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2017 Annual Report

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RNS Number : 2206S
Prairie Mining Limited
29 September 2017
 

PRAIRIE MINING LIMITED

 

2017

 

ANNUAL REPORT | ROCZNY RAPORT

 

ABN 23 008 677 852

 

DIRECTORS:
Mr Ian Middlemas                  Chairman
Mr Benjamin Stoikovich        Director and CEO
Ms Carmel Daniele               Non-Executive Director
Mr Thomas Todd                    Non-Executive Director
Mr Mark Pearce                       Non-Executive Director
Mr Todd Hannigan                 Alternate Director

Mr Dylan Browne                    Company Secretary

PRINCIPAL OFFICES:

PD Co sp. z. o.o. (Warsaw):

Ul. Wspolna, 35 lok. 4

00-519 Warsaw

Karbonia S.A. (Czerwionka - Leszczyny):

Ul. 3 Maja 44,

44-230 Czerwionka - Leszczyny

 

London:
Unit 3C, 38 Jermyn Street
London SW1Y 6DN
United Kingdom

 

Australia (Registered Office):
Level 9, BGC Centre
28 The Esplanade
Perth   WA   6000
Tel:      +61 8 9322 6322
Fax:     +61 8 9322 6558

SOLICITORS:

Poland:
DLA Piper Wiater sp.k.

United Kingdom:
DLA Piper UK LLP

Australia:
DLA Piper Australia

 

AUDITOR:

Poland:
Ernst & Young Audyt Polska sp. z. o.o.

Australia:
Ernst & Young - Perth

 

BANKERS:

Poland:
Bank Zachodni WBK S.A. - Santander Group

Australia:
Australia and New Zealand Banking Group Ltd

 

SHARE REGISTRIES:

Poland:
Komisja Nadzoru Finansowego (KNF)
Plac Powstańców Warszawy 1, skr. poczt. 419
00-950 Warszawa
Tel: Tel: +48 22 262 50 00

United Kingdom:
Computershare Investor Services PLC
The Pavilions, Bridgewater Road
Bristol BS99 6ZZ
Tel: +44 370 702 0000

Australia:
Computershare Investor Services Pty Ltd
Level 11, 172 St Georges Terrace
Perth WA 6000
Tel: +61 8 9323 2000


STOCK EXCHANGE LISTINGS:

Poland:
Warsaw Stock Exchange - GPW Code: PDZ

United Kingdom:
London Stock Exchange (Main Board) - LSE Code: PDZ

Australia:
Australian Securities Exchange - ASX Code: PDZ

 

CONTENTS | ZAWARTOŚĆ


Directors' Report


Consolidated Statement of Profit or Loss and other Comprehensive Income


Consolidated Statement of Financial Position


Consolidated Statement of Changes in Equity


Consolidated Statement of Cash Flows



The following sections (as well as all illustrations and figures) are available in the full version of the 2017 Annual Report on the Company's website at www.pdz.com.au

Auditor's Independence Declaration


Notes to and Forming Part of the Financial Statements


Directors' Declaration


Independent Auditor's Report


Corporate Governance


Mineral Resources and Ore Reserves Statement


ASX Additional Information


 

The Company also advises that an Appendix 4G (Key to Disclosures: Corporate Governance Council Principles and Recommendations) and 2017 Corporate Governance Statement have been released today and are also available on the Company's website.

 

The Directors of Prairie Mining Limited present their report on the Consolidated Entity consisting of Prairie Mining Limited ("Company" or "Prairie") and the entities it controlled at the end of, or during, the year ended 30 June 2017 ("Consolidated Entity" or "Group").

 

OPERATING AND FINANCIAL REVIEW

 

Operations

 

Highlights during, and since the end of, the financial year end include:

 

Debiensko Mine (Premium Hard Coking Coal)

·      Acquired the Debiensko Mine ("Debiensko"), a fully permitted, hard coking coal project located in the Upper Silesian Coal Basin in Poland.

·      Transformational acquisition marking Prairie's entry into the hard coking coal sector and creating a multi-project coking coal development company based in Poland.

·      Scoping Study confirms potential for Debiensko to be a globally significant hard coking coal project with robust economics positioning the Company to become a large scale, low cost and long life premium hard coking coal supplier.

·      Independent marketing study confirmed cost of delivery of only US$4.60 per tonne compared to costs of imported hard coking coal of up to US$37.70 per tonne.

·      Debiensko has exceptionally low capital intensity of US$197 per tonne of annual saleable production capacity compared to an industry average of over US$401 per tonne.

·      With Debiensko now development ready, Prairie will focus on planning the mine site's redevelopment program, including:

Ø preparation for an in-fill drill program to increase JORC measured and indicated resources.

Ø completion of a re-engineered mine plan to produce a feasibility study to international standards with a focus on near term production at Debiensko.

Ø advancing discussions with regional steel makers and coke producers for future coking coal sales and offtake.

·      Completed a Maiden Coal Resource Estimate ("CRE") of 301 million tonnes of hard coking coal at Debiensko.

·      Debiensko coking coal is expected to enjoy strong demand from European steelmakers, with substantial netback pricing advantages given proximity to regional customers.

Jan Karski Mine (Semi-Soft Coking Coal)

·      Recent coal quality analysis re-affirms the Jan Karski Mine's ("Jan Karski") potential to produce high value ultra-low ash semi-soft coking coal.

·      Independent assessment predicts that Jan Karski semi-soft coking coal would potentially realise a 10% premium to international benchmark prices.

·      Prairie signed a landmark Strategic Co-operation Agreement with China Coal to advance the financing and construction of Jan Karski.

·      Since then China Coal has made substantial progress on the Bankable Feasibility Study ("BFS"). Continued discussions were held with Chinese financing institutions which will progress further with completion of the BFS expected in the coming months.

·      Spatial development plan approved at Jan Karski meaning the rezoning of 56 hectares of agricultural land for industrial use is complete allowing for construction of a mine site, shafts and associated surface infrastructure at Jan Karski.

·      Jan Karski is now one of the most advanced new large scale coking coal projects in the Northern Hemisphere.

·      Development activities have commenced with the appointment of a leading contractor to design and supervise the bulk power supply connections for the project, including power lines and substations.

 

Corporate

·      At the date of this report, cash of $18 million, placing the Company in an excellent position to complete its planned development activities at Debiensko and Jan Karski.

·      Successful placing of 11.5 million new ordinary shares during the financial year to a number of UK based high quality institutional investors to raise approximately £3.2 million (~A$5.5 million) before costs.

·      Subsequent to the end of the financial year, Prairie and CD Capital completed an additional investment of US$2.0 million (A$2.6 million) in the form of non-redeemable, non-interest-bearing convertible loan notes ("Loan Note 2").

 

Debiensko Mine

Debiensko, is a fully permitted, hard coking coal project located in the Upper Silesian Coal Basin in the south west of the Republic of Poland. It is approximately 40 km from the city of Katowice and 40 km from the Czech Republic.

Debiensko is bordered by the Knurow-Szczyglowice Mine in the north west and the Budryk Mine in the north east, both owned and operated by Jastrzębska Spółka Węglowa SA ("JSW"), Europe's leading producer of hard coking coal.

The Debiensko mine was originally operated by various Polish mining companies until 2000 when mining operations were terminated due to a major government led restructuring of the coal sector caused by a downturn in global coal prices. In early 2006 New World Resources Plc ("NWR") acquired Debiensko and commenced planning for Debiensko to comply with Polish mining standards, with the aim of accessing and mining hard coking coal seams. In 2008, the Minister of Environment of Poland ("MoE") granted a 50-year mine license for Debiensko.

In October 2016, Prairie acquired Debiensko with a view that a revised development approach would potentially allow for the early mining of profitable premium hard coking coal seams, whilst minimising upfront capital costs. Prairie has proven expertise in defining commercially robust projects and applying international standards in Poland. The fact that Debiensko is a former operating mine and its proximity to two neighbouring coking coal producers in the same geological setting, reaffirms the significant potential to successfully bring Debiensko back into operation.

Scoping Study Results

In March 2017, Prairie announced the results of a scoping study ("Scoping Study") in accordance with the JORC Code 2012 and completed by independent consultants Royal HaskoningDHV given their extensive and recent track record of successful involvement in European underground coal projects in the UK, Kazakhstan and Poland, including Prairie's Jan Karski mine.

