
Headline loss per share excludes all items of a capital nature and represents an after tax amount. It is calculated by dividing the headline loss shown below by the number of shares in issue during the year:
IAS 33 – Loss for the year (43 837 740) (89 909 990)
Non – recurring items:
Proceeds on sale of scrap (90 037) (12 312)
Retrenchement costs 4 382 064 2 020 787
Loss on disposal of Treasury Bills 6 521 040
Tax effect of the above (2 260 089) ( 517 182)
Headline loss (37 320 784) (88 418 697)
Weighted average number of ordinary shares in issue 183 720 699 183 720 699
Headline loss per share (0.20) (0.48)
13.4 Diluted headline loss per share
Loss used to determine diluted headline loss per share (37 320 784) (88 418 697)
Weighted average number of ordinary shares in issue 183 720 699 183 720 699
Diluted headline loss per share (0.20) (0.48)

14 Property, plant and equipment

14.1 Finance lease arrangements
The Company has certain property that is held under a finance lease arrangement. As at 31 December 2017, the carrying
amount of the property is USD 720 931 (2016: USD 775 095) included in freehold land and buildings. Finance lease liabilities
are secured by the related assets held under finance leases. Future minimum lease payments at 31 December were as

14.1 Finance lease arrangements
The Company has certain property that is held under a finance lease arrangement. As at 31 December 2017, the carrying
amount of the property is USD 720 931 (2016: USD 775 095) included in freehold land and buildings. Finance lease liabilities
are secured by the related assets held under finance leases. Future minimum lease payments at 31 December were as

The lease agreements include fixed lease payments and a purchase option at the end of the lease term. The agreements are
non-cancellable but do not contain any further restrictions.
No contingent rents were recognised as an expense in the reporting periods under review, and no future sublease income is
expected to be received as all assets are used exclusively by the Company.



The Company holds a 49% voting and equity interest in Clay Products (Private) Limited. Hwange Colliery Company Limited
also holds a 44% voting and equity interest in Zimchem Refineries (Private) Limited. The investments are accounted for under
the equity method.
The shares are not publicly listed on a stock exchange and hence published price quotes are not available. The aggregate
amounts of certain financial information of the associates can be summarised as follows:



The Company did not recognise its share of losses for the year amounting to USD 595 888 (2016: USD 619 247) for Zimchem
Refiners (Private) Limited as the share of cumulative losses exceed the carrying amount of the investment in the associate.

The Company incurred a share of loss for the year amounting to USD 189 704 (2016: USD 168 035) for Clay Products
(Private) Limited. However the Company recognised a share of loss amounting to USD 63 113 limited to the carrying amount
of the investment in the associate.

Dividends are subject to the approval of at least 51% of all shareholders of the associates. The Company did not receive
dividends during the 2017 and 2016 financial years.

The Company has not incurred any contingent liabilities or other commitments relating to the investment in associates.
*Unaudited financial information for associates has been included in these financial statements as the audited financial
information was not available.

16.3 Investment in joint venture

Hwange Coal Gasification Company (Private) Limited is the only jointly controlled entity and the ultimate ownership interest
is 25%. Hwange Colliery Company Limited’s investment in the joint venture is being acquired on a piecemeal basis. The
investment in the joint venture has been accounted for using the equity method.

The aggregate amounts relating to Hwange Coal Gasification Company are as follows:



The Company has an enterprise resource planning (ERP) software that supports the administration and control of the
Company. Some modules for mine planning and marketing are still to be developed. Mining rights comprise coal mining
claims which are yet to be mined. No intangible assets have been pledged as security for liabilities.

17.1 Mining rights
The Company has five (5) mining concessions, Hwange option area, Hwange Concession, Western areas of Hwange town,
Lubimbi East and Lubimbi West. The special grants, Western areas of Hwange town, Lubimbi East and Lubimbi West measure
9 648, 4 200 and 10 995 hectares of minable area respectively and were awarded by the Government of Zimbabwe on 31 July
2015. These Concessions will increase the life of the mine by an estimated 50 years.

The Company accumulated coal fines over the years for which an active market was identified in 2009. Coal fines in excess
of the average annual uptake of the product have been classified to non-current assets.

No coal fines were written down in 2017 (2016: USD 10 638 008).

During the year ended 31 December 2017, a total of USD307 544 (2016: USD 995 201) worth of inventories was included in
profit and loss as an expense resulting from write down of inventories to net realisable value.

