annual report 2012 - wescoalwescoal annual report 2012 3 definitions in this integrated annual...

Coal mining, processing and distribution for a brighter future

annua l r ep o r t 2012

WESCOAL annual report 2012 1

content s

Scope of report ...................................................................................................... 2

Definitions ............................................................................................................... 3

Group overview ..................................................................................................... 4

Wescoal at a glance ................................................................................................... 4

Group ownership ....................................................................................................... 4

Wescoal Mining ......................................................................................................... 4

Wescoal Trading ......................................................................................................... 5

Black Economic Empowerment .................................................................................... 6

Key strategic intent ...................................................................................................... 6

Key indicators ............................................................................................................ 6

Our history ................................................................................................................ 7

Board of Directors ...................................................................................................... 8

Group Executive ......................................................................................................... 9

Chairman’s report .................................................................................................... 10

Chief Executive Officer’s report .................................................................................. 12

Operating context ............................................................................................... 15

Resource and reserves statement ............................................................................... 15

Stakeholders ............................................................................................................ 19

Performance review ............................................................................................. 23

Financial highlights ................................................................................................... 23

Non-financial highlights ............................................................................................ 23

Wealth distribution .................................................................................................... 23

Corporate social investment ...................................................................................... 24

Sustainability report .................................................................................................. 25

Corporate governance ........................................................................................ 32

Risk management ..................................................................................................... 32

Board, committees and attendance ............................................................................ 35

Corporate governance statement ............................................................................... 36

Remuneration report ................................................................................................. 38

King III compliance matrix ......................................................................................... 42

Shareholders ........................................................................................................ 46

Analysis of shareholders ............................................................................................ 46

JSE share information ............................................................................................... 47

Interaction with shareholders ..................................................................................... 47

Shareholders’ diary ................................................................................................... 47

Annual financial report ........................................................................................ 48

Certification by company secretary ............................................................................ 48

Audit Committee report ............................................................................................. 49

Independent auditors’ report .................................................................................... 50

Directors’ responsibilities and approval ..................................................................... 51

Directors’ report ...................................................................................................... 52

Statement of financial position .................................................................................. 55

Statement of comprehensive income ......................................................................... 55

Statement of changes in equity ................................................................................. 56

Statement of cash flows ............................................................................................ 57

Accounting policies .................................................................................................. 57

Notes to the annual financial statements .................................................................... 67

Notice of annual general meeting ..................................................................... 87

Form of proxy

Appendix 1 .......................................................................................................... 93

Corporate information

WESCOAL annual report 20122

Wescoal Holdings Limited (“Wescoal”) operates in South Africa, and is involved in the mining, processing and marketing of coal and coal related products. This document contains the annual financial statements of Wescoal Holdings Limited and its subsidiaries and covers the financial year from 1 April 2011 to 31 March 2012. The previous year’s annual financial statements were published in September 2011. This report contains a restatement of the financial results for the year ended 31 March 2011.

The report contains feedback from the Chairman and CEO. The activities and performance of the Group are discussed in conjunction with an evaluation of risks and the manner in which stakeholder communication is upheld.

This is the first integrated report published by Wescoal and is a self-declared entry level 3 document. External financial assurance for these annual financial statements have been provided by our external auditor, PricewaterhouseCoopers Inc.

The Wescoal Board confirms its responsibility for the integrity of the integrated report and the annual financial statements, the content of which has been collectively assessed by the Directors who believe that all material issues have been addressed.

The financial statements were prepared according to International Financial Reporting Standards (IFRS), the requirements of the South African Companies Act and regulations of the JSE Limited (JSE). The Group has, for the first time, provided reporting guidance in accordance with the guidelines of the Global Reporting Initiative (GRI G3), the details of which are available on the website at www.wescoal.com.

Any queries regarding this integrated report or its contents should be directed to:

P Janse van RensburgChief Financial OfficerTel: 011 954 2721Fax: 011 954 6737228 Voortrekker RoadKrugersdorp 1739South AfricaEmail: [email protected]

s cope of repor t

WESCOAL integrated annual report 20122


def in i t ions

In this integrated annual report, unless the context indicates to the contrary, the following expressions bear the meanings assigned to them below:

Abrina Abrina 724 Proprietary Limited

AltX Alternative Exchange

AMCU Association of Mine Workers and Construction Union

Atlantis Atlantis Coal Estate CC

BCEA Basic Conditions of Employment Act

BEE Black Economic Empowerment

Blanford Blanford 006 Proprietary Limited

Blesboklaagte Blesboklaagte washing plant

CEO Chief Executive Officer

Chandler Chandler Coal Proprietary Limited

CSDP Central Securities Depository Participant

CSI Corporate Social Investment

DMR Department of Mineral Resources

DWAF Department of Water Affairs and Forestry

EE Employment Equity

Elandspruit Elandspruit 291 JS, Portions 4 and 23

EXCO Executive Committee

Express Express Technology CC

Fikza Fikza Investment Holdings Proprietary Limited

GRI G3 Global Reporting Initiative

Heuwelfontein Heuwelfontein, Portions 96, 97 and 103 215 IR

Hilkru Hilkru Mining Development Proprietary Limited

IFRS International Financial Reporting Standards

JSE JSE Limited

Khanyisa Khanyisa Mine/Colliery

LTI Lost Time Injury

LTIFR Lost Time Injury Frequency Rate

Mineral Recoveries Wescoal Mineral Recoveries Proprietary Limited

MoI Memorandum of Incorporation

mtpa Million tons per annum

NUM National Union of Mineworkers

Proudafrique Proudafrique Trading 147 Proprietary Limited

PwC PricewaterhouseCoopers Inc

Razorbill Razorbill Properties 269 Proprietary Limited

SAMREC South African Code for Reporting Results, Mineral Resource and Mineral Reserves

SHE Safety Health and Environment

SLA Service Level Agreement

Vlakvarkfontein Vlakvarkfontein 213 IR

Vuselela Vuselela Mining Proprietary Limited

Wescoal or the Group or the Company Wescoal Holdings Limited

Wescoal Mining or Wesmine Wescoal Mining Proprietary Limited

Wescoal Trading Including the operations which trade as Chandler Coal

WPP Waterberg Portion Property Proprietary Limited


Wescoal at a glance

Wescoal is involved in the mining, processing and distribution of coal. Wescoal consists of two primary divisions, namely Mining and Trading.

Our vision is to be the leading junior coal miner with a sustainable resource base and a coal trading operation.

Our mission

To mine, process and market coal and related coal products.

We embrace strong values within Wescoal, where we follow the principles and dedication of: development of our employees; the maintenance and promotion of their safety and health; and ensure trust and respect for all employees. We are passionate regarding the preservation of the

environment and strive for wealth creation for all stakeholders.

Group ownership

Wescoal Mining

The strategic intent of the division is to produce the bulk of the Group’s profits into the future.

In the 2012 financial year, Wescoal successfully produced 1.34 million tons of coal at Khanyisa Colliery. It is the Company’s stated intent to increase this to 4 million tons per annum by 2015/2016.

The Mining Division is involved in the following activities:

Coal mining Raw run of mine material is mined by opencast truck and shovel method, processed and on-sold.

Coal exploration Drilling and exploration is done on the reserves purchased from Vuselela, Razorbill and Proudafrique and is currently taking place at the resources of Silverbank and Verblyden.

Coal processing Processing of coal for the local power generation industry.

Products and services consist of:

• Mining of coal

• Processing of coal

• Hauling of coal by road through outsourced partners

• Drilling and exploration of own coal reserves.

Notwithstanding the previous difficult year, valuable lessons have been learnt by the management team and going forward, Wescoal will ensure ownership of all surface rights affected by the proposed mining operations. Wescoal will further endeavour to appoint only mining contractors with a longstanding history, even if this means that operating costs are higher. It is felt that this approach allows for greater sustainability and a longer working relationship.

A resource statement is provided on page 15 of this annual report.

g roup over v iew

Wescoal Holdings Limited

Wescoal Exploration (Pty) Ltd

Wescoal Mineral Recoveries (Pty) LtdWescoal Mining (Pty) Ltd Chandler Coal (Pty) Ltd

Blanford 006 (Pty) Ltd

100%

60% 100%

100%100%


Wescoal Trading

Mainstay feature of the Group and will remain as such.

Wescoal Trading has its roots in Chandler Coal, a coal trader which spans more than 80 years’ operational experience in South Africa. Fifteen years ago, the Company was acquired and in 2005 incorporated into Wescoal, positioning the listed entity of Wescoal as a miner and trader of coal. Deep rivets of expertise and knowledge of the workings of the coal market, together with value-added services, position Chandler Coal, which is the trading name, as a leading coal merchant in South Africa. To be an effective coal merchant, an organisation requires staff with embedded knowledge of coal markets, clients with a demand for coal, a deep understanding of market influences, the ability to source the correct grade of coal to match client needs, as well as long and established relationships with mines and customers – Chandler Coal has all these attributes.

Products and services consist of:

• Sourcing of suitable product

• Technical support for optimal steam generation

• Securing delivery of product as and when required

• Securing markets for new producers.

Chandler Coal is represented on a national basis across South Africa, with offices and depots in Cape Town, Port Elizabeth, Benoni, Witbank and Johannesburg. However the vast majority of coal trading takes place in the provinces of Gauteng, Mpumalanga and North West. The trading arm is also active in cross-border trade with Swaziland and Mozambique.

Chandler Coal has strong ties and associations with industries across South Africa and its neighbouring countries, with clients operating in the beverage, mining, food, yeast, paper and sugar industries, as well as poultry farms and supplying coal to hospitals. Chandler’s market share of the merchant coal market is currently estimated at 20%.

Wescoal – Segmental percentage contribution to revenue and EBITDA

Contribution to revenue Contribution to EBITDA

On an EBITDA level, the Mining Division contributes over 80% to Group profitability and this strong drive in earnings and margin is to be harnessed into the future.

NamibiaBotswana

Zimbabwe

Limpopo

MpumalangaGauteng

North West

Northern Cape

Western Cape

Free State KwaZulu-Natal

Lesotho

Eastern Cape

Swaziland

Mozambique

Chandler Coal areas of activity

MiningTrading

87%

13%

43%

57%


Black Economic Empowerment (BEE)

Wescoal complies with the BEE parameters as set out in the Mining Charter.

Wescoal successfully concluded a transaction in November 2007 with a BEE partner, Waterberg Portion Property Proprietary Limited (WPP), which initially acquired a 31.36% shareholding in Wescoal. WPP is a BEE Company operating in the minerals and energy space, the major shareholders being Mr MR Ramaite and Mr E Mzimela.

Mr Ramaite, Chairman of WPP and the Non-executive Chairman of Wescoal, is a former Director-General of the Department of Public Service and Administration and sits on a number of Boards of Directors of other listed companies.

The BEE partners currently hold a total of 34.6% shareholding in Wescoal, and intend to increase their shareholding to more than 34.9%, which is currently taking place through the additional purchase of shares on the stock market.

The major shareholders of WPP have been involved in mining for the last five years and, through Vuselela, hold several mining rights for coal and other minerals in Mpumalanga, Waterberg and KwaZulu-Natal.

Key strategic intent

Our strategic intent is to:

• Deliver financial growth

• Take the lead in coal production by junior miners

• Enhance Group reputation

• Be cost-effective

• Make safety, health and environment (SHE) a priority

• Develop our relationships not only with our customers, but also with our stakeholder base.

Our values are based on the principles of:

• Development of our employees

• Maintenance and promotion of the safety and health of all our employees

• Ensuring trust and respect for all employees

• Preservation of the environment

• Wealth creation for all stakeholders.

Key indicators

Wescoal is a well-structured junior coal mining Company which is set to grow coal mining assets in order to provide the Group with a consistent and meaningful source of product. Key indicators in the two operating segments of Mining and Trading differ as set out below:

Mining Trading

Positive Negative Positive Negative

•RenewedEskomsupply contract

• Increasedlifeofmine extracted from Khanyisa

•Miningrightgranted for Intibane coal asset

•Activelysecuringlong-term assets (coal reserves for opencast mining)

•Labouraction

•Geologicalconditions

•Adverseweatherpatterns

•Depressedinternational coal prices

•80yearsofcoal trading knowledge

•Marketsharefairly high in a fragmented market place

•Limitedinlandsupply, with most high quality coal exported

•Escalatinginternational coal prices

•Manufacturingindex increase

•Unethicalpractices

•Limitedinlandsupply, with most high quality coal exported

•Manufacturingindex decline

group over v iew (con t inued )


Our history

The Company today known as Wescoal, has its

origins in the Chandler family business. The

family has been involved in the coal trading and

logistics business for approximately 60 years.

1950

14 March 2007 Mineral Recoveries acquired the technology licence to upsize

coal fines into saleable products.

15 August 2011 Sale of the Blesboklaagte Washing Plant.

31 July 2012 Wescoal entered into various

transactions with Xstrata to increase life of mine by 15 years.

16 July 2012Awarded mining licence for Intibane Colliery.

1 April 2008 Chandler purchased the business of Atlantis

and Express.

3 March 2005 A Shelf Company, Abrina, was registered to:• becomethelistedholdingpublicCompany• acquiretheentireissuedsharecapitalofChandler• facilitatetheBEEshareholdingofFikza.

3 June 2008 Wescoal purchased prospecting rights from Proudafrique.

December 2009FirstcoalisminedandextractedfromKhanyisaMine.

1 April 2005 Abrina acquired 100% of the shares in Chandler, in a “share-for-share deal”. The Abrina name

was changed to Wescoal Holdings Limited on 14 June 2005 and Wescoal Holdings Limited listed successfully on the AltX Board of the JSE on 20 July 2005.

2005

2006

2007

2008

2009

2010

2011

2012

2013

October 2009The mining operations at Heuwelfontein were bought

toestablishKhanysiaMinenearKendalinMpumulangawithin situ coal reserves of 4.5 million tons.

15 April 2010 Wescoal moved its listing to the JSE Main Board, Mining, sub-sector Coal.

26 August 1996Chandler was incorporated to purchase the Chandler coal trading and logistics business and other assets from the Chandler family.

1 October 2004 Chandler acquired a 34% interest in Wesmine from Hilkru. Wesmine’s main

business is coal beneficiation. Wescoal acquired the remaining 66% shareholding from Hilkru on 18 July 2005, after which Wesmine became a wholly-owned

subsidiary of Wescoal.

3 June 1998 Chandler acquired 100% of Blanford, a property holding Company,

which owns the property where the head office of the Group is situated.

1995

2000

10 April 2008 Wescoal purchased prospecting rights from

Vusela and Razorbill.


Muthanyi Robinson Ramaite (43)Non-executive ChairpersonMM (Public & Development Management) – University of the WitwatersrandB.Juris – University of the North

Responsibilities at Wescoal: Chairman of the Board Years with the Group: 5

Robinson is a former Director-General of the Department of Public Service and Administration and a former advisor to various Ministers of Parliament. He has been involved in the mining sector over the past six years as Chairman of Vuselela Mining Proprietary Limited and sits on the boards of various listed and non-listed companies.

Petrus Janse van Rensburg (54)Chief Financial OfficerCA(SA)

Responsibilities at Wescoal: Member of the Board, Member of EXCO Years with the Group: 7

‘Piet’joinedDeccaNavigationSystemsin1986andprogressedtoFinancialDirector.In1989hejoinedtheChubbGroupasFinancialDirector.HejoinedCompairin1996asFinancialDirectorandbecameGautengRegionalDirectorforOperationsin2004.In2005hejoinedWescoalasFinancialDirector.

Wiseman Nkululeko Khumalo (36)Executive DirectorMBA – Graduate School of Business at the University of Cape TownB.Com (Accounting) – Rhodes University

Responsibilities at Wescoal: Recently appointed Executive Director, Member of the Board, Member of EXCOYears with the Group: 2

WisemanworkedintheCorporateFinanceDivisionforEskom;intheEnergyandMiningDivisionforPricewaterhouseCoopersandasaFinancialManager on Capital Projects for the London and NASDAQ Listed RANDGOLD Resources. Most recently he was CEO of Carbon Reduction SA and in 2009 he became the Executive Director of American Regenerated Energy (Pty) Ltd & GHG Reductions (Pty) Ltd, companies established to reduce carbon emissions in Africa and the Middle East.

André Russell Boje (56)Chief Executive OfficerCertificate in the Theory of Accounting – University of Port Elizabeth

Responsibilities at Wescoal: Member of the Board, Member of EXCO Years with the Group: 16

André isa formerManagingDirectorofChubbFireSecurity (Pty)Ltd fromwhichhe resigned in1993 tostarthisownmanagementconsultancy practice. In 1995 he joined the MacPhail Group as Managing Director, resigning in 1997 to acquire an interest in Chandler Coal, now a subsidiary of the Wescoal Group.

Jacobus Gustavus Pansegrouw (51)Non-executive DirectorB.Com (Accounting) – Rand Afrikaans University

Responsibilities at Wescoal: Member of the Board, Audit and RemCo Committees Years with the Group: 16

‘Kosie’istheManagingDirectorofGuvonInvestments(Pty)Ltd,adiversifiedcompanywithdirectandindirectinvestmentinpropertymanagement and development, tourism, laundry, dry cleaning and transport. He has vast business experience and serves on the boards of various companies.

Dalia Maria Teresita van Gaalen (54)Independent Non-executive DirectorStrategic Marketing – Unisa; Communications – Damelin;Leadership and Executive Development – Gordon Institute of Business Science; and IEDP – ESADE (Madrid)Responsibilities at Wescoal: Member of the Board and Audit Committee, Chairman of RemCo and Nominations Committees Years with the Group: 3

Teresita was the Chief Executive of Changan Southern Africa, where she was tasked with rebuilding the group while expanding the Chana brand footprint in Southern Africa. She continues to play a leading role in the local motor industry, having previously completed an assignment with Commercial Motors in Botswana where she upgraded the group’s infrastructure and skills levels while expanding the footprint for MAN, Honda and Tata. Prior to this she was Managing Director of Subaru Southern Africa and a member of the Barloworld Automotive Executive Management Board. Teresita set her pace in the motor industry by putting Hyundai on the map and introducing relationship marketing for the first time.

Board of Directors

The management team at Wescoal has in excess of 35 years of experience in the production and mining of coal. In addition to this proficiency, Wescoal sub-contracts mining operations to leaders in their respective fields, further enhancing efficiencies in operating activities. We are committed to the growth and development of junior coal mining operations, targeting smaller

deposits and focusing on the internal South African market. This means that we will strive to be cost-effective, we make safety a priority and we develop relationships not only with our customers, but also with our stakeholder base.



Martin BartleManaging Director: Wescoal MiningYears with the Group: 3

Martin began his career in 1975 teaching at Muir College in Uitenhage. In 1980 he joined Rand Mines, Harmony Gold Mine as an Education Officer. During his ten years spent with Rand Mines, he held a number ofpositionsintheHumanResourcesDevelopmentDepartment.From1990to2000,Martinwasemployedat Bank Colliery/Amcoal Central Workshop as a Training Superintendent and Personnel Manager. In 1995

he was promoted to Amcoal Group Training Centre as the Training Manager responsible for the group’s technical training.

Later in his career he joined Eyesizwe as the Continuous Improvement Manager and was later appointed as the SHE Manager at Arnot Colliery and in the same year, 2003, was appointed as the Group Risk Manager for Eyesizwe. Martin was part of the team responsible for theamalgamationofEyesizweandKumbaintoExxaroGroup.In2007MartinheldthepositionofGeneralManagerBusinessandContinuousImprovement for all Exxaro’s underground operations. On 1 October 2009 Martin was appointed as the Managing Director of Wescoal Mining, a position he retains today where he is responsible for the overall operations of the Wescoal Mining segment, taking part in the Executive Management and reporting to Wescoal, as well as lending his vast experience to many sub-committees within Wescoal operations.

Peter AndrewManaging Director: Wescoal TradingYears with the Group: 4

Peter has 25 years of experience in the coal industry, specialising in marketing and long-term contract and procurement negotiations, primarily for the South African inland coal market. His career began with the National Institute of Metallurgy in 1966, after graduating from the University of the Witwatersrand with a B.Sc. degree in Geology and Chemistry. Peter worked at Sasol Marketing and Otavi Mining and as a

SalesManagerbeforejoiningR.E.MBlakewayfrom1977to1980asaSalesandProcurementManager.From1980to1989Peterwasthe Inland Marketing Manager for the Transvaal Coal Owners Association, responsible for the total sales and distribution of approximately 22 million tons of coal per annum produced through the association. Prior to joining Wescoal, Peter spent 17 years with Ingwe Coal Corporation as their Inland Marketing Manager where he was responsible for increasing market share and developing long-term contracts with large industrial consumers, as well as coal procurement from smaller independent collieries, to ensure exports through the Richards Bay Coal Terminal were achieved and that all rail contracts were fulfilled and consigned.

In 2008 Peter joined the Wescoal Group as the Managing Director responsible for the Chandler Coal operation. His expansive knowledge of the inland coal market, negotiation skills, relationships and thorough understanding of the market are all beneficial skills for Wescoal.

Ettienne Strydom Projects Manager: Wescoal MiningYears with the Group: 1

Ettienne holds a B.Com in FinancialManagement and completed his studies in Strategic FinancialAnalysis at Harvard Business School. His working career began in consulting as a programme director/manager, a business integration specialist and a manager of business development at Deloitte Consulting, T-SystemsandBilliton.From2002to2005hewasemployedastheProgrammeManagerforSasolIM

Oryx Project in Qatar, where he was the team leader responsible for the technical and functional design and implementation work of the businessstructuresandsystems.From2006to2010EttienneworkedforLonmininvariousroles,includingBusinessAnalyst,SeniorManager Strategic and Long-Term Planning, Senior Manager Restructuring and Reorganisation. All positions reported to the Executive Vice-President Mining. In 2010 Ettienne consulted to Xstrata Alloys, Chrome and Platinum where the primary functions included DMR compliance tracking, design, structure and implementation of capital projects and legal compliance.

In January 2011 Ettienne moved to Wescoal Mining where he currently holds the position of Projects Manager. His well-developed ability to understand, analyse, develop and implement successful solutions to business challenges, with a strong knowledge base in mining, oil and gas, and in particular coal, platinum, chrome and manganese, means that Wescoal will extract the benefit from his experienced gained over 15 years.

Curtis MnisiGroup Financial Manager: Wescoal HoldingsYears with the Group: Curtis joined Wescoal post-year-end on 11 June 2012

Curtis completed a B.Com degree in Accountancy at the Rand Afrikaans University and Honours B.Compt (Accountancy) from Unisa in 2004 where his major subjects included applied financial accounting, applied financial management, applied taxation and applied auditing. His working career began in 2004 with DeBeersConsolidatedMinesasaSeniorFinanceClerk.In2005CurtismovedtoDeBeersGroupServices

and remained there until 2008, holding various positions including assistant financial accountant, acting financial accountant, consolidations accountant, internal auditor and project accountant, with the experience gained across a variety of accounting principles, being invaluable. In March 2008, for a year, Curtis was responsible for capital reporting to the board and tax for De Beers Consolidated Mines.

FromApril2009untilJune2012CurtiswastheManagementAccountantforDeBeersConsolidatedMines,beforejoiningWescoalHoldings.HerehewilltakeresponsibilityforfinancialmanagementatWescoalHoldings,reportingtotheGroupFinancialDirector.

Curtis holds professional memberships at the South African Institute of Chartered Accountants, the Association for the Advancement of Black AccountantsofSouthernAfricaandBlackManagementForum.

André Russell Boje

See résumé under Board of Directors

Petrus Janse van Rensburg


Wiseman Nkululeko Khumalo


Group Executive

Chairman’s report

The main thrust of our drive in 2012 is to be a leading junior coal miner with access to our own product.

Introduction

I am pleased to present to our shareholders our first integrated annual report in which we have strived to address all pertinent material issues facing Wescoal and the markets in which we operate. Overall, Wescoal has emerged from a period in which we have had to defend our integrity and ethos of operations, which I am pleased to announce we have managed to successfully achieve. With this behind us, we look forward to implementing the recently acquired projects and getting these to mining stage as soon as it is practically possible.

Financial results

Wescoal delivered a sound set of full year results with Group revenue up 13.1% to R630.8 million and EBITDA increasing from a loss of R6.2 million to a profit of R45.2 million, reinforcing the Group’s turnaround performance in the midst of challenging market conditions. The Board is pleased with this improved set of results, which demonstrates that we have worked hard to turn around the loss position reported in March 2011.

Operating costs increased by 10.45% to R38.9 million, mainly due to inflationary factors, expansion in the Mining Division and legal, professional and consulting fees incurred. Despite this, the positive EBITDA position was driven by cost savings in the Mining Division, lower cost per stripping ratio achievements and increased selling prices in the trading environment.

Headline earnings per share was a pleasing 11.4 cents compared to a loss of 8.1 cents in the comparative period from continued operations.

Further details on the operation performance of our two segments are contained in the CEO’s report on page 12 of this integrated annual report.


Robinson RamaiteChairman: Wescoal


Long-term mining assets

Wescoal stated that it wished to remove and conclude any outstanding cautionary issues and this has been done. Wescoal announced its entry into a four-step transaction with Xstrata, further details regarding this important transaction are included in the CEO report.

During the course of the financial year, Wescoal produced 1.34 million tons of coal from the Khanyisa Colliery. It is our stated intention to reach 4 million tons per annum by 2015/2016.

Labour relations and safety

Wescoal has a combined workforce of 121, of which 82 workers are associated with Wescoal Mining. Our objective is to have zero fatalities at the mine, and I am pleased to report that Wescoal suffered no fatalities during the reporting period, as well as during the previous period.

Our LTIFR remained steady at 0.56 with a target in place to reach 0.3.

Wescoal recognises two trade unions at its mining operations and these are AMCU and NUM. During the year under review, one legal strike took place relating to wages. It was settled on the basis that we have a two-year wage agreement in place, which all workers abide by.

Changes to the Board of Directors and management enhancements

During the year under review, no change to the Board of Directors was made. On 2 May 2012, an announcement was made regarding the appointment of Wiseman Khumalo as Executive Director after serving as a Non-executive Director of the Board. He will be responsible for new resource development. We are pleased to have Wiseman on board and look forward to his contribution to the Group.

A project manager, Ettienne Strydom, was appointed and will focus on the development of the various prospects outlined in the resource statement.

Sustainability

Contained in this integrated report is Wescoal’s first sustainability report which focuses on our stance and measurement towards the environment, the economy, labour practices, human rights and our products.

In October 2011, in an effort to strengthen overall corporate governance, Wescoal appointed PricewaterhouseCoopers, a leading audit and accounting practice, to replace our previous auditors Middel & Partners.

We remained focused on ensuring that we stay true to being a socially responsible Company adding value to our employees and the communities in which our mines are located. In this regard, we have multiple social responsibility projects and comply with all environmental and water use regulations.

Conclusion and appreciation

I am pleased that Wescoal has positioned the Company towards a sustainable future as a junior coal miner with access to its own product. Although these remain early days, our drive, commitment and resources form the foundation upon which the Company can grow and develop further into a formidable force in South Africa.

Wescoal continues to seek additional coal mining assets and to pursue corporate transactions in addition to those already announced, in order to further extend its life of mine through access to resources. The lifting of the cautionary announcement with regard to Pegasus does not mean that Wescoal does not retain interest in the resource.

The Board looks towards the future of Wescoal with enthusiasm, confident in the direction which the Company is taking and mindful that, as a Board, it is our role to support management and provide them with the necessary tools to be successful.

I would like to thank the shareholders, management and staff for their support and, of course, my fellow Board members for their continued support and guidance over the past year.

Robinson Ramaite3 August 2012

WESCOAL integrated annual report 2012 11


Chief Executive Officer’s report

Introduction

The Group produced a solid set of results for the financial year ended 31 March 2012, which reinforces the clear turnaround from the loss position in March 2011. This turnaround is evidence that the strategic decision to focus on mining, which has greater margins and returns, is a beneficial strategy for Wescoal. Last year, all non-core mining activities, such as the Blesboklaagte washing and beneficiation plant, were disposed of in an effort to streamline and focus on pure opencast coal mining. Within the Wescoal results there are no further discontinued operations for this 2012 reporting period. This strategy has born fruit and will be applicable in future. Furthermore, we are hard at work to increase our resource base for the Mining Division, as well as to ensure own product for our Trading operation. Again these are all strategies to ensure that our objective of producing 4 million tons of coal per annum by 2015/2016 is achieved, which in turn will answer to our stated value of shareholder wealth improvement year-on-year.