The Scoping Study utilised a maiden CRE for Debiensko which comprises a Global CRE of 301 million tonnes ("Mt") including an Indicated Resource of 93 Mt from three coal seams; 401/1, 404/9 and 405 seams. Key results of the Scoping Study were as follows:

 

Strong Project Estimations and Approximations
(to a maximum accuracy variation ± 30%)

Cash flow


Average Operating Costs Steady State

~US$47 per tonne

Long Term Hard Coking ("HCC") Price Benchmark (FOB Australia - REAL 2016$)

~US$142 per tonne (current Mar 2017 spot price: +US$160/t)

Average Received HCC Price FOR (including netback)

~US$157 per tonne

Average Steady State EBITDA

~US$282 million

Production


Average ROM* Coal Production Steady State

~4 Mtpa

Life of Mine Plant Feed Coal Production ("LOM")

~100.3 Mt

Average Effective Product Yield LOM

~67.8 %

Mine Life Following First Production

~26 years

Average Saleable HCC Production Steady State

~2.6 Mtpa

Total Saleable HCC Produced LOM

~65 Mt

Total Saleable Coal Produced LOM (HCC + Middlings)

~68 Mt

Capital Expenditure to First Production


Shaft sinking

~US$208.5 million

Coal processing and surface facilities

~US$102.5 million

Underground Infrastructure (Belts, Ventilation, Electrics)

~US$62.0 million

Capitalised Pre-Production Expenses (Labour, Power, Contractors etc.)

~US$51.5 million

Contingencies, EPCM and owners costs

~US$79.5 million

Start of Construction

~2019

Start of Production Ramp-Up

~2023

The results of the Scoping Study demonstrate the potential for exceptionally high operating margins and cash flow generation given the anticipated low operating costs for Debiensko. This is achieved because Prairie is pioneering in Poland well established international best practice in mine design, production organisation and technology for the project. Debiensko benefits from being a formerly operating mine, giving an excellent understanding of geology and mining conditions with substantial existing infrastructure available at site.

Based on an independent marketing study conducted by CRU International ("CRU"), a long term hard coking coal benchmark price forecast of US$142/t (FOB Australia, real 2016 $) has been used in this Scoping Study. This compares to the current spot price of approximately US$200/t and the 2017 Q1 quarterly contract price of US$285/t. Due to the considerable transport cost advantages compared to imported hard coking coal, the CRU study also identified that Debiensko would potentially benefit from a substantial netback premium of US$15/t above benchmark prices for coal sold to regional Central European customers.

 

Potentially Lowest Global Cash Operating Costs Delivered Into Europe

Debiensko is projected to have an average steady state total cash cost of approximately US$47 per tonne Free On Rail ("FOR") for its premium hard coking coal, producing an average 2.6 Mtpa saleable hard coking coal. Hard coking coal product from Debiensko is anticipated to be at the bottom of the global cost curve for hard coking coal delivered into Central Europe, with a delivered cost of approximately US$51 per tonne (FOR total cash cost including royalty + rail to typical regional customer).

Netback Pricing Advantage & Marketing Strategy

CRU completed a review of the European coking coal market on behalf of Prairie. The CRU study, together with various independent and internal studies regarding coal quality and railway transport indicates that premium hard coking coal produced at Debiensko will attract strong regional demand and will benefit from a significantly lower estimated cost of delivery to Central European customers compared to coking coal imported from the international seaborne market. Accordingly, hard coking coal sales from Debiensko will likely secure a substantial "netback" price advantage.

The CRU study included a comparison of the cost of importing hard coking coal from Australia, USA and Russia delivered into Polish steelworks. CRU used ArcelorMittal's Zdzieszowice coke plant, the largest coke plant in Central Europe, as representative benchmark to estimate delivery costs.

Coal imported for delivery to Zdzieszowice from the international seaborne market is purchased at the prevailing FOB price at the country of origin. Transportation costs incurred to deliver coal to the port of Swinoujscie, Poland include sea freight, port handling, storage and forwarding costs. Subsequently, the coal needs to be transported approximately 600 km by rail to the Zdzieszowice coke plant which incurs further freight charges. The coal requires up to 60 days to reach the coke plant from Australia and approximately 30 days from the USA. It is also handled multiple times, with greater potential for increased degradation and fines generation.

In comparison, Debiensko is only 70 km from the Zdzieszowice coke plant and directly linked by rail. Transportation costs for Debiensko's coal to Zdzieszowice are estimated to be less than US$4.60/t.

Due to their proximity to Central European coking plants, regional producers such as NWR or JSW have traditionally gained a "netback premium" over FOB Australia or USA benchmark prices, which once adjusted for coal quality differences, equates to approximately 50% of the total transport cost differential. Essentially, an analysis of past practises shows that the coal producer and steel maker "split the difference". Following this approach for Debiensko would result in a potential netback premium of ~US$15/t above prevailing benchmark prices for Debiensko coal when sold to regional end users compared to imported hard coking coal. However, Prairie believes there is significant potential to increase this netback premium during future discussions with offtakers.

Total Freight to Zdzieszowice (Source: CRU)

Port of Origin

Sea freight distance to Swinoujscie

Estimated Shipping Time

Typical Vessel Type

Typical Vessel Size

(dwt)

Estimated Sea Freight Cost to Swinoujscie

(US$/t 2017)

Port Handling, Storage and Forwarding Fees

(US$/t)

Total Sea Freight Cost

(US$/t)

Estimated Rail Freight Cost (US$/t 2017)

Rail Handling & Parking Fees

(US$/t)

Total Freight Costs

(US$/t 2017)

Debiensko

n/a

n/a

n/a

n/a

n/a

n/a

n/a

3.00

1.60

4.60

Hampton Roads

3,958

16 days

Panamax

70,000

11.50

6.00

17.50

11.90

1.60

31.00

Murmansk

1,656

7 days

Panamax

70,000

6.70

6.00

12.70

11.90

1.60

26.20

Mobile

5,173

21 days

Panamax

70,000

14.00

6.00

20.00

11.90

1.60

33.50

Queensland

11.858

49 days

Panamax

70,000

18.20

6.00

24.20

11.90

1.60

37.70

 

Premium Quality Hard Coking Coal

Preliminary analysis indicates that a range of premium hard coking coals that will be in high demand from European steelmakers can be produced from Debiensko. This analysis is based on historical data, neighbouring operational coking coal mines and the results of a suite of modern coking tests performed on selected seams from a fully cored borehole drilled by the previous owners in 2015/16. Two premium hard coking coal specifications have been delineated from select seams at Debiensko, namely Medium volatile matter hard coking coal ("Mid-vol HCC") and Low volatile matter hard coking coal ("Low-vol HCC"). Future study phases will determine the precise Debiensko premium hard coking coal quality specification on a year by year basis depending on final adopted mine plan, mining schedule and extent of coal blending.

Both Debiensko's Mid-vol and Low-vol HCC lie within the range of premium hard coking coals produced globally. Indications are that the Mid-vol HCC at Debiensko is present between 850 m to 1,000 m from surface and the Low-vol HCC is present 1,000 m to 1,300 m below surface i.e. at depths similar to adjacent operating mines owned by JSW - the largest coking coal producer in Europe.

Preparation for the Next Phase of Project Studies

Pre-qualification of contractors for the major components of the next phase of Debiensko studies were commenced including:

·        Drilling contractors for the planned in-fill drilling program

·        Coal Handling and Preparation Plant ("CHPP")

·        Shafts and bulk coal winder

·        Desalination plant

·        Surface facilities

Demolition of old surface structures of the former Debiensko mine was commenced during the financial year, including the bathhouse, switchgear building and locomotive garage. In addition, drilling of 28 shallow geotechnical holes for engineering design of foundations for structures was commenced.

Jan Karski Mine

 

Coking Coal Quality Results Establish Jan Karski as a High Value Ultra-Low Ash Semi-soft Coking Coal Mine

During the financial year, Prairie announced the results of enhanced coal quality analysis and test work from the completed borehole, Cycow 9, at Jan Karski. Key results from the expanded coke oven and washability test work indicated the potential to produce a high value ultra-low ash Semi-Soft Coking Coal ("SSCC") with a high Coke Strength after Reaction ("CSR") and a high 75% product yield. Preliminary analysis by independent consultants indicates that the Jan Karski ultra-low ash SSCC could achieve a 10% premium to international SSCC benchmark prices, due to several superior qualities.