No reversal of previous write-downs was recognised as a reduction of expense in 2017 (2016: nil)

All amounts are short-term. The net carrying value of trade receivables is considered a reasonable approximation of fair

Included in trade receivables is an amount of USD 14 622 776 (2016: USD 9 067 817) relating to related party receivables
(note 23.2).

All of the Company’s trade and other receivables have been reviewed for indicators of impairment. Certain trade receivables
were found to be impaired and an increase in allowance for credit losses of USD 2 891 699 (2016:USD 10 787 450) has
been recognised. The increase in allowance for credit losses is included within administration expenses. The impaired trade
receivables are mostly due from customers that are experiencing financial difficulties.

The movement in the allowance for credit losses can be reconciled as follows:

22.2 Related party balances and transactions

Included in the trade receivable and trade payable balances are related party balances that resulted from transactions that
occurred between Hwange Colliery Company Limited and its related parties.

Transactions with Hwange Coal Gasification Company (HCGC)
HCCL sells coking coal to HCGC in the ordinary course of business. During the year ended 31 December 2017, HCCL sold
coking coking coal worth USD 4 833 006 (2016: USD 3 527 997) to HCGC.

Transactions with Clay Products (Private) Limited
HCCL sells coal and coal products to Clay Products (Private) Limited in the ordinary course of business. During the year
ended 31 December 2017, HCCL sold coal products worth USD 7 705 (2016: USD 9 797) to Clay Products.

Transactions with Zimchem Refineries (Private) Limited
HCCL sales coal and coal products to Zimchem Refineries (Private) Limited and purchases chemicals from the associate
company in the ordinary course of business. During the year ended 31 December 2017, HCCL sold coal products worth USD
19 481 (2016: USD 14 721) to Zimchem Refineries.

Loans from shareholders
Included in the non-current portion of the balance relating to borrowings (note 28), are loans issued by the Government of
Zimbabwe through the Ministry of Finance and Economic Development in December 2016 as part of the ongoing restructuring
plan. The loan is as follows:

Government of Zimbabwe (note 28) 119 955 416 59 216 000

22.3 Transactions with key management personnel
Key management of the Company are the executive members of HCCL’s board of directors and senior management personnel. Key
management personnel’s remuneration includes the following expenses:

23 Cash and cash equivalents

For the purposes of statement of cash flows, cash and cash equivalents include cash on hand and in banks net of outstanding
bank overdrafts.

The non-distributable reserve is attributable to the net effect of the restatement of assets and liabilities previously
denominated in Zimbabwean dollars on 21 January 2009. The assets and liabilities were restated to the United States Dollars
using the guidance issued by the Public Accountants and Auditors Board and Zimbabwe Stock Exchange in 2009.

The movement in the revaluation reserve is attributable to the revaluation of the Company’s investment properties perfomed
by Messrs Dawn Properies on 31 December 2016.

24.5 Employee share option scheme
As at 31 December 2017, the Company maintained an employee share option scheme known as the “Hwange Colliery
Company Limited Share Option Scheme.” The scheme is designed to attract and retain employees. Share options under this
scheme are allocated annually to employees if a specified period of service has been completed. The period of service ranges
from 1 to 5 years depending on the employee’s grade. Upon vesting, each option allows the holder to purchase ordinary
shares at a discount of 80% of the market price determined at grant date.

During the year ended 31 December 2017 no shares (2016: nil) were allocated to employees under the employee share option

24.6 Directors’ interests
At 31 December 2017, the current Directors did not hold any beneficial and non-beneficial ordinary shares in the Company.

24.7 Borrowing powers
In terms of the Articles of Association paragraph 60, registered with the Registrar of Companies on 21 April 1992, the total
borrowing powers of the company may not, without the sanction of a General Meeting, exceed an amount equal to three (3)
times the aggregate of the nominal amount of the issued and paid up capital and the capital and revenue reserves of the

As at 31 December 2017, total borrowings amounted to USD 150 312 839 (2016: USD 88 423 385). As a result of the negative
equity the borrowings will need to be sanctioned at an Annual General meeting.

The Company failed to comply with the borrowing powers in accordance with the Company’s Articles of Association.


This OK Zimbabwe lease is a Build Operate and Transfer agreement for the establishment of a supermarket building which
OK Zimbabwe funded the construction of the building for its own occupation for a period of nine years and eleven months.
The estimated cost of construction is USD 1 000 000 and the interest rate is 10 % per annum.