Wescoal Mining

The goal for the Mining Division, to focus on supplying Eskom with quality product and to dispose of all other associated operations, is continuing to prove to be a valid strategy.

While revenues in the division are down by 7.5% due to disposals, when excluding the non-recurring write-off of R29.3 million, EBITDA has increased by 73%. In addition to the on-going rehabilitation programme, R7.7 million was spent in the period November 2011 to March 2012 to accelerate the rehabilitation of two mined out areas at Khanyisa, over-and-above on-going rehabilitation.

Deliveries to Eskom continue unabated, however negotiations are at an advanced stage to secure a three-year contract to include the Vlakvarkfontein resource (Intibane Colliery).

Executive management at Wescoal Mining has been strengthened by the appointment of an executive director for Group development, and a project manager to focus on development and the various prospects outlined below and to separate operational management from Group development and projects.

Hard times financially, operationally and economically should always be passed through with meaningful lessons learnt. In light of this, Khanyisa has undergone substantial change in the manner in which business is conducted, and the main focus at the moment is on production and compliance. For instance, operational costs were reviewed and better cost efficiencies were put into place. Processes which were previously undertaken by sub-contractors were undertaken in-house – momentum such as this needs to be maintained. A further strategic focus will be on supply contracts to Eskom.

Andre BojéChief Executive Officer: Wescoal




Wescoal Trading

The division, which trades under the name Chandler Coal, delivered positive results with revenue up by 13.2% and EBITDA at R7.0 million, an increase of 67% on the results to March 2011.

Transnet Freight Rail (TFR) transfers to Richards Bay Coal Terminal (RBCT) for the calendar year to April 2012 totalled 23.8 million tons, an annualised rate of 71.5 million tons. The increase on the 2011 calendar year of 5.8 million tons is primarily being taken from domestic coal supply, resulting in shortages of sized coal for the domestic market.

Despite export prices decreasing to as low as $82, the transfers continue and domestic prices have increased with demand remaining strong. Management is of the opinion that the trading environment will show significant improvement in the next financial year.

Chandler, through persistent marketing efforts, landed the first order in three years to supply coal to the Swaziland sugar industry. It has also made inroads into the South African sugar industry by landing the first ever order to supply a sugar producer with thermal coal.

Financial overview

The current year’s financial results reflect the final sale of the Blesboklaagte beneficiation plant in the discontinued results of the Group. An after-tax profit of R2.9 million was made on the sale of the plant, and substantial rehabilitation work was done on the Witbank site and recouped from the proceeds of the sale. Management is comfortable that this business venture has now been concluded successfully but will monitor the sub-lessee’s activities until the end of the lease period.

Continuing operations within the Group, which includes coal mining, processing and trading, reflected a healthy growth in revenue of R73.1 million, up 13.1% from the comparative financial period. It is notable that the half-year revenue only reflected a R2.8 million (0.8%) increase in revenue and substantial improvement in revenue was experienced towards the latter part of the financial year. In March the Group experienced an increase in revenue of R30.0 million, compared to the previous financial year. This is specifically disclosed because of the trend in revenue improvement, but more to substantiate the high levels of trade and other receivables and the decline in cash generated from operations.

Market conditions in the trading environment continued to improve, with revenue ending on R359.0 million, which is R42.0 million (13.2%) up on the previous reporting period. Mining activities at Khanyisa were stabilised towards the end of the previous financial year, and the division managed to generate revenues of R291.0 million. This is, however, 7.5% lower than the previous financial year, but generated an EBITDA of R47.0 million compared to a loss of R2.0 million in the previous year.

Operating costs increased by 10.45% to R38.9 million mainly due to inflationary factors, expansion in the Mining Division and legal, professional and consulting fees incurred. All of these costs have been expensed and the Group is involved in a legal process to recover the punitive cost orders. Group EBIDTA ended on R45.0 million compared to a loss of R6.0 million. This improvement was driven by cost savings in the Mining Division, lower cost per stripping ratio achievements and increased selling prices in the trading environment.

Headline earnings per share is 11.4 cents compared to a loss of 25.9 cents in the comparative period. The current financial period also carried an additional six million (4.2%) fully diluted weighted average shares in issue due to a shares-for-cash issue done in the previous financial year.

The debt to equity levels remain low at 12% compared to 23% in the previous financial year and significantly below industry norms. The Group is committed to balance the level of debt to other funding alternatives and continuously monitors the cost effects thereof. The Group reduced debt to the value of R13.0 million during the reporting period.

Cash and cash equivalents reduced by R11.0 million to R20.0 million, but it must be noted that trade receivables increased by R36.0 million without a corresponding increase in trade payables. Instead, trade payables remained constant year-on-year. The above scenario is a feature of increased sales towards the latter part of the financial year as mentioned earlier, and a trend in the trading environment where upfront payment for coal supply is required. Cash flow was further impacted by the R7.7 million spent on mine rehabilitation (referred to earlier).

The issues mentioned in cash and cash equivalents have had a negative impact on cash generated from operations but will have a positive free cash impact on the cash flow for the Group going into the new financial year. The Group invested a further R5.0 million into the improvement of the resource statement of its existing reserves and this investment will unlock value in the next financial year.

Dividends

No dividend has been declared. The Board reviews the dividend policy on an on-going basis and uses new projects, possible acquisitions and the Group’s financial position as indicators in this decision-making process.

Safety, Health and Environment (SHE)

During the period under review, Wescoal produced a clean record with no incidents of health or safety violations or accidents at the operations.


Resources

The resource and reserves statement has been updated and is contained on page 15 of the integrated report. In terms of the sustainability of assets, it is felt they can best be described in the summary of resource as at the beginning of August 2012.

Resource Life of resource CommencementResource

(million tons)Khanyisa 10 – 12 months Current 0.87Intibane (Vlakvarkfontein) 20 – 26 months End 2012 1.88Vlaklaagte (in the process of bieing sold) 12 – 15 years 2014 38.55

Silverbank To be announced To be announced 40.80Verblyden To be announced To be announced 61.70Total 143.80

Subsequent to the above resource summary, Wescoal announced that it had entered into a four-step transaction with Xstrata, which will in the medium term increase its life of mine by 15 years. Wescoal currently has a mining right over Vlaklaagte, which it will sell to Xstrata for R82 million. The rationale for the sale is that Vlaklaagte is currently surrounded by Xstrata operations; the Vlaklaagte mining right is an underground resource that will require extensive capital expenditure to bring to full production and Wescoal’s expertise is in open cast mining. The next step would be to acquire Elandspruit from Xstrata coal, which has an existing mining right with a resource of close to 30 million tons. Elandspruit is better situated for Wescoal – it is in close proximity to the other Wescoal operations at Khanyisa and Intibane and is an open cast resource. Wescoal will also acquire the Duiker properties from Xstrata, which hold the bulk of the surface rights needed to conduct mining operations at the Elandspruit resource.

Rights and licences

Many of the properties on which Wescoal operates are not owned, but rather leased. Wescoal will strive for ownership of both the mineral and mining rights to a project or claim which vests mining rights and activities to Wescoal, thereby eliminating the need to pay royalties to an external party. Furthermore Wescoal has instituted a policy to ensure ownership of all surface rights affected by the proposed mining operations. This is the manner in which, going forward, Wescoal will undertake each of its mining operations or projects.

Highlights of the past year

Over the past eighteen months Wescoal has successfully defended a series of attacks on the integrity of the business and its management. With this behind the Group, the key strategic thrust of Wescoal is to be a leading junior coal miner with a sustainable resource base and

a coal trading operation. The strategic decision to focus on mining with the intent to supply Eskom has extended the life of the mine at Khanyisa, and allowed for additional capacity with mining set to commence at Intibane Colliery towards the end of the 2012 calendar year.

The foundation of this strategic thrust is in play, whereby Wescoal secured a high quality coal resource that can be mined by the opencast method to increase production and sustainability of a metallurgical and high grade coal resource.

The future

The Trading Division will continue to experience strong demand and with the large producers’ focus on export, restricted supply is foreseen to continue.

The Mining Division will continue at maximum production and with Vlakvarkfontein, to be known as the Intibane Colliery, coming on stream later in the year, increased profitability is forecast going forward. Wescoal will continue to source supply contracts with Eskom as their demand increases. Wescoal also finds Eskom to be a good creditor with timeous payments, and therefore risks in this regard are reduced.

Overall, management expects strong growth in both divisions for the year ending March 2013 with the Vlakvarkfontein resource contributing substantially from there on. The post-year-end announcement of the Elandspruit transaction will help to bulk up operations across Wescoal’s Mining Division and is in line with the Company’s goal of securing high quality coal assets that can increase productivity and sustainability through open cast mining.

The product to be produced will be for the Eskom, domestic and export markets.

This timescale for the projects will be the building blocks to achieve the stated goal of mining 4 million tons per annum by 2016.

Conclusion and appreciation

Wescoal is very aware that the major assets the Company has are resources, people and intellectual capital, which it will continue to hone to produce greater shareholder value. Furthermore the strengthening of our executive management team is pivotal to Wescoal.

I wish to thank the Board for its guidance and support, as well as our staff, shareholders and suppliers for their support during the year.

Andre Bojé3 August 2012


WESCOAL annual report 2012 15WESCOAL integrated annual report 2012 15

Resource and reserves statement

opera t ing contex t

0.87 million tonsKhanyisaCollieryStrip ratio: 3,5-4 : 1

1.88 million tonsIntibane CollieryStrip ratio: 1,5 : 1

38.55 million tonsVlaklaagteStrip ratio: 2,5-3,5 : 1

2014

2015

Onwards

2009

Reser

ves

2010

2011

2012

2013

LoM10-12 months

LoM20-26 months Potential of

4 million tons of coal mined per year

LoM12 years

Silverbank Currently underVerblyden exploration


Wescoal locality map

Powerstation

Main Roads

Operating Mine

Mining Right

Approved Prospecting Licence

Legend

PRETORIA

JOHANNESBURG

Free State

Gauteng

Mpumalanga

North West

VereenigingHeidelberg

Standerton

Secunda

Kriel

WitbankMiddelburg

0 10 20 40 60Kilometres

Silverbank Verblyden

Vlakvarkfontein Intibane Colliery

Khanyisa CollieryElandspruit

opera t ing contex t (con t inued )

N


The resources and reserves statement contained within this 2012 Wescoal annual report is an extract from the full SAMREC compliant report dated August 2012 issued by DS Coetzee (PhD Geology, Pr. Sci. Nat.: 400136/00). The full details of the resources and reserves statement prepared for Wescoal Holdings Limited is available on the Wescoal website at www.wescoal.com and is subject to the assumptions disclaimer and notes therein. No report is available for the 2011 period. Wescoal undertakes to comply with this regulation going forward as a further enhancement of corporate governance.

The report covers the new order mining right at the operating collieries and prospects of:

• Khanyisa Colliery (including Sarie Marais) (Mining Right number MP30/5/1/2/2/107MR) covering Portions 96, 97 and 103 of the farm Heuvelfonten 215 IR;

• Intibane Colliery (Mining Right number MP30/5/1/1/2/483MR) covering Portion 16 of the farm Vlakvarkfontein 213 IR;

• Vlaklaagte Prospect (Mining right number MP30/1/1/2/10035MR) covering Portions 1, 2, 4, 7, 8, 9, 10, 13, 14, 15, 16, 17, 40 and 41 of the farm Vlaklaagte 330 JS;

• Silverbank Prospect (Mining right number MP30/1/1/2/10037MR) covering the entire farm Silverbank 611 IR excluding Portions 1, 10, 12 and 14;

• Verblyden Prospect (Mining right number MP30/1/1/2/10036MR) covering the entire farm Verblyden 387 IS excluding Portions 18 and 35.

All details regarding the geology, topography, climate, rainfall, drainage, veld type, land type and land use are contained within the full resources and reserves statement on the Wescoal website.

Summary of resources and reserves (million tons)

Area Seam

Resources Reserves

GTIS Reconnaissance Measured Total MTISRun of Mine

(ROM)

Khanyisa 4 seam 0.06 0.06 0.06 0.06 0.05

2 seam 0.73 0.69 0.69 0.69 0.60

Sarie Marais

4 seam 0.08 0.08 0.08 0.08 0.07

Sub-total 0.87 0.82 0.82 0.82 0.72

Initbane 4 seam 0.19 0.17 0.17 0.17 0.14

2 seam 1.69 1.53 1.53 1.53 1.27

Sub-total 1.88 1.70 1.70 1.70 1.41

Vlaklaagte 5 seam 4.67 4.22 4.22 4.22 2.24

4U seam 2.56 2.31 2.31 2.31 1.22

4L seam 4.98 4.50 4.50 4.50 2.38

2 seam 20.36 18.37 18.37 18.37 9.74

1 seam 4.54 4.09 4.09 4.09 2.17

1L seam 1.44 1.30 1.30 1.30 0.69

Sub-total 38.55 34.79 34.79 34.79 18.44

Silverbank 2 seam 40.80 9.79

Verblyden 4 seam 61.70 14.81


Summary of geological losses (GL) and modelling estimation errors (MEE) used for the calculations in the above table are:

Area Geological losses (%) Modelling estimation errors (%)

Khanyisa 3 3

Initbane 5 5

Vlaklaagte 5 5

Silverbank 40 60

Verblyden 40 60

Coal quality

Coal qualities are reported on an air dry basis for raw coal. Wescoal mainly supplies steam coal to Eskom for power generation purposes.

Area Description Calorific valueVolatile matter

Moisture content

Sulphur

Khanyisa The coal product from Khanyisa supplied to Eskom is in line with the following minimum standards prescribed by Eskom

≥21.7MJ/kg ≥21.5% < 9.0% Between 0.5% and 1.3%

Initbane 4 seam Average 22.9 MJ/kg; ranging between 21.4 MJ/kg and 24.3 MJ/kg

Average 23.5%; ranging between 20.8% and 26.7%



2 seam Average 20.4 MJ/kg; ranging between 16.6 MJ/kg and 23.8 MJ/kg




Area Description Calorific valueVolatile matter

Moisture content

Sulphur

Vlaklaagte 5 seam Average 22.1 MJ/kg; ranging between 18.6 MJ/kg and 24.7 MJ/kg




4 lower seam Average 19.8 MJ/kg; ranging between 13.4 MJ/kg and 23.0 MJ/kg




2 seam Average 19.2 MJ/kg; ranging between 11.5 MJ/kg and 23.0 MJ/kg




Silverbank No qualities are available

Verblyden No qualities are available



Comments

• Nolegalproceedingsarependingagainstanyoftheminingrights.

• EnvironmentalImpactStudiesforKhanyisaandIntibanehavebeenconductedby E van der Linde. These reports are available for inspection at the offices of Ferret Mining and Environmental Services; Ground Floor, Turnberry Building, Fourways Golf Park, Roos Street, Fourways. Environmental Impact Studies for Vlaklaagte, Silverbank and Verblyden Prospects have not been conducted yet.

• TheremainingROMReserveforKhanyisareportedinWescoal’s2011AnnualReportis 1.2 MT. The progressive production from Khanyisa during the 2011–2012 financial year was 0.54 MT, which implies a remaining ROM Reserve of 0.66 MT at the end of March 2012. The actual ROM Reserve calculated, however is 0.65 MT, which implies a shortfall of 0.01 MT is. This shortfall can be explained in terms of additional information obtained from ongoing drilling during 2011–2012 financial year to refine the resource on an ongoing basis.

• TheresourcesstatedforSilverbankandVerblydenareassumptionsbasedonthework of CL Greyling and the properties need to be extensively explored to prove these resources; therefore they are currently reported as reconnaissance resources only.

Stakeholders

Wescoal defines stakeholders as groups, people, organisation or communities that have a direct interest in the businesses of Wescoal. Stakeholder evaluation has been undertaken at the Holdings level as well as in the Mining and Trading Divisions. For the purposes of this integrated report only the high level initiatives will be addressed.

Engagement with stakeholders takes various forms, including informal meetings, calls, customer meetings, staff meetings, newsletters and formal meetings with regulators.

Key stakeholders to Wescoal include:

ShareholdersCommunities

Government/municipalities

EmployeesTrade unions

RegulatorsContractors

Customers

Financiers

Civil societySuppliers


Details of the Group’s key stakeholders, the type of engagement, material issues raised and actions are provided in the table below.


Stakeholder Type of engagement Material issue raised Action takenShareholders Interim and final results presentations and

teleconferences are held regularly, an active website is in place, dissemination of information through a defined contact list, calls with strategic shareholders if and when required and site visits and investor and press open days to mining facilities regularly take place

Long-term life of mines, earnings and sustainability of the Company, dividend payments and succession planning

A concerted effort to change the focus of the business from predominantly a coal trading company to a coal miner has been completed

Assets are actively being increased

Additional executive management has been added to the head office structure

Communities and civil society

Active CSI initiatives, community participation and assistance, meetings with representatives from organisations supported

Active assistance and support, especially prevalent once mining operations at a particular site are completed and rehabilitated

Assistance in the form of money, the establishment of an education facility, as well as a chicken farm have been established at Khanyisa Mine. The focus is to ensure projects are sustainable beyond mine closure

Blankets and other much needed utilities are provided

Wescoal staff also give of their own personal time

Fundraising golf day was undertaken with proceeds already distributed

Government and municipalities

Conference participation, meetings, industry body representation

Transformation remains a key driver for Wescoal, so too compliance with municipal regulations especially where operations could impact on communities

Wescoal is completely BEE compliant and has, as a BEE partner, WPP

Meeting with municipalities if the need arisesRegulators (including the DMR)

Compliance with DMR administrative requirements, reporting, correspondence, formal meetings and feedback sessions

Regulatory compliance DMR documentation is regularly updated and in order

Monthly monitoring by consultants

Feedback from SHE representatives

Compliance inspections by government officials

Feedback from SHE Committee

Remedial action where required


Stakeholder Type of engagement Material issue raised Action takenEmployees Compliance with legislation:

Employment equity

Promoting equal opportunity and fair treatment in employment

Prohibition of unfair discrimination

Awareness of rules and regulations within the workplace

Affirmative action measures

Eliminate unfair discrimination

Employment Equity Policy

Ensure Disciplinary Code and Grievance Procedure address channels of correction for unfair discrimination

Basic conditions of employment

Communication

Training

Employment equity reports in terms of the Act

Regulation of working time, holidays, leave, termination of employment

Communication structures in place to keep employees informed

Employee competency

Ensure that there are no barriers to employment equity

Annual submission of EE reports to the Department of Labour on progress of EE plan

Display BCEA at workplaces

Ensure policy is in place to regulate these conditions

Pre-shift team talks, monthly forums, staff newsletter

Training plan for employees in place to ensure competency as well as development

Trade unions Advance economic development, social justice, labour practices and the democratisation of the workplace

Collective Bargaining/Establishment of Bargaining Council

Recognition thresholds within Wescoal Holdings

Wescoal recognises two unions: NUM and AMCUMedia Media are invited to attend interim and final results

presentations

One-on-one engagement with key media

Site visits and press open days to mining facilities regularly take place

Reputation concerns regarding litigation issues raised in 2011

A concerted effort to respond quickly to litigation issues raised – openness with media on the issues at hand

One-on-one engagement with key Tier 1 media after the litigation issues to ensure Wescoal strategy message was well received, as opposed to the negative reputation risk issues



Stakeholder Type of engagement Material issue raised Action takenContractors Service Level Agreements (SLAs), outsourced contract

agreementsDiscrepancies in outcomes Continual monitoring takes place to ensure SLAs and

outsourced contracts are adhered to and followedCustomers Formalised business dealings, meetings, telephone

conversations, credit checks and reviewsCompetitive pricing structures

Product quality

Complaints

Conscious effort to meet expectations where applicable

Product quality from both the mining and trading operators are continually monitored. From the trading side, the vast knowledge on the quality of coal for various applications is continually monitored

Recorded, addressed and resolvedSuppliers One-on-one business dealings, presentations on

product features and correspondenceDatabase of suppliers kept and maintained

Delivery of products

Overseen across the Group and updated accordingly

Timeous delivery is strived for across both divisionsFinanciers Formal meetings, updated status meetings and

feedback sessionsLoan agreements and overdrafts to Wescoal Wescoal has kept its providers of finance informed of

all developments within the Company pertaining to overdraft requirements and the process for settling debt


700,000

600,000

500,000

400,000

300,000

200,000

100,000

02007 2008 2009 2010 2011 2012

Financial highlights

Revenue – continuing operations (R’000)

Headline earning per share – continuing operations (cents)

Maintaining positive relationships with major stakeholders

• Implement strategy and remain focused on areas where expertise presides

• Continue to uphold an open culture of communication with stakeholders through all channels.

Utilising operational resources on a responsible level

• Minimise waste and level of environmental impacts

• Enhance measures of environmental impacts

• Reduce non-renewable resource requirements by optimising the level of extenders in the final product

• Reduce energy consumption.

Promote social upliftment

• Continue to initiate and support corporate social investment (“CSI”) programmes in our community – leaving a mark in the hearts and minds of the people, rather than on the land

• Skills transfer and development, training and support in disadvantaged communities

• Uplift disadvantaged communities by investing in and using materials and resources from local communities.

Wealth distributionNon-financial highlights

Position the Company for long-term growth and sustainability

• Ensure optimal assets and asset life is in place

• Appoint appropriate leadership and management

• Ensure cash flow returns that allow for continued reinvestment

• Increase market share through quality provision of product

• Lower production costs and improved efficiencies

• Ensure compliance with all DMR and other regulatory codes

• Skilled and motivated staff complement, complying with employment and transformation objectives.

pe r formance rev iew

269,5

58 376,0

88

570,5

61

353,9

00

557,6

14 630,7

52

EmployeesRetained incomeReplacement of assetsGovernmentProviders of capital

36%

27%

25%

7%5%

20

15

10

5

0

-5

-10

2007 2008 2009 2010 2011 2012

3.8

11.5 14

.2 17.0

-8.1

11.4


Corporate social investment

Wescoal is acutely aware of the communities in and around the areas of operations. With the primary area of mining operation being Witbank and the communities situated adjacent to the Khanyisa Colliery, this is the current geographic focus for Wescoal. The motto Wescoal has adopted to care for the environment and the community is to leave its mark in the hearts and minds of the people, rather than on the land. With this in mind, Wescoal actively interfaced and discusses development needs with the community and then provided what the community desperately needed, rather than making an assumption with regard to the needs.

During the year under review Wescoal participated in various CSI initiatives and projects including:

Balmoral and Imbalenhle Primary Schools

In March 2012, Wescoal hosted a golf day at the Middelburg Golf Club in which 20 Group clients participated. The main aim of the day was to raise funds for worthy community projects in the Witbank/eMalahleni area. Flowing from a number of generous donations, Wescoal was able to donate R40,000 to Balmoral Primary School to assist children who cannot afford school fees, as well as to upgrade the facilities, and a further R40,000 to Imbalenhle Primary School at Khanyisa Mine – an initiative supported directly by Wescoal.

Wescoal also donated blankets to Imbalenhle Primary School children as well as households in the informal settlement surrounding the mine at the start of the winter.

Project summary – Balmoral Primary SchoolBefore After• Nosupportfromthemine • Sustainableinvolvement

Project summary – Imbalenhle Primary SchoolBefore After• Limitedsupportfromthemine • Schoolbooks,etc.

• Blanketswhichthechildrencouldtakehome to share with the family

• Employmentofadditionalstaffmembers

• On-goingmaintenanceandsupport

• Ensuringsustainability

Elkana Educational Centre and Kabod House

Through Good Morning Angels on Radio Jacaranda, R50,000 was donated to the Elkana Educational Centre and a further R50,000 to Kabod House in Witbank.

Elkana Education Centre

Elkana Educational Centre is a private, non-profit educational centre catering for mentally and physically challenged children within the Witbank community. The 62 learners, aged 6–18 years, have exemption from compulsory school attendance. The Elkana Education Centre, which has been in existence for the past 11 years, has grown to take in more and more children as facilities became available through donations and fundraising efforts.

Kabod House

This home looks after destitute babies before they are placed in more permanent care. They mostly take in orphaned babies (babies left in hospitals and found by police). The house is not short on commitment, love and a desire to give the best possible care, but the house is reliant on private funds to do its essential work. Wescoal gave the donation to Kabod House to feed and look after the babies in their care.

pe r fo rmance rev iew (con t inued )


Project summary – Elkana Educational Centre

Before After

• Nosupportfromthemine • Additionalfunding

• On-goingstructuralmaintenancebyWescoal

Project summary – Kabod House

Before After

• On-goingneedoffunds • Additionalfunding

• On-goingstructuralmaintenancebyWescoal

Imbalenhle Chicken Farm

As part of a local community development initiative, Wescoal assisted in the erecting, education and planning of a sustainable chicken farm. A chicken house has been built and stocked with 500 day-old chicks. In addition, 16 members of the Imbalenhle community were trained in various aspects of chicken farming, including the handling, feeding and cleaning of the chickens; personal sanitisation so as to limit infection to the birds; temperature control; and business skills. The house is currently fully operational and once able to sustain itself, a second house will be built.

Project summary – Imbalenhle Chicken Farm

Before After

• Subsistencefarmingofchickenswithinthe community

• Afullyoperationalchickenhouse

• Educationinrearingandhandlingchickens, as well as disease control measures

• Regularfoodonthetable

• Additionalcashfromexternalsales. All profits are reinvested in the project

• Employmentcreated

Sustainability report

Wescoal wishes to leave its mark behind in the hearts and minds of the people, rather than on the land. To this end Wescoal will continue to participate in education and food security for the

communities in which it operates.

This is the first sustainability report prepared by Wescoal and, as such, focuses on performance indicators in the order of economic, environmental, labour practices and a decent work environment, human rights, society and product responsibility. Wescoal is in the process of improving policies and procedures for gathering sustainability information, which will assist in the assessment of its performance. This, together with additional management of material risks, will have a direct benefit on the Group and its stakeholders. This will also enhance sustainability reporting into the future.

Economic indicators

On page 23 of the integrated report Wescoal has plotted its economic value generated and distributed to employees, government, providers of capital and the amount retained for growth.

Although Wescoal does not measure its effect on climate change, it will endeavour to measure the change and/or impact in future.

Wescoal has not received any financial assistance from government or quasi-government organisations. Cash flow required to run the operation and pay for capital expenditure is generated and used from cash generated by operations, as well as manageable overdraft facilities arranged with our bankers, Absa.

Wescoal, being a coal mining and trading Company, understands that in order to extract product, it will impact on the environment. Our cause, effect and rehabilitation initiatives are discussed in the section covering environmental indicators below.

Transportation costs

This is the first occasion on which Wescoal is reporting on transportation costs, and it will continue to do so in future. The Trading Division of Wescoal is heavily dependent on transportation of coal from source to end customer. In 2012, transportation costs amounted to R104.7 million, very much in line with the 2011 amount which was R102.2 million.


Electricity costs

There is a conscious drive within Wescoal to make every effort to reduce electricity costs, however the high tariff increases passed on to consumers by Eskom are unavoidable.

R’000 Mining Division Trading Division Corporate2012 75.8 42.5 80.82011 1,107.6 78.5 54.7

Energy saving initiatives

The majority of Wescoal’s operation is diesel driven. Office lights, geysers and other electrical requirements are sourced from Eskom.

Environmental indicators

Water licences issued by DWAF

Wescoal is the owner of a water use licence issued by DWAF at Khanyisa Colliery in respect of:

• Taking water from a water resource

• Storing water

• Disposing of water

• Removing, discharging and disposing of water found underground.

The licence is governed by strict adherence and compliance measures set out by DWAF, which include a series of specific management guidelines, measurement guidelines, internal audits and submissions to DWAF on a yearly basis.

This licence is important to Wescoal as the registration of water use is required in terms of section 26 (1)(c) and 34(2) of the National Water Act, No. 36 of 1998. There are a number of reasons why water users are required to register their water use with the Department and these include:

• The management and control of water resources for planning and development purposes

• The protection of water resources against over-use, damage and impacts

• To ensure fair allocation of water among users.

The registration of water rights and usages is to the benefit of the country as a whole, and not only to water users. According to a leading expert, Dr Rudy Boer, South Africa is one of the

most water-scarce countries in the world – on the brink of being defined as a country “under water stress.” Estimates are that all freshwater resources will be fully allocated in about 20–30 years from now, depending on economic growth scenarios.

These licences entitle Wescoal to extract 36,000 m3 per annum from an underground borehole.