Cycow 9 was a large diameter, PQ size borehole and the first of its kind to be drilled at Jan Karski enabling sufficient quantities and sized coal from the 391 seam to be collected to meet the requirements for physical coke testing, specifically confirmation of CSR and extended coal washability test work. The analysis and testwork was conducted at leading fully accredited European laboratories in Poland, Germany and the UK. The CSR test is considered vital in testing for a coal's coking properties important to steelmakers as it is an indicator of the performance / strength of the coke produced from the coal. The full range of standard coking tests were also conducted as shown in the table below:

Analysis results from Cycow 9 borehole - 391 seam  

TOTAL MOISTURE

ar%

10-12%

ULTIMATE ANALYSIS



COKING PROPERTIES




Carbon

daf%

81.90

FSI


5.5

PROXIMATE ANALYSIS



Hydrogen

daf%

5.42

Gray King Coke


G5

Inherent moisture

adb%

3.4

Nitrogen

daf%

1.91

Roga Index


69

Ash

ar%

2.6

Sulphur

ad%

1.16

CSR

%

51.5

Volatile Matter

ar%

33-36

Oxygen

daf%

7.10

CRI

%

39.1

Fixed Carbon

ad%

57




Ash in Coke

%

3.3




RO(MAX) & MACERAL ANALYSIS



Sulphur in Coke

%

0.87

ASH CHEMISTRY



Vitrinite

%

74.40




SiO2

db%

33.32

Liptinite

%

13.20

Giesler Plastometer



Al2O3

db%

29.63

Inertinite

%

12.4

Initial Softening

°C

379

Fe2O3

db%

20.30

Mineral Matter

%

0.00

Max Fluidity temp

°C

416

CaO

db%

4.49

RoMax

%

0.88

Resolidification

°C

435

MgO

db%

1.73




Max Fluidity

ddpm

90

TiO2

db%

0.98

OTHER COAL PROPERTIES






NaO2

db%

0.96

Sulphur

ar%

1.09

ASTM Dilation



K2O

db%

1.10

HGI average

ad%

44

Softening Temperature

°C

370

P2O5

db%

3.41

Phosphorus

ad%

0.034

Max Contraction Temp

°C

408

SO3

db%

2.36




Max Dilation Temp

°C

433

Other

db%

1.72




Max Contraction

% C

32







Max Dilation

% D

35

 

Jan Karski Coking Coal Key Quality Advantages

 

Ultra-low Ash

Washability analysis from the Cycow 9 borehole and previous boreholes drilled by Prairie across Jan Karski has demonstrated that due to the low inherent ash and excellent washability characteristics of the 391 seam, Jan Karski SSCC coal is unique with typical ash product level of less than 3% (air dried) and far superior to typical ash levels for major coking coal brands (both hard and soft) traded internationally and produced domestically in Europe. The figure below shows there is a range of ash specifications for SSCCs. With an average ash specification of 2.6%, the Jan Karski SSCC is an ultra-low ash product compared to all the comparison coals. Low ash provides a number of technical benefits including improved coke strength and caking properties, and reduced fuel rate in the blast furnace.

The ultra-low ash content increases the coals value-in-use to steel and coke makers, making the product highly saleable in both the domestic European and international markets. One of the key outcomes of utilising ultra-low ash coking coal to produce low ash coke ash is the resulting decreased fuel rate. This has a key environmental benefit for steel makers that results in a reduction in CO2 emissions per tonne of hot metal produced.

Prairie's analysis predicts increasing global demand for ultra-low ash coking coal for blending with HCC, because of a continuing trend of rising average ash levels in globally traded hard coking coals. Premium hard coking coal resources with low ash are becoming increasingly scarce, forcing consumers to make concessions on HCC ash levels. Ultra-low ash coking coals for blending are becoming increasingly sought after by consumers seeking to "blend-down" the ash levels in their coke blends. This is a particular advantage for European steelmakers where EU regulations focus on reduced CO2 emissions. This trend has important implications for the future marketability of Jan Karski ultra-low ash SSCC.

Coke Strength after Reaction

The figure below shows the measured CSR (51.5) of the 391 seam from Cycow 9 borehole at Jan Karski is at the top end of the range for semi-soft coking coal. A CSR figure of 51.5 shows the coal has the ability to form a coherent coke mass. The Jan Karski coal has a number of features conducive to forming good coke for a semi-soft type coal:

1.     the coal is ultra-low ash and low inertinite, meaning the coke has few inertinites to bind;

2.     the coal has higher rank for a semi-soft compared to typical Hunter Valley and Maules Creek semi-soft coking coals; and

3.     the coal exhibits moderate fluidity and reasonable total dilatation.

Further CSR analysis will be undertaken as part of future drilling programs.

 

Other Positive Attributes

Other Jan Karski ultra-low ash SSCC quality positives are its high vitrinite content, and low phosphorous levels, mid-range FSI (5.5), Gray King Index (G5). The volatile matter is in the range typical for Australian traded SSCCs, with the rank of the Jan Karski coal being slightly higher and closer to a semi-hard coking coal specification.

Price Benchmarking

Independent coal market specialists CRL Energy Ltd ("CRL") were appointed by Prairie to analyse the potential value of Jan Karski ultra-low ash SSCC in the market. CRL took two approaches to price benchmarking. The first approach applied the method used by the Platts publication of international benchmark coal prices. The second was a proprietary approach adopted by CRL based on value in use assessment incorporating assumptions regarding a typical Western European coking coal blend used by steel makers and proportions of Jan Karski ultra-low ash SSCC included in the blend.

The Platts coal market publication shows a number of penalty/premium factors that can be used to calculate relative value of coking coals against a stated benchmark. The limit of this method is that it assumes all markets would derive the same value from a particular coal; this is not strictly applicable in all cases, since value is also a function of the other coals in the blend, coke versus PCI rate and plant configuration. The "benchmark" coal used in this evaluation is the Rio Tinto Hunter Valley semi-soft, hence this coal is calibrated at 100% of the benchmark. The Platts benchmarking shows the Jan Karski coal specification is valued at 112.7% of the Rio Tinto semi-soft specification. The only comparable coal is the Blackwater coking coal (which is more of a semi-hard type specification) and the NZ SSCC (a low ash semi-soft coking coal).

Both Platts benchmarking and value in use modelling show Jan Karski is a high value semi-soft, driven substantially by the ultra-low ash. The Platts specification benchmarking suggests Jan Karski should be priced at a 10% premium above the benchmark Rio Tinto Hunter Valley semi-soft coal. 

China Coal Bankable Feasibility Study, EPC Contract and Financing

During the financial year, China Coal No.5 Construction Company Ltd ("China Coal") provided Prairie with a draft of the Jan Karski BFS and discussions were held with Chinese financing institutions. China Coal and Prairie continue to advance towards completion of the BFS by the end of 2017, which will provide the basis for an Engineering, Procurement, Construction ("EPC") contract and finalising a term sheet with Chinese financing institutions for a construction funding package for Jan Karski.

In November 2016, Prairie and China Coal, the second largest coal mining company in China and one of the world's most advanced and prolific shaft sinking and total underground coal mine construction companies, signed a landmark Strategic Co-operation Agreement to advance the financing and construction of Prairie's Jan Karski Mine in Poland.

Prairie and China Coal have been in discussions since 2014 regarding the potential for collaboration in designing and constructing Jan Karski.

Since 2014, Prairie's senior management and technical team have met with China Coal numerous times in China and inspected China Coal's various shaft sinking projects, mine construction sites and state of the art longwall coal mines operated by China Coal.

The Strategic Co-operation Agreement was signed confirming the intention of the parties to, on a best efforts basis:

(i)         complete a BFS within the coming months, which will form the basis of Chinese bank credit approval for project finance;

(ii)        based on the results of the BFS, enter into a complete EPC contract under which China Coal will construct the Jan Karski Mine; and

(iii)       incorporate relevant Polish content into the design and construction phases, which will include working with a range of Polish specialists, sub-contractors and business partners.

It is the intention of the parties to enter into future binding agreements for China Coal to construct Jan Karski once the BFS is completed successfully and financing terms are agreed with Chinese financing institutions.

Permitting Milestones

Prairie is currently working towards completing a mining concession application which, in Poland, comprises the submission of a Deposit Development Plan ("DDP"), an Environmental Social Impact Assessment ("ESIA") that is to be approved by regional authorities and approval of a spatial development plan (rezoning of land for mining use). The Company intends to formally lodge a mining concession application for Jan Karski in early 2018.

Prairie achieved a significant permitting milestone during the year following official approval by the Lublin Regional Mining Authority of the Jan Karski DDP, which now paves the way forward for the Company to submit a formal mining concession application.

The DDP is a mine technical-economic study which is prepared according to Polish government standards. Prairie is expecting Environmental Consent during the second half of 2017. A granted mining concession will be valid for up to 50 years.

Subsequent to the end of the year, Prairie also received formal approval of the spatial development plan (rezoning). This approval formally rezones 56 hectares of agricultural land for industrial use to allow for construction of a mine site, shafts and associated surface infrastructure at Jan Karski.

Sale of Prairie Downs Metals Project ("BMP")

 

During the financial year, Prairie completed the sale of the Prairie Downs Base Metals Project ("BMP") to Marindi Metals Limited ("Marindi") for a total of $1.15 million ($0.65 million received in 2017 (2016: nil; 2015: $0.5 million)).