In 2015, the Reserve Bank of Zimbabwe assumed the PTA finance lease facility of USD 18 216 000 which was obtained by the
Company in 2015 relating to the acquisition of coal mining equipment from Belaz. The finance lease facility was assumed by
the Reserve Bank of Zimbabwe as a secured, 3 year term loan at an interest rate of LIBOR + 9% p.a. The loan was securitised
by the following:

i) A First Ranked Mortgage Bond over the Company’s immovable property known as Coal House situated at 17 Nelson
Mandela Avenue, Harare;
ii) A First Ranked Mortgage Bond over the Company’s immovable property known as Coal House situated at 95 Robert
Mugabe Street, Bulawayo;
iii) A First Ranked Notarial General Covering Bond on the Company’s movable assets both present and future;
iv) Proceeds of the Off Take Agreements which shall be paid to the Collection Agent; and
v) An insurance policy covering fire, burglary, and flood in respect of all the goods, secured property, and comprehensive
motor insurance in respect of vehicles and assets of the Company for the duration of the lease.

The finance lease was paid in full following the assumption of the loan by the Government of Zimbabwe through the Ministry
of Finance and Economic Development. Refer to note 28.


27.3 Borrowing terms

Export Import Bank of India (EXIM)
This is a USD 13 703 666 (principal and interest) loan guaranteed by the Reserve Bank of Zimbabwe, taken for the purposes
of financing the purchase of coal mining equipment. Interest is charged at a rate of LIBOR + 3.5 % p.a.

Government of Zimbabwe
As part of the ongoing restructuring plan, the Government of Zimbabwe through the Ministry of Finance and Economic
Development issued treasury bills of USD 41 million and USD 18.216 million in settlement of the Mota Engil and RBZ/PTA
Bank loan, respectively. The Government of Zimbabwe has agreed that the Government support be treated as a loan payable
over 15 years with a 7% interest per annum in accordance with the provisions of the scheme of arrangement

An additional USD 52.3 million worth of treasury bills was issued towards the proposed Scheme of Arrangement bringing the
total support from the Government of Zimbabwe to USD 111.5 million worth of treasury bills.

Zimbabwe Asset Management Corporation (ZAMCO)
Zimbabwe Asset Management Corporation (ZAMCO) took over USD 16 201 625 (principal and interest) outstanding on the
BancABC loan on 1 September 2015 in a debt restructuring exercise. The ZAMCO loan now forms part of the scheme of
arrangement and a debenture with a ten year tenure has been issued. The debenture has a two year moratorium ending in
May 2019. It is to be settled in half yearly equal repayments.

The Company has an obligation to undertake rehabilitation and restoration when environmental disturbance is caused by the
ongoing mining activities. The provision for rehabilitation costs recognised in these financial statements relates to previously
mined areas.

The rehabilitation provision included in the financial statements is an estimate of the cost that will be incurred for the
rehabilitation and restoration of the environment. The Directors are aware of the Company’s responsibility for the rehabilitation
and restoration of the environment and have come up with an estimate of the costs that would be incurred to rehabilitate and
restore the mined areas.

The investment properties were valued on 31 December 2016 by Messrs Dawn Properties, an independent, professionally
qualified valuer. The fair value was determined based on current prices in an active market for similar property in the same
location and condition. A fair value gain of USD790 000 was realised in 2016 as a result of the independent valuation exercise.
Management determined that the effect of changes in fair values between the valuation report date and reporting date is

33 Critical accounting estimates and judgments
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances.

33.1 Accounting judgements
Current and deferred tax
The Company is subject to income tax; significant judgment is required in determining the provision. There are many
transactions and calculations for which the ultimate tax determination is uncertain. The Company recognises liabilities for
anticipated tax assessment based on estimates of whether additional taxes will be due. Where the final outcome of these
matters is different from the amounts that were initially recorded, such differences will impact the current and deferred
income tax assets and liabilities in the period in which such determination is made.

Where the actual final outcome (on the judgment areas) differs from management estimates, the Company will need to
increase the income and deferred tax liability if unfavourable or decrease the income and deferred tax liability if favourable.

33.2 Accounting estimates and assumptions
The Company makes assumptions concerning the future. The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities within the next financial year are addressed below:

Property, plant and equipment.
Items of property, plant and equipment are depreciated over their estimated useful lives taking into account residual values
where appropriate. The useful lives and the residual values are re-assessed annually and may vary due to factors such as
technological innovation and maintenance programmes in place.

Impairment of non-financial assets
In assessing impairment, management estimates the recoverable amount of each asset or cash-generating units based on
expected future cash flows and uses an interest rate to discount them. Estimation uncertainty relates to assumptions about
future operating results and the determination of a suitable discount rate.