Water licence issued in terms of Chapter 4 of the National Water Act, No. 36 of 1998

Issuedto–Wescoal(Pty)Ltd–KhanyisaCollieryLicence No. – 04/B207/ABGJ//1507FileNo.–16/2/7/B100C404

Validforatwo(2)yearperiodfromdateofissuancewhichwas21February2012

Properties over which the water uses are exercisedWater Act section Water uses Property Amount of water

(cubic metres)/other

Section 21 (a) of the Act

Taking of water from a water resource

Heuvelfontein 215 IR* portion 106

36,000 m3/a

Section 21 (b) of the Act

Storage of water Heuvelfontein 215 IR portion 106

36,000 m3/a

Section 21 (g) of the Act

Disposing of water in a manner which may detrimentally impact on a water source

Heuvelfontein 215 IR portion 97 and106

Pollution control dam – 2,190,000 m3/a

Septic tank – 40,000 m3/a

Silt trap dam – 49,200 m3/a

Section 21 (j) of the Act

Removing, discharging or disposing of water found underground

Heuvelfontein 215 IR portion 103 and 106

16,100 m3/a based on an average quantity of 275 m3 per day

(*) Heuvelfontein is the property on which Khanyisa Colliery is situated.

Potable water is provided for employees from a bore hole at the Khanyisa site and stored in a 5,000 litre tank. Biological monitoring of the potable water is regularly conducted.

Over the period under review Wescoal has had no water or liquid spills or contamination of water sources.



Mine rehabilitation

The mining properties on which Wescoal has rights to mine are primarily leased by the Company. Wescoal is committed to the rehabilitation of mining activity on a continual and on-going basis in the roll-over method and to date Wescoal has met all rehabilitation requirements, including an additional 71,245 m2 at the Khanyisa Colliery.

Wescoal spent the following amounts on various forms of accelerated rehabilitation at its mining operations:

Khanyisa Other2012 R7.7 million R3.7 million2011 - -

Waste management

In the past, Khanyisa Colliery has experienced problems with previous mining contractors who ignored solid waste management requirements. Wescoal now has receptacles in place which are utilised by all staff and contractors, into which waste is dumped and then professionally removed.

Wescoal does have certain hazardous chemicals at the Khanyisa operation such as hydrocarbons. Hydrocarbons are oils, like crude, petrol, diesel, heavy oils and lubricants. There can be indirect effects as a result of burning them such as the release of carbon dioxide, nitrogen oxides, sulphur oxide and partial oxidation, which might then be further altered into photochemical smog in the right conditions. This might cause coughs, and other respiratory ailments for people exposed to the fumes.

Other management practices undertaken by Wescoal include:

Dust control

Dust control is monitored and measured daily, weekly and monthly by environmental consultants LESHCON. With levels measuring in at suitable levels, the Khanyisa Colliery received the following results:

Coal dust exposure – mg/m3

A dust fall-out monitoring system has been implemented at Khanyisa.

3.00

2.50

2.00

1.50

1.00

0.50

0.00Gra

ders

Dumper

s

Telly

Dozer

sExc

avator

Blaste

rsDri

fters

Sups

Sample

rsPla

nt ops

Loader

sMa

nagem

entWork

shops

Securi

ty

1.34

0.76 1.0

2

0.97

2.27

1.22

1.70

0.54 0.7

7

2.43

0.55

0.62 0.8

2

0.92

Exposure levels measured Occupational Exposure LevelsSource: LESCHCON

East pit before

Area rehabilitated71,245 m2

West pit before

East pit after

West pit after


Labour practices and decent work environment

For a mining operation, Wescoal has a fairly small labour force, split between the two operations as follows:

Wescoal Mining

Wescoal Trading

Workforce – 82 Ethnic group split Trade union members

Workforce – 37 Ethnic group split

FemaleMale

WhiteBlack

FemaleMale

10

16

72

21

WhiteBlackColoured

75

7

1912

6

Non-union membersAMCUNUM

49

28

5

Note: Wescoal Trading has no trade union members

Source: Wescoal Human Resources data on employees

per fo rmance rev iew (con t inued )


Training is undertaken on a regular basis, and over the year the following staff were trained:

Wescoal Mining

Staff trained in the year

Wescoal Trading

Staff trained in the year

Health and safety initiatives

Wescoal complies with the Mine Health and Safety Act, No. 29 of 1996, the purpose of which is to provide for the health and safety of employees and other persons at mines and for that purpose:

• To promote a culture of health and safety

• To provide for the enforcement of health and safety measures

• To provide for appropriate systems of employee, employer and state participation in health and safety matters

• To establish representative tripartite systems and inspections, investigations and inquiries to improve health and safety

• To promote training and human resources development

• To regulate employers and employees duties to identify hazards and eliminate, control and minimise the risk to health and safety

• To entrench the right to refuse to work in dangerous conditions

• To give effect to the public international law obligations of South Africa relating to mining health and safety

• And to provide for matters connected therewith.

Wescoal ensures compliance with the above through the Wescoal Mining Safety Health and Environmental Management System.

Wescoal Mining appointed three entities to manage compliance with the SHE Management System:

• Leschon CC – responsible for Safety and Occupational Hygiene

• Dr Prinsloo – responsible for Industrial Health Services

• Ferret Mining and Environmental Services – responsible for the Environment.

Monthly internal audits and reports are undertaken under the SHE System covering safety, occupational hygiene, occupational health and the environment. External regular visits and/or audits are conducted by the DMR. Occasionally, the Department of Water Affairs will visit and very seldom the Department of Environmental Affairs. No reports are written if compliance and administration are adhered to, however, directives are given if non-compliance is discovered.

109876543210

Accounting software Operator training Excel HR training

9

3

1 1

8070605040302010

0Safety training Induction training TMM operator Firstaid

76 76

36

6


Summary of performance achievements and targets for Khanyisa Colliery

Description Objectives 2012/2013

Actual 2011/2012

Performance 2010/2011

Occupational diseases 0 0 0Fatalities 0 0 0LTI 1 2 4LTIFR 0.3 0.56 0.56Shifts lost 20 76 116NLTI 2 3 12NLTIFR 0.6 0.74 3.27Total number of incidents 3 5 10

Continual measurement and improvement will be strived for.

On 14 December 2011, Wescoal officially launched a far more visible safety drive. An entire awareness campaign was created based on the safety mascots. The aim of the safety programme at Khanyisa Colliery is to create behaviour-based safety to be followed by all employees in order to:

• Remind all employees of their responsibility regarding safety

• Ensure that all employees work within the rules

• Remind all employees to identify and report all hazards

• Remind all employees to report all incidents and accidents

• Help to make the mine the safest in the country.



Human rights

The fundamentals and values of Wescoal dictate fairness and integrity in the treatment of all staff and the adherence to human rights.

In the period under review, no incidents of discrimination or human rights abuses have been reported or investigated by the Group.

The Group and its operations acknowledge that employees and staff have the right to exercise freedom of association and collective bargaining and, as such, Wescoal Mining acknowledges the trade unions, NUM and AMCU. Unauthorised strike action is deemed a risk to Wescoal Mining, however Wescoal endeavours to negotiate effectively and responsibly with the respective trade unions.

During the period under review Wescoal experienced one legal wage strike, which was resolved within 14 days and resulted in a two-year wage agreement which is currently in place.

Wescoal is against the use of child labour and is not aware of any such practice across the business segments.

During the period under review there was one human rights violation incident at the Khanyisa Colliery, where a person living on a plot adjacent to the mining operation reported Khanyisa to the Human Rights Commission for dust and noise pollution resulting in sleep deprivation. Khanyisa complied with the investigation and provided all necessary documentation and reports required by the Commission. The Human Rights Commission found Khanyisa to be operating within all the necessary parameters and no action was taken against Khanyisa or Wescoal.

Society

On page 24 of this integrated report Wescoal has provided information on CSI activities within the community in which it is operational. Proactive CSI is a recent undertaking for Wescoal and a small measurement of impact has been provided in the CSI section contained on page 24, however Wescoal will endeavour to enhance this as the initiative develops.

Risks relating to corruption within the business units of Wescoal have not been undertaken. As a start, only high level risks have been evaluated and are being worked on and assessed in conjunction with risk consultants. Please refer to further details in the risk report contained on page 32.

Wescoal makes no donations, contributions or in-kind contributions to any political parties, politicians or related institutions in the country or any areas of operation.

Product responsibility

The only product Wescoal supplies is coal. In the supply of coal it is critical that Wescoal ensures the correct quality, quantity and timed delivery to clients.

WESCOAL annual report 201232 WESCOAL integrated annual report 201232

corpora te governance

Risk Management

During the course of the financial year, Wescoal, together with risk consultants, undertook a detailed risk assessment and prioritisation of Group risk. This strategic session, resulting in a working document and implementation plan, was the starting point for the formalisation of more pro-active risk management within Wescoal. The main risks have been categorised into the following risk categories:

Wescoal (including Mining

and Trading)

Operations

Regulatory

FinancialGovernance

Stakeholders Strategy


The top risks identified include the following:

Operations

Risk Mitigation strategy Progress

Mine planning

•Lackofsufficientprojectmanagementskills

•Qualityofreserves

• Inherentriskofcoalmining–miningcorrectareas,qualityof seams and strip ratios

•Uptodategeologicalinformation

•Expertiseinexploration/geologyandmanagingexploration projects

•Employnecessaryexpertise

• Increasecapability

•Assessandimprovetheskillslevelofcurrentemployees

• Initiatedandon-going

Sustainability of current mining activity • Investigateanddevelopcurrentresources

•Acquireadditionalcoalassets

•Elandspruit

•Vlakvarkfontein

•Vlaklaagte

Unavailability of product •Sourcesupplyagreements

• Jointventurewithotherproducers


Environmental risks at mine

•Waterquality

•Groundwatermonitoring

•Wastemanagement

•Continuousmonitoring

•Hydrocarbonmanagement

•Re-drillboreholes

•Continuousmonitoring

•Addbinsandskips

•Monthlymonitoringprocessesinplace

•Lockableareawithimpermeablefloor

•Sufficientholesinplaceformonitoringpurposes

•AnalysisundertakenbyRegenWaterLaboratoriesandresults are within specification

•Skipsandbinsarelocatedinstrategicplaces

Strategy

On-going legal action against company •Resolveissueslegally •FinaljudgementshandeddowninWescoal’sfavour

Mining operating model •Employnecessaryexpertise

• Increasecapability

•Assessandimprovetheskillslevelofcurrentemployees



Financial

Risk Mitigation strategy Progress

Limited access to working capital •Seekadditionaldebtfunding • Indiscussionswithfinancialinstitutions

Inadequate capacity within finance department

•Amountofpeoplewithqualificationsandexperience

•Operationalcostcontrol

•Managementabilityandneedtorestructure

• Increasecapacitywithinthedepartment

• Improveskillslevels

•Assesscurrentemployees

•Decentraliseidentifiedfunctions

•EmployedhighlyqualifiedGroupFinancialManager

•RemotedeploymentofITprogrammesfordecentralisationinitiative

Regulatory

Absence of an overall compliance framework which is actively implemented

• IdentifycompliancerequirementsspecifictotheGroup

•Appointpersonsresponsibleforcompliance

•AllregulatoryrequirementspertainingtotheGrouphavebeen identified

•AppointedDirectorresponsibleforcompliance

Governance

Inadequate application of King III

•Boardandvariouscommitteestructures

• IndependenceofDirectors

•Restructurecommittees

•Boardindependence

•Requirementsforcommitteesidentified

•ProcessinplacetoappointindependentDirectors

Stakeholders

Shareholder and investor relations

•Lossofinvestorconfidence

•Changeinmajorshareholders

• Lossofinstitutionalshareholders

•Relationshipswithmajorshareholdersandinvestmentcommunity

•ProactiveIRprogrammetobeenhanced

•Moreregularandtimelycommunicationsandreachtoshareholders

•Drivetosecureadditionalinstitutionalshareholders

•ProactiveIRprogrammeisinplace

•Comprehensiveroadshows,teleconferences,sitevisitsand presentations have been put together

•MoreinformationonWescoalisbeingdisseminatedthrough an integrated annual report and comprehensive website

Quality of communications programme

•Poorcommunicationswithemployeesandstakeholders

• Initiateinformationflowtostakeholders •Quarterlystaffnewsletterisbeingdistributedtostaffandplaced on the website

•Quarterlyinvestorupdateinprogress

•SENSupdatesissued



Board committees and governance structure

The Wescoal Board of Directors continues to be mindful and cognisant that corporate governance is essential to protect the interests of all stakeholders, and remains committed to compliance with legal requirements and sound corporate governance principles.

Governance structure

A summary below shows the committees established within Wescoal:

Board / Committee

Roles and responsibilities Members

Wescoal Holdings Board

The Board is the focal point of the corporate governance structure and the overriding body at which strategic decisions are made. It is responsible for the governance process, sustainable growth and company affairs

Andre Bojé (CEO)

Piet van Rensburg (CFO)

Wiseman Khumalo (Executive Director)

Robinson Ramaite (Non-executive Chairman)

Jacobus Pansegrouw (Non-executive Director)

Teresita van Gaalen (Independent Non-executive Director)

Marius Meyer (Sponsor)Executive Committee

Responsible for the day-to-day management of Wescoal and the operations of Mining and Trading

André Boje (CEO)

Piet van Rensburg (CFO)

Wiseman Khumalo (Executive Director)

Martin Bartle (MD: Mining)

Peter Andrew (MD: Trading)

Curtis Mnisi (Group Financial Manager)

Ettienne Strydom (Group Projects Manager)

Wescoal MiningMD

Martin Bartle

Wescoal TradingMD

Peter Andrew

Corporate functionsLegal (outsourced),

Treasury,Sustainable development,

Group finance, Tax, IT,Corporate affairs,

Risk

Wescoal Holdings Ltd Board Remuneration, Nomination & Transformation Committee

Audit & Ethics CommitteeRisk, SHE & Social Committee

Executive Committee (Exco)


Board / Committee

Roles and responsibilities Members

Audit and Ethics Committee

This committee is responsible for:

•Reviewofannualfinancialstatements

•Ensuringeffectiveinternalcontrol

• Liaisingandnominatingexternalauditorsand their fee structure

•Evaluatingtheindependenceoftheauditors

•Pre-approvingcontractswithexternalauditors for the provision of non-audit services

Jacobus Pansegrouw (Chairman)

Teresita van Gaalen (Committee member)

Marius Meyer (Sponsor)

Remuneration, Nominations and Transformation Committee

The committee is responsible for:

•Ensuringcompanytargetswithregardtoremuneration and transformation are in place

•ReviewingnominationstotheBoardandother committees

•Providingguidanceandprincipleswithregard to executive pay structures and incentives schemes

•Ensuringapplicationoftheremunerationphilosophy within the organisation

•Recommendingandguidingshareschemeallocations

Teresita van Gaalen (Chairman)

Jacobus Pansegrouw (Committee member)

One vacant position

Risk, SHE and Social Committee

The Board established the committee in compliance with the requirement of Section 74 and Regulation 43 (5) of the Companies Act, which regulates social and ethical practices.

The committee, although still very new, will monitor:

•Socialandeconomicdevelopment

•Goodcorporatecitizenship

•Theenvironment,healthandpublicsafety

•Consumerrelationships

• Labourandemployment

Robinson Ramaite (Chairman)

Teresita van Gaalen (Committee member)

One vacant position

Corporate governance statement

Introduction

Wescoal’s Board of Directors supports the principles of the code of corporate practices and conduct contained in the report of the King Commission on Corporate Governance for South Africa (“the Code”), King III, and acknowledges the importance of sound corporate governance and the guidelines set out in the Code.

Statement of compliance

The Listings Requirements of the JSE require that companies report on the extent to which they comply with the principles incorporated in the Code. The Code recommends that the Chairperson be an independent Non-executive Director. It is the Board’s opinion that as the Chief Executive Officer and the Executive Chairperson’s roles are separate; there is a clear division of responsibilities at the head of the Company, which ensures a balance of power and authority, such that no one individual has unfettered powers of decision-making.

Board of Directors

The Chairperson

The Non-executive Chairperson is Robinson Ramaite. The Board delegates to the Chairperson responsibility for ensuring the effectiveness of governance practices. He leads the Board and is responsible for representing the Board to shareholders. As required in terms of the Listings Requirements of the JSE, the role of the Chairperson is separate from that of the Chief Executive Officer.

The Board

The Board retains full and effective control over the Company. Apart from regular meetings, additional meetings are arranged, when necessary, to review strategy, planning, operations, financial performance, risk and capital expenditure, human resource and environmental management. The Board is also responsible for monitoring the activities of the executive management.



Composition of the Board

The Board comprises three Executive Directors and three Non-executive Directors. The Non-executive Directors are free to make their own decisions and judgements. They enjoy no benefits from the Company for their services as Directors other than their fees and potential capital gains and dividends on their interests in ordinary shares and options. The Non-executive Directors are high calibre professionals and sufficient in number for their views to carry significant weight in the Board’s deliberations and decisions. The guidelines contained in the Listings Requirements of the JSE were used to test the category most applicable to each Director. The names and biographical details of each of the Directors are set out on page 8 of this integrated report.

Board meetings

Seven Board meetings were held during the financial year ended 31 March 2012. Board meetings are convened by formal notices incorporating a detailed agenda.

Attendance at Board meetings

26 May 2011

9 Jun 2011

28 Jun 2011

2 Nov 2011

22 Nov 2011

25 Jan 2012

29 Feb 2012

AR Boje

PJ van Rensburg

JG Pansegrouw

DMT van Gaalen

WN Khumalo

RM Ramaite

M Meyer

Present Not present

Board Committees

While the Board remains accountable and responsible for the performance and affairs of the Group, it is assisted in the discharge of its duties by a number of sub-committees as follows:

The Executive Committee

The Executive Committee (“EXCO”) comprises three Executive Directors, together with the Directors of the different business units. The EXCO, which is responsible for the daily running

of the Group, regularly reviews current operations in detail, develops strategy and policy proposals for consideration by the Board and then implements its directives. The Board has also established a number of standing committees on which only the Non-executive Directors serve and to which EXCO members are invited. The Chairperson liaises on a regular basis with the Chief Financial Officer and the Chief Executive Officer with regard to matters raised and to be raised at committee meetings. Four EXCO meetings were held during the year.

Attendance at EXCO Meetings

15 Sep 2011 8 Nov 2011 24 Jan 2012 13 Mar 2012AR Boje

PJ van Rensburg

WN Khumalo

M Bartle

P Andrew

C Mnisi

E Strydom

Present Not present

The Audit and Ethics Committee

The Audit and Ethics Committee is responsible for monitoring and reviewing:

• The effectiveness of the Group’s information systems and other systems of internal control

• The effectiveness of the internal audit function

• The reports of both the external and internal auditors

• The annual report and specifically the annual financial statements included therein

• The accounting policies of the Group and any proposed revisions thereto

• The external audit findings, reports and fees and the approval thereof

• Compliance with applicable legislation and requirements of regulatory authorities

• The principles for recommending the use of external auditors for non-audit services.

The external auditors have unrestricted access to the Audit and Ethics Committee and its Chairperson, with a view to ensuring that their independence is not impaired. The Audit and Ethics Committee is satisfied that the external auditor was independent of the Company.


The Audit and Ethics Committee confirmed that it has satisfied itself with the appropriateness of the expertise and experience of the Financial Director. Although not currently compliant, the Board acknowledges that the Companies Bill 61 of 2008 and King III require that the Audit and Ethics Committee comprises at least two Independent Non-executive Directors with the Chairman of the Audit and Ethics Committee being independent of the Chairman of the Board. Three Audit and Ethics Committee meetings were held during the financial year ended 31 March 2012.

Attendance at Audit and Ethics Committee meetings

20 June 2011 15 Nov 2011 25 Jan 2012JG Pansegrouw

DMT van Gaalen

M Meyer

WN Khumalo

AR Boje

PJ van Rensburg

Present Not present

The Remuneration, Nominations and Transformation Committee

The Remuneration, Nominations and Transformation Committee establishes the Group’s remuneration philosophy and reviews the terms and conditions of employment of the Executive Directors and other executives, as well as incentive schemes. Three Remuneration, Nominations and Transformation Committee meetings were held during the financial year under review.

Attendance at Remuneration, Nominations and Transformation Committee meetings

11 May 2011 29 Sep 2011 14 Mar 2012DMT van Gaalen

JG Pansegrouw

WN Khumalo

M Meyer

Present Not present

See further details in the Remuneration Report on page 38 of this integrated report.

The Company Secretary

Mr JW Walters was appointed with effect from 1 April 2012. The Company secretary is responsible for providing the Board collectively, and each Director individually, with detailed guidance on the discharge of their duties and responsibilities in terms of the specific legislation, regulatory requirements and best practice.

Appointments to the Board

The Board has adopted a policy setting out the procedures for appointments to the Board. Such appointments are formal and transparent and a matter for the Board as a whole. Wescoal made no changes to the Board during the financial year under review.

Retirement and re-election of Directors

In terms of the Memorandum of Incorporation (“MoI”), Directors shall retire at the first annual general meeting of the Company, and thereafter one-third of the Directors shall retire. Directors are subject to election by shareholders at the first opportunity after their initial appointment. The names of all the Directors submitted for re-election are accompanied by brief biographical details to enable shareholders to make an informed decision in respect of their election. In terms of the Company’s MoI, the Directors retire at the age of 75 years.

Share dealings

The Group has a written policy in place where the dealings of Directors are regulated and monitored, and disclosure is made as required in terms of the Listings Requirements of the JSE. This policy is monitored by the Company secretary. No trading by Directors is authorised without clearance being first received from the CEO. Should the CEO wish to trade in his shares, clearance must be obtained from the Board prior to any dealing. This policy is reviewed and updated from time to time to ensure that it is compliant with any changes in legislation and regulation.

Remuneration report

The work of the remuneration committee is under the microscope at a time when globally, executive remuneration remains at the top of the corporate agenda.

In the period reviewed, the Wescoal Remuneration, Nominations and Transformation Committee focused on making a meaningful contribution to the Group’s development and to supporting



the EXCO in a turnaround strategy designed to secure the business’ return to a sustainable, profitable base. This was accomplished from a strategic platform that saw the committee working closely with the EXCO to secure the targets and to achieve the Group’s goals.

Wescoal set out to meet the challenges of remuneration governance in complete transparency and in this process continued to apply the principals of a performance-driven remuneration framework.

In addition, activity intensified between the sub-committees to produce sustainable progress in compliance, allowing for a seamless, cohesive approach to governance. As a result, the ability to produce Wescoal’s first fully integrated annual report was enhanced as demonstrated in this report.

The Group posted highly improved results for the period and secured a return to profitability after a difficult period. In keeping with negotiated rates with labour union AMCU the annual general pay adjustment across the board was set at 8 percent, at the top end of the scale in the sector.

Executive pay

The Board approved extraordinary adjustments of 10 percent for key individuals in senior management posts who excelled over the period and who were particularly instrumental in securing the significant turnaround of the bottom line. The Chief Executive Officer was awarded a 10 percent annual increment, in keeping with the performance-linked remuneration approach, underpinned by his presiding over the successful implementation of the turnaround strategy.

The three highest paid members in the Wescoal Holdings group of companies for the year ended 30 March 2012 are set out in the summary below:

Annual salary – CTC period to

31 March 2012Bonus R000’s Total R000’s

Employee 1 R2.104 R170 R2.274Employee 2 R1.744 R145 R1.889Employee 3 R1.361 R113 R1.474

Executive remuneration philosophy

At Wescoal executive reward is treated on merit, and is therefore individualistic and performance-based in nature. The Group places significant value on the individual’s contribution.

Current practice is that the nature of executive and senior managers’ remuneration consists

of a fixed component comprising basic salary and benefits. Performance awards are granted ex-gratia; participation in any incentive scheme is similarly treated.

It is clear that aligning reward policies and practices with overall business strategy and objectives is key to a robust future for the Group.

To this end, the priority is to provide a structured, fully integrated approach for reward management and in this context the committee has agreed to develop and install a dynamic programme that will stimulate and oversee the strong growth targets set for the period ahead.

The programme is expected to, in a transparent manner, align reward practices with business strategy through a process of performance monitoring and continuous analysis that will adhere to best practice standards and good governance and will enjoy focused communication to all stakeholders in the process of measurement and management of the programme.

The rewards programme that is proposed will follow from the current HR Compliance and Development project for which REMCO holds the oversight responsibility. The outcomes of this project are designed to enable a number of important procedures, including retention as a key strategic objective, also in support of strategic recruitment drives.

The new Companies Act and the Code have redefined the frameworks for executive pay and in recognising this; members of the Wescoal Remuneration, Nominations and Transformation Committee applied their minds to an internal review, geared at ensuring that a best practice approach is maintained and that the terms of reference are simple and clear.

Share scheme allocation

In light of the Cautionary which has prevailed over an extended period, relating specifically to imminent developments and in accordance with the Terms of the Share Scheme, no options may be issued in a closed period.

As part of the transformation strategy currently under way, the committee will undertake a full review of the scheme and will consider an approach that will align the scheme with the goals set, including:

• A scheme that is designed to support critical short-term staff retention imperatives

• Recognition of critical staff based on performance outcomes

• Recognition of critical staff based on the fundamentals of business continuity, capacity to attain and exceed goals set and competitive advantage, as well as value creation


• Performance measures will embrace a wider definition of performance, taking into consideration financial and non-financial measurements, in line with the spirit of integrated reporting

• A scheme that is accessible to executives, senior managers and other key personnel

• A scheme that will also cater for the participation of the broader workforce through a future structure that rewards specific imperatives, critical to continuity, improved productivity and in keeping with sector best practice.

Proposed changes will be in line with international best practice and in compliance with JSE regulations. Changes to the scheme will be carefully considered and refined to meet with all the requirements and to serve the Group’s strategic intent, before presentation to the Board of Directors and the shareholders for approval and ratification.

Director’s fees

It is globally accepted that the quality of the leadership and contribution of the chairperson is fundamentally consequential to the overall effectiveness of the Board of Directors. For Wescoal this is certainly the case. Mr Muthanyi Robinson Ramaite played a pivotal and invaluable role in heightening the performance of the Group during this period.

As a Non-executive Chairman, Mr Ramaite has set a new standard by his active commitment to the goals set, and the Board of Directors acknowledges his valuable time and input received, well beyond the call of duty.

A nominal or symbolic fee of R20,000.00 (twenty thousand rand) was approved, payable to the Chairperson on a monthly basis and effective from 1 April 2012.

Non-executive Directors receive fees for their attendance of Board meetings and for services provided as members of Board Committees. Fees payable to Non-executive Directors were adjusted up by 10 percent.

Focus areas

Reward

It becomes clear that aligning reward policies and practices with overall business strategy and objectives is key to a robust future.

It is therefore a priority to provide a structured, fully integrated approach for reward management

and in this context the committee has agreed to develop and install a dynamic programme that will stimulate and oversee the strong growth targets set for the period that lies ahead.

Recruitment

The Group’s rapidly increasing focus on mining now demands that weighting be given to attracting high calibre professionals with a strong mining background. The environment is highly competitive and further influenced by the dynamics of a ‘world without borders’ as far as experienced intellectual capital is concerned. High demand and low supply for such human resource adds complexity to becoming an employer of choice for high calibre mining individuals.

Restructure

Transformation at Board and executive levels is mapped, heralded by Mr Wiseman N Khumalo’s move from Non-executive to Executive Director: Business Development and Compliance.

In the process of transformation and compliance, the Board of Directors has tasked the Remuneration, Nominations and Transformation Committee with the screening, selection and nomination of two new Non-executive Directors.

In the context of the nominations portfolio and responsibilities arising, the committee has progressed well on the road to increasing capacity for the near term through specialist recruitment. In this process, the Group also set out to address the need for Wescoal to restructure its operational platforms and in so doing to bring about transformation, underpinned by the growing strategic focus on mining.

Succession planning was identified as a high level risk for the Group, and with this in mind the restructuring process will be guided to provide the necessary platforms that will address this important aspect of the business and its vision.

HR Project

The committee recognised the need to position a full-scale Human Resource Compliance and Development project.

For that purpose, the committee has secured the services of a consultancy and expects to have fully upgraded processes, procedures plus policy development and implementation rollout within three months from the start of the project, which is 1 August 2012.


WESCOAL annual report 2012 41WESCOAL integrated annual report 2012 41

Succession planning

The Board has commissioned the REMCO to undertake the introduction of a framework for a full-scale executive succession plan across the Group companies, paying specific attention to a three- to five-year managed approach to the position of Chief Executive Officer, held by Andre Bojé since 2005.

The Remuneration, Nominations and Transformation Committee

A formal charter codifies the tasks and responsibilities of the committee. The charter will be revised in the year ahead to address changes to the remuneration and reward programmes, as has been extensively explained herein, as well as in consideration of changing codes of practice and new legislation where applicable.