 

Prairie now retains a 2.5% net smelter royalty over the BMP.

 

Results of Operations

 

The net loss of the Consolidated Entity for the year ended 30 June 2017 was $11,482,002 (2016: $6,761,400). Significant items contributing to the current year loss and the substantial differences from the previous financial year include:

 

(i)    Exploration and Evaluation expenses of $6,560,343 (2016: $4,830,109), which is attributable to the Group's accounting policy of expensing exploration and evaluation expenditure incurred by the Group subsequent to the acquisition of rights to explore and up to the commencement of a bankable feasibility study for each separate area of interest. As a direct result of exploration and evaluation activities conducted during the year, the Group achieved key milestones including (i) completion of a Scoping Study at Debiensko; (ii) completion of an infrastructure study at Debiensko; (iii) completion of an independent marketing study at Debiensko; (iv) announcement of a maiden CRE at Debiensko; (v) substantial progress made on the BFS for Jan Karski; (vi) completed a borehole at Jan Karski which re-affirmed Jan Karski's potential to produce high value ultra-low ash SSCC; and (vii) received significant permitting milestones with the DDP and spatial rezoning approved paving the way for a mining concession application in early 2018 at Jan Karski.

 

(ii)   Business development expenses of $1,474,077 (2016: $1,219,309) which includes expenses in relation to the Group's investor relations activities, including brokerage fees, public relations, digital marketing, travel costs, attendances at conferences and business development consultant costs;

 

(iii)  Other expenses of $521,502 (2016: nil) which relates to legal, accounting and other consultant costs in relation to the extensive due diligence and legal process conducted by the Company to effectively execute the acquisition of Karbonia;

 

(iv)   Non-cash share-based payment gain of $392,275 (2016: expense $1,723,271) due to incentive securities issued to key management personnel and other key employees and consultants of the Group as part of the long-term incentive plan to reward key management personnel and other key employees and consultants for the long term performance of the Group. The expense results from the Group's accounting policy of expensing the fair value (determined using an appropriate pricing model) of incentive securities granted on a straight-line basis over the vesting period of the options and rights. The gain in share-based payments in 2017 compared to an expense in 2016 is attributable to the forfeiture of 4.4 million unvested Performance Rights during the year;

 

(v)    Non-cash fair value loss of $4,264,925 (2016: gain of $1,765,429) which is attributable to a $4,264,925 loss (2016: gain of 632,463) on the conversion right of the original CD Capital convertible loan note ("Loan Note 1") accounted for as a financial liability at fair value through profit and loss. This is a non-cash derivative instrument liability of which the Company will never be required to outlay any cash to settle. The financial liability only arises from the requirement to issue unlisted options in the Company following conversion of Loan Note 1. There was also a nil (2016: $1,132,966) fair value gain on the B2Gold Corp financial assets, classified as fair value through profit and loss, as the Company disposed of its entire B2Gold holding during the 30 June 2016 financial year;

 

(vi)   Revenue of $1,340,749 (2016: $309,969) consisting of interest revenue of $368,380 (2016: $309,969) and the receipt of $972,369 (2016: nil) of gas and property lease income derived since acquiring Karbonia in October 2016; and

 

(vii)  Other income of $650,000 (2016: nil) is attributable to the receipt of $650,000 (2016: nil) on the sale of the BMP to Marindi.

 

Financial Position

 

At 30 June 2017, the Company had cash reserves of $16,826,854 (2016: $18,063,119) placing it in an excellent position to conduct its planned development activities at Debiensko and Jan Karski.

 

At 30 June 2017, the Company had net assets of $13,095,130 (2016: $17,815,760), a decrease of 26% compared with the previous year. This is largely attributable to the investment made in Karbonia, the increase in non-cash financial liabilities and the loss for the financial year.

 

Business Strategies and Prospects for Future Financial Years

 

Prairie's strategy is to create long-term shareholder value by creating synergies and developing both Debiensko and the Jan Karski in Poland.

 

To date, the Group has not commenced production of any minerals. To achieve its objective, the Group currently has the following business strategies and prospects:

·        preparation for an in-fill drill program to increase JORC measured and indicated resources to support future feasibility studies at Debiensko;

·        completion of a re-engineered mine plan to produce a feasibility study to international standards with a focus on near term production at Debiensko;

·        advancing discussions with regional steel makers and coke producers for future coking coal sales and offtake at Debiensko;

·        complete the mining concession amendment at Debiensko;

·        furthering discussions with a select group of Chinese financing institutions as China Coal nears completion of its BFS;

·        based on the results of the BFS, enter into a complete EPC contract under which China Coal will construct the Jan Karski mine;

·        continuing project permitting activities including obtaining an Environmental Consent Decision and complete the land acquisition process at Jan Karski; and

·        formally lodging a mining concession application for Jan Karski in early 2018.

All of these activities are inherently risky and the Board is unable to provide certainty of the expected results of these activities, or that any or all of these likely activities will be achieved. The material business risks faced by the Group that could have an effect on the Group's future prospects, and how the Group manages these risks, include the following:

·        The Company's activities will require further capital in future years - At the date of this report, the Company has cash of approximately $18 million which places it in an excellent position to conduct its current planned exploration and development activities at Debiensko and Jan Karski. However, the ability of the Company to finance capital investment in future years for the construction and future operation of the Company's projects is dependent, among other things, on the Company's ability to raise additional future funding either through equity or debt financing. Any failure to obtain sufficient financing in the future may result in delaying or indefinite postponement of any future construction of the projects or even a loss of property interest (in the future). The key items which the Company would require further funding in future years would be for the construction of the mines at each project.

In this regard, and pursuant to the CD Capital investment agreement, CD Capital has a first right to invest a further $55 million in any future fund raise conducted by the Company, plus CD Capital will have the ability to inject a further $13 million through the exercise of $0.60 options to be held in the Company. There is however no guarantee that CD Capital would take up this right in the future (or exercise their options). There is also a risk that the Company's obligation to offer CD Capital a first right of refusal on any future fund raising could prejudice the Company's ability to raise funds from investors other than CD Capital. However, the Company considers that it would not be necessary to undertake such development actions until it has secured financing to do so and the timing for commencement of such actions would accordingly depend on the date that such financing is secured. If, in the unlikely event that future financing cannot be secured, the Group has the flexibility and ability to significantly reduce its ongoing expenditure.

 

The Company has also signed a Strategic Co-operation Agreement with China Coal for the financing and construction of Jan Karski. Subsequent to the end of the financial year, China Coal and Prairie continue to advance towards completion of the BFS, which will provide the basis for an EPC contract and finalising a term sheet with Chinese financing institutions for a construction funding package for Jan Karski.

 

Furthermore, the Company's board of directors has a successful track record of fundraising for natural resources projects, including large scale coal projects, and has completed successful financing transactions with strategic partners, large institutional fund managers, off-take partners and traders and project finance lenders.

 

There is however no guarantee that the then prevailing market conditions will allow for a future fundraising or that new investors will be prepared to subscribe for ordinary shares or at the price at which they are willing to do so in the future. Failure to obtain sufficient future financing may result in delaying or indefinite postponement of appraisal and any development of the Company's projects in the future, a loss of the Company's personnel and ultimately a loss of its interest in the projects. There can be no assurance that additional future capital or other types of financing will be available, if needed, or that, if available, the terms of such future financing will be favourable to the Company.

 

If the Company obtains debt financing in the future, it will be exposed to the risk of leverage and its activities could become subject to restrictive loan and lease covenants and undertakings. If the Company obtains future equity financing other than on a pro rata basis to existing Shareholders, the future percentage ownership of the existing Shareholders may be reduced, Shareholders may then experience subsequent dilution and/or such securities may have preferred rights, options and pre-emption rights senior to the Ordinary Shares. There can be no assurance that the Company would be successful in overcoming these risks in the future or any other problems encountered in connection with such financings.

·        Risk of failure to amend the Debiensko mining concession - The Company's mining exploration and development activities at Debiensko are dependent upon the alteration of, or as the case may be, the maintenance of appropriate licences, concessions, leases, claims, permits and regulatory consents which may be withdrawn or made subject to limitations. The maintaining of concessions, obtaining renewals, or attaining concessions alterations, often depends on the Company being successful in obtaining required statutory approvals for its proposed activities and that the licences, concessions, leases, claims, permits or consents it holds will be renewed and altered as and when required. In this regard the Company has made an application to the Polish MoE to amend the Debiensko mining concession (which is valid until 2048) to alter the commencement of production from 2018 to 2025. There is no assurance that such applications (or renewals or alterations) of the concession will be granted or that such applications, renewals, alterations, rights and title interests will not be revoked or significantly altered. If such applications, renewals or alterations of concessions applied for are not granted or are in fact revoked in the future, there is a risk that this may have a material adverse effect on the financial performance and operations at Debiensko, the Company and on the value of the Company's securities. Under Poland's Geological and Mining Law, the MoE is required to view any application to modify a concession in the same manner as any initial application for a concession, in that the award of the concession is not in detriment to public interest (building a mine is considered to be in the best interest of the public), does not particularly breach any environmental laws (Karbonia was awarded with an environmental consent decision prior to being granted with the mining concession) and is not in breach of the spatial development plan (Karbonia was granted with spatial approval prior to the award of the mining concession).  