Management estimates the net realisable values of inventories, taking into account the most reliable evidence available at
each reporting date. The future realisation of these inventories may be affected by future technology or other market-driven
changes that may reduce future selling prices.

34 Going concern
The Company is experiencing the following challenges which have an effect on its ability to continue operating as a going

34.1 Recurring losses
The Company incurred a loss for the year of USD 43 837 740 (2016 : USD89 909 990 ). The reduction in the reported loss by
the Company is attributable to an increase in production volumes from 969 153 tonnes in 2016 to 1 280 829 tonnes in 2017
and various cost cutting measures implemented by the Company.

34.2 Negative equity
As at 31 December 2017, the Company’s total liabilities exceeded total assets resulting in a negative equity position of USD
211 581 962 (2016: USD 167 744 222). This is attributable to recurring losses which eroded the capital and reserves.

34.3 Low machine availability

The Company experienced low machine availability mainly as a result of technical challenges faced in operating the
equipment and indaquate working capital.
In view of the above, the Directors have assessed the ability of the Company to continue to operate as a going concern and
are of the view that the preparation of these financial statements on a going concern basis is appropriate as supported by the
following plans which are intended to address these challenges:

Scheme of Arrangement
As at 31 December 2016, the Company had litigation claims brought against it as follows:

The Company entered into a Scheme of Arrangement which was approved by its creditors in April 2017 and sanctioned by the
High Court on the 15th of May 2017. The Scheme of Arrangement was aimed at creating operating space for the Company
to focus on its turnaround plans without the pressure from creditors while at the same time addressing creditors’ claims in a
systematic manner.

The Scheme of Arrangement included a conversion of short term debts into long term debts thus restructuring the Company’s
balance sheet and making it attractive to financial institutions to extend lines of credit.

All lawsuits against the Company and all matters as had been set down at Court were removed from the Court Rolls. In
the result, all matters involving labour, bulk of which relate to outstanding salaries were ring fenced for payment under the
scheme of arrangement.

34 Going concern

Focus on core business and least cost production strategy
The Company is no longer a monopoly. New entrants with a lower overhead cost have entered the coal mining sector.
The Company continues to review its cost structure so that it is able to compete in the face of competition. Apart from
employment related cost reductions, the Company is determined to focus on its core business and allow the non-core units
to operate independently without any financial support from the mining operations. The Company will sweat its assets
and unlock value from its non-core assets so that it is able to direct its resources towards increasing production and also
deal with its debts in the Scheme of Arrangement. Valuation of the town infrastructure and properties has been initiated in
an effort to determine how much of the scheme debts could be covered by the sale of these assets. The approval of the
shareholders shall be sought at the appropriate time.

Improving the sales mix and increasing production
While the Company is focussed on ramping up production to above break-even point, it is also cognisant of the fact that the
sales mix is important in order to lower the break-even point and to achieve profitability. Therefore the mining contractor’s
operations are dedicated to mining the lower value thermal and industrial coal while the Company’s capacity has been
deployed to mine higher value coking coal.

The company has secured working capital facilities to import the remaining underground mining equipment and to carry out
mid-life interventions on its own mining equipment. The thrust is to rely more on its own capacity and to reduce equipment
hire. At the same time, the Company will develop and secure export markets in Zambia, South Africa and the Democratic
Republic of Congo so that it can finance its imported production inputs such as spare parts and explosives. The rapid results
initiatives and principles will continue to be inculcated in its production and maintenance processes in order to improve
productivity and efficiencies. The Company’s negotiations to take over the Hwange Coal Gasification Company coke oven
batteries are underway along with the enquiries to replace or rebuild its own coke oven batteries. The first section of the
underground mine will be operating at full capacity by the mid 2018 after operations resumed in December 2017. The
development of a second and a third portal at underground mining is at the initial stages.

Customer centricity and increasing export sales
In the domestic and regional market, the Company’s coal has a reputation for its high quality. The market has been segmented
in a way that recognises high, medium and low volume users. As determined by the purchasing pattern, customer loyalty
programmes have been mapped out to improve customer retention. Thermal and industrial coal customers are encouraged
to keep strategic stock on their premises in order to overcome periods of low coal supply due to break downs or other
unforeseen circumstances. For the tobacco farmers’ market, coal merchants are the preferred distribution channel to this
market segment so that products are available as close as possible to the end user. The Company’s thrust is to increase
export sales of coking coal and coke given their higher price and margin. The target markets are Zambia, South Africa and the
Democratic Republic of Congo. The Company is promoting annual supply contracts in order to assure customers of product

35 Financial instruments by category 31 December 2017

36 Financial risk management objectives and policies

The Company’s principal financial liabilities comprise finance lease liabilities, loans payable, bank overdrafts and trade
payables. The main purpose of these financial liabilities is to raise finance for the Company’s operations. The Company has
various financial assets such as trade receivables and cash and short term deposits, which arise directly from its operations.
Exposure to credit, interest rate and currency risk arises in the normal course of Company’s business and these are main
risks arising from the Company`s financial instruments.