The committee is responsible for ensuring that the principles and objectives set out by the Group are achieved in so far as they pertain to the remuneration and reward of executives and the Group as a whole.

The committee also fulfils the nomination role and oversees the executive succession plan and key skills level within the organisation.

The committee, in its current form, has been in existence for three years and had its most active and accomplished twelve month period.

The committee now looks forward to a rewarding 2013 financial year. Its aim is that of guiding the Group to the highest level of corporate governance and to implementing a total reform in the approach to performance-linked pay and rewards, and to play a key role in unifying the complete workforce under the umbrella of a strong incentive strategy, underpinned by ambitious goals and business deliverables.

It has been my privilege to guide this committee for the past three years and I look forward to the coming challenges.

Teresita van Gaalen3 August 2012


King III Compliance Matrix

Apply Partially apply Under review

Ethical Leadership and Corporate Citizenship

Effective leadership based on an ethical foundation

Responsible corporate citizen

Effective management of Company’s ethics

Assurance statement on ethics in integrated report

Boards and Directors

The Board is the focal point for and custodian of corporate governance

Strategy, risk, performance and sustainability are inseparable

Directors act in the best interests of the Company

The Chairman of the Board is an independent Non-executive Director

Framework for the delegation of authority has been established

The Board comprises a balance of power, with a majority of Non-executive Directors who are independent

Directors are appointed through a formal process

Formal induction and on-going training of Directors is conducted

The Board is assisted by a competent, suitably qualified and experienced Company Secretary

Regular performance evaluations of the Board, its committees and the individual Directors

Appointment of well-structured committees and oversight of key functions

An agreed governance framework between the Group and its subsidiary Boards is in place

Directors and executives are fairly and responsibly remunerated

Remuneration of Directors and senior executives is disclosed

The Company’s remuneration policy is approved by its shareholders




Internal Audit

Effective risk-based internal audit

Written assessment of the effectiveness of the Company’s system of internal controls and risk management

Internal Audit is strategically positioned to achieve its objectives

Audit Committee

Effective and independent

Suitably skilled and experienced independent Non-executive Directors

Chaired by an independent Non-executive Director

Oversees integrated reporting

A combined assurance model is applied to improve efficiency in assurance activities

Satisfies itself of the expertise, resources and experience of the Company’s finance function

Oversees Internal Audit

Integral to the risk management process

Oversees the External Audit process

Reports to the Board and shareholders on how it has discharged its duties

Compliance with Laws, Codes, Rules and Standards

The Board ensures that the Company complies with relevant laws

The Board and directors have a working understanding of the relevance and implications of non-compliance

Compliance risk forms an integral part of the Company’s risk management process

The Board has delegated to management the implementation of an effective compliance framework and processes



Governing Stakeholder Relationships

Appreciation that stakeholders’ perceptions affect a company’s reputation

Management proactively deals with stakeholder relationships

There is an appropriate balance between its various stakeholder groupings

Equitable treatment of stakeholders

Transparent and effective communication to stakeholders

Disputes are resolved effectively and timeously

The Governance of Information Technology

The Board is responsible for information technology (IT) governance

IT is aligned with the performance and sustainability objectives of the Company

Management is responsible for the implementation of an IT governance framework

The Board monitors and evaluates significant IT investments and expenditure

IT is an integral part of the Company’s risk management

IT assets are managed effectively

The Risk Committee and Audit Committee assist the Board in carrying out its IT responsibilities




The Governance of Risk

The Board is responsible for the governance of risk and setting levels of risk tolerance

The Risk Management Committee assists the Board in carrying out its risk responsibilities

The Board delegates the process of risk management to management

The Board ensures that risk assessments and monitoring is performed on a continual basis

Frameworks and methodologies are implemented to increase the probability of anticipating unpredictable risks

Management implements appropriate risk responses

The Board receives assurance on the effectiveness of the risk management process

Sufficient risk disclosure to stakeholders

Integrated Reporting and Disclosure

Ensures the integrity of the Company’s integrated report

Sustainability reporting and disclosure is integrated with the Company’s financial reporting

Sustainability reporting and disclosure is independently assured


Analysis of shareholdersAs at 30 March 2012

Size of holdings

Number of shareholdings

% of total shareholdings

Number of shares

% of shares in issue

1 – 1,000 shares 254 13.89% 144,816 0.09%1,001 – 10,000 shares 871 47.62% 4,588,777 2.75%10,001 – 100,000 shares 591 32.31% 18,659,773 11.19%100,001 – 1,000,000 shares 98 5.36% 24,303,273 14.56%1,000,001 shares and over 15 0.82% 119,104,722 71.41%Total 1,829 100.00% 166,801,361 100.00%

Distribution of shareholders



Number of shares


Close corporations 34 1.86% 5,252,909 3.15%Custodians 2 0.11% 93,165 0.06%Empowerment 1 0.05% 33,190,376 19.90%Foundations and charitable funds 2 0.11% 20,110 0.01%Individuals 1,678 91.76% 95,030,091 56.97%Investment partnerships 14 0.77% 332,639 0.20%Managed funds 1 0.05% 14,000 0.01%Private companies 25 1.37% 12,665,934 7.59%Retirement benefit funds 1 0.05% 100,000 0.06%Share schemes 1 0.05% 8,870,000 5.32%Stockbrokers and nominees 1 0.05% 8,055,700 4.83%Trusts 69 3.77% 3,176,437 1.90%Total 1,829 100.00% 166,801,361 100.00%

Beneficial shareholders with a holding greater than 3% of the issued shares



Number of shares


Waterberg Portion Property (Pty) Ltd 1 0.05% 33,190,376 19.90%Mr MR Ramaite 1 0.05% 14,564,356 8.73%Gujo Investments (Pty) Ltd 1 0.05% 10,800,000 6.47%Mnr GM Botha 1 0.05% 10,244,000 6.14%Wescoal Share Incentive Trust 1 0.05% 8,870,000 5.32%Mr G Coetzee 1 0.05% 8,220,000 4.93%Rand Merchant Bank 1 0.05% 8,055,700 4.83%Mr AR Boje 2 0.11% 7,319,300 4.39%Total 9 0.46% 101,263,732 60.71%

Public and non-public shareholders



Number of shares


Non-public shareholders 9 0.49% 69,503,040 41.67%Directors and associates of the Company 7 0.38% 46,770,678 28.04%

Directors and associates (Direct holding) 4 0.22% 22,402,656 13.43%Directors and associates (Indirect holding) 3 0.16% 24,368,022 14.61%

Wescoal Share Incentive Trust 1 0.05% 8,870,000 5.32%Empowerment Holding (Less Mr Ramaite's indirect holding) 1 0.05% 13,862,362 8.31%Public shareholders 1,820 99.51% 97,298,321 58.33%Total 1,829 100.00% 166,801,361 100.00%

Total number of shareholdings 1,829Total number of shares in issue 166,801,361

shareholder s


JSE share price performance

Share price performance

Opening price 1 April 2011 R0.88Closing price 30 March 2012 R0.69Closing high for the period R0.89Closing low for the period R0.49

Number of shares in issue 166,801,361Volume traded during period 37,933,160Ratio of volume traded to shares issued (%) 22.74%Total (R) value traded during period R27,421,982

Since publication of the final results, although this is post the period being reported on, it is clear that the market is beginning to recognise the potential of Wescoal.

Close

JSE share information

Date Volume Value (c) Close (c) High (c) Low (c)

29 Apr 2011 2,215,256 178,764,200 84 83 8031 May 2011 1,536,240 122,564,600 80 82 7830 Jun 2011 4,130,667 329,295,400 70 82 7829 Jul 2011 6,041,393 441,541,500 72 75 7031 Aug 2011 2,031,477 138,207,800 68 71 6730 Sep 2011 1,217,038 84,488,700 65 70 6731 Oct 2011 1,797,644 106,673,200 57 62 5830 Nov 2011 10,024,540 660,447,900 74 69 6330 Dec 2011 2,712,698 195,155,100 80 76 7231 Jan 2012 2,909,356 231,193,000 80 81 7829 Feb 2012 2,203,365 172,787,400 80 80 7830 Mar 2012 1,113,486 81,071,400 69 76 73Grand total 37,933,160 2,742,190,200

Interaction with shareholders

Wescoal maintains an open dialogue with its key financial audiences, including private shareholders and analysts. An Investor Relations Consultancy has been appointed which further disseminates information to the market, and shareholders are also encouraged to contact the consultancy or Wescoal management directly should they require additional information. The investor relations team, together with executive management, manages the dialogue with these respective audiences. The Group adopts a proactive stance in timely dissemination of appropriate information to stakeholders and shareholders through print and electronic news releases and the statutory publication of the Group’s financial performance. Wescoal regularly has shareholder briefings in which a presentation of the results, prospects and the operating environment are discussed and simultaneously a teleconference is held for audiences in locations other than Johannesburg. Site visits to outlying operations are also regularly undertaken.

The Group’s website provides the latest and historical financial as well as other information such as the Wescoal share price and the international price of API#4, including the financial reports and information on the subsidiaries of the Company.

The Board encourages shareholders to attend its Annual General Meeting, notice of which is contained in this integrated report, where shareholders will have the opportunity to put questions to the Board, including the Chairmen of the Board committees.

Shareholders’ diary

Annual General Meeting 30 October 2012Announcement of interim results November 2012Financial year-end 31 March 2013Announcement of final results May/June 2013

100959085807570656055504540

Finalresultsfortheyearended30 March 2012 released

Source:McGregorBFA

Source:McGregorBFA

WESCOAL annual report 201248 WESCOAL integrated annual report 201248

annual f inancial repor tfor the year ended 31 March 2012

General information

Country of incorporation and domicile South AfricaNature of business and principal activities Investment holding companyDirectors AR Boje P Janse van Rensburg JG Pansegrouw MR Ramaite DMT van Gaalen WN KhumaloRegistered office 228 Voortrekker Street, Krugersdorp, 1739Business address 228 Voortrekker Street, Krugersdorp, 1739Postal address PO Box 1020, Paardekraal, 1752Bankers Absa BankAuditors PricewaterhouseCoopers Inc Registered AuditorSecretary JW WaltersCompany registration number 2005/006913/06Level of assurance These annual financial statements have

been audited in compliance with the applicable requirements of the Companies Act, No. 71 of 2008

Preparer Connie Hertzog, CA(SA), supervised the preparation of the annual financial statements

Published 28 September 2012

Certification by company secretary

In terms of section 88(2)(e) of the South African Companies Act, No. 71 of 2008, as amended (the Act), I hereby certify that, to the best of my knowledge and belief, Wescoal Holdings Limited has lodged with the Companies and Intellectual Property Commission, for the financial year ended 31 March 2012, all such returns and notices as are required in terms of the Act and that all such returns and notices are true, correct and up to date.

JW WaltersCompany secretary, Wescoal Holdings Limited3 August 2012


Audit Committee meetings

Three Audit Committee meetings were held during the financial year ended 31 March 2012 and the external auditors presented formal reports to the committee and attended meetings by invitation.

Date of meeting Attended by

20 June 2011 JG Pansegrouw (Chairperson), WN Khumalo, DMT van Gaalen, and by invitation, AR Boje, P Janse van Rensburg, M Meyer, C Middel (Middel and Partners), D Swanepoel (Middel and Partners), K Ermann, R Austin (CIS Company Secretaries)

15 November 2011 JG Pansegrouw (Chairperson), WN Khumalo, DMT van Gaalen, and by invitation, AR Boje, P Janse van Rensburg, M Meyer, K Ermann, H Zastrau (PwC), FJ Lombard (PwC), M Naidoo (PwC)

25 January 2012 JG Pansegrouw (Chairperson), WN Khumalo, DMT van Gaalen, and by invitation, AR Boje, P Janse van Rensburg, M Meyer, M Naidoo (PwC)

Conclusion

The external auditors have unrestricted access to the Audit Committee and its Chairperson with a view to ensuring that their independence is not impaired. The Audit Committee is satisfied that the external auditor was independent of the Company. The Audit Committee confirmed that it has satisfied itself with the appropriateness of the expertise and experience of the Financial Director.

Notwithstanding the ongoing initiatives or matters requiring attention noted above, the committee has satisfied itself that the internal control environment, disciplines and procedures are adequate to comply with the Act, to minimise the financial risks of the Group, and to provide adequate information in a timeous manner to enable management and the Audit Committee to perform their responsibilities.

The committee is of the opinion that its objectives were met during the year under review.

JG Pansegrouw3 August 2012

Appointment

The Audit Committee is appointed at each Annual General Meeting as required by the new Companies Act, No. 71 of 2008 (the Act) Part D, Section 94. This section requires the Audit Committee to prepare a report to be included in the annual financial statements for that financial year, specifying the matters set out below.

Constitution of the committee

Although not currently compliant, the Board acknowledges that the Companies Bill 61 of 2008 and King III require that the Audit Committee comprises at least two Independent Non-executive Directors with the Chairman of the Audit Committee being independent of the Chairman of the Board. This matter will be addressed and rectified at the next Annual General Meeting.

Responsibilities

The Audit Committee is responsible for monitoring and reviewing:

• The effectiveness of the Group’s information systems and other systems of internal control;

• The effectiveness of the internal audit function;

• The reports of both the external and internal auditors;

• The annual report and specifically the annual financial statements included therein;

• The accounting policies of the Group and any proposed revisions thereto;

• The external audit findings, reports and fees and the approval thereof;

• Compliance with applicable legislation and requirements of regulatory authorities; and

• The principles for recommending the use of external auditors for non-audit services.

audit commit tee repor t


Opinion

In our opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of Wescoal Holdings Limited as at 31 March 2012, and its consolidated and separate financial performance and its consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa.

Other reports required by the Companies Act

As part of our audit of the consolidated and separate financial statements for the year ended 31 March 2012, we have read the Directors’ Report, the Audit Committee’s Report and the Company Secretary’s Certificate for the purpose of identifying whether there are material inconsistencies between these reports and the audited consolidated and separate financial statements. These reports are the responsibility of the respective preparers. Based on reading these reports we have not identified material inconsistencies between these reports and the audited consolidated and separate financial statements. However, we have not audited these reports and accordingly do not express an opinion on these reports.

PricewaterhouseCoopers Inc Director: Megandra NaidooRegistered AuditorSunninghill3 August 2012

We have audited the consolidated and separate financial statements of Wescoal Holdings Limited set out on pages 55 to 86, which comprise the statements of financial position as at 31 March 2012, and the statements of comprehensive income, statements of changes in equity and statements of cash flows for the year then ended, and the notes, comprising a summary of significant accounting policies and other explanatory information.

Directors’ responsibility for the financial statements

The Company’s Directors are responsible for the preparation and fair presentation of these consolidated and separate financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as the Directors determine is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatements, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on these consolidated and separate financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated and separate financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

independent auditors’ repor t


The external auditors are responsible for independently reviewing and reporting on the Group’s annual financial statements. The annual financial statements have been examined by the Group’s external auditors and their report is presented on page 50.

The annual financial statements set out on pages 55 to 86, which have been prepared on the going concern basis, were approved by the Directors on 3 August 2012 and were signed on its behalf by:

AR Boje P Janse van RensburgChief Executive Officer Chief Financial Officer

3 August 2012

The Directors are required in terms of the Companies Act, No. 71 of 2008 to maintain adequate accounting records and are responsible for the content and integrity of the annual financial statements and related financial information included in this report. It is their responsibility to ensure that the annual financial statements fairly present the state of affairs of the Group as at the end of the financial year and the results of its operations and cash flows for the period then ended, in conformity with International Financial Reporting Standards. The external auditors are engaged to express an independent opinion on the annual financial statements.

The annual financial statements are prepared in accordance with International Financial Reporting Standards and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgments and estimates.

The Directors acknowledge that they are ultimately responsible for the system of internal financial control established by the Group and place considerable importance on maintaining a strong control environment. To enable the Directors to meet these responsibilities, the Directors set standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the Group and all employees are required to maintain the highest ethical standards in ensuring the Group’s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the Group is on identifying, assessing, managing and monitoring all known forms of risk across the Group. While operating risk cannot be fully eliminated, the Group endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints.

The Directors are of the opinion, based on the information and explanations given by management, that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the annual financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss.

The Directors have reviewed the Group’s cash flow forecast for the year to 31 March 2013 and, in the light of this review and the current financial position, they are satisfied that the Group has or has access to adequate resources to continue in operational existence for the foreseeable future.

directors’ responsibilit ies and approval


• The disposal of the Vlaklaagte prospecting right by Wescoal Mining (Pty) Ltd to Xstrata South Africa (Pty) Ltd for an amount of R81.12 million

• The acquisition of the Elandspruit mining right by Wescoal Mining (Pty) Ltd from Duiker Mining (Pty) Ltd for R93.81 million

• The acquisition by Blanford 006 (Pty) Ltd of three properties owned by Xstrata South Africa (Pty) Ltd for R3.4 million.

The Directors are not aware of any other matters or circumstances arising since the end of the financial year relevant to an assessment of the annual financial statements at 31 March 2012, except as mentioned above.

Directors’ interest in contracts

During the year ended 31 March 2012, none of the Directors had any interest in any contract or arrangement entered into by the Company or its subsidiaries.

Compliance with financial reporting standards

The Wescoal Group and Company annual financial statements comply with International Financial Reporting Standards, the South African Companies Act and the JSE Listings Requirements.

Share incentive scheme

The Directors are authorised to issue, allot and grant options to acquire up to a maximum of 31,586,272 ordinary shares in the issued share capital of the Company in terms of the Share Incentive scheme. At 31 March 2012, this represented 20% of shares in issue. The unexercised options under the scheme represented 5.32% of shares in issue as at 31 March 2012. Details of share options granted under the scheme are as follows:

Options are exercisable in five equal tranches, annually on the anniversary date of the options. The market value of share options outstanding at year end amounts to R6,120,300 (2011: R7,716,900). Options granted to employees have a six year contractual life and are forfeited if not exercised on termination of employment.

Options at 31 March 2011 8,870,000Options at 31 March 2012 8,870,000

Borrowing limitations

In terms of the Articles of Association of the Company, the Directors may exercise all the powers of the Company to borrow money, as they consider appropriate.

The Directors submit their report for the year ended 31 March 2012.

Shareholders with 5% or more of any class of shares

31 March 2012 31 March 2011Shareholder No. of Shares % of Shares No. of Shares % of Shares

Waterberg Portion Property (Pty) Ltd 33,190,376 19.90% 33,190,376 19.90%MR Ramaite 14,564,356 8.73% 14,564,356 8.73%Gujo Investments (Pty) Ltd 10,800,000 6.47% 10,800,000 6.47%GM Botha 10,244,000 6.14% 10,244,000 6.14%

The percentage of share calculation is based on the issued share capital of 166,801,361 less the 8,870,000 shares issued to the Wescoal Share Incentive Trust.

Review of activities

Main business and operations

The main business of the Company is that of an investment and management company with operating subsidiaries engaged in mining, processing and trading of coal. The Group operates principally in South Africa. The operating results and state of affairs of the Group and Company are fully set out in the annual financial statements and do not in our opinion require any further comment.

The Group made a profit after tax of R20.6 million.

Detail of operating segments in terms of IFRS 8 is disclosed in Note 35.

Going concern

The annual financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business.

Post-balance sheet events

On 31 July 2012 the Group announced the following:

• The related party acquisition by Wescoal Mining (Pty) Ltd of the Vlaklaagte prospecting right, and any subsequent mining right to which such prospecting right is converted, from Wescoal Exploration (Pty) Ltd for R60 million

directors’ repor t


Directors

The Directors of the Company during the reporting period and to the date of this report are as follows:

Name NationalityAR Boje South AfricanP Janse van Rensburg South AfricanJG Pansegrouw South AfricanMR Ramaite South AfricanDMT van Gaalen Costa RicanWN Khumalo South African

Company Secretary

The secretary of the Company is Jurie Wynand Walters of:

Business address Postal address149 Oak Avenue, Ferndale, 2194 PO Box 3333, Pinegowrie, 2123

Litigation statements

There are no legal or arbitration proceedings during the 12 months preceding the date of the annual financial statements which have, or may have, a material effect on the financial position of the Group or Company.

Resolutions

The following resolutions were approved by shareholders at an annual general meeting of the Company held on 11 October 2011.

Ordinary resolutions

• The approval of the annual financial statements

• The re-election of Mr MR Ramaite and Mr JG Pansegrouw

• The appointment of Audit Committee members – Mr JG Pansegrouw, Ms DMT van Gaalen and Mr WN Khumalo

• The appointment of PricewaterhouseCoopers Inc as Independent Auditors of the Company

• To place the authorised and unissued ordinary share capital under the control of the Directors of the Company

• To authorise the Directors of the Company to issue unissued, but authorised shares for cash

• The ratification of the remuneration policy.

Share capital

Authorised

There was no change in the authorised share capital of the Company during the year. The authorised share capital of the Company is R500,000 in 500,000,000 shares of 0.1 cent each.

Issued

Shares were issued during the year under the general authority granted to the Directors. The movement during the year was as follows:

At the beginning of the year 166,801,361At the end of the year 166,801,361

In terms of the authority granted by shareholders at the last annual general meeting held, all of the authorised but unissued share capital is placed under the control of the Directors. This authority expires at the next annual general meeting where shareholders will be asked to renew this authority.

Corporate governance

The Directors acknowledge the importance of sound corporate governance and the guidelines set out in the report of the King Commission on Corporate Governance for South Africa (“the Code”). The Directors therefore embrace the Code so far as is appropriate having regard for the size and nature of the various companies making up the Group. The Board will continue to take such measures as are practicable to comply with the Code.

Dividend policy

In line with the Group’s growth strategy, no dividend was declared during the year.

Listing

The abbreviated name under which the Company is listed on the Main Board of the JSE Limited is “Wescoal” and the short code is WSL.


Directors’ remuneration

Details of Directors’ remuneration are set out below:

Executive DirectorsAJ Boje

R

P Janse van Rensburg

R

31 March 2012Remuneration 2,037,896 1,589,496Medical and provident fund contributions 66,707 154,616Performance bonus 169,824 145,320Fringe and other benefits - -Cash total 2,274,427 1,889,432IFRS 2: Expense relating to share options granted - -

31 March 2011Remuneration 2,037,896 1,743,837Medical and provident fund contributions 89,417 141,090Performance bonus 169,825 145,320Fringe and other benefits - 53,060Cash total 2,297,138 2,083,307IFRS 2: Expense relating to share options granted 60,565 83,511

Non-executive DirectorsMR Ramaite

RJG Pansegrouw

RDMT van Gaalen

RWN Khumalo

R

31 March 2012Fees for services as a Director 265,000 182,500 185,000 137,500

265,000 182,500 185,000 137,500

31 March 2011Fees for services as a Director 60,000 90,000 40,000 45,000

60,000 90,000 40,000 45,000

Share options in the Company held by Directors

Year granted

Option grant (strike

price) cents

Balance held at

1 March 2011

Granted during the

year R

Balance held at

31 March 2012

Available for take-up

AR Boje 2011 106.00 1,000,000 - 1,000,000 June 2016

P Janse van Rensburg 2005 50.00 1,000,000 - 1,000,000 Immediately2008 88.70 450,000 - 450,000 March 20132010 86.10 550,000 - 550,000 January 20152011 106.00 260,000 - 260,000 June 2015

Special resolutions

• The authorisation of Non-executive Directors’ remuneration

• The authorisation of financial assistance to all related or inter-related companies

• The general approval to repurchase Company shares.

Interest in subsidiaries

Name of subsidiary

Percentage holding

%

Net income/(loss) after tax

R

Chandler Coal (Pty) Ltd 100% 1,712,822Wescoal Mining (Pty) Ltd 100% 20,353,413Wescoal Mineral Recoveries (Pty) Ltd 100% 1,327,461Blanford 006 (Pty) Ltd 100% 333,431Wescoal Exploration (Pty) Ltd 60% -

Details of the Company’s investment in subsidiaries are set out in Note 8.

Independent auditors

PricewaterhouseCoopers Inc (Johannesburg) will continue in office as Wescoal’s Independent Auditors for the ensuing year following their appointment in accordance with the Companies Act of South Africa.

Directors’ interest in the issued share capital

Direct beneficial

R

Indirect beneficial

R

Direct non-beneficial

R

Indirect non-beneficial

R

31 March 2012MR Ramaite 14,564,356 18,918,514 - -AR Boje 7,319,300 3,008,000 - -JG Pansegrouw - - - 2,040,000P Janse van Rensburg 520,000 - - -

22,403,656 21,926,514 - 2,040,000

31 March 2011MR Ramaite 14,564,356 18,918,514 - -AR Boje 7,319,300 3,008,000 - -JG Pansegrouw - - - 2,040,000P Janse van Rensburg 520,000 - - -

22,403,656 21,926,514 - 2,040,000

The tables above reflect the beneficial and non-beneficial interest of Directors in the issued share capital of the Company.

d i rec to r s’ repor t (con t inued )


Group Company2012 2011 2012 2011

Note(s) R R R R

Continuing operationsRevenue 23 630,751,540 557,598,179 1,629,441 1,472,125Cost of sales 24 (566,613,346) (544,402,996) - -Gross profit 64,138,194 13,195,183 1,629,441 1,472,125Other income 7,221,877 812,440 - -Operating expenses (40,872,167) (40,062,145) (12,125,770) (9,561,880)Operating profit/(loss) 25 30,487,904 (26,054,522) (10,496,329) (8,089,755)Finance income 26 167,998 174,475 9,033,132 7,425,849Finance costs 27 (4,464,319) (3,296,539) (1,296,526) (104,471)Profit/(loss) before taxation 26,191,583 (29,176,586) (2,759,723) (768,377)Taxation 28 (5,589,272) 12,157,788 (341,624) 319,077Profit/(loss) from continuing operations 20,602,311 (17,018,798) (3,101,347) (449,300)

Discontinued operationsLoss from discontinued operations - (26,714,231) - -Profit/(loss) for the year 20,602,311 (43,733,029) (3,101,347) (449,300)Other comprehensive income - - - -Total comprehensive income/(loss) 20,602,311 (43,733,029) (3,101,347) (449,300)

Total comprehensive income/(loss) attributable to:Owners of the parent 20,602,311 (43,589,135) (3,101,347) (449,300)Non-controlling interest - (143,894) - -

20,602,311 (43,733,029) (3,101,347) (449,300)

Earnings per sharePer share informationBasic earnings/(loss) per share (c) 30 13 (29.03) - -Diluted earnings/(loss) per share (c) 30 13 (28.71) - -

* The notes on pages 57 to 86 are an integral part of the financial statements.