·        Risk of further challenges by Bogdanka - Since April 2015, Lubelski Wegiel Bogdanka ("Bogdanka") has made a number of applications and appeals to the Polish MoE seeking a mining concession application over the Company's K-6-7 exploration concession and priority right (only one concession area that comprises of Jan Karski). All applications and appeals previously made by Bogdanka have been outright rejected.

However Bogdanka has made a further appeal to the Supreme Administrative Court (with no court hearing being scheduled to date). The Supreme Administrative Court has no authority to grant Bogdanka a mining concession but it may however cancel the MoE's previous rejection decision. If the Supreme Administrative Court does cancel the MoE decision, the MoE will be required to re-assess Bogdanka's mining concession application. These proceedings do not relate to the Prairie's valid and existing priority right to apply for a mining concession over the K-6-7 area. As discussed above, Bogdanka has in the past raised several appeals challenging the Company's title to the exploration concessions comprising Jan Karski mine. There is therefore no guarantee that Bogdanka will not seek to file further appeals to future decisions taken by government departments in the course of Jan Karski's development timeline.

·        Operations conducted in an emerging market - The Company's operations are located in Poland and will be exposed to related risks and uncertainties associated with this jurisdiction. Changes in mining or investment policies, laws or regulations (or the application thereof) or shifts in political attitude in Poland, in particular to mining, use of coal, and foreign ownership of coal projects may adversely affect the operation or profitability of the Company. The Company continues to consult with the various levels of Government but there can be no assurances that the future political developments in Poland will not directly impact the Company's operations or its ability to attract funding for its operations. The Company also competes with many other companies in Poland, including companies with established mining operations. Some of these companies have greater financial resources and political influence than the Company and, as a result, may be in a better position to compete with or impede the Company's current or future activities.

·        The Company may be adversely affected by fluctuations in coal prices and/or foreign exchange - The price of coal fluctuates widely and is affected by numerous factors beyond the control of the Company. Coal prices are currently high compared to previous levels but there is no guarantee that prices will remain at this level in the future. Future production, if any, from the Company's mineral properties and its profitability will be dependent upon the price of coal being adequate to make these properties economic. Current and planned development activities are predominantly denominated in Euros and the Company's ability to fund these activates may be adversely affected if the Australian dollar continues to fall against the Euro. The Company currently does not engage in any hedging or derivative transactions to manage commodity price or foreign exchange risk. As the Company's operations change, this policy will be reviewed periodically going forward.

DIRECTORS

The names and details of the Group's Directors in office at any time during the financial year or since the end of the financial year are:

Directors:

Mr Ian Middlemas                   Chairman

Mr Benjamin Stoikovich        Director and CEO

Ms Carmel Daniele               Non-Executive Director  

Mr Thomas Todd                    Non-Executive Director

Mr Mark Pearce                       Non-Executive Director

Mr Todd Hannigan                 Alternate Director

Mr Emil Morfett                        Non-Executive Director (resigned 31 July 2016)

 

Unless otherwise stated, Directors held their office from 1 July 2016 until the date of this report.

CURRENT DIRECTORS AND OFFICERS

Mr Ian Middlemas  B.Com, CA

Chairman

Mr Middlemas is a Chartered Accountant, a member of the Financial Services Institute of Australasia and holds a Bachelor of Commerce degree. He worked for a large international Chartered Accounting firm before joining the Normandy Mining Group where he was a senior group executive for approximately 10 years. He has had extensive corporate and management experience, and is currently a Director with a number of publicly listed companies in the resources sector.

Mr Middlemas was appointed a Director of the Company on 25 August 2011. During the three year period to the end of the financial year, Mr Middlemas has held directorships in Apollo Minerals Limited (July 2016 - present), Cradle Resources Limited (May 2016 - present), Paringa Resources Limited (October 2013 - present), Berkeley Energia Limited (April 2012 - present), Salt Lake Potash Limited (January 2010 - present), Equatorial Resources Limited (November 2009 - present), Piedmont Lithium Limited (September 2009 - present), Sovereign Metals Limited (July 2006 - present), Odyssey Energy Limited (September 2005 - present), Syntonic Limited (April 2010 - June 2017) and Papillon Resources Limited (May 2011 - October 2014).

 

Mr Benjamin Stoikovich  B.Eng, M.Eng, M.Sc, CEng, CEnv

Director and CEO

Mr Stoikovich is a mining engineer and professional corporate finance executive. He has extensive experience in the resources sector gained initially as an underground Longwall Coal Mining Engineer with BHP Billiton where he was responsible for underground longwall mine operations and permitting, and more recently as a senior executive within the investment banking sector in London where he gained experience in mergers and acquisitions, debt and off take financing.

 

He has a Bachelor of Mining Engineering degree from the University of NSW; a Master of Environmental Engineering from the University of Wollongong; and a M.Sc in Mineral Economics from Curtin University. Mr Stoikovich also holds a 1st Class Coal Mine Managers Ticket from the Coal Mine Qualifications Board (NSW, Australia) and is a registered Chartered Engineer (CEng) and Chartered Environmentalist (CEnv) in the United Kingdom.

 

Mr Stoikovich was appointed a Director of the Company on 17 June 2013. During the three year period to the end of the financial year, Mr Stoikovich has not held any other directorships in listed companies.

 

Ms Carmel Daniele B.Ec, CA

Non-Executive Director

 

Ms Carmel Daniele is the founder and Chief Investment Officer of CD Capital in London. Ms Daniele has over 20 years of global natural resources investment experience, ten of which was spent with Newmont Mining/Normandy Mining and acquired companies. As a Senior Executive (Corporate Advisory) at Newmont she structured cross-border M&As including the three-way merger between Franco-Nevada, Newmont and Normandy. Post-merger Ms Daniele structured the divestment of various non-core mining assets around the world for the merchant banking arm, Newmont Capital.  Ms Daniele started off her career at Deloitte Touche Tohmatsu. Prior to setting up CD Capital in London in 2006, Ms Daniele was an investment advisor to RAB Capital's Special Situations Fund on sourcing and negotiating natural resource private equity investments. Ms Daniele holds a Master of Laws (Corporate & Commercial) and Bachelor of Economics from the University of Adelaide and is a Fellow of the Institute of Chartered Accountants.

 

Ms Daniele was appointed a Director on 21 September 2015. During the three year period to the end of the financial year, Ms Daniele has not held any other directorships in listed companies.

 

Mr Thomas Todd B.Sc (Hons), CA
Non-Executive Director


Mr Todd was the Chief Financial Officer of Aston Resources from 2009 to November 2011. Prior to Aston Resources, Mr Todd was Chief Financial Officer of Custom Mining, where his experience included project acquisition and funding of project development for the Middlemount project to the sale of the company to Macarthur Coal. A graduate of Imperial College, Mr Todd holds a Bachelor of Physics with first class Honours. He is a Chartered Accountant (The Institute of Chartered Accountants in England and Wales) and a graduate of the Australian Institute of Company Directors.

 

Mr Todd was appointed a Director on 16 September 2014. During the three year period to the end of the financial year, Mr Todd has been an alternate director in Paringa Resources Limited (May 2014 - Present).

Mr Mark Pearce  B.Bus, CA, FCIS, FFin

Non-Executive Director

Mr Pearce is a Chartered Accountant and is currently a Director of several listed companies that operate in the resources sector. He has had considerable experience in the formation and development of listed resource companies. Mr Pearce is also a Fellow of the Institute of Chartered Secretaries and Administrators and a Fellow of the Financial Services Institute of Australasia.

Mr Pearce was appointed a Director of the Company on 25 August 2011. During the three year period to the end of the financial year, Mr Pearce has held directorships in Apollo Minerals Limited (July 2016 - present), Salt Lake Potash Limited (August 2014 - present), Equatorial Resources Limited (November 2009 - present), Piedmont Lithium Limited (September 2009 - present), Sovereign Metals Limited (July 2006 - present), Odyssey Energy Limited (September 2005 - present) and Syntonic Limited (April 2010 - October 2016).