The Board of Directors reviews and agrees policies for managing each of these risks which are summarised below:

36.1 Credit risk
Management has a credit policy in place and the exposure to credit risk is monitored on an on-going basis. The Company
assumes foreign credit risk only on customers approved by the Board and follows credit review procedures for local credit
Investments are allowed only in liquid securities and only with approved financial institutions. At the reporting date there were
no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amounts of
each financial asset in the statement of financial position.

36.2 Interest rate risk
The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s long and short
term debt obligations and bank overdrafts. The Company’s policy is to manage its interest cost using fixed rate debts.

36.3 Currency risk
The Company is exposed to foreign currency risk on transactions that are denominated in a currency other than the United
States Dollar. The currency giving rise to this risk is primarily the South African Rand.
In respect of all monetary assets and liabilities held in currencies other than the United States Dollar, the Company ensures
that the net exposure is kept to an acceptable level, by buying or selling foreign currencies at spot rates where necessary to
address short-term imbalances.
The Company’s exposure to foreign currency changes is not significant.

36.4 Liquidity risk
Liquidity risk is that the Company might be unable to meet its obligations. The Company manages its liquidity needs by
monitoring scheduled debt servicing payments for long-term financial liabilities as well as forecast cash inflows and outflows
due in day-to-day business. The data used for analysing these cash flows is consistent with that used in the contractual
maturity analysis below. Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week basis, as
well as on the basis of a rolling 30-day projection. Long-term liquidity needs for a 180-day and a 360-day lookout period are
identified monthly. Net cash requirements are compared to available borrowing facilities in order to determine headroom or
any shortfalls. This analysis shows that available borrowing facilities are expected to be sufficient over the lookout period.
The Company’s objective is to maintain cash and marketable securities to meet its liquidity requirements for 30-day periods
at a minimum. This objective was not adequately met for the reporting periods. Funding for long-term liquidity needs is not
readily available on the market due to tight liquidity on the local and regional financial markets.
The Company considers expected cash flows from financial assets in assessing and managing liquidity risk, in particular
its cash resources and trade receivables. The Company’s existing cash resources and trade receivables do not exceed the
current cash outflow requirements. Cash flows from trade and other receivables are all collectible within six months and
trade and other payables are contractually due within six months.

36.4 Liquidity risk
The table below summarises the maturity profile of the Company’s financial liabilities at the year end based on contractual
undiscounted payments.

37  Capital management policies and procedure

The Company’s capital management objectives are designed to ensure the Company’s ability to continue as a going concern
and to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk. The
Company monitors capital on the basis of the carrying amount of debt finance as a portion of the Company’s total debt plus
equity finance as presented on the face of the statement of financial position. Management’s goal in capital management is
to maintain a debt capital-to-overall financing ratio of 1 : 2. This is in line with the Company’s covenants resulting from the
debt finances it has taken out.
The Company sets the amount of debt capital in proportion to its overall financing structure, i.e. equity and financial liabilities.
The Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and
the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust
the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt.

Capital for the reporting period under review is summarised as follows:

38 Contingent liabilities

38.1 Significant litigation cases
Litigation cases have been included in the value of cases pending judgement at the courts in note 34 above:

39 Events after the reporting date
At the date of approval of the financial statements on 13 March 2018 there were no adjusting events or significant nonadjusting
events that occurred between the 31 December reporting date and the date of approval.

40 Changes in Directorship
The following changes in Directorship took place after the reporting date:

40.1 Resignations

The following Non-Executive Directors resigned from the Board on dates noted below:

Mr. W. Chitando                    7 December 2017
Mr. W. Kutekwatekwa          18 July 2017
Mr. A. Ngapo                          28 July 2017

40.2 Appointments

The following Non Executive Directors were appointed to the Board in the year 2017
Mrs. J. Muskwe (Acting Board Chairperson)                 15 December 2017
Mr E. N. Tome                                                                      24 March 2017