Group Company

20122011

Restated2010

Restated 2012 2011Note(s) R R R R R

AssetsNon-current assetsInvestment property 4 709,250 709,250 709,250 - -Property, plant and equipment 5 55,684,949 67,510,174 57,031,788 - -Goodwill 6 49,737,559 49,737,559 54,513,322 - -Intangible assets 7 18,801,094 16,870,620 19,742,670 10,585,437 9,559,528Investments in subsidiaries 8 - - - 32,642,127 32,643,477Loans to group companies 9 - - - 99,950,861 110,278,019Investments 1,210,296 - - - -Deferred tax 11 8,980,610 15,461,562 4,147,598 - 399,812

135,123,758 155,289,165 136,144,628 143,178,425 152,880,836Current assetsInventories and work-in-progress 12 13,156,524 13,032,228 37,449,278 - -Current income tax receivable 280,000 613,734 - - -Trade and other receivables 13 112,853,177 76,615,690 67,623,581 5,050,000 339,032Cash and cash equivalents 14 20,163,007 31,340,109 11,380,857 - 2,000,000

146,452,708 121,601,761 116,453,716 5,050,000 2,339,032Non-current assets held for sale 15 - 2,404,295 3,058,031 - -Total assets 281,576,466 274,295,221 255,656,375 148,228,425 155,219,868

Equity and liabilitiesEquityEquity attributable to equity holders of parentShare capital 16 137,091,977 137,091,977 123,850,440 137,091,977 137,091,977Reserves 802,720 802,720 305,215 802,720 802,720Retained income 19,343,010 (1,259,301) 43,830,723 9,875,897 12,977,244

157,237,707 136,635,396 167,986,378 147,770,594 150,871,941Non-controlling interest (176,799) (176,799) (1,533,794) - -

157,060,908 136,458,597 166,452,584 147,770,594 150,871,941LiabilitiesNon-current liabilitiesInstalment sales agreements 18 8,182,963 18,549,928 8,105,300 - -Deferred tax 11 131,594 98,738 1,325,738 - -Provisions 19 8,793,820 8,910,788 8,392,592 - -Interest bearing borrowings 20 547,899 683,333 - - -

17,656,276 28,242,787 17,823,630 - -Current liabilitiesSouth African Revenue Services 35,148 4,212,361 5,871,976 - 3,612,103Instalment sales agreements 18 10,213,631 12,332,309 4,511,168 - -Trade and other payables 21 96,170,991 92,507,205 60,997,017 207,474 719,101Interest bearing borrowings 20 189,155 200,000 - - -Bank overdraft 14 250,357 16,723 - 250,357 16,723

106,859,282 109,268,598 71,380,161 457,831 4,347,927Liabilities of disposal groups 15 - 325,239 - - -Total liabilities 124,515,558 137,836,624 89,203,791 457,831 4,347,927Total equity and liabilities 281,576,466 274,295,221 255,656,375 148,228,425 155,219,868


s tatement of financial positionas at 31 March 2012

s tatement of comprehensive incomefor the year ended 31 March 2012


Share capitalShare

premium Total share

capital

Share based payment reserve

Retained income

Total attributable to equity holders of the Group/

Company

Non-controlling

interest Total equityR R R R R R R R

GroupOpening balance as previously reported 145,931 123,704,509 123,850,440 305,215 44,032,860 168,188,515 (1,533,794) 166,654,721AdjustmentsPrior year adjustments - - - - (202,137) (202,137) - (202,137)Balance at 1 April 2010 as restated 145,931 123,704,509 123,850,440 305,215 43,830,723 167,986,378 (1,533,794) 166,452,584Changes in equityTotal comprehensive income for the year - - - - (43,589,135) (43,589,135) (143,894) (43,733,029)Issue of ordinary shares 20,870 21,921,130 21,942,000 - - 21,942,000 - 21,942,000Issue of treasury shares (8,870) (8,373,000) (8,381,870) - - (8,381,870) - (8,381,870)Employees’ share option scheme - - - 497,505 - 497,505 - 497,505Expenses written off against share premium - (318,593) (318,593) - - (318,593) - (318,593)Changes in ownership interest - control not lost - - - - (1,500,889) (1,500,889) 1,500,889 -Total changes 12,000 13,229,537 13,241,537 497,505 (45,090,024) (31,350,982) 1,356,995 (29,993,987)Balance at 1 April 2011 157,931 136,934,046 137,091,977 802,720 (1,259,301) 136,635,396 (176,799) 136,458,597Changes in equityTotal comprehensive income for the year - - - - 20,602,311 20,602,311 - 20,602,311Total changes - - - - 20,602,311 20,602,311 - 20,602,311Balance at 31 March 2012 157,931 136,934,046 137,091,977 802,720 19,343,010 157,237,707 (176,799) 157,060,908Note(s) 16 16 16

CompanyBalance at 1 April 2010 145,931 123,704,509 123,850,440 305,215 13,426,544 137,582,199 - 137,582,199Changes in equityTotal comprehensive loss for the year - - - - (449,300) (449,300) - (449,300)Issue of ordinary shares 20,870 21,921,130 21,942,000 - - 21,942,000 - 21,942,000Issue of treasury shares (8,870) (8,373,000) (8,381,870) - - (8,381,870) - (8,381,870)Employees share option scheme - - - 497,505 - 497,505 - 497,505Expenses written off against share premium - (318,593) (318,593) - - (318,593) - (318,593)Total changes 12,000 13,229,537 13,241,537 497,505 (449,300) 13,289,742 - 13,289,742Balance at 1 April 2011 157,931 136,934,046 137,091,977 802,720 12,977,244 150,871,941 - 150,871,941Changes in equityTotal comprehensive income for the year - - - - (3,101,347) (3,101,347) - (3,101,347)Total changes - - - - (3,101,347) (3,101,347) - (3,101,347)Balance at 31 March 2012 157,931 136,934,046 137,091,977 802,720 9,875,897 147,770,594 - 147,770,594Note(s) 16 16 16


s tatement of changes in equit yas at 31 March 2012


1. Basis of preparation

The annual financial statements have been prepared in accordance with International Financial Reporting Standards, and the Companies Act, No. 71 of 2008. The annual financial statements have been prepared on the historical cost basis, except for the measurement of investment properties and certain financial instruments at fair value, and incorporate the principal accounting policies set out below. They are presented in South African Rands.

These accounting policies are consistent with the previous period.

1.1 Consolidation

Basis of consolidation

The consolidated annual financial statements incorporate the annual financial statements of the Company and all entities, including special purpose entities, which are controlled by the Company.

Control exists when the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

Subsidiaries

The results of subsidiaries are included in the consolidated annual financial statements from the effective date of acquisition to the effective date of disposal.

Transactions and minority interests

Adjustments are made when necessary to the annual financial statements of subsidiaries to bring their accounting policies in line with those of the Group.

All intra-Group transactions, balances, income and expenses are eliminated in full on consolidation.

Non-controlling interests in the net assets of consolidated subsidiaries are identified and recognised separately from the Group’s interest therein, and are recognised within equity. Losses of subsidiaries attributable to non-controlling interests are allocated to the non-controlling interest even if this results in a debit balance being recognised for non-controlling interest.

Transactions which result in changes in ownership levels, where the Group has control of the subsidiary both before and after the transaction, are regarded as equity transactions and are recognised directly in the statement of changes in equity.

Group Company2012 2011 2012 2011

Note(s) R R R R

Cash flows from operating activitiesCash used in operations 31 12,533,305 45,863,801 (15,717,574) (8,117,931)Interest income 167,998 174,475 9,033,132 7,425,849Finance costs (3,869,774) (2,655,623) (1,296,526) (104,471)Tax (paid)/received 32 (3,245,592) (2,320,416) (3,553,915) -Cash flows of held-for-sale/discontinued operations 15 - (28,653,219) - -Net cash from operating activities 5,585,937 12,409,018 (11,534,883) (796,553)

Cash flows from investing activitiesPurchase of property, plant and equipment 5 (8,342,610) (31,528,253) - -Sale of property, plant and equipment 5 9,391,926 89,999 - -Purchase of other intangible assets 7 (4,203,772) (383,768) (1,025,909) (300,475)Loans advanced to Group companies - - 10,327,158 (12,222,337)Purchase of financial assets (1,210,296) - - -Net cash flows of discontinued operations - 6,964,894 - -Net cash from investing activities (4,364,752) (24,857,128) 9,301,249 (12,522,812)

Cash flows from financing activitiesProceeds on share issue 16 - 13,241,537 - 13,241,537Movement in interest bearing borrowings (146,279) 905,917 - -Repayment of interest bearing borrowings - (22,584) - -Movement on instalment sale agreements (12,485,642) 18,265,769 - -Net cash from financing activities (12,631,921) 32,390,639 - 13,241,537

Total cash, cash equivalents and bank overdrafts movement for the year (11,410,736) 19,942,529 (2,233,634) (77,828)Cash, cash equivalents and bank overdrafts at the beginning of the year 31,323,386 11,380,857 1,983,277 2,061,105Total cash, cash equivalents and bank overdrafts at end of the year 14 19,912,650 31,323,386 (250,357) 1,983,277


s tatement of cash f lowsfor the year ended 31 March 2012

accounting policiesfor the year ended 31 March 2012


to other comprehensive income and accumulated in equity are recognised in profit or loss as a reclassification adjustment.

Goodwill is determined as the consideration paid, plus the fair value of any shareholding held prior to obtaining control, plus non-controlling interest and less the fair value of the identifiable assets and liabilities of the acquiree.

Goodwill is not amortised but is tested on an annual basis for impairment. If goodwill is assessed to be impaired, that impairment is not subsequently reversed.

1.2 Significant judgements and sources of estimation uncertainty

In preparing the annual financial statements, management is required to make estimates and assumptions that affect the amounts represented in the annual financial statements and related disclosures. Use of available information and the application of judgement is inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the annual financial statements. Significant judgements include:

Trade receivables and Loans and receivables

The Group assesses its Trade receivables and Loans and receivables for impairment at the end of each reporting period. In determining whether an impairment loss should be recorded in profit or loss, the Group makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset.

The impairment for Trade receivables and Loans and receivables is calculated on a portfolio basis, based on historical loss ratios, adjusted for national and industry-specific economic conditions and other indicators present at the reporting date that correlate with defaults on the portfolio. These annual loss ratios are applied to loan balances in the portfolio and scaled to the estimated loss emergence period.

Fair value estimation

The fair value of financial instruments traded in active markets (such as trading and available-for-sale securities) is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the Group is the current bid price.

The fair value of financial instruments that are not traded in an active market (for example, over the counter derivatives) is determined by using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at the end of each reporting period.Quotedmarketpricesordealerquotesforsimilarinstrumentsareusedforlong-termdebt.

The difference between the fair value of consideration paid or received and the movement in non-controlling interest for such transactions is recognised in equity attributable to the owners of the parent.

Where a subsidiary is disposed of and a non-controlling shareholding is retained, the remaining investment is measured to fair value with the adjustment to fair value recognised in profit or loss as part of the gain or loss on disposal of the controlling interest.

Business combinations

The Group accounts for business combinations using the acquisition method of accounting. The cost of the business combination is measured as the aggregate of the fair values of assets given, liabilities incurred or assumed and equity instruments issued. Costs directly attributable to the business combination are expensed as incurred, except the costs to issue debt which are amortised as part of the effective interest and costs to issue equity which are included in equity.

Contingent consideration is included in the cost of the combination at fair value as at the date of acquisition. Subsequent changes to the assets, liabilities or equity which arise as a result of the contingent consideration are not affected against goodwill, unless they are valid measurement period adjustments.

The acquiree’s identifiable assets, liabilities and contingent liabilities which meet the recognition conditions of IFRS 3 Business Combinations are recognised at their fair values at acquisition date, except for non-current assets (or disposal groups) that are classified as held-for-sale in accordance with IFRS 5 Non-current Assets Held-For-Sale and discontinued operations, which are recognised at fair value less costs to sell.

Contingent liabilities are only included in the identifiable assets and liabilities of the acquiree where there is a present obligation at acquisition date.

On acquisition, the Group assesses the classification of the acquiree’s assets and liabilities and reclassifies them where the classification is inappropriate for Group purposes. This excludes lease agreements and insurance contracts, whose classification remains as per their inception date.

Non-controlling interest arising from a business combination is measured either at their share of the fair value of the assets and liabilities of the acquiree or at fair value. The treatment is not an accounting policy choice but is selected for each individual business combination, and disclosed in the note for business combinations.

In cases where the Group held a non-controlling shareholding in the acquiree prior to obtaining control, that interest is measured to fair value as at acquisition date. The measurement to fair value is included in profit or loss for the year. Where the existing shareholding was classified as an available-for-sale financial asset, the cumulative fair value adjustments recognised previously

account ing po l ic ie s (con t inued )


Contingent provisions on business combinations

Contingencies recognised in the current year required estimates and judgments. Refer to note on business combinations.

Expected manner of realisation for deferred tax

Judgment is required in determining whether deferred tax assets are recognised on the statement of financial position. Deferred tax assets, including those arising from unutilised tax losses, require management to assess the likelihood that the Company will generate taxable earnings in future periods, in order to utilise recognised deferred tax assets. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Group to realise the net deferred tax assets recorded at the reporting date could be impacted. Deferred tax is provided for on the fair value adjustments of investment properties based on the expected manner of recovery, i.e. sale or use. This manner of recovery affects the rate used to determine the deferred tax liability. Refer to Note 11 – Deferred tax.

Taxation

Judgement is required in determining the provision for income taxes due to the complexity of legislation. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

The Group recognises the net future tax benefit related to deferred income tax assets to the extent that it is probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability of deferred income tax assets requires the Group to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Group to realise the net deferred tax assets recorded at the end of the reporting period could be impacted.

Units-of-production depreciation

Estimated recoverable reserves are used in determining the depreciation and/or amortisation of mine specific assets. This results in a depreciation/amortisation charge proportional to the depletion of the

Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward foreign exchange contracts is determined using quoted forward exchange rates at the end of the reporting period.

The carrying value less impairment provision of trade receivables and payables is assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

Impairment testing

The recoverable amounts of cash-generating units and individual assets have been determined based on the higher of value-in-use calculations and fair values less costs to sell. These calculations require the use of estimates and assumptions. It is reasonably possible that the assumption may change which may then impact estimations and may then require a material adjustment to the carrying value of goodwill and tangible assets.

The Group reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. In addition, goodwill is tested on an annual basis for impairment. Assets are grouped at the lowest level for which identifiable cash flows are largely independent of cash flows of other assets and liabilities. If there are indications that impairment may have occurred, estimates are prepared of expected future cash flows for each group of assets. Expected future cash flows used to determine the value in use of goodwill and tangible assets are inherently uncertain and could materially change over time. They are significantly affected by a number of factors including entity specific variables such as production estimates, supply and demand, together with economic factors such as exchange rates, inflation and interest.

Mine rehabilitation provision

The Group assesses its mine rehabilitation provision annually. Significant estimates and assumptions are made in determining the provision for mine rehabilitation as there are numerous factors that will affect the ultimate liability payable. These factors include estimates of the extent and costs of rehabilitation activities, technological changes, regulatory changes, cost increases as compared to the inflation rates, and changes in discount rates. Those uncertainties may result in future actual expenditure differing from the amounts currently provided. The provision at balance date represents management’s best estimate of the present value of the future rehabilitation costs required.

Additional disclosure of these estimates of provisions is included in Note 19.


1.4 Property, plant and equipment

The cost of an item of property, plant and equipment is recognised as an asset when:

• It is probable that future economic benefits associated with the item will flow to the Company; and

• The cost of the item can be measured reliably.

Property, plant and equipment is initially measured at cost.

Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to, replace part of, or service it. If a replacement cost is recognised in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred.

The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located is also included in the cost of property, plant and equipment, where the entity is obligated to incur such expenditure, and where the obligation arises as a result of acquiring the asset or using it for purposes other than the production of inventories.

Major spare parts and stand by equipment which are expected to be used for more than one period are included in property, plant and equipment. In addition, spare parts and stand by equipment which can only be used in connection with an item of property, plant and equipment are accounted for as property, plant and equipment.

Major inspection costs which are a condition of continuing use of an item of property, plant and equipment and which meet the recognition criteria above are included as a replacement in the cost of the item of property, plant and equipment. Any remaining inspection costs from the previous inspection are derecognised.

Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses. The useful lives of items of property, plant and equipment have been assessed as follows:

Item Average useful lifeBuildings• Straight line 50 yearsPlant and machinery• Straight line 5 yearsFurniture and fixtures• Straight line 5 to 10 years

the anticipated remaining life of mine production. Each item’s life, which is assessed annually, has regard to both its physical life limitations and to present assessments of economically recoverable reserves of the mine property at which the asset is located. These calculations require the use of estimates and assumptions, including the amount of recoverable reserves and estimates of future capital expenditure. Numerous units-of-production (“UOP”) depreciation methodologies are available to choose from; the Company adopts a Run of the Mine (“ROM”) tons of ore produced methodology for mining costs.

Inventories

Net realisable value tests are performed at least annually and represent the estimated future sales price of the product based on selling prices at the reporting date. Stockpile tonnages are verified by periodic surveys.

1.3 Investment property

Investment property is recognised as an asset when, and only when, it is probable that the future economic benefits that are associated with the investment property will flow to the enterprise, and the cost of the investment property can be measured reliably.

Investment property is initially recognised at cost. Transaction costs are included in the initial measurement.

Costs include costs incurred initially and costs incurred subsequently to add to, or to replace a part of, or service a property. If a replacement part is recognised in the carrying amount of the investment property, the carrying amount of the replaced part is derecognised.

Cost model

Investment property is carried at cost less depreciation less any accumulated impairment losses.

Depreciation is provided to write down the cost, less estimated residual value by equal instalments over the useful life of the property, which is as follows:

Item Useful life Property – land indefinite Property – buildings 20 years



• There are available technical, financial and other resources to complete the development and to use or sell the asset

• The expenditure attributable to the asset during its development can be measured reliably.

Intangible assets are carried at cost less any accumulated amortisation and any impairment losses.

An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows. Amortisation is not provided for these intangible assets, but they are tested for impairment annually and whenever there is an indication that the asset may be impaired. For all other intangible assets amortisation is provided on a straight line basis over their useful life.

The amortisation period and the amortisation method for intangible assets are reviewed every period-end.

Reassessing the useful life of an intangible asset with a finite useful life after it was classified as indefinite is an indicator that the asset may be impaired. As a result the asset is tested for impairment and the remaining carrying amount is amortised over its useful life.

Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance are not recognised as intangible assets.

The right to operate the mine is amortised on a unit of production basis, in production to the ROM tons of coal extracted in the year compared with total proven and probable reserves at the beginning of the year.

1.6 Investments in subsidiaries

Company annual financial statements

In the Company’s separate annual financial statements, investments in subsidiaries are carried at cost less any accumulated impairment. The cost of an investment in a subsidiary is the aggregate of:

• The fair value, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Company; plus

• Any costs directly attributable to the purchase of the subsidiary.

An adjustment to the cost of a business combination contingent on future events is included in the cost of the combination if the adjustment is probable and can be measured reliably.

Motor vehicles• Straight line 5 yearsOffice equipment• Straight line 10 yearsIT equipment• Straight line 3 yearsMining properties• Units of production Estimated ROM tons

Mining properties are depreciated on a unit of production basis, in proportion.

The residual value, useful life and depreciation method of each asset are reviewed, and adjusted if appropriate, at the end of each reporting period. If the expectations differ from previous estimates, the change is accounted for as a change in accounting estimate.

The depreciation charge for each period is recognised in profit or loss unless it is included in the carrying amount of another asset.

The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or loss when the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

1.5 Intangible assets

Intangible assets are initially recognised at cost.

Expenditure on research (or on the research phase of an internal project) is recognised as an expense when it is incurred. An intangible asset arising from development (or from the development phase of an internal project) is recognised when:

• It is technically feasible to complete the asset so that it will be available for use or sale

• There is an intention to complete and use or sell it

• There is an ability to use or sell it

• It will generate probable future economic benefits


Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as held-for-trading unless they are designated as hedges. Assets in this category are classified as current assets if expected to be settled within 12 months; otherwise, they are classified as non-current.

Financial assets at fair value through profit or loss are measured initially and subsequently at fair value. Gains or losses arising from changes in fair value are included in the statement of comprehensive income.

Transaction costs are recognised in the statement of comprehensive income. Dividend income is recognised in the statement of comprehensive income as part of other income when the Group’s right to receive payment is established.

Derivatives

Derivative financial instruments consisting of foreign exchange contracts and interest rate swaps are initially measured at fair value on the contract date and subsequently re-measured to their fair values.

Derivatives embedded in other financial instruments or other non-financial host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contract; the host contract is not carried at fair value with unrealised gains or losses reported in the statement of comprehensive income; a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative. The Group does not document, at inception of each hedge transaction, the relationship between the hedging instrument and the hedged item. The Group does, however, have a general policy to hedge items that significantly expose the Group interest rate risk and foreign exchange risk. The Group economically hedges to manage risk but does not hedge account.

Changes in the fair value of derivative financial instruments are recognised in profit or loss as they arise.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the financial year. These are classified as non-current assets. The Group’s loans and receivables comprise ‘Loans to/(from) associate companies’, ‘Loans to/(from) shareholders’, ‘Trade and other receivables’, ‘Loans receivable’ and ‘Cash and cash equivalents’.

1.7 Financial instruments

Initial recognition and measurement

Financial assets and financial liabilities are recognised on the Group’s statement of financial position when the Group becomes party to the contractual provisions of the instrument. Financial assets are derecognised when the rights to receive cash flows from the financial asset have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.

Financial liabilities are derecognised when the obligation specified in the contract is discharged, cancelled or expires.

Purchases and sales of financial assets are recognised on trade date; the date on which the Group commits to purchase or sell the asset. Financial assets and financial liabilities are initially recognised at fair value plus transaction costs for all financial assets and financial liabilities not carried at fair value through profit or loss. Financial assets and financial liabilities carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the statement of comprehensive income. Available-for-sale financial assets and financial assets and financial liabilities at fair value through profit or loss are subsequently carried at fair value. Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method.

Fair value determination

The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis and option pricing models, making maximum use of market inputs and relying as little as possible on entity-specific inputs.

Classification and subsequent measurement

The Group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. The classification of financial assets depends on the purpose for which they were acquired. The Group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets.



At subsequent reporting dates these are measured at amortised cost using the effective interest rate method, less any impairment loss recognised to reflect irrecoverable amounts.

Impairment of financial assets

The Group assesses at each statement of financial position date whether there is objective evidence that a financial asset or a class of financial assets is impaired. For loans receivable, the impairment is measured as the difference between the financial assets carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.

The asset’s carrying amount is reduced and the amount of the loss is recognised in the statement of comprehensive income.

A financial asset or group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the securities are 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 other comprehensive income and recognised in the statement of comprehensive income.

Impairment losses recognised in the statement of comprehensive income on equity instruments are not reversed through the statement of comprehensive income.

The criteria the Group uses to determine that there is objective evidence of an impairment loss on trade receivables includes:

• Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired.

Impairment losses are reversed in subsequent periods when an increase in the financial asset’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the financial asset at the date the impairment is reversed shall not exceed what the amortised cost would have been had the impairment not been recognised. The reversal of the previously recognised impairment loss is recognised in the statement of comprehensive income.

Loans and receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

Trade and other receivables

Trade receivables are amounts due from customers for services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, 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 and bank overdrafts.

Available-for-sale financial assets

These financial assets are non-derivatives that are either designated in this category or not classified elsewhere. They are included in non-current assets unless management intends to dispose of the financial asset within 12 months of the statement of financial position date.

These investments are measured initially and subsequently at fair value. Gains or losses arising from changes in fair value are recognised in other comprehensive income until the security is disposed of or is determined to be impaired.

When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the statement of comprehensive income.

Interest on available-for-sale securities calculated using the effective interest method is recognised in the statement of comprehensive income as part of ‘finance income’. Dividends on available-for-sale equity instruments are recognised in the statement of comprehensive income as part of ‘other income’ when the Group’s right to receive payments is established.

Held-to-maturity

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and with fixed maturities. Financial assets that the Group has the positive intention and ability to hold to maturity are classified as held-to-maturity.

These financial assets are initially measured at fair value plus direct transaction costs.


• A transaction or event which is recognised, in the same or a different period, to other comprehensive income; or

• A business combination.

Current tax and deferred taxes are charged or credited to other comprehensive income if the tax relates to items that are credited or charged, in the same or a different period, to other comprehensive income.

Current tax and deferred taxes are charged or credited directly to equity if the tax relates to items that are credited or charged, in the same or a different period, directly in equity.

1.9 Leases

A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.

Finance leases – lessor

The Group recognises finance lease receivables in the statement of financial position.

Finance income is recognised based on a pattern reflecting a constant periodic rate of return on the Group’s net investment in the finance lease.

Finance leases – lessee

Finance leases are recognised as assets in the statement of financial position at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation.

The discount rate used in calculating the present value of the minimum lease payments is 8.5%.

The lease payments are apportioned between the finance charge and reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of return on the remaining balance of the liability. The corresponding rental obligation, net of finance charges, is included in payables. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset and the lease term.

1.8 Income tax

Current income tax assets and liabilities

Current income tax for current and prior periods is, to the extent unpaid, recognised as a liability. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset.

Current income tax liabilities/(assets) for the current and prior periods are measured at the amount expected to be paid to/(recovered from) the tax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax assets and liabilities

A deferred tax liability is recognised for all taxable temporary differences, except to the extent that the deferred tax liability arises from the initial recognition of an asset or liability in a transaction which at the time of the transaction, or when it affects neither accounting profit nor taxable profit/(tax loss).

A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised. A deferred tax asset is not recognised when it arises from the initial recognition of an asset or liability in a transaction at the time of the transaction, affects neither accounting profit nor taxable profit/(tax loss).

A deferred tax asset is recognised for the carry forward of unused tax losses to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

Income tax expenses

Current and deferred taxes are recognised as income or an expense and included in profit or loss for the period, except to the extent that the tax arises from:



Irrespective of whether there is any indication of impairment, the Group also:

• Tests intangible assets with an indefinite useful life or intangible assets not yet available for use for impairment annually by comparing the carrying amount with the recoverable amount. This impairment test is performed during the annual period and at the same time every period.

• Tests goodwill acquired in a business combination for impairment annually.

If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash-generating unit to which the asset belongs is determined.

The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use.

If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss.

An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately in profit or loss. Any impairment loss of a revalued asset is treated as a revaluation decrease.

Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination.

An impairment loss is recognised for cash-generating units if the recoverable amount of the unit is less than the carrying amount of the unit. The impairment loss is allocated to reduce the carrying amount of the assets of the unit in the following order:

• First, to reduce the carrying amount of any goodwill allocated to the cash-generating unit and

• To the other assets of the unit, pro rata on the basis of the carrying amount of each asset in the unit.

An entity assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods for assets other than goodwill may no longer exist or may have decreased. If any such indication exists, the recoverable amounts of those assets are estimated.

Operating leases – lessor

Operating lease income is recognised as an income on a straight-line basis over the lease term. The difference between the amounts recognised as an income and the contractual receipts is recognised as an operating lease liability. This liability is not discounted.

Initial direct costs incurred in negotiating and arranging operating leases are added to the carrying amount of the leased asset and recognised as an expense over the lease term on the same basis as the lease income.

Income for leases is disclosed under revenue in profit or loss.

Operating leases – lessee

Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset. This asset is not discounted.

Any contingent rents are expensed in the period they are incurred.

1.10 Inventories and work-in-progress

Inventories and work-in-progress are measured at the lower of cost and net realisable value on the first-in-first-out basis.

Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

The cost of inventories and work-in-progress comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories and work-in-progress to their present location and condition. It excludes borrowing costs.

1.11 Impairment of non-financial assets

The Group assesses at each end of the reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the Group estimates the recoverable amount of the asset.


- the location, function, and approximate number of employees who will be compensated for terminating their services

- the expenditures that will be undertaken

- when the plan will be implemented

• Has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement that plan or announcing its main features to those affected by it.

After their initial recognition contingent liabilities recognised in business combinations that are recognised separately are subsequently measured at the higher of:

• The amount that would be recognised as a provision

• The amount initially recognised less cumulative amortisation.

Contingent assets and contingent liabilities are not recognised. Contingencies are disclosed in Note 36.

1.14 Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset until such time as the asset is ready for its intended use. The amount of borrowing costs eligible for capitalisation is determined as follows:

• Actual borrowing costs on funds specifically borrowed for the purpose of obtaining a qualifying asset less any temporary investment of those borrowings

• Weighted average of the borrowing costs applicable to the entity on funds generally borrowed for the purpose of obtaining a qualifying asset. The borrowing costs capitalised do not exceed the total borrowing costs incurred.

The capitalisation of borrowing costs commences when:

• Expenditures for the asset have occurred

• Borrowing costs have been incurred

• Activities that are necessary to prepare the asset for its intended use or sale are in progress.

Capitalisation is suspended during extended periods in which active development is interrupted.

The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods.

A reversal of an impairment loss of assets carried at cost less accumulated depreciation or amortisation other than goodwill is recognised immediately in profit or loss. Any reversal of an impairment loss of a revalued asset is treated as a revaluation increase.

1.12 Share capital and equity

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.

1.13 Provisions and contingencies

Provisions are recognised when:

• The Group has a present obligation as a result of a past event

• It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation

• A reliable estimate can be made of the obligation.

The amount of a provision is the present value of the expenditure expected to be required to settle the obligation.

Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement shall be recognised when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement shall be treated as a separate asset. The amount recognised for the reimbursement shall not exceed the amount of the provision.

Provisions are not recognised for future operating losses.

If an entity has a contract that is onerous, the present obligation under the contract shall be recognised and measured as a provision. A constructive obligation to restructure arises only when an entity:

• Has a detailed formal plan for the restructuring, identifying at least:

- the business or part of a business concerned

- the principal locations affected



Capitalisation ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete. All other borrowing costs are recognised as an expense in the period in which they are incurred.

1.15 Revenue

Revenue is measured at the fair value of the consideration received or receivable and represents the amounts receivable for goods and services provided in the normal course of business, net of trade discounts and volume rebates, and value added tax.

Revenue from the sale of goods is recognised when significant risks and rewards of ownership of the goods are transferred to the buyer. This is usually when title and insurance risk have passed to the customer and the goods have been delivered to a contractually agreed location.