 

Mr Todd Hannigan  B.Eng (Hons)

Alternate Director for Mr Thomas Todd

 

Mr Hannigan was the Chief Executive Officer of Aston Resources from 2010 to 2011. During this time, the company significantly progressed the Maules Creek project, including upgrades to the project's resources and reserves, completion of all technical and design work for the Definitive Feasibility Study, negotiation of two major project stake sales and joint venture agreements, securement of port and rail access and progression of planning approvals to final stages. Mr Hannigan has worked internationally in the mining and resources sector for over 18 years with Aston Resources, Xstrata Coal, Hanson PLC, BHP Billiton and MIM.

 

Mr Hannigan was appointed as Alternate for Mr Thomas Todd on 16 September 2014. During the three year period to the end of the financial year, Mr Hannigan has held a directorship in Paringa Resources Limited (May 2014 - Present).

 

Mr Dylan Browne  B.Com, CA, AGIA

Company Secretary

Mr Browne is a Chartered Accountant and Associate Member of the Governance Institute of Australia who is currently Company Secretary for a number of ASX and European listed companies that operate in the resources sector. He commenced his career at a large international accounting firm and has since been involved with a number of companies operating in the resources sector including Papillon Resources Limited and Berkeley Energia Limited. Mr Browne was appointed Company Secretary of the Company on 25 October 2012. 

 

PRINCIPAL ACTIVITIES

The principal activities of the Group during the financial year consisted of the exploration and development of resource projects. No significant change in nature of these activities occurred during the year.

EARNINGS PER SHARE



2017
Cents


2016
Cents

Basic and diluted loss per share

(7.42)

(4.52)

ENVIRONMENTAL REGULATION AND PERFORMANCE

The Group's operations are subject to various environmental laws and regulations under the relevant government's legislation. Full compliance with these laws and regulations is regarded as a minimum standard for all operations to achieve.

Instances of environmental non-compliance by an operation are identified either by external compliance audits or inspections by relevant government authorities.

There have been no significant known breaches by the Group during the financial year.

DIVIDENDS       

No dividends were paid or declared since the start of the financial year. No recommendation for payment of dividends has been made (2016: nil).

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

There were no significant changes in the state of affairs of the Group during the year other than the following:

(i)        On 11 October 2016, completed the acquisition of Debiensko transforming Prairie into a hard coking coal company complementing Prairie's advanced Jan Karski project, and creating a multi-project coking coal development company based in Poland to supply European industry;

(ii)       On 2 November 2016, Prairie and China Coal, the second largest coal mining company in China and one of the world's most advanced and prolific shaft sinking and total underground coal mine construction companies, signed a landmark Strategic Co-operation Agreement to advance the financing and construction of Jan Karski;

(iii)      On 23 January 2017, Prairie announced that the results of preliminary coal quality analysis from a borehole drilled at Debiensko confirming that the project hosts a range of premium quality hard coking coals comparable to internationally traded benchmark coking coals;

(iv)      On 1 February 2017, the Company announced a maiden CRE of 301 million tonnes of hard coking coal at Debiensko;

(v)       On 16 March 2017, a positive Scoping Study was announced which illustrates the potential for Debiensko to be a globally significant hard coking coal project with robust economics positioning the Company to become a large scale, low cost and long life premium hard coking coal supplier;

(vi)      On 3 April 2017, the Company successfully completed a placing of 11.5 million new ordinary shares to a number of UK based high quality institutional investors to raise approximately £3.2 million (~A$5.5 million) before costs;

(vii)     On 1 May 2017, the Company announced coal quality results which have confirmed Jan Karski's potential to produce high value ultra-low ash semi-soft coking coal; and

(viii)    On 25 May 2017, Prairie achieved a significant permitting milestone following official approval by the Lublin Regional Mining Authority of the Jan Karski DDP.

SIGNIFICANT EVENTS AFTER BALANCE DATE

(i)       On 6 July 2017, Prairie and CD Capital completed an additional investment of US$2.0 million (A$2.6 million) in the form of non-redeemable, non-interest-bearing convertible Loan Note 2;

(ii)      On 23 August 2017, Prairie announced that the spatial development plan had been approved at Jan Karski by the MoE meaning the rezoning of 56 hectares of agricultural land for industrial use is complete allowing for construction of a mine site, shafts and associated surface infrastructure at Jan Karski; and

(iii)     On 25 August 2017, the Company issued 5,775,000 Performance Rights which do not have an exercise price but are subject to various performance conditions to be satisfied prior to the relevant expiry dates between 31 December 2017 and 31 December 2020.

 

Other than as outlined above, at the date of this report, there are no matters or circumstances, which have arisen since 30 June 2017 that have significantly affected or may significantly affect:

·      the operations, in financial years subsequent to 30 June 2017, of the Consolidated Entity;

·      the results of those operations, in financial years subsequent to 30 June 2017, of the Consolidated Entity; or

·      the state of affairs, in financial years subsequent to 30 June 2017, of the Consolidated Entity.

DIRECTORS' INTERESTS

As at the date of this report, the Directors' interests in the securities of the Company are as follows:

 


Interest in securities at the date of this report


Ordinary Shares1

Incentive Options2

Performance Rights3

Mr Ian Middlemas

10,600,000

-

-

Mr Benjamin Stoikovich

1,500,000

-

3,100,000

Ms Carmel Daniele4

-

-

-

Mr Thomas Todd

2,800,000

1,400,0005

-

Mr Mark Pearce

3,000,000

-

-

Mr Todd Hannigan

3,504,223

1,400,0005

-

Notes:

1   "Ordinary Shares" means fully paid Ordinary Shares in the capital of the Company.

2   "Incentive Options" means an option to subscribe for one Ordinary Share in the capital of the Company.

3   "Performance Rights" means Performance Rights issued by the Company that convert to one Ordinary Share in the capital of the Company upon vesting of various performance conditions.

4   As founder and controller of CD Capital, Ms Daniele has an interest in the convertible notes and the right of CD Capital to acquire 44,776,119 Ordinary Shares and 21,388,060 $0.60 CD Options which may result in the issue of an additional 21,388,060 Ordinary Shares. Subsequent to the end of the financial year, Ms Daniele also acquired an interest for CD Capital to acquire a further 5,711,804 Ordinary shares through the issue of a $0.46 convertible note.

5   On 11 September 2014, 1,400,000 Incentive Options were issued to T2 Resources Pty Ltd, a Company in which Messrs Todd and Hannigan are directors and shareholders.

SHARE OPTIONS AND PERFORMANCE RIGHTS

At the date of this report the following Options and Performance Rights have been issued over unissued Ordinary Shares of the Company:

·        1,400,000 Incentive Options exercisable at $0.45 each on or before 30 June 2018;

·        200,000 Incentive Options exercisable at $0.50 each on or before 31 March 2020;

·        400,000 Incentive Options exercisable at $0.60 each on or before 31 March 2020;

·        700,000 Incentive Options exercisable at $0.80 each on or before 31 March 2020;

·        12,575,000 Performance Rights with various vesting conditions and expiry dates between 31 December 2017 and 31 December 2020;

·        Convertible note with a principal amount of $15,000,000, exchangeable into 44,776,120 ordinary shares at a conversion price of $0.335 per share with no expiry date (Loan Note 1);

·        Agreement to issue 22,388,060 Options exercisable at $0.60 each expiring 3 years after conversion of Loan Note 1; and

·        Convertible loan note with a principal amount of $2,627,430, convertible into 5,711,805 ordinary shares at a conversion price of $0.46 per share with no expiry date (Loan Note 2).

During the year ended 30 June 2017, 4,020,000 Ordinary Shares have been issued as a result of the exercise of 4,020,000 Incentive Options, and nil Ordinary Shares have been issued as a result of the conversion of Performance Rights. Subsequent to year end and up until the date of this report, nil Ordinary Shares have been issued as a result of the exercise of Incentive Options, and nil Ordinary Shares have been issued as a result of the conversion of Performance Rights.

INDEMNIFICATION AND INSURANCE OF OFFICERS AND AUDITORS

The Constitution of the Company requires the Company, to the extent permitted by law, to indemnify any person who is or has been a Director or officer of the Company or Group for any liability caused as such a Director or officer and any legal costs incurred by a Director or officer in defending an action for any liability caused as such a Director or officer.

During or since the end of the financial year, no amounts have been paid by the Company or Group in relation to the above indemnities.

During the financial year, an annualised insurance premium was paid to provide adequate insurance cover for directors and officers against any potential liability and the associated legal costs of a proceeding.

 

To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial year.

REMUNERATION REPORT (AUDITED)

This Remuneration Report, which forms part of the Directors' Report, sets out information about the remuneration of Key Management Personnel ("KMP") of the Group.

Details of Key Management Personnel

Details of the KMP of the Group during or since the end of the financial year are set out below:

Directors

Mr Ian Middlemas                  Chairman

Mr Benjamin Stoikovich        Director and CEO

Ms Carmel Daniele               Non-Executive Director

Mr Thomas Todd                    Non-Executive Director

Mr Mark Pearce                       Non-Executive Director

Mr Todd Hannigan                 Alternate Director

Mr Emil Morfett                        Non-Executive Director (resigned 31 July 2016)

 

Other KMP

Mr Miroslaw Taras                 Group Executive - Poland (appointed 13 October 2016)

Mr Artur Kluczny                      Group Executive - Poland

Mr Simon Kersey                    Chief Financial Officer (appointed 1 April 2017)

Mr Dylan Browne                    Company Secretary

Mr Janusz Jakimowicz          Group Executive - Poland (resigned 13 July 2016)

 

Unless otherwise disclosed, the KMP held their position from 1 July 2016 until the date of this report.

Remuneration Policy

The Group's remuneration policy for its KMP has been developed by the Board taking into account the size of the Group, the size of the management team for the Group, the nature and stage of development of the Group's current operations, and market conditions and comparable salary levels for companies of a similar size and operating in similar sectors. In addition to considering the above general factors, the Board has also placed emphasis on the following specific issues in determining the remuneration policy for KMP:

(a)    the Group is currently focused on undertaking exploration, appraisal and development activities;

(b)    risks associated with small cap resource companies whilst exploring and developing projects; and

(c)     other than profit which may be generated from asset sales, the Company does not expect to be undertaking profitable operations until sometime after the commencement of commercial production on any of its projects.

Executive Remuneration

The Group's remuneration policy is to provide a fixed remuneration component and a performance based component (short term incentive and long term incentive). The Board believes that this remuneration policy is appropriate given the considerations discussed in the section above and is appropriate in aligning executives' objectives with shareholder and business objectives.

Fixed Remuneration

Fixed remuneration consists of base salaries, as well as employer contributions to superannuation funds and other non-cash benefits. Non-cash benefits may include provision of car parking and health care benefits.

Fixed remuneration is reviewed annually by the Board. The process consists of a review of company and individual performance, relevant comparative remuneration externally and internally and, where appropriate, external advice on policies and practices.

Performance Based Remuneration - Short Term Incentive ("STI")

Some executives are entitled to an annual cash incentive payment upon achieving various key performance indicators ("KPI's"), as set by the Board. Having regard to the current size, nature and opportunities of the Company, the Board has determined that these KPI's will include measures such as successful commencement and/or completion of exploration activities (e.g. commencement/completion of exploration programs within budgeted timeframes and costs), establishment of government relationship (e.g. establish and maintain sound working relationships with government and officialdom), development activities (e.g. completion of infrastructure studies and commercial agreements), corporate activities (e.g. recruitment of key personnel and representation of the company at international conferences) and business development activities (e.g. corporate transactions and capital raisings). These measures were chosen as the Board believes they represent the key drivers in the short and medium term success of the Company's development. On an annual basis, and subsequent to year end, the Board assesses performance against each individual executive's KPI criteria. During the 2017 financial year, a total cash incentive of $256,487 (2016: Nil) was paid, or is payable, to KMP on achievement of KPIs as set by the Board which included: (i) Completed the acquisition of Karbonia after managing an intensive due diligence program; (ii) Completion of a positive Scoping Study for Debiensko; (iii) Completed the successful placement in April 2017 raising £3.2m and introducing prominent London fund managers to the Prairie share register; (iv) Agreed the additional US$2.0m Loan Note 2 investment with strategic partners CD Capital; (v) Announcement that the DDP for Jan Karski had been approved (vi) Establishing Jan Karski as an ultra-low ash premium semi-soft coking coal supplier; and (vii) Entered into a Strategic Co-operation Agreement with China Coal in November 2016 to complete a BFS for Jan Karski, and to provide Chinese bank debt funding in relation to a China Coal EPC contract;  

 

Performance Based Remuneration - Long Term Incentive

 

The Group has adopted a long-term incentive plan ("LTIP") comprising the "Prairie Employee and Contractors Performance Rights Plan" (the "Plan") to reward KMP and key staff (including eligible employees and contractors) for long-term performance. Shareholders approved the Plan in November 2013 at an Annual General Meeting of Shareholders and on 17 August 2017 shareholders approved an amended and renewal of the Plan.

The Plan provides for the issuance of unlisted Performance Rights which, upon satisfaction of the relevant performance conditions attached to the Performance Rights, will result in the issue of an Ordinary Share for each Performance Right. Performance Rights are issued for no consideration and no amount is payable upon conversion thereof.

 

To achieve its corporate objectives the Company needs to attract and retain its key staff, whether employees or contractors. The Board believes that grants made to eligible participants under the Plan provides a powerful tool to underpin the Company's employment and engagement strategy, and that the implementation of the Plan will:

(a)        enable the Company to recruit, incentivise and retain KMP and other eligible employees and contractors to assist with the completion of and achievement of the Company's strategic objectives;

 

(b)        link the reward of eligible employees and contractors with the achievements of strategic goals and the long term performance of the Company;

(c)        align the financial interests of eligible participants of the Plan with those of Shareholders; and

(d)        provide incentives to eligible employees and contractors of the Plan to focus on superior performance that creates Shareholder value.

Performance Rights granted under the Plan to eligible participants will be linked to the achievement by the Company of certain performance conditions as determined by the Board from time to time. These performance conditions must be satisfied in order for the Performance Rights to vest. The Performance Rights also vest where there is a change of control of the Company. Upon Performance Rights vesting, Ordinary Shares are automatically issued for no consideration. If a performance condition of a Performance Right is not achieved by the expiry date then the Performance Right will lapse.

 

During the financial year, Performance Rights were granted (and were on issue) to certain KMP and other employees with the following performance conditions:

(a)        Mining Concession Milestone means the granting of a mining concession at Jan Karski before 31 December 2017;

(b)        Decision to Commence Construction means a Board decision to commencement of construction activities (including securing adequate project finance to enable construction to commence) for Jan Karski (including but not limited the commencement of ground breaking for the construction of infrastructure, coal processing and/or coal breaker station facilities), in accordance with the activities outlined in the project development schedule and budget approved by the Board and forming part of a technical study before 31 December 2018;

(c)        Debiensko Feasibility Study means the announcement on ASX by the Company of a positive Feasibility Study at Debiensko before 31 December 2019; and;

(d)        Decision to Commence Underground Mining Construction means a Board decision to commencement of construction activities (including securing adequate project finance to enable construction to commence) for Debiensko (including but not limited the commencement of ground breaking for the construction of infrastructure, coal processing and/or coal breaker station facilities), in accordance with the activities outlined in the project development schedule and budget approved by the Board and forming part of a technical study before 31 December 2020.

In addition, the Group may choose to provide unlisted Incentive Options to some KMP as part of their remuneration and incentive arrangements in order to attract and retain their services and to provide an incentive linked to the performance of the Group. The Board's policy is to grant Incentive Options to KMP with exercise prices at or above market share price (at the time of agreement). As such, any Incentive Options granted to KMP are generally only of benefit if the KMP performed to the level whereby the value of the Group increased sufficiently to warrant exercising the Incentive Options granted.

Other than service-based vesting conditions (if any), there are generally no additional performance criteria attached to any Incentive Options granted to KMP, as given the speculative nature of the Group's activities and the small management team responsible for its running, it is considered that the performance of the KMP and the performance and value of the Group are closely related.

 

The Company prohibits executives entering into arrangements to limit their exposure to Incentive Options and Performance Rights granted as part of their remuneration package.

Non-Executive Director Remuneration

The Board's policy is for fees to Non-Executive Directors to be no greater than market rates for comparable companies for time, commitment and responsibilities. Given the current size, nature and risks of the Company, Incentive Options may also be used to attract and retain Non-Executive Directors. The Board determines payments to the Non-Executive Directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required.

The maximum aggregate amount of fees that can be paid to Non-Executive Directors is subject to approval by shareholders at a General Meeting. Director's fees paid to Non-Executive Directors accrue on a daily basis. Fees for Non-Executive Directors are not linked to the performance of the economic entity. However, to align Directors' interests with shareholder interests, the Directors are encouraged to hold shares in the Company and given the current size, nature and opportunities of the Company, Non-Executive Directors may receive Incentive Options in order to secure and retain their services.

Fees for the Chairman were set at $36,000 per annum (2016: $36,000) (excluding post-employment benefits).

Fees for Non-Executive Directors' were set at $20,000 per annum (2016: $20,000) (excluding post-employment benefits). These fees cover main board activities only. Non-Executive Directors may receive additional remuneration for other services provided to the Company, including but not limited to, membership of committees.