Interest is recognised, in profit or loss, using the effective interest rate method.

Dividends are recognised, in profit or loss, when the Company’s right to receive payment has been established.

Service fees included in the price of the product are recognised as revenue over the period during which the service is performed.

1.16 Cost of sales

When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write down or loss occurs. The amount of any reversal of any write down of inventories, arising from an increase in net realisable value, is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

The related cost of providing services recognised as revenue in the current period is included in cost of sales.

Contract costs comprise:

• Costs that relate directly to the specific contract

• Costs that are attributable to contract activity in general and can be allocated to the contract

• Such other costs as are specifically chargeable to the customer under the terms of the contract.

notes to the annual financial statementsfor the year ended 31 March 2012

2. New standards and interpretations

2.1 Standards and interpretations effective and adopted in the current year

In the current year, the Group has adopted the following standards and interpretations that are effective for the current financial year and that are relevant to its operations:

• IFRS 2 Share-based Payments – Group Cash-settled Share-based Payment Transactions

• IFRS 3 Business Combinations (revised 2008)

• IFRS 5 Non-current Assets Held-for-Sale and Discontinued Operations

• IFRS 8 Operating Segments

• IAS 1 Presentation of Financial Statements

• IAS 7 Statement of Cash Flows

• IAS 17 Leases

• IAS 27 Consolidated and Separate Financial Statements (amended 2008)

• IAS 36 Impairment of Assets

• IAS 38 Intangible Assets

• IAS 39 Financial Instruments – Eligible Hedged Items

• IFRIC 9 Reassessment of Embedded Derivatives

2.2 Standards and interpretations not yet effective

The Group has chosen not to early adopt the following standards and interpretations, which have been published and are mandatory for the Group’s accounting periods beginning on or after 1 April 2012 or later periods:

IAS 12 (Amendment) Income Taxes – Deferred Tax: Recovery of Underlying Assets


period. The amendments will promote transparency in the reporting of transfer transactions and improve users’ understanding of the risk exposures relating to transfers of financial assets and the effect of those risks on an entity’s financial position, particularly those involving securitisation of financial assets.

IFRS 7 Amendments to IFRS 7 (AC 144) Disclosures – Transfers of financial assets

Amended the required disclosures to help users of financial statements evaluate the risk exposures relating to transfers of financial assets and the effect of those risks on an entity’s financial position.

The effective date of the amendment is for years beginning on or after 1 July 2011.

The Group expects to adopt the amendment for the first time in the 2013 annual financial statements.

It is unlikely that the amendment will have a material impact on the Company’s annual financial statements.

IFRS 10 Consolidated Financial Statements

This standard replaces the consolidation sections of IAS 27 Consolidated and Separate Financial Statements and SIC 12 Consolidation – Special Purpose Entities. The standard sets out a new definition of control, which exists only when an entity is exposed to, or has rights to, variable returns from its involvement with the entity, and has the ability to effect those returns through power over the investee.

The effective date of the standard is for years beginning on or after 1 January 2013.

The Group expects to adopt the standard for the first time in the 2014 annual financial statements.

It is unlikely that the standard will have a material impact on the Company’s annual financial statements.

IAS 27 Separate Financial Statements

Consequential amendment as a result of IFRS 10. The amended Standard now only deals with separate financial statements. The effective date of the amendment is for years beginning on or after 1 January 2013.



2.3 Standards and interpretations not yet effective or relevant

The following standards and interpretations have been published and are mandatory for the Group’s accounting periods beginning on or after 1 April 2012 or later periods but are not relevant to its operations:

IFRS 1 (Amendment): First-time Adoption of International Financial Reporting Standards – Removal of Fixed Dates for First-time Adopters


The amendment replaces references to a fixed date of ‘1 January 2004’ with ‘the date of transition to IFRSs’, thus eliminating the need for companies adopting IFRSs for the first time to restate derecognition transactions that occurred before the date of transition to IFRSs.

IFRS 1 (Amendment): First-time Adoption of International Financial Reporting Standards – Guidance on Severe Hyperinflation


The amendment provides guidance on how an entity should resume presenting financial statements in accordance with IFRSs after a period when the entity was unable to comply with IFRSs because its functional currency was subject to severe hyperinflation.

IFRS 1 (Amendment): First-time Adoption of International Financial Reporting Standards – Guidance on Government Loans

The effective date of the amendment is for years beginning on or after 1 January 2013.

The amendment provides guidance on how a first-time adopter would account for a government loan with a below-market rate of interest when transitioning to IFRS.

IFRS 7 (Amendment): Financial Instruments: Disclosures – Transfer of Financial Assets


The amendment will allow users of financial statements to improve their understanding of transfer transactions of financial assets, including understanding the possible effects of any risks that may remain with the entity that transferred the assets. It will also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of the reporting

no te s to the annual f inancia l s ta tement s (con t inued )




IAS 1 Presentation of Financial Statements

The amendment requires items of other comprehensive income to be presented as:

• Those which will be reclassified to profit or loss

• Those which will not be reclassified to profit or loss.

The related tax disclosures are also required to follow the presentation allocation.

In addition, the amendment changes the name of the statement of comprehensive income to the statement of profit or loss and other comprehensive income.




IAS 12 Income Taxes: Amendment: Deferred Tax: Recovery of Underlying Assets

The amendment provides that for investment property measured at fair value, the recovery of the carrying amount is assumed to be through sale, with the result that deferred tax arising on the valuation is measured using the prevailing tax rate for capital gains.




IAS 19 Employee Benefits Revised

• Requires recognition of changes in the net defined benefit liability (asset) including immediate recognition of defined benefit cost, disaggregation of defined benefit cost into components, recognition of remeasurements in other comprehensive income, plan amendments, curtailments and settlements

IFRS 11 Joint Arrangements

The standard replaces IAS 31 Interests in Joint Ventures and SIC 13 Jointly Controlled Entities – Non Monetary Contributions by Venturers. The standard defines a joint arrangement as existing only when decisions about relevant activities requires the unanimous consent of the parties sharing joint control in terms of a contractual arrangement. The standard identifies two types of joint arrangements:

• Joint operations which exist when the entities sharing joint control have direct rights to the assets and obligations for the liabilities of the joint arrangements. In such cases the joint operators recognise their share of the assets and liabilities and profits and losses of the joint arrangements in their financial statements.

• Joint operations which exist when the entities sharing joint control have direct rights to the assets and obligations for the liabilities of the joint arrangements. In such cases the joint operators recognise their share of the assets and liabilities and profits and losses of the joint arrangements in their financial statements.




IFRS 12 Disclosure of Interests in Other Entities

The standard sets out disclosure requirements for investments in subsidiaries, associates, joint ventures and unconsolidated structured entities. The disclosures are aimed to provide information about the significance and exposure to risks of such interests. The most significant impact is the disclosure requirement for unconsolidated structured entities or off balance sheet vehicles.




IFRS 13 Fair Value Measurement

This new standard sets out guidance on the measurement and disclosure of items measured at fair value or required to be disclosed at fair value in terms of other IFRSs.



Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availibility of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, Group treasury maintains flexibility in funding by maintaining availability under committed credit lines.

The Group’s risk to liquidity is a result of the funds available to cover future commitments. The Group manages liquidity risk through an ongoing review of future commitments and credit facilities.

The table below analyses the Group’s financial liabilities in terms of relevant maturity groupings based on the remaining period between the statement of financial position and contractual maturity date.

Less than 1 year

Between 1 and 2 years

Between 2 and 5 years

R R R

GroupAt 31 March 2012Borrowings 257,690 257,690 221,674Trade and other payables 96,170,991 - -Instalment sales agreements 11,592,459 8,581,154 7,286South African Revenue Services 35,148 - -

At 31 March 2011Borrowings 257,690 257,690 601,276Trade and other payables 92,507,202 - -Instalment sales agreements 14,807,434 11,843,462 8,499,522South African Revenue Services 4,212,361 - -

CompanyAt 31 March 2012Trade and other payables - - 207,474South African Revenue Services - - 250,357

At 31 March 2011Trade and other payables 719,101 - -South African Revenue Services 3,612,103 - -

• Introduces enhanced disclosures about defined benefit plans

• Modifies accounting for termination benefits, including distinguishing benefits provided in exchange for service and benefits provided in exchange for the termination of employment and affects the recognition and measurement of termination benefits

• Clarifies of miscellaneous issues, including the classification of employee benefits, current estimates of mortality rates, tax and administration costs and risk-sharing and conditional indexation features.




3. Risk management

Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

Financial risk management

The Group’s activities expose it to a variety of financial risks: market risk (including cash flow interest rate risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance.

Risk management is carried out by the head office function under policies approved by the Board of Directors. The head office function identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, and investment of excess liquidity.



4. Investment property

2012 2011

Cost Accumulated depreciation

Carrying value Cost Accumulated

depreciationCarrying

valueR R R R R R

GroupInvestment property 709,250 - 709,250 709,250 - 709,250

Opening balance Total

R R

Reconciliation of investment property – Group – 2012Investment property 709,250 709,250

Reconciliation of investment property – Group – 2011Investment property 709,250 709,250

Interest rate risk

As the Group has no significant interest-bearing assets, the Group’s income and operating cash flows are substantially independent of changes in market interest rates.

The Group’s interest rate risk arises mainly from instalment sale agreements. Borrowings issued at variable rates expose the Group to cash flow interest rate risk.

Sensitivity analysis

A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) profit before tax by the amounts shown below. This analysis assumes that all other variables remain constant. The analysis is performed on the same basis for 2011.

Group Company2012 2011 2012 2011

R R R R

Increase by 100 basis points 191,336 225,520 - -Decrease by 100 basis points (191,336) (225,520) - -

Credit risk

Credit risk consists mainly of cash deposits, cash equivalents, derivative financial instruments and trade debtors. The Company only deposits cash with major banks with high quality credit standing and limits exposure to any one counter party.

Trade receivables comprise a widespread customer base. The Company trades only with recognised, creditworthy third parties. It is the Company’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures, which include an assessment of credit rating, short term liquidity and financial position. The Company obtains sufficient collateral (where appropriate) from customers as a means of mitigating the risk of financial loss from defaults. In addition, trade receivable balances are monitored on an ongoing basis with the result that the Company’s exposure to bad debts is not significant.


5. Property, plant and equipment

2012 2011 2010

CostAccumulated depreciation

Carrying value Cost

Accumulated depreciation

Carrying value Cost

Accumulated depreciation

Carrying value

R R R R R R R R R

GroupLand 4,906,445 - 4,906,445 4,906,445 - 4,906,445 4,626,445 - 4,626,445Buildings 5,067,704 (335,147) 4,732,557 5,100,604 (234,446) 4,866,158 3,698,678 (160,472) 3,538,206Plant and machinery 48,895,691 (22,878,815) 26,016,876 51,924,630 (15,010,164) 36,914,466 37,607,485 (17,230,687) 20,376,798Furniture and fixtures 1,420,887 (699,152) 721,735 1,417,103 (554,352) 862,751 1,203,462 (396,004) 807,458Motor vehicles 2,152,611 (710,973) 1,441,638 2,217,969 (1,149,701) 1,068,268 1,992,203 (849,366) 1,142,837Office equipment 201,387 (87,180) 114,207 136,235 (66,934) 69,301 133,335 (55,725) 77,610IT equipment 1,626,794 (838,986) 787,808 1,307,180 (581,087) 726,093 940,654 (304,162) 636,492Assets under construction 6,328,327 - 6,328,327 - - - - - -Mining properties 28,569,149 (17,933,793) 10,635,356 28,825,112 (10,728,420) 18,096,692 28,084,508 (2,258,566) 25,825,942Total 99,168,995 (43,484,046) 55,684,949 95,835,278 (28,325,104) 67,510,174 78,286,770 (21,254,982) 57,031,788

Opening balance Additions Disposals

Classified as held-for-

sale Transfers Depreciation

Change in estimates –

environmental assets Total

R R R R R R R R

Reconciliation of property, plant and equipment – Group – 2012Land 4,906,445 - - - - - - 4,906,445Buildings 4,866,158 - - - (32,234) (101,367) - 4,732,557Plant and machinery 36,914,466 55,575 (215,365) (1,766,831) - (8,970,969) - 26,016,876Furniture and fixtures 862,751 49,096 - (26,914) - (163,198) - 721,735Motor vehicles 1,068,268 1,103,157 (449,654) - - (280,133) - 1,441,638Office equipment 69,301 32,252 - - 32,234 (19,580) - 114,207IT equipment 726,093 319,615 - - - (257,900) - 787,808Assets under construction - 6,328,327 - - - - - 6,328,327Mining properties 18,096,692 454,588 - - - (7,205,380) (710,544) 10,635,356

67,510,174 8,342,610 (665,019) (1,793,745) - (16,998,527) (710,544) 55,684,949

notes to the annual f inancia l s ta tement s (con t inued )

Opening balance Additions

Disposals – discontinued operations


sale Depreciation

Change in estimates –

environmental assets Total

R R R R R R R

Reconciliation of property, plant and equipment – Group – 2011Land 4,626,445 280,000 - - - - 4,906,445Buildings 3,538,206 1,401,926 - - (73,974) - 4,866,158Plant and machinery 20,376,798 28,172,581 (1,777,289) (2,404,295) (7,453,329) - 36,914,466Furniture and fixtures 807,458 215,231 (1,413) - (158,525) - 862,751Motor vehicles 1,142,837 225,766 - - (300,335) - 1,068,268Office equipment 77,610 2,900 - - (11,209) - 69,301IT equipment 636,492 366,526 - - (276,925) - 726,093Mining properties 25,825,942 863,323 - - (8,469,854) (122,719) 18,096,692

57,031,788 31,528,253 (1,778,702) (2,404,295) (16,744,151) (122,719) 67,510,174

Opening balance Additions

Additions through business

combinations

Disposals – discontinued operations


sale DepreciationImpairment

loss

Changes in estimates –

environmental rehabilitation

assets TotalR R R R R R R R R

Reconciliation of property, plant and equipment – Group – 2010Land 4,626,445 - - - - - - - 4,626,445Buildings 3,009,917 592,125 - - - (63,836) - - 3,538,206Plant and machinery 17,507,260 12,995,247 - (706,124) (3,058,031) (5,851,845) (509,709) - 20,376,798Furniture and fixtures 774,603 209,384 - - - (131,195) (45,334) - 807,458Motor vehicles 565,407 849,448 - - - (226,784) (45,234) - 1,142,837Office equipment 49,008 38,763 - (1,527) - (8,634) - - 77,610IT equipment 152,967 559,157 - - - (75,632) - - 636,492Mining properties - - 19,898,151 - - (2,258,560) - 8,186,351 25,825,942

26,685,607 15,244,124 19,898,151 (707,651) (3,058,031) (8,616,486) (600,277) 8,186,351 57,031,788

WESCOAL integrated annual report 2012 73


7. Intangible assets

2012 2011

CostAccumulated amortisation

Carrying value Cost

Accumulated amortisation

Carrying value

R R R R R R

GroupMineral prospecting rights 14,203,123 - 14,203,123 9,999,351 - 9,999,351Customer list 917,900 - 917,900 917,900 - 917,900Mining properties 9,985,363 (6,305,292) 3,680,071 9,985,363 (4,031,994) 5,953,369Total 25,106,386 (6,305,292) 18,801,094 20,902,614 (4,031,994) 16,870,620

CompanyMineral prospecting rights 10,585,437 - 10,585,437 9,559,528 - 9,559,528

Opening balance Additions Amortisation Total

R R R R

Reconciliation of intangible assets – Group – 2012Mineral prospecting rights 9,999,351 4,203,772 - 14,203,123Customer list 917,900 - - 917,900Mining properties 5,953,369 - (2,273,298) 3,680,071

16,870,620 4,203,772 (2,273,298) 18,801,094

Reconciliation of intangible assets – Group – 2011Mineral prospecting rights 9,615,583 383,768 - 9,999,351Customer list 917,900 - - 917,900Mining properties 9,209,187 - (3,255,818) 5,953,369

19,742,670 383,768 (3,255,818) 16,870,620

Opening balance Additions Total

R R R

Reconciliation of intangible assets – Company – 2012Mineral prospecting rights 9,559,528 1,025,909 10,585,437

Reconciliation of intangible assets – Company – 2011Mineral prospecting rights 9,259,053 300,475 9,559,528

Neither the Company nor the Group has internally generated intangible assets.

All intangible assets have finite lives.

5. Property, plant and equipment (continued)

Group Company2012 2011 2010 2012 2011

R R R R R

Pledged as securityCarrying value of assets pledged as security:Property – Erf 325 Witbank 1,622,299 1,681,926 - - -Plant and machinery 23,392,074 30,868,109 11,001,537 - -Motor vehicles 342,811 952,267 968,836 - -IT equipment 255,122 370,480 - - -

Plant and machinery, motor vehicles and IT equipment are encumbered as stated in Note 15.

The property is subject to a first charge to secure a mortgage bond within the Group. Refer to Note 17.

Compensation received for losses on property, plant and equipment – included in operating profit

Plant and machinery - 540,000 1,088,245 - -Office equipment - - 1,526 - -

- 540,000 1,089,771 - -

A register containing the information required by Regulation 25(3) of the Companies Regulations, 2011 is available for inspection at the registered office of the Company.

6. Goodwill

2012 2011

Cost ImpairmentCarrying

value Cost ImpairmentCarrying

valueR R R R R R

GroupGoodwill 49,737,559 - 49,737,559 54,513,322 (4,775,763) 49,737,559

Opening balance Total

R R

Reconciliation of goodwill – Group – 2012Goodwill 49,737,559 49,737,559

Opening balance

Impairment loss Total

R R R

Reconciliation of goodwill – Group – 2011Goodwill 54,513,322 (4,775,763) 49,737,559



Fair value of loans to and from group companies

The Directors consider the carrying amount of loans to/(from) group companies to approximate their fair values.

The maximum exposure to credit risk at the reporting date is the carrying amount of each class of loan mentioned above.

Reconciliation of provision for impairment of loans to group companies

The creation and release of provision for impaired receivables have been included in operating expenses in the statement of comprehensive income. Unwind of discount is included in the statement of comprehensive income. Amounts charged to the allowance account are generally written off when there is no expectation of recovering additional cash.

The maximum exposure to credit risk at the reporting date is the fair value of each class of loan mentioned above. The Group does not hold any collateral as security.

10. Financial assets by category

The accounting policies for financial instruments have been applied to the line items below:

Loans and receivables

Held-to-maturity

investments TotalR R R

Group – 2012Trade and other receivables 113,133,177 - 113,133,177Cash and cash equivalents 20,163,008 - 20,163,008Investments - 1,210,296 1,210,296

133,296,185 1,210,296 134,506,481

Group – 2011Trade and other receivables 76,615,690 - 76,615,690Cash and cash equivalents 31,340,109 - 31,340,109

107,955,799 - 107,955,799

8. Investments in subsidiaries

% holding % holdingCarrying amount

Carrying amount

Name of company Held by 2012 2011 2012 2011

Chandler Coal (Pty) Ltd Wescoal Holdings Ltd 100.00% 100.00% 30,276,479 30,276,479Wescoal Mining (Pty) Ltd Wescoal Holdings Ltd 100.00% 100.00% 2,365,648 2,365,648Wescoal Mineral Recoveries (Pty) Ltd Wescoal Holdings Ltd 100.00% 100.00% - 1,350Blanford 006 (Pty) Ltd Chandler Coal (Pty) Ltd 100.00% 100.00% - -Wescoal Exploration (Pty) Ltd Wescoal Mining (Pty) Ltd 60.00% 60.00% - -

32,642,127 32,643,477

The carrying amounts of subsidiaries are shown net of impairment losses.

Changes in ownership interest which did not result in loss of control

The following schedule represents the impact of changes in ownership interest of subsidiaries where control was not lost, on the equity attributable to owners of the Group:

Group Company2012 2011 2012 2011

R R R R

Purchase of additional shares in Wescoal Mineral Recoveries (Pty) Ltd from non-controlling interest, increasing ownership interest from 80% to 100% - 1,500,889 - -

9. Loans to/(from) group companies

Group Company2012 2011 2012 2011

R R R R

SubsidiariesChandler Coal (Pty) Ltd - - 7,897,742 32,522,151The loan bears interest at the prime overdraft lending rate with no fixed terms of repaymentsBlanford 006 (Pty) Ltd - - 5,107,939 4,716,622The loan bears interest at the prime overdraft lending rate with no fixed terms of repaymentsWescoal Mineral Recoveries (Pty) Ltd - - 3,025,164 3,951,555The loan bears no interest with no fixed terms of repaymentsWescoal Mining (Pty) Ltd - - 83,920,016 69,087,691The loan bears interest at the prime overdraft lending rate with no fixed terms of repayments

- - 99,950,861 110,278,019

All rights, titles and interests in and to the loans have been ceded to Absa Bank Limited.


12. Inventories and work in progress

Group Company2012 2011 2012 2011

R R R R

Raw materials 597,995 1,177,106 - -Work in progress - 625,351 - -Finished goods 12,558,529 10,862,833 - -Consumable stores - 366,938 - -

13,156,524 13,032,228 - -

Product inventories are valued at the lower of cost and net realisable value, primarily on a FIFO basis.

Average costs are calculated by reference to the cost levels experienced over a defined production period which largely reflects the production process and timing thereof.

Cost for raw materials is the purchase price and for partly processed and saleable products it is generally the cost of production.

The cost of product inventories comprises the direct cost of production which includes mining and production overheads, depreciation, amortisation and transport costs to port.

Net realisable value is the estimated selling price in the ordinary course of business, less costs to complete and applicable variable selling expenses.

In 2012 changes in finished goods and work in progress recognised as cost of sales amounted to R2,908 credit (2011: R6,746 credit) for the Group. The Company has no inventory.

13. Trade and other receivables

Group Company2012 2011 2012 2011

R R R R

Trade receivables 101,426,237 66,907,589 5,050,000 50,000Loans to employees 46,000 62,048 - -Prepayments 380,317 4,783,580 - 250,469Deposits 47,916 49,316 - -VAT 734,377 730,568 - 38,563Debtors accrual 1,052,073 3,534,147 - -Creditors with debit balances 9,166,257 548,442 - -

112,853,177 76,615,690 5,050,000 339,032

10. Financial assets by category (continued)

Loans and receivables Total

R R

Company – 2012Trade and other receivables 99,950,861 99,950,861Cash and cash equivalents 5,050,000 5,050,000

105,000,861 105,000,861

Company – 2011Loans to group companies 110,278,019 110,278,019Trade and other receivables 339,032 339,032Cash and cash equivalents 2,000,000 2,000,000

112,617,051 112,617,051

11. Deferred tax

Group Company2012 2011 2012 2011

R R R R

Deferred tax assetAccelerated capital allowances for tax purposes 850,620 (5,298,979) - 399,812Rehabilitation provision 2,461,058 942,953 - -Tax losses available for set-off against future taxable income 4,753,007 18,734,712 - -Allowance for credit losses - 984,138 - -Provision for doubtful debt 784,331 - - -

8,849,016 15,362,824 - 399,812

Reconciliation of deferred tax asset/(liability)At beginning of the year 15,362,824 2,821,860 399,812 80,735Charged to income statement (6,187,159) 12,540,964 (399,812) 319,077Effect of prior year adjustment (326,649) - - -

8,849,016 15,362,824 - 399,812

Deferred tax assets:Deferred tax assets to be recovered within 12 months 8,980,610 6,480,952 - -Deferred tax assets to be recovered after more than 12 months - 8,980,610 - 399,812

8,980,610 15,461,562 - 399,812

Deferred tax liabilities:Deferred tax assets to be recovered within 12 months 131,594 98,738 - -

131,594 98,738 - -

Unrecognised deferred tax assetUnused tax losses not recognised as deferred tax assets 2,682,149 6,409,002 821,224 -



Group Company2012 2011 2012 2011

R R R R

The total amount of undrawn facilities available for future operating activities and commitments 19,968,000 18,983,277 9,000,000 8,983,277

15. Discontinued operations or disposal groups or non-current assets held for sale

Disposal of Wescoal Mining’s (Blesboklaagte) beneficiation plant

On 31 March 2011, the Board of Directors announced a plan to dispose of Wescoal Mining (Pty) Ltd’s beneficiation plant at Blesboklaagte.

The decision was made by the Board of Directors to discontinue this operation due to reduced production and increased costs which resulted in losses. The disposal was completed 31 August 2011, on which date control of the beneficiation plant passed to the acquirer.

Analysis of discontinued operations

The salient financial information of the discontinued operations included in the consolidated statement of comprehensive income is set out below.

Group Company2012 2011 2012 2011

R R R R

Profit and lossRevenue - 22,740,850 - -Cost of sales - (44,790,737) - -Other income - 495,545 - -Depreciation and impairment - (4,836,646) - -Profit on sale of assets - 410,882 - -Finance costs - (745,978) - -Net loss before tax - (26,726,084) - -Taxation - 11,853 - -

- (26,714,231) - -

Assets and liabilitiesAssets classified as held-for-saleProperty, plant and equipment - 2,404,295 - -

Liabilities directly associated with assets held for saleDeferred tax - 325,239 - -

The net cashflows associated with the discontinued operations are as follows:Operating cash flows - (28,653,219) - -Investing cash flows - 6,964,894 - -

- (21,688,325) - -

Trade and other receivables past due but not impaired

At 31 March 2012, trade receivables of R23,757,175 (2011: R20,798,527) were past due but not impaired. The ageing of amounts past due but not impaired is as follows:

Group Company2012 2011 2012 2011

R R R R

30 to 60 Days 16,467,744 15,676,094 - -60 to 90 Days 2,898,537 1,427,172 - ->90 Days 4,390,894 3,695,261 - -

23,757,175 20,798,527 - -

Trade and other receivables impaired

As of 31 March 2012, trade receivables of R3,734,626 (2011: R4,686,373) were impaired and provided for. Movements in the allowance for impairment of receivables were as follows:

Group Company2012 2011 2012 2011

R R R R

Opening balance 4,686,373 4,213,282 - -Provision for impairment 3,243,581 1,260,000 - -Amounts written of as uncollectable (4,195,507) (786,909) - -

3,734,447 4,686,373 - -

14. Cash and cash equivalents

Group Company2012 2011 2012 2011

R R R R

Cash and cash equivalents consist of:Cash on hand 65,856 50,101 - -Bank balances 20,097,151 29,290,008 - -Short-term deposits - 2,000,000 - 2,000,000Bank overdraft (250,357) (16,723) (250,357) (16,723)

19,912,650 31,323,386 (250,357) 1,983,277

Current assets 20,163,007 31,340,109 - 2,000,000Current liabilities (250,357) (16,723) (250,357) (16,723)

19,912,650 31,323,386 (250,357) 1,983,277

The average effective interest rate on bank overdrafts approximates 9.5% (2011: 10%) per annum and is determined based on the prime overdraft lending rate.


17. Share-based payments

Wescoal Share Incentive Scheme

Share options are granted to Directors and to selected employees. The options are exercisable at a rate of 20% per annum from the issue date. The Group has no legal or constructive obligation to repurchase the options.

Movements in the number of share options outstanding and their related weighted average exercise price are as follows:

2012 2011Average

exercise price in cents per share option Options

Average exercise price in cents per share option Options

At the beginning of the year 94 8,870,000 77 3,470,000Granted - - 106 5,400,000

94 8,870,000 94 8,870,000

Out of the 8,870,000 outstanding options (2011: 8,870,000), 2,548,000 options (2011: 1,974,000) were exercisable.

Share options outstanding at the end of the year have the following expiry date and exercise prices:

Granted VestExercise price in cents per share

Shares 2012

Shares 2011

20 July 2005 19 July 2010 50.0 1,000,000 1,000,0001 March 2008 28 February 2013 88.7 1,200,000 1,200,00031 January 2010 30 January 2015 86.1 1,270,000 1,270,0009 June 2010 8 June 2015 106.0 5,400,000 5,400,000

8,870,000 8,870,000

Information on options granted during the year

The weighted average fair value of options granted during the comparative period, determined using the Black-Scholes valuation model, was 37.85 cents per option. The significant inputs into the model were weighted average share price of 111 cents at the grant date, exercise price shown above, volatility of 25%, no expected dividends, an expected option life of five years and an annual risk-free interest rate of 8%. See Note 25 for the total expense recognised in the income statement for share options granted to Directors and employees.