During the 2017 financial year, no Incentive Options or Performance Rights were granted to Non-Executive Directors.

The Company prohibits Non-Executive Directors entering into arrangements to limit their exposure to Incentive Options granted as part of their remuneration package.

Relationship between Remuneration of KMP and Shareholder Wealth

During the Company's exploration and development phases of its business, the Board anticipates that the Company will retain earnings (if any) and other cash resources for the exploration and development of its resource projects. Accordingly, the Company does not currently have a policy with respect to the payment of dividends and returns of capital. Therefore there was no relationship between the Board's policy for determining, or in relation to, the nature and amount of remuneration of KMP and dividends paid and returns of capital by the Company during the current and previous four financial years.

The Board did not determine, and in relation to, the nature and amount of remuneration of the KMP by reference to changes in the price at which shares in the Company traded between the beginning and end of the current and the previous four financial years. Discretionary annual cash incentive payments are based upon achieving various non-financial key performance indicators as detailed under "Performance Based Remuneration - Short Term Incentive" and are not based on share price or earnings. However, as noted above, certain KMP may receive Incentive Options in the future which generally will be of greater value to KMP if the value of the Company's shares increases sufficiently to warrant exercising the Incentive Options.

Relationship between Remuneration of KMP and Earnings

As discussed above, the Company is currently undertaking exploration and development activities, and does not expect to be undertaking profitable operations (other than by way of material asset sales, none of which is currently planned) until sometime after the successful commercialisation, production and sales of commodities from one or more of its projects. Accordingly the Board does not consider earnings during the current and previous four financial years when determining, and in relation to, the nature and amount of remuneration of KMP.

Emoluments of Directors and Executives

Details of the nature and amount of each element of the emoluments of each Director and KMP of Prairie Mining Limited are as follows:

 



Short-term benefits


Post-employment benefits
$

Non-Cash
Share-based payments
$




Total
$


Perfor-mance related
%



Salary & fees
$

Cash Incentive Payments
$

Living Allow-ance
$

Directors









Ian Middlemas

2017

36,000

-

-

3,420

-

39,420

-


2016

36,000

-

-

3,420

-

39,420

-

Benjamin Stoikovich

2017

376,963

169,233

-

-

(163,617)

382,579

44.2


2016

452,718

-

-

-

276,999

729,717

38.0

Carmel Daniele1

2017

-

-

-

-

-

-

-


2016

-

-

-

-

-

-

-

Thomas Todd

2017

20,000

-

-

1,900

-

21,900

-


2016

20,000

-

-

1,900

-

21,900

-

Mark Pearce

2017

20,000

-

-

1,900

-

21,900

-


2016

20,000

-

-

1,900

-

21,900


Todd Hannigan

2017

-

-

-

-

-

-

-


2016

-

-

-

-

-

-

-

Emil Morfett1,2

2017

2,706

-

-

-

-

2,706

-


2016

30,147

-

-

-

-

30,147

-

Anastasios Arima3

2016

11,174

-

-

1,062

-

12,236

-

John Welborn3

2016

4,470

-

-

425

-

4,895

-

Other KMP









Miroslaw Taras4

2017

76,533

24,371

-

-

36,403

137,307

44.3

Artur Kluczny

2017

124,457

24,420

-

-

(49,005)

99,872

-


2016

131,776

-

-

-

146,081

277,857

52.6

Simon Kersey5

2017

68,644

21,549

-

-

11,481

101,674

32.5

Dylan Browne

2017

128,244

16,914

-

-

15,341

160,499

20.1


2016

102,177

-

-

-

64,151

166,328

38.6

Janusz Jakimowicz6

2017

97,378

-

13,618

-

79,591

190,587

41.8


2016

332,504

-

49,437

-

592,433

974,374

60.8

Hugo Schumann7

2016

79,767

-

-

-

283,500

363,267

78.0

Total

2017

950,925

256,487

13,618

7,220

(69,806)

1,158,444



2016

1,220,733

-

49,437

8,707

1,363,164

2,642,041


Notes:

1   During the year Ms Daniele waived her Non-Executive Director remuneration. 

2   Mr Morfett was appointed on 21 September 2015 and resigned on 31 July 2016.

3   Messrs Arima and Welborn resigned on 21 September 2015.

4   Mr Taras was appointed as Group Executive - Poland on 13 October 2016.

5   Mr Kersey was appointed as Chief Financial Officer on 1 April 2017.

6   Mr Jakimowicz resigned as Group Executive - Poland on 13 July 2016 by giving 3 months' notice pursuant to his contract with the Group.

7   Mr Schumann resigned as Corporate Manager on 31 December 2015.

Incentive Options and Performance Rights Granted to KMP

Details of Incentive Options and Performance Rights granted as part of remuneration by the Company to each KMP of the Group during the financial year is as follows:

2017

Security

Grant
Date

Expiry Date

Vesting Date

Exercise Price

$

Grant Date Fair Value1

$

Number Granted

Number Vested

Other KMP









Simon Kersey

Rights

23 May 17

31 Dec 19

31 Dec 19

-

0.510

264,000

-


Rights

23 May 17

31 Dec 20

31 Dec 20

-

0.510

396,000

-

Notes:

1   For details on the valuation of the Incentive Options and Performance Rights, including models and assumptions used, please refer to Note 20 to the financial statements.

2   Each Incentive Option or Performance Right converts into one Ordinary Share of Prairie Mining Limited.

 

Details of the values of Incentive Options granted, exercised or lapsed for each KMP of the Group during the 2017 financial year are as follows:

2017

Value of Options Granted during the Year1

$

Value of Options exercised during the year

$

Value of Options included in remuneration report for the year

$

Remuneration for the year that consists of options

%

Director





Benjamin Stoikovich

-

255,0002

23,155

3.8

Other KMP





Dylan Browne

-

11,2003

-

-

Notes:

1   For details on the valuation of the Incentive Options, including models and assumptions used, please refer to Note 20.

2   On 16 June 2017, Mr Stoikovich exercised 1,500,000 Incentive Options. The value of the Incentive Options exercised is calculated by using the closing price on that date, being $0.52, less the exercise price $0.35.

3   On 16 June 2017, Mr Browne exercised 160,000 Incentive Options. The value of the Incentive Options exercised is calculated by using the closing price on that date, being $0.52, less the exercise price $0.45.

 

Employment Contracts with Directors and KMP

Mr Stoikovich has signed an appointment letter with an effective appointment date of 17 June 2013, under the terms of which he agrees to serve as a Director of the Company. Mr Stoikovich's appointment letter is terminable, pursuant to the Company's Constitution, by giving the Company notice in writing. Mr Stoikovich receives a fixed fee of £25,000 per annum pursuant to this appointment letter.

Windellama Capital Limited, a company of which Mr. Stoikovich is a director and shareholder, has a consulting agreement with the Company to provide project management and capital raising services (CEO services) related to Debiensko and Jan Karski. Under this agreement, Windellama Capital Limited will be paid a fixed annual consultancy fee of £225,000 per annum and an annual incentive payment of up to £100,000 payable upon the successful completion of key project milestones as determined by the Board. In addition, Windellama Capital Limited, subject to meeting the requirements of the Corporations Act and where necessary receiving the appropriate approvals, will be entitled to receive a payment incentive worth the annual fixed directors fees and consultancy fee in the event of a change of control clause being triggered with the Company. The consulting contract may be terminated by either Windellama Capital Limited or the Company by giving twelve months' notice. No amount is payable to Windellama in the event of termination of the contract arising from negligence or incompetence in regard to the performance of services specified in the contract. 

Mr Taras, was appointed as Group Executive - Poland on 13 October 2016. He has a consultancy agreement with the company dated 1 March 2015 and amended effective 1 September 2015, which provides for a consulting fee of PLN22,500 per month for strategic advisory services. The contract may be terminated by either party by giving one months' notice. Mr Taras also receives a fixed Management Board fee for PD Co sp. z o.o. (Jan Karski) of PLN4,400 per month.

Mr Kluczny, was appointed as Group Executive - Poland on 25 November 2014. He has a consultancy agreement with the company dated 12 December 2013 and amended effective 1 November 2014, which provides for a consulting fee of PLN26,600 per month for strategic advisory services. The contract may be terminated by either party by giving three months' notice.

Mr Simon Kersey, Chief Financial Officer, is engaged under a consultancy deed with Cheyney Resources Limited ("Cheyney") dated 1 April 2017. The agreement specifies the duties and obligations to be fulfilled by Mr Kersey as the Chief Financial Officer. The Company may terminate the agreement with three months written notice. No amount is payable in