16. Share capital

Group Company2012 2011 2012 2011

R R R R

Authorised500,000,000 Ordinary par value shares of 0.1c each 500,000 500,000 500,000 500,000

Reconciliation of number of shares issued:Reported at the beginning of the year 166,801,361 145,931,361 166,801,361 145,931,3618,870,000 shares issued to Wescoal Share Incentive Trust - 8,870,000 - 8,870,00012,000,000 shares issued for cash on 19 November 2010 at R1.13 - 12,000,000 - 12,000,000

166,801,361 166,801,361 166,801,361 166,801,361

333,198,639 unissued ordinary shares are under the control of the Directors in terms of a resolution of members passed at the last annual general meeting. This authority remains in force until the next annual general meeting.

IssuedOrdinary 166,801 166,801 166,801 166,801Share premium 136,934,046 137,252,509 136,934,046 136,934,046Share issue costs written off against share premium - (318,463) - -Treasury shares/held by subsidiaries (8,870) (8,870) (8,870) (8,870)

137,091,977 137,091,977 137,091,977 137,091,977

The Directors are authorised to issue, allot and grant options to acquire up to a maximum of 31,586,272 ordinary shares in the issued share capital of the Company in terms of the incentive scheme.



The Group’s mining and exploration activities are subject to extensive environmental laws and regulations. These laws and regulations are continually changing and are generally becoming more restrictive. The Group has made, and expects to make in the future, expenditures to comply with such laws and regulations but cannot predict the full amount of such future expenditures. Estimated future reclamation costs are based principally on legal and regulatory requirements. The above is a reconciliation of the total liability for environmental rehabilitation.

Refer to Note 1 of the accounting policies for the accounting estimates used and judgement applied in calculating rehabilitation provisions.

While the ultimate amount of rehabilitation costs to be incurred in the future is uncertain, the Group has estimated that, based on current environmental and regulatory requirements, the total cost for the mines, in the current monetary terms, is approximately R9,111,523 (2011: R9,200,000, 2010: R9,200,000).

2012 2011 2010R R R

Future net undiscounted obligationsUltimate estimated rehabilitation cost 9,111,523 9,200,000 9,200,000Amounts invested in trust funds (1,210,296) - -

7,901,227 9,200,000 9,200,000

The Group intends to finance the ultimate rehabilitation costs from the money invested in environmental trust funds, ongoing contributions, as well as the proceeds on sale of assets at the time of mine closure. The Group has guarantees in place relating to the environmental liabilities as follows:

2012 2011 2010R R R

GuaranteesEnvironmental rehabilitation guarantees issued to the DMR 3,755,471 - -

These guarantees have been issued by third parties.

A restatement of the financial results for the years ended 31 March 2011 and 31 March 2010 was done regarding the environmental rehabilitation provision.

Environmental rehabilitation provisions recorded under IAS 37: Provisions, Contingent Liabilities and Contingent Assets, were previously recorded directly in the statement of comprehensive income. In accordance with IAS 16: Property, Plant and Equipment, and the environmental rehabilitation provision are now raised as an asset and a full liability.

18. Instalment sales agreementsGroup Company

2012 2011 2012 2011R R R R

Minimum lease payments due- no later than one year 11,592,459 14,807,434 - -- later than one year and no later than five years 8,588,440 20,342,984 - -

20,180,899 35,150,418 - -less: future finance charges (1,784,304) (4,268,181) - -Present value of minimum lease payments 18,396,595 30,882,237 - -

Present value of minimum lease payments due- no later than one year 10,213,632 12,332,309 - -- later than one year and no later than five years 8,182,963 18,549,928 - -

18,396,595 30,882,237 - -

Non-current liabilities 8,182,963 18,549,928 - -Current liabilities 10,213,631 12,332,309 - -

18,396,594 30,882,237 - -

It is the Group policy to finance certain items of plant and equipment under instalment sale agreements.

The average finance term is 4 years and the average effective prime borrowing rate was 10% (2011: 10%). Interest rates are linked to prime at the contract date.

The Group’s obligations under instalment sale agreements are secured by the lessor’s charge over the financed assets. Refer to Note 5.

19. Provisions

Opening balance

Additional provision

due to new disturbances allocated to

Property, Plant and Equipment

Time value of money

and inflation component of rehabilitation cost. Refer to

Note 27 TotalR R R R

Reconciliation of provisions – Group – 2012Environmental rehabilitation 8,910,788 (711,422) 594,454 8,793,820

Reconciliation of provisions – Group – 2011Mine and environmental rehabilitation 8,392,592 (122,719) 640,915 8,910,788

Reconciliation of provisions – Group – 2010Environmental rehabilitation - 8,186,351 206,241 8,392,592


22. Financial liabilities by category

The accounting policies for financial instruments have been applied to the line items below:

Financial liabilities at amortised

cost Total

Group – 2012South African Revenue Services 35,148 35,148Interest bearing borrowings 737,054 737,054Trade and other payables 96,170,991 96,170,991Bank overdraft 250,357 250,357Instalment sale agreements 18,396,595 18,396,595

115,590,145 115,590,145

Group – 2011South African Revenue Services 4,212,361 4,212,361Interest bearing borrowings 883,333 883,333Trade and other payables 92,507,202 92,507,202Bank overdraft 16,723 16,723Instalment sale agreements 30,882,237 30,882,237

128,501,856 128,501,856

Company – 2012Trade and other payables 207,474 207,474Bank overdraft 250,357 250,357

457,831 457,831

Company – 2011South African Revenue Services 3,612,103 3,612,103Trade and other payables 719,101 719,101Bank overdraft 16,723 16,723

4,347,927 4,347,927

23. Revenue

Group Company2012 2011 2012 2011

R R R R

Sale of goods 629,899,582 556,026,044 - -Administration fees - - 1,629,441 1,472,125Rental Income 851,958 1,572,135 - -

630,751,540 557,598,179 1,629,441 1,472,125

Refer to Note 35 for further information regarding revenue.

20. Interest bearing borrowings

Group Company2012 2011 2012 2011

R R R R

Held at amortised costMortgage bond 737,054 883,333 - -

Non-current liabilitiesAt amortised cost 547,899 683,333 - -Current liabilitiesAt amortised cost 189,155 200,000 - -

737,054 883,333 - -

The loan bears interest at the prime overdraft lending rate plus 0.5% and is repayable in 60 monthly instalments. The maturity date of this loan is 1 August 2015.

The loan is secured by a first charge over certain of the Group’s land and building with a carrying value of R1,622,299.

The Directors consider that the carrying value of the loan approximates its fair value.

21. Trade and other payables

Group Company2012 2011 2012 2011

R R R R

Trade payables 89,348,249 85,081,997 - 608,365Unclaimed credits 790,894 1,013,667 - -VAT payable 1,712,880 171,108 - -Trade debtors with a credit balance 456,706 258,434 - -Accrued expenses 3,862,262 5,981,999 207,474 110,736

96,170,991 92,507,205 207,474 719,101

Fair value of trade and other payables

The Directors consider the carrying amount of trade and other payables to approximate their values.



26. Finance income

Group Company2012 2011 2012 2011

R R R R

Interest revenueInter-company loans - - 9,028,811 7,425,749Interest on bank deposits 167,954 174,446 4,321 100Other interest 44 29 - -

167,998 174,475 9,033,132 7,425,849

27. Finance costs

Group Company2012 2011 2012 2011

R R R R

Interest bearing borrowings 83,195 31,294 - -Trade and other payables 446 948,310 - -Finance leases 2,306,990 898,101 - -Bank and loans 1,479,143 478,294 1,296,526 104,471Unwinding of discount on environmental rehabilitation provision 594,545 640,915 - -SARS - 299,625 - -

4,464,319 3,296,539 1,296,526 104,471

24. Cost of sales

Group Company2012 2011 2012 2011

R R R R

Sale of goodsDirect purchases 422,374,626 333,796,632 - -Royalty expense 743,333 595,600 - -Mining cost 102,434,552 139,336,042 - -Inventory movement 2,908 6,746 - -Consumables and maintenance cost 2,449,548 1,757,492 - -Staff costs 10,682,581 10,968,906 - -Fuel 12,227,570 8,071,142 - -Amortisation and depreciation of assets 7,635,472 6,822,817 - -Other direct mining costs 8,062,756 43,047,619 - -

566,613,346 544,402,996 - -

25. Operating profit/(loss)

Operating profit/(loss) for the year is stated after accounting for the following:

Group Company2012 2011 2012 2011

R R R R

Auditors' remunerationAudit fees 845,852 587,164 - 587,164Other services 510 210,913 - 44,720

846,362 798,077 - 631,884

Operating lease chargesPremises

Contractual amounts 583,130 583,130 - -

Profit/(loss) on sale of property, plant and equipment 4,528,867 89,999 - -Share-based payment expense - 497,505 - 126,325Administration fees received - - (1,629,441) (1,472,124)Impairment on goodwill - 4,775,763 - -Depreciation on property, plant and equipment 16,998,527 16,744,151 - -Depreciation on investment property - 81,189 - -Employee costs 28,479,140 29,652,733 5,315,466 4,735,144Research and development - 36,229 - -


29. Auditors’ remuneration

Group Company2012 2011 2012 2011

R R R R

Fees 845,852 798,077 826,119 631,884

30. Earnings per share

Basic earnings per share

Basic earnings per share is determined by dividing profit or loss attributable to the ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

Where there is a discontinued operation, earnings per share is determined for both continuing and discontinued operations.

Group Company2012 2011 2012 2011

R R R R

Basic earnings/(loss) per shareFrom continuing operations (c per share) 11.10 (11.25) - -From discontinued operations (c per share) 1.90 (17.78) - -

13.00 (29.03) - -

Basic earnings per share was based on earnings/(loss) of R20,625,973 (2011: R43,618,062) and a weighted average number of shares of 157,931,361 (2011: 150,271,087).

Reconciliation of profit or loss for the year to basic earningsProfit or loss for the year attributable to equityholders of the parent 20,602,311 (43,589,135) (3,101,347) (449,300)

Diluted earnings per share

In the determination of diluted earnings per share, profit or loss attributable to the equity holders of the parent and the weighted average number of ordinary shares are adjusted for the effects of all dilutive potential ordinary shares.

Where there is a discontinued operation, diluted earnings per share is determined for both continuing and discontinued operations.

28. Income tax expense

Group Company2012 2011 2012 2011

R R R R

Major components of the tax (income)/expenseCurrentLocal income tax – current period - 47,067 - -Local income tax – recognised in current tax for prior periods (597,887) - (58,188) -

(597,887) 47,067 (58,188) -

DeferredOriginating and reversing temporary differences 5,033,650 (12,204,855) - (319,077)Write down, or reversal of previous write down of a deferred tax asset 1,153,509 - 399,812 -

5,589,272 (12,157,788) 341,624 (319,077)

Reconciliation of the tax expenseReconciliation between accounting profit and tax expense

Accounting profit/(loss) before tax – continuing operations 26,191,583 (29,205,513) (2,759,723) (768,377)Accounting profit/(loss) before tax – discontinued operations - (26,726,132) - -Accounting profit/(loss) before tax 26,191,583 (55,931,645) (2,759,723) (768,377)

Tax at the applicable tax rate of 28% (2011: 28%) 7,333,643 (15,660,861) (772,722) (215,146)

Tax effect of:Non-deductible expenditure 224,584 995,525 216,096 -Goodwill impairment - 1,337,213 - -Effect of deferred tax on unused tax loss derecognised 1,153,509 1,585,067 399,812 -Deferred tax not recognised on assessed loss (26,098) - 556,626 -Recognised in equity - - - (103,931)Adjustment in respect of prior periods (923,322) (318,526) (58,188) -Other (2,148,867) (108,059) - -

5,613,449 (12,169,641) 341,624 (319,077)

Income tax expense reported in the statement of comprehensive income 5,589,272 (12,157,788) 341,624 (319,077)Income tax attributable to discontinued operation - (11,853) - -

5,589,272 (12,169,641) 341,624 (319,077)

No provision has been made for 2012 tax as the Group has no taxable income. The estimated tax loss available for set off against future taxable income is R2,931,591 (2011: R1,194,109).



31. Cash generated from/(used in) operations

Group Company2012 2011 2012 2011

R R R R

Profit/(loss) before taxation 26,191,583 (29,176,586) (2,759,723) (768,377)Adjustments for:Depreciation and amortisation 19,271,824 19,799,926 - -Profit on sale of assets (4,528,867) (89,999) - -Interest received (167,998) (174,475) (9,033,132) (7,425,849)Finance costs 3,869,774 2,655,624 1,296,526 104,471Impairment loss - 4,775,763 - -Share-based payment expense - 497,505 - 126,324Other non-cash items 441 - 1,350 -Change in estimate – environmental rehabilitation provision 594,545 640,915 - -Changes in working capital:Inventories and work in progress (124,296) 24,417,050 - -Trade and other receivables (36,237,487) (8,992,109) (4,710,968) (263,066)Trade and other payables 3,663,786 31,510,187 (511,627) 108,566

12,533,305 45,863,801 (15,717,574) (8,117,931)

32. Tax (paid)/refunded

Group Company2012 2011 2012 2011

R R R R

Balance at beginning of the year (3,598,627) (5,871,976) (3,612,103) (3,612,103)Current tax for the year recognised in profit or loss 597,887 (47,067) 58,188 -Balance at end of the year (244,852) 3,598,627 - 3,612,103

(3,245,592) (2,320,416) (3,553,915) -

Group Company2012 2011 2012 2011

R R R R

Diluted earnings (loss) per shareFrom continuing operations (c per share) 11.10 (11.13) - -From discontinued operations (c per share) 1.90 (17.58) - -

13.00 (28.71) - -

The earnings used in the calculation of diluted earnings per share are the same as those used to calculate basic earnings per share. The weighted average number of ordinary shares used to calculate diluted earnings per share was 158,246,792 (2011: 151,930,876).

Reconciliation of weighted average number of ordinary shares used for earnings per share to weighted average number of ordinary shares used for diluted earnings per shareWeighted average number of ordinary shares used for basic earnings per share 157,931,361 150,271,087 - -Adjusted for:Share options in terms of the Wescoal Share Incentive Scheme* 315,431 1,659,789 - -

158,246,792 151,930,876 - -

* Diluted earnings reflected showing the potential effect of dilution for 8,8 million options (2011: 8,8 million options) held in terms of the Wescoal Share Incentive Trust by the Directors and employees to subscribe to new shares in Wescoal.

Headline earnings and diluted headline earnings per share

Headline earnings and diluted headline earnings are determined by adjusting basic earnings and diluted earnings by excluding separately identifiable remeasurement items. Headline earnings and diluted headline earnings are presented after tax and non-controlling interest.

Group Company2012 2011 2012 2011

R R R R

Headline earnings (loss) per share (c) 11.40 (26.18) - -Diluted headline earnings (loss) per share (c) 11.40 (25.90) - -

Reconciliation between earnings/(loss) and headline earnings (loss)Basic earnings (loss) 20,602,311 (43,589,135) (3,101,347) (449,300)Adjusted for: - - - -

Reconciliation between diluted earnings/(loss) and diluted headline earnings/(loss)Diluted earnings/(loss)Adjusted for: 20,602,311 (43,589,135) (3,101,347) (449,300)Profit on sale of assets (2,655,164) (500,880) - -Impairment on assets - 4,775,763 - -

17,947,147 (39,314,252) (3,101,347) (449,300)


34. Directors’ emoluments

Executive Remuneration

Medical and provident

fund contributions

Performance bonus

Fringe and other benefits Total

2012AR Boje 2,037,896 66,707 169,824 - 2,274,429P Janse van Rensburg 1,469,496 154,346 145,320 120,000 1,889,162

3,507,392 221,053 315,144 120,000 4,163,589

2011AR Boje 2,037,896 89,417 169,825 - 2,297,138P Janse van Rensburg 1,743,837 141,090 145,320 53,060 2,083,307

3,781,733 230,507 315,145 53,060 4,380,445

Non-executive

Fees for service as Director Total

2012JG Pansegrouw 182,500 182,500MR Ramaite 265,000 265,000DMT van Gaalen 185,000 185,000WN Khumalo 137,500 137,500

770,000 770,000

2011JG Pansegrouw 90,000 90,000MR Ramaite 60,000 60,000DMT van Gaalen 40,000 40,000WN Khumalo 45,000 45,000

235,000 235,000

33. Related parties

RelationshipsUltimate holding company Wescoal Holdings LimitedSubsidiaries Refer to Note 8

Group Company2012 2011 2012 2011

R R R R

Related party balancesLoan accounts – Owing (to) by related partiesChandler Coal (Pty) Ltd - - 7,897,742 32,522,151Wescoal Mining (Pty) Ltd - - 83,720,016 69,087,691Wescoal Mineral Recoveries (Pty) Ltd - - 3,025,164 3,951,555Blanford 006 (Pty) Ltd - - 5,107,939 4,716,622

- - 9,995,086 110,278,019

Related party transactionsInterest received from related partiesWescoal Mining (Pty) Ltd - - 6,452,608 3,185,813Blanford 006 (Pty) Ltd - - 391,317 339,899Chandler Coal (Pty) Ltd - - 1,964,365 3,900,036Wescoal Mineral Reserves (Pty) Ltd - - 220,521 -

- - 9,028,811 7,425,748

Administration fees received from related partiesChandler Coal (Pty) Ltd - - 899,521 784,048Wescoal Mining (Pty) Ltd - - 729,920 688,076

- - 1,629,441 1,472,124

Wescoal Share TrustShare options held by trust - - 8,870,000 8,870,000

Compensation to Directors and other key managementNon-executive Directors’ fees 770,000 235,000 770,000 235,000Remuneration 5,472,652 6,341,747 3,530,377 3,781,732Retirement and medical contributions 350,001 230,507 350,001 230,507Performance bonus 756,685 512,069 476,240 315,144Fringe and other benefits 420,815 53,060 300,815 53,060IFRS 2: Share based payments expense - 227,293 - 126,324

7,770,153 7,599,676 5,427,433 4,741,767



35. Operating segments

For management purposes, the Group is organised into business units based on their products and activities and has five reportable operating segments as follows:

• The mining segment is involved in the exploration, beneficiation and mining of bituminous coal

• The trading segment buys and sells coal to inland customers

• The recovery segment recovers and upsizes coal fines

• The property rental segment rents property to other segments within the Group

• The investment holding segment is the holding company of the Group.

No operating segments have been aggregated to form the above reportable operating segments. Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the consolidated financial statements.

Segments results and reporting is presented below:Continuing operations

Mining TradingProperty rental

Investment holding

Discontinued operations

Adjustments and

eliminations ConsolidatedSegments R R R R R R R

2012Revenue- External customers 274,061,130 356,690,410 - - - 630,751,540 - Inter-segment 44,079,690 2,575,897 925,000 1,629,441 - (49,210,028) - Total revenue 318,140,820 359,266,307 925,000 1,629,441 - (49,210,028) 630,751,540

Cost of sales (219,760,416) (330,543,955) - - - (16,308,975) (566,613,346)Operating expenses (74,607,276) (23,895,216) (366,469) (12,125,774) - 70,122,562 (40,872,172) Depreciation and amortisation (15,052,897) (1,824,055) (20,207) - - - (16,897,159) Interest received 2,388,267 304,743 - - - - 2,693,010 Interest paid 54,659 108,725 292 8,812,611 - (8,808,289) 167,998 Gain/(loss) on sale of asset (9,317,393) (2,153,701) (504,988) (1,296,526) - 8,808,289 (4,464,319) Profit/(loss) before income tax 21,427,528 3,086,903 53,835 (2,980,248) - 4,603,559 26,191,578

Total assets 141,567,889 119,552,768 10,729,756 148,228,424 - (138,502,371) 281,576,466 Total liabilities (161,377,776) (94,228,705) (7,003,304) (457,831) - 138,552,058 (124,515,558)

2011Revenue- External customers 243,901,022 313,713,156 - - 22,740,851 - 580,355,029 - Inter-segment 38,185,765 3,644,809 1,140,000 1,472,142 82,513,850 (126,956,566) - Total revenue 282,086,787 317,357,965 1,140,000 1,472,142 105,254,701 (126,956,566) 580,355,029

Cost of sales (255,279,852) (292,084,214) - - (92,720,286) 45,392,128 (594,692,224) Operating expenses (3,257,497) (28,676,609) (490,202) (9,561,882) - 1,978,381 (40,007,809) Depreciation and amortisation (15,905,585) (1,831,270) (81,189) - (4,836,646) - (22,654,690) Impairment - (4,775,763) - - - - (4,775,763) Interest received - 174,338 8 7,425,849 1,229 (7,425,720) 175,704 Interest paid (5,042,467) (4,563,151) (371,208) (104,471) (745,978) 7,425,675 (3,401,600) Gain/(loss) on sale of asset - 89,999 - - 410,882 - 500,881 Profit/(loss) before income tax 20,680,949 (7,532,324) 278,599 (768,379) (26,736,132) (492,411) (14,569,698)

Total assets 129,321,037 103,555,368 10,732,064 155,219,868 2,404,295 (132,307,304) 268,925,328 Total liabilities (159,493,707) (79,936,779) (7,339,043) (4,347,927) (325,239) 119,149,174 (132,293,521)


Management has accounted for the risk associated with projected cash flows by performing a probabilistic range analysis using Monte Carlo simulation. As a result of this analysis, management has recognised an impairment charge of R4,775,763 against goodwill previously carried at R21,820,000, which is recorded in the statement of comprehensive income.

The calculation of value in use is most sensitive to the following assumptions:

• Gross margin

• Discount rates

• Raw materials price inflation

• Market share during the budget period

• Growth rate used to extrapolate cash flows beyond the budget period.

Gross margins – Gross margins are based on average values achieved in the three years preceding the start of the budget period. These are increased over the budget period for anticipated efficiency improvements.

Discount rates – Discount rates represent the current market assessment of the risks specific to the industry, regarding the time value of money and individual risks of the underlying assets which have not been incorporated in the cash flow estimates. The discount rate calculation is based on the specific circumstances of the Company and its operating segment. Segment specific risk is incorporated by applying individual beta factors. The beta factors are evaluated annually based on publicly available market data.

Raw materials price inflation – Estimates are based on local published indices.

Market share assumptions – These assumptions are important because, as well as using industry data for growth rates (as noted below), management assesses how the unit’s position, relative to its competitors, might change over the budget period. Management expects the Atlantis depot’s share of the inland coal market to be stable over the budget period.

Growth rate estimates – Rates are based on management’s estimates and expectations of future operations.

Fair value less cost to sell

Fair value less cost to sell is based on a provisional sale agreement prepared by management for the proposed disposal of the briquetting plant and operations of Wescoal Mineral Recoveries (Pty) Ltd to an external party.

Sensitivity of key assumptions

The Directors believe that any reasonably possible change in the key assumptions on which the recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the cash generating unit.

36. Contingencies

By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. The assessment of such contingencies inherently involves the exercise of significant judgement and estimates of the outcome of future events.

Litigation and other judicial proceedings as a rule raise difficult and complex legal issues and are subject to uncertainties and complexities including, but not limited to, the facts and circumstances of each particular case, issues regarding the jurisdiction in which each suit is brought and differences in applicable law. Upon resolution of any pending legal matter, the Company may be forced to incur charges in excess of the presently established provisions and related insurance coverage. It is possible that the financial position, results of operations or cash flows of the Company could be materially affected by the unfavourable outcome of litigation.

Guarantees

Guarantees of R1,329,000 were issued to financial institutions as collateral security for prospecting rights.

Legal claims

A possible obligation exists for the Group totalling R1,026,658.

37. Impairment of assetsGroup Company

2012 2011 2012 2011R R R R

Goodwill - (4,775,763) - -The Group performed its annual impairment test on goodwill as at 31 March 2012.

No Impairment charge was recognised in the current year. Management felt it prudent to provide for impairment in the prior year due to a decline in margins achieved at the Atlantis depot. The recoverable amount of the goodwill was based on its value in use.Total impairment losses recognised - (4,775,763) - -

Value in use

The recoverable amount of the Atlantis depot was determined using cash flow projections from financial budgets approved by the Directors covering a three year period. The projected cash flows have been updated to reflect the demand for coal. The pre-tax discount rate applied to cash flow projections is 21.55% and cash flows beyond the three-year period are extrapolated based on the Directors’ future outlook for the Atlantis depot.


NOTICE is hereby given that the annual general meeting of shareholders of Wescoal will be held at the offices, 228 Voortrekker Street, Krugersdorp, South Africa, on Tuesday, 30 October 2012 at 9:00. The date for the purpose of determining which shareholders are entitled to receive this notice is 16 October 2012.

The record date on which members must be recorded as such in the register maintained by the transfer secretaries of the Company for the purposes of being entitled to attend and vote at the meeting is 16 October 2012. All meeting participants will be required to provide identification reasonably satisfactory to the Chairman of the meeting.

On 1 May 2011 the Companies Act, No. 71 of 2008 came into effect (“the Act”) and the Company’s Memorandum and Articles of Association (“MAA”) are deemed to have been converted into the Company’s Memorandum of Incorporation (“MoI”). Accordingly, all references made in this notice to the Company’s MoI refer to the provisions of that portion of the Company’s MAA.

Presentation of the Annual Financial Statements

The consolidated annual financial statements of the Company and its subsidiaries, incorporating the reports of the auditors, the Audit Committee and the Directors for the year ended 31 March 2012 have been distributed as required and will be presented to shareholders as required in terms of section 30(3)(d) of the Act.

The purpose of the meeting is to propose the following special and ordinary resolutions:

Ordinary resolutions

Ordinary resolution number 1:

Re-appointment of Directors

“To re-elect, by separate ordinary resolution, the following Director who retires by rotation in accordance with the Company’s MoI:

1.1 Ms DMT van Gaalen”

Notes: The retiring Director is eligible and offers herself for re-election. Brief biographical details of the Director is set out on page 8 of the integrated report issued to shareholders which forms part of this notice to shareholders.

Not less than 50% (fifty present) plus 1 (one) (majority vote) of the votes cast by shareholders present and represented by proxy at the meeting must be cast in favour of this resolution for it to be adopted.


Appointment of Audit Committee members

“To confirm, by way of separate ordinary resolutions, the appointment of the following Non-executive Directors as members of the Audit Committee for the year ending 31 March 2013.

2.1 Mr JG Pansegouw

2.2 Ms DMT van Gaalen”

Notes: In terms of s 94(2) of the Companies Act, No. 71 of 2008 (“the Act”), a public company must at each annual general meeting elect an Audit Committee comprising at least three members who are Directors and who meet the criteria of s 94(4) of the Act. Brief biographical details of each of these Directors are set out on page 8 of the integrated report.

Not less than 50% (fifty present) plus 1 (one) (majority vote) of the votes cast by shareholders present and represented by proxy at the meeting must be cast in favour of this resolution for it to be approved.


Appointment of external auditors

“To re-appoint, on recommendation of the Audit Committee, PricewaterHouseCoopers Inc as independent auditors to the Company for the ensuing year and to note Mr Megandra Naidoo be and is hereby confirmed as the designated auditor until the next AGM.”

WESCOAL HOLDINGS LIMITED(Incorporated in the Republic of South Africa)(Registration number 2005/006913/06)(JSE Share code: WSL ISIN: ZAE000069639)(“Wescoal” or “the Company”)

no t ice of annual general meet ing


Note: Not less than 50% (fifty present) plus 1 (one) (majority vote) of the votes cast by shareholders present and represented by proxy at the meeting must be cast in favour of this resolution for it to be approved.


Control of authorised but unissued share capital

“Resolved that the unissued ordinary shares in the authorised share capital of the Company be hereby placed under the control of the Directors of the Company as a general authority to them in order to allot and issue the same at their discretion in terms of the Company’s MoI and the JSE Listings Requirements.”

Note: Not less than 50% (fifty present) plus 1 (one) (majority vote) of the votes cast by shareholders present and represented by proxy at the meeting must be cast in favour of this resolution for it to be approved.


General authority to issue of shares for cash

“Resolved that, subject to:

1. The passing of ordinary resolution numbered 4 above, and

2. Not less than 75% of the shareholders present in person or by proxy and entitled to vote at the meeting voting in favour of this resolution

3. The Directors are hereby authorised and empowered, by way of a general authority and empowered, by way of a general authority, to allot and issue for cash, without restriction, all or any of the authorised but unissued ordinary shares in the capital of the Company placed under their control as they in their discretion may deem fit, subject to the Companies Act, the Company’s MoI and the provisions of the JSE Listings Requirements, namely:

- That this authority shall not extend beyond fifteen months from the date of this meeting, or the date of the next annual general meeting, whichever is the earlier date

- The issue shall be to public shareholders as defined in the JSE Listings Requirements and not to related parties

- That a paid press release, giving all the details, including the impact on net asset value, net tangible asset value and earnings per share be published at the time of any issue representing, on a cumulative basis within one year, 5% or more of the number of ordinary shares issued prior to the issue

- That issues in the aggregate in any financial year, not exceed 15% of the number of shares of the Company’s issued share capital, including instruments which are convertible into ordinary shares

- The equity securities which are the subject of the issue for cash must be of a class already in issue, or where this not the case, must be limited to such securities or rights that are convertible into a class already in issue

- That in determining the price at which an issue for shares will be made in terms of this authority, the maximum discount permitted be 10% of the weighted average traded price of the shares over thirty business days prior to the date that the price of the issue is in writing between the issuer and the party subscribing for the securities.”


Remuneration policy

“To endorse, through a non-binding advisory note and to ascertain the shareholder’s view, on the Company’s remuneration policy and its implementation. A summary of the policy is set out on pages 38 to 41 of the integrated report.”

Note: Not less than 50% (fifty present) plus 1 (one) (majority vote) of the votes cast by shareholders present and represented by proxy at the meeting must be cast in favour of the resolution for it to be approved.

no t ice o f the annual genera l mee t ing (con t inued )


Special resolution number 1:

Non-executive Directors’ remuneration

“Resolved as a special resolution that the remuneration of the Non-executive Directors for the year ending 31 March 2013 be as follows:

Type of fees (per meeting)Fees in Rands

2011Fees in Rands

2012

Board

As Chairman* R20,000 R22,000

As Member R10,000 R11,000

Audit Committee

As Chairman R10,000 R16,500


Remuneration Committee

As Chairman R10,000 R16,500


* In addition the Chairman of the Board receives a monthly retainer of R11 000 (2011: R10 000)”

The reason and effect of this special resolution is to obtain shareholder approval for the remuneration payable to Non-executive Directors during the current financial year and until such time as amended by shareholders by way of a special resolution.

Note: Not less than 75% (seventy-five present) majority of the votes cast by shareholders present and represented by proxy at the meeting must be cast in favour of this resolution for it to be approved.


Financial Assistance to all related and inter-related companies

“Resolved as a special resolution that a general authority be given to the Board of Directors of the Company to provide financial assistance to all related and inter-related companies within the Wescoal Group of companies, at such times and on such terms and conditions as the Directors in their sole discretion deem fit and subject to all relevant statutory and regulatory

requirements being met. Such authority to remain in place until rescinded by way of a special resolution passed at a duly constituted annual general meeting of the Company.”

The reason and effect of this special resolution is to approve the authority of Directors to provide financial assistance to all related and inter-related companies within the Wescoal Group of companies.



General approval to repurchase Company shares

“Resolved as a special resolution that the Company hereby approves, as a general approval, the acquisition by the Company or any of its subsidiaries from time to time of the issued shares of the Company, upon such terms and conditions and in such amounts as the Directors of the Company may from time to time determine, but subject to the Mol, the provisions of the Companies Act and the JSE Listings Requirements and provided that the acquisitions by the Company and its subsidiaries of shares in the capital of the Company may not, in the aggregate, exceed in any one financial year 20% (twenty percent) of the Company’s issued share capital of the shares acquired from the date of the granting of this approval.”


Approval to convert shares

“That, as required by Section 35 (2) of the Companies Act, 2008, read with item 6 of Schedule 5 of the Companies Act, 2008, and Regulation 31 (6) of the Companies Regulations, 2011, the Company’s Memorandum of Incorporation is amended by converting the Company’s:

500,000,000 authorised ordinary shares with a par value of 0,1 cent each; and

166,801,361 issued ordinary shares with a par value of 0,1 cent each into:

500,000,000 authorised ordinary shares with no par value; and

166,801,361 issued ordinary shares with no par value.”


Reason for and effect of special resolution number 4

The reason for Special Resolution number 4 is to enable the Company to comply with the provisions of the Companies Act, 2008, which effectively require the conversion of all par value shares to no par value shares. In terms of Regulation 31(3) no authorised but unissued par value shares may be issued until the shares have been converted to no par value shares.

The effect of the resolution is to convert all the Company’s authorised and issued ordinary shares with a par value to shares with no par value.

The aforesaid resolution was preceded by a Report prepared at the request of the Board by the Company’s sponsors, Exchange Sponsors, as required by Regulation 31(7). The Report must be published to shareholders before the meeting and reads as follows:

“3 August 2012The Board of DirectorsWescoal Limited.Lady and gentlemen,

Report in respect of proposed conversion of shares

We were requested by your Board to prepare a report to the Board in respect of the proposed conversion of the Company’s authorised and issued shares from shares with par value to shares with no par value, as required by Regulation 31 (7) of the Companies Regulations, 2011. The information on which this report was based was obtained from the Company.

The Company’s share capital is currently as follows:

- 500,000,000 authorised ordinary shares with a par value of 0,1 cent each; and

- 166,801,361 issued ordinary shares with a par value of 0,1 cent each.

All the Company’s issued shares are listed on the stock exchange operated by the JSE Limited.

(a) All the authorised and issued ordinary shares of the Company rank pari passu in all respects. All the issued shares are equal in value.

(b) All ordinary shareholders will be affected by the proposed conversion.

(c) The proposed conversion will not affect the rights of the holders of the ordinary shares. In our respectful view, the simultaneous conversion of all the Company’s authorised and issued ordinary shares will not affect the value of the shares.

(d) The proposed conversion will not have any material adverse effect on the shareholders or the shares, and consequently no shareholder will receive any compensation in terms of the proposed conversion.

We consent to this report being included in the notice of meeting at which the resolution to convert the shares will be considered, and to the report being filed with the Companies and Intellectual Property Commission and the South African Revenue Services, at the same time the conversion proposal is published to the shareholders of the Company.

Yours faithfully,Marius MeyerEXCHANGE SPONSORS”

Notice in terms of Regulation 31(9) of the Companies Regulations, 2011:

In terms of Regulation 31(9) any shareholder affected by the proposal, who believes that the proposal does not adequately protect his rights, or otherwise fails to satisfy the requirements of the Companies Act, may, at any time before the Annual General Meeting, apply to the court for an order.

Special resolution 5

Adoption of new Memorandum of Incorporation

“Resolved that the shareholders approve and adopt the new Memorandum of Incorporation, a copy of which lies for inspection at the Company’s office, in substitution for the Company’s existing Memorandum of Association and Articles of Association.”

Reason for and effect of special resolution number 5:

The Company wishes to adopt a new Memorandum of Incorporation (“MoI”) to replace the existing Memorandum and Articles of Association before 1 May 2013, as required by the Companies Act. The new MoI complies with the Companies Act, 2008, as well as the Listings Requirements of the JSE. It is considered more appropriate to adopt the proposed new MoI rather than to amend the existing Memorandum and Articles of Association. The principal changes being proposed in the new MoI are summarised in Appendix 1.

The effect of the special resolution will be that the new MoI will substitute the Company’s existing Memorandum and Articles of Association in their entirety.

no t ice o f the annual genera l mee t ing (con t inued )


Additional requirements imposed by the JSE Listings Requirements

It is recorded that the Company or its subsidiaries may only make a general acquisition of shares if the following JSE Listings Requirements are met:

a. Any such acquisition of shares shall be affected through the order book operated by the JSE trading system and done without any prior understanding or arrangement between the Company or its subsidiaries and the counterparty, or other manner approved by the JSE.

b. The general approval shall only be valid until the Company’s next annual general meeting or for 15 (fifteen) months from the date of passing of this special resolution, whichever period is shorter.

c. A paid press announcement will be published as soon as the Company and/or its subsidiaries has/have acquired shares in terms of this authority constituting, on a cumulative basis, 3% (three percent) of the number of shares of the class of shares acquired in issue at the time of granting of this general approval and for each 3% (three percent) in aggregate of the initial number of that class of shares acquired thereafter, which announcement shall contain full details of such acquisitions as required by paragraph 11.27 of the JSE Listings Requirements.

d. In determining the price at which the Company’s shares are acquired by the Company or its subsidiaries in terms if this general approval, the maximum price at which such shares may be acquired may not be greater than 10% (ten percent) above the weighted average of the market value at which such shares are traded on the JSE, as determined over the 5 (five) business days immediately preceding the date of the acquisition of such shares by the Company or its subsidiaries.

e. In the case of a derivative (as contemplated in the JSE Listings Requirements), the price of the derivative shall be subject to the limitations set out in paragraph 5.84(a) of the JSE Listings Requirements.

f. A resolution by the Board of Directors of the Company that they authorised the repurchase, that the Company passed the solvency and liquidity test and that since the test was done there have been no material changes to the financial position of the Group.

g. The Company and/or its subsidiaries may not repurchase any shares in terms of this authority during a prohibited period, as defined in the JSE Listings Requirements, unless the Company and/or its subsidiaries has in place a repurchase programme, where

dates and quantities of shares to be traded during the prohibited period are fixed and full details of the programme have been disclosed in an announcement over SENS prior to the commencement of the prohibited period.

Statement by the Board of Directors of the Company

Pursuant to, and in terms of the JSE Listings Requirements, the Board of Directors of the Company hereby states that:

a. The intention of the Directors of the Company is to utilise the general authority to acquire shares in the capital of the Company if at some future date the cash resources of the Company are in excess of its requirements or there are other good grounds for doing so. In this regard the Directors will take account of, inter alia, an appropriate capitalisation structure for the Company, the long-term cash needs of the Company and there interests of the Company.

b. In determining the method by which the Company intends to repurchase its securities, the maximum number of securities to be repurchased and the date on which such repurchase will take place, the Directors of the Company will only make repurchases if at the time, they are of the opinion that:

b.1 The Company and its subsidiaries will, after the repurchase, be able to pay their debts as they become due in the ordinary course of business for the 12 (twelve) month period following the date of this notice of the annual general meeting

b.2 The consolidated assets of the Company and its subsidiaries, fairly valued and recognised and measured in accordance with the accounting policies used in the latest audited financial statements, will, after the repurchase, be in excess of the consolidated liabilities of the Company and its subsidiaries for the 12 (twelve) month period following the date of this notice of the annual general meeting

b.3 The issued share capital and the reserves of the Company and its subsidiaries will, after the repurchase, be adequate for the ordinary business purposes of the Company and its subsidiaries for the 12 (twelve) month period following the date of this notice of the annual general meeting

b.4 The working capital available to the Company and its subsidiaries will, after the repurchase, be adequate for the ordinary business requirements of the Company and its subsidiaries for the 12 (twelve) month period following the date of this notice of the annual general meeting.


The reason and effect of this special resolution is to grant the Company a general authority in terms of the JSE Listing Requirements for the acquisition by the Company or any of its subsidiaries of shares issued by the Company, which authority shall be valid until the earlier of the next annual general meeting of the Company or the variation or revocation of such general authority by special resolution by any subsequent general meeting of the Company, provided that the general authority shall only be valid until the Company’s next annual general meeting, or for 15 (fifteen) months from the date of passing of this special resolution, whichever period is shorter. The passing of this special resolution will have the effect of authorising the Company and/or its subsidiaries to acquire shares issued by the Company.


Voting, proxies and attendance at the shareholders meetings

Shareholders who hold their shares in certified form or who are own-name registered shareholders holding their shares in dematerialised form and who are unable to attend the annual general meeting but wish to be represented there at, are required to complete and return the attached Form of Proxy, which must be received by the Company’s registrars by not later than 9:00 on 26 October 2012.

Shareholders who have dematerialised their shares through a Central Securities Depository Participant (“CSDP”) or broker, other than by own-name registration, who wish to attend

the meeting should instruct their CSDP or broker to issue them with the necessary letter of representation to attend the meeting, in terms of the custody agreement entered into between such shareholder and their CSDP or broker. Shareholders who have dematerialised their shares through a CSDP or broker, other than by own-name registration, who wish to vote by way of a proxy, should provide their CSDP or broker with voting instruction, in terms of the custody agreement entered into between such shareholders and their CSDP or broker. These instructions must be provided to their CSDP or broker by the cut-off or date advised by their CSDP or broker for instructions of this nature.

Shareholders who have any doubt as to action they should take should consult their CSDP, broker, accountant, attorney, banker or other professional adviser immediately.

By order of the Board

JW WaltersCompany SecretaryJohannesburg3 August 2012

not ice o f the annual genera l mee t ing (con t inued )

fo rm of p rox y(for use by certificated shareholders and own-name dematerialised shareholders only)

WESCOAL HOLDINGS LIMITED(Incorporated in the Republic of South Africa)(Registration number 2005/006913/06)(JSE Share code: WSL ISIN: ZAE000069639)(“Wescoal” or “the Company”)

Form of proxy for the annual general meeting of the Company to be held at 9:00 on Tuesday, 30 October 2012 at the registered office of the Company at 228 Voortrekker Street, Krugersdorp, South Africa (“the meeting”) and is for use by registered shareholders whose shares are registered in their own names on the date of the meeting (“record date”).

I/We (name in block letters)

of (Address)

Telephone (work) (home)

being the holder/s of ordinary shares in the Company, do hereby appoint

1) or failing him/her

2) or failing him/her

3) The chairperson of the annual general meeting

As my/our proxy to act for me/us and on my/our behalf at the annual general meeting of the Company which will be held for the purpose of considering and, if deemed fit, of passing, with or without modification, the ordinary and special resolutions to be proposed thereat and at any adjournment thereof, and to vote in favour of and/or against the resolutions and/or abstain from voting in respect of the ordinary shares registered in my/our name/s, in accordance with the following instructions (see notes):

Number of votes on a poll (one vote per ordinary share)

In favour Against AbstainTo pass ordinary resolutions:1. To re-appoint the following Director

1. Ms DMT van Gaalen2. Appointment of Audit Committee members

1. Mr JG Pansegrouw2. Ms DMT van Gaalen

3. Re-appointment of external auditors4. Control of authorised but unissued share capital5. Issues of shares for cash6. Remuneration PolicyTo pass special resolution:1. Non-executive Directors’ remuneration

1.1. The Board1.1.1. The Chairman1.1.2. The Member

1.2. The Audit Committee1.2.1. The Chairman1.2.2. The Member

1.3. The Remuneration Committee1.3.1. The Chairman1.3.2. The Member

2. Financial assistance to all related or inter-related companies

3. General approval to repurchase Company shares4. Approval to convert shares5. Adoption of new Memorandum of Incorporation

(Indicate instruction to proxy by way of a cross in the space provided above)

Unless otherwise instructed, my/our proxy may vote as he/she thinks fit.

Signed at on 2012

Signature

Assisted by (if applicable)

Please read the notes here after.

Dated this day of 2012

Signature

1. This proxy form will not be effective at the meeting unless received at the Company’s transfer office, Computershare Investor Services (Pty) Ltd, 70 Marshall Street, Johannesburg, by no later than 9:00 on Friday, 26 October 2012. If a shareholder does not wish to deliver this proxy from to that address, it may also be posted, at the risk of the shareholder, to Computershare Investor Services (Pty) Ltd, PO Box 61051, Marshalltown, 2107.

2. This form is for use by registered shareholders who wish to appoint another person (a proxy) to represent them at the meeting. If duly authorised, companies and other corporate bodies who are registered shareholders may appoint a proxy using this form, or may appoint a representative in accordance with paragraph 12 below.

Other shareholders should not use this form. All beneficial shareholders who have dematerialised their shares through a CSDP or broker must provide the CSDP or broker with their voting instruction. Alternatively if they wish to attend the meeting in person, they should request the CSDP or broker to provide them with a letter of representation in terms of the custody agreement entered into between the beneficial shareholder and the CSDP or broker.

3. This proxy shall apply to all ordinary shares registered in the name of the shareholder who signs this proxy form at the record date unless a lesser number of shares is inserted.

4. A shareholder may appoint one person of his own choice as his proxy by inserting the name of such proxy in the space provided. Any such proxy need not be a shareholder of the Company. The shareholder may insert the name(s) of one or more proxies (none of whom need be a Company shareholder) in the space provided, with or without deleting the words “the Chairperson of the annual general meeting of the ordinary shareholders”. The person whose name stands first on the form of proxy and has not been deleted and who is present at the annual general meeting will be entitled to act as proxy to the exclusion of those whose names follow. In the event that no names are indicated, the proxy shall be exercised by the Chairperson.

5. Unless revoked, the appointment of a proxy in terms of this proxy form remains valid until the end of the meeting, even if the meeting or part thereof is postponed or adjourned.

6. If:

6.1. A shareholder does not indicate on this instrument that the proxy is to vote in favour of or against or to abstain from voting on any resolution, or

6.2. The shareholder gives contradictory instructions in relation to any matter, or

6.3. Any additional resolution/s are properly put before the meeting, or

6.4. Any resolution listed in the proxy form is modified or amended,

then the proxy shall be entitled to vote or abstain from voting, as he thinks fit, in relation to that resolution or matter. If however, the shareholder has provided further written instructions which accompany this form and which indicate how the proxy should vote or abstain from voting in any of the circumstances referred to a 6.1 to 6.4, then the proxy shall comply with those instructions.

7. If this proxy is signed by a person (signatory) on behalf of the shareholder, whether in terms of a power of attorney or otherwise, then this proxy form will not be effective unless:

7.1. It is accompanied by a certified copy of the authority given by the shareholder to the signatory, or

7.2. The Company has already received a certified copy of that authority.

8. The Chairman of the meeting may, in his discretion accept or reject any proxy form or other written appointment of a proxy which is received by the Chairman prior to the time when the meeting deals with a resolution or matter to which the appointment of the proxy relates, even if that appointment of a proxy has not been completed and/or received in accordance with these instructions. However, the Chairman shall not accept any such appointment of a proxy unless the Chairman is satisfied that it reflects the intention of the shareholder appointing the proxy.

9. Any alternations made in this proxy form must be initialled by authorised signatory/ies.

10. This proxy form is revoked if the shareholder who granted the proxy:

10.1. Gives written notice of such revocation to the Company, so that it is received by the Company by not later than 9:00 on Friday, 26 October 2012, or

10.2. Subsequently appoints another proxy for the meeting, or

10.3. Attends the meeting himself in person.

11. All notices which a shareholder is entitled to receive in relation to the Company shall continue to be sent to that shareholder and shall not to be sent to the proxy.

12. If duly authorised, companies and other corporate bodies who are shareholders of the Company having shares registered in their own names may, instead of completing this proxy form, appoint a representative to represent them and exercise all of their rights at the meeting by giving written notice of the appointment of that representative. That notice will not be effective at the meeting unless it is accompanied by a duly certified copy of the resolution/s or other authorities in terms of which that representative is appointed and is received at the Company’s transfer office, Computershare Investor Services (Pty) Ltd, 70 Marshall Street, Johannesburg, by no later than 9:00 on Friday, 26 October 2012. If a shareholder does not wish to deliver that notice to that address, it may also be posted, at the risk of the shareholder to Computershare Investor Services (Pty) Ltd, PO Box 61061, Marshalltown, 2107.

13. The completion and lodging of this form of proxy does not preclude the relevant shareholder from attending the annual general meeting and speaking and voting in person to the exclusion of any proxy appointed by the shareholder.

14. The Chairman of the annual general meeting may accept or reject any form of proxy which is completed and/or received other than in accordance with these instructions, provided that he shall not accept a proxy unless he is satisfied as to the manner in which a shareholder wishes to vote.

notes to the form of proxy


appendi x 1

Explanatory notes of principal changes to the Company’s existing Memorandum of Association and Articles of Association

Substantive changes being proposed to the Company’s existing Memorandum of Association and Articles of Association (“Memorandum and Articles”) which are intended to bring them in line with the new Companies Act, 2008 (“Act”) and the JSE’s Listings Requirements (”JSE LR”). The salient features are as follows:

Theme or paragraph Existing regime in Memorandum and Articles Proposed regime in MoIReplacement and substitution of Memorandum and Articles

The Memorandum and Articles govern the affairs of the Company. The Memorandum of Incorporation (“MoI”) replaces the Memorandum and Articles. (Clause 2.7)

The founding document/s of the Company

The key founding document of the Company is the Memorandum of Association, which determines the nature and scope of the Company. The rights, duties and powers of members, Directors and the general meeting of members (amongst other things) are set out in the Articles of Association of the Company.

The Act abolishes the distinction between the Memorandum and Articles of Association and provides that in future there will only be one founding document, namely the MoI. (Clause 2)

Amendments The existing Memorandum and Articles require a special resolution for amendment.

Clause 39 sets out various procedures to be followed to amend the MoI.

Power to make rules The existing Memorandum and Articles do not contain such a provision. Although allowed by the Act, the JSE LR do not allow the Company to make rules. (Clause 40)

Authorised share capital The authorised share capital is set out in the existing Memorandum as 500,000,000 ordinary par value shares.

Special resolution number 4 proposes that the authorised share capital be converted to 500,000,000 ordinary no par value shares. (Clause 3.1)

Issue of securities The Company may by special resolution authorise the Directors to issue any unissued shares.

Shareholders may authorise Directors by ordinary resolution to issue unissued shares or grant options. (Clause 3.8)

Allotment and issue of more than 30% of securities

The existing Memorandum and Articles do not contain such a provision. In terms of section 41(3) of the Act, the issue of certain shares, securities convertible into shares, or rights exercisable for shares in a transaction or series of integrated transactions, must be approved by special resolution if the votes of the shares issued will be equal to or exceed 30%. (Clause 3.12)

Pre-emptive rights The existing Memorandum and Articles do not contain such a provision. The Board may only issue shares if shareholders have first been offered such shares, pro rata to their existing holdings. (Clause 3.11)

Beneficial shareholders The existing Memorandum and Articles do not contain such a provision. Securities may be held and registered in the name of one person for the beneficial interest of another person. (Clause 14).

Acquisition of its own shares The Company may repurchase its shares, or that of its holding company, if authorised thereto by special resolution. (article 9)

The Company, or a subsidiary, may acquire shares of the Company. Before doing so, the Board must pass a resolution to that effect, acknowledging that it has applied the solvency and liquidity test. (Clause 16.1 – 16.2) Such resolution must be followed by a special resolution of shareholders under certain circumstances. (Clause 16.3)

Financial assistance No such provision exists in the Memorandum and Articles. However, it was allowed under certain circumstances by the Companies Act, 1973 (Section 38).

The Board is authorised to provide financial assistance to any person as set out in Section 44 of the Act. However, such financial assistance is subject to the solvency and liquidity test and approval by a special resolution. (Section 44)

Distributions The Company may make payments to its members. (article 10) All distributions must comply with section 46, meaning that a board resolution is required. Before doing so, the Board must apply the solvency and liquidity test. (Clause 46)

Unclaimed dividends Dividends unclaimed for a period of no less than 3 years from the date of declaration thereof may be forfeited by the Directors to the Company. (article 25.12)

May be declared forfeited by the Board for the benefit of the Company after 3 years. (Clause 34.5)

Composition of the board The Board shall comprise not less than 4 and not more than 15 Directors. (article 17.1)

The Board shall comprise not less than 4 and not more than 10 Directors. (Clause 24.1)


Theme or paragraph Existing regime in Memorandum and Articles Proposed regime in MoIManaging Director The Directors may appoint a Managing Director. (article 19.1) The Board may appoint a Managing Director. (Clause 28)Remuneration of Directors The Directors shall be entitled to such remuneration as may be determined

by the Company in a general meeting. (article 17.4)Non-executive Directors shall be entitled to such remuneration for acting as Directors as may be approved from time to time by a special resolution of the holders passed at a general meeting within the previous two years. Executive Directors shall not be remunerated for their services as Directors and their remuneration shall be determined by a quorum of disinterested Directors. (Clause 27.1)

Director acting in another capacity

No such provision exists in the Memorandum and Articles. A Director serving on a committee may be paid extra remuneration as determined by a disinterested quorum of Directors. (Clause 27.2)

Directors’ reimbursement for other services and costs

Directors shall be entitled to be reimbursed for all travelling and other expenses, as well as for extra services rendered. (article 17.5)

Directors will be paid for travelling and other expenses, and for other services rendered. (Clause 27.3)

Rotation of Directors One third of all Directors shall retire at each annual general meeting and if the number is not a multiple of three, then the nearest number to, but not less than one third, shall retire. (article 18.1) A Managing Director shall not be subject to rotation during the period of his contract. (article 19.3)

The same provision will apply, but rotation will be confined to Non-executive Directors. (Clause 24.7.1)

Shareholders’ meetings Meetings of members are regulated by articles 13 & 14. Clause 18 regulates shareholders’ meetings.Record date Indirectly referred to in article 25.1. The record date for purposes of determining shareholder rights shall be

determined in terms of the JSE LR. (Clause 17.1.6)Round robin resolution of shareholders

No such provision exists in the Memorandum and Articles. Not allowed if resolution is required in terms of JSE LR. (Clause 18.5.2)

Electronic participation in shareholders’ meetings

No such provision exists in the Memorandum and Articles. New arrangement provided for in Clause 19.

Notice period for annual general and other general meetings

21 clear days’ notice is required for an annual general meeting and 14 clear days’ written notice for any other general meeting. (article 13.4)

A shareholders’ meeting (whether called for the passing of special or ordinary resolutions) shall be called with at least 15 business days’ written notice. (Clause 18.10)

Quorumrequirementatageneral meeting

3 members personally present and entitled to vote. (article 14.2) At least three shareholders plus sufficient persons to exercise in aggregate 25% of all the voting rights. (Clause 18.11)

Chairperson’s casting vote at general meeting

Chairperson may cast any votes he is entitled to as a member. (article 14.5) Not allowed. (Clause 20.8)

Ordinary resolution Must be passed by more than 50% of the voting rights exercised on the resolution. (article 14.5)

Must be passed by more than 50% of the voting rights exercised on the resolution. (Clause 22.1)

Special resolution Defined in Companies Act, 1973, as at least 75% of the votes cast by all shareholders present in person or represented by proxy.

Must be passed by at least 75% of the voting rights exercised on the resolution. (Clause 22.2)

Board meetings Proceedings of Directors are set out in article 20. Clause 25 regulates Directors’ meetings.Quorum Two Directors. (article 20.1) A majority of the Board. (Clause 25.5.2)Chairman’s casting vote In case of an equality of votes, the Chairman will have a casting vote.

(article 20.3)In case the vote is tied, the Chairman will not have a casting vote. (Clause 25.5.5)

Round robin resolutions by Board

Provided for. (article 20.7) Provided for. (Clause 25.7.1)

Conference telephone facilities Meetings may be held by making use of such facilities. (article 20.7) Meetings may be held by making use of such facilities. (Clause 25.7.2)

appendi x (con t inued )

corpora te in format ion

Company secretary

Mr JW Walters 149 Oak Avenue, Ferndale, 2194 (PO Box 3333, Pinegowrie, 2123) Telephone (011) 789 3507 Fax (011) 886 2742

Transfer secretaries

Computershare Investor Services (Pty) Ltd (Registration number 2004/003647/07) Ground Floor, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107) Telephone (011) 370 5000 Fax (011) 688 5210

Attorneys

KWA Attorneys South Wing, 97 Central Street, Houghton, 2198 (PO Box 47153, Parklands, 2121) Telephone (011) 728 7728 Fax (011) 728 7727

Sponsor

Exchange Sponsors (2008) (Pty) Ltd (Registration number 2008/019553/07) 44A Boundary Road, Inanda, 2196 (PO Box 411216, Craighall, 2024) Telephone (011) 880 2113 Fax (011) 447 4824

Auditors and reporting accountants

PricewaterhouseCoopers Inc (Practice number: 901121) 2 Eglin Road, Sunninghill, 2157 Telephone (011) 797 4000 Fax (011) 797 5800

Commercial banker

Absa Bank Limited (Registration number 1986/004794/06) 10th floor, 11 Diagonal Street, Newtown, Johannesburg (PO Box 42010, Fordsburg, 2033) Telephone (011) 556 6128 Fax (011) 556 6926

Wescoal Holdings Limited

(Registration number 2005/006913/06) (Incorporated in the Republic of South Africa)

Registered office

228 Voortrekker Street, Krugersdorp, 1739 (PO Box 133, Krugersdorp, 1740) Telephone (011) 954 2721 Fax (011) 954 6737

JSE abbreviated nameJSE codeISINOperating sectorExchangeFormedListed on the JSEShares in issueNumber of shareholdersMarket capitalisation –EmployeesWebsite

WescoalWSLZAE000069639CoalMain Board199620 July 2005166,801,3611,829as at 31 March 2009 R115 million121www.wescoal.com

K-9839 [www.kashan.co.za]

228 Voortrekker Street, Krugersdorp, 1739 • PO Box 133, Krugersdorp, 1740

Tel: +27(0) 11 954 2721 • Fax: +27(0) 11 954 6737

www.wescoal.com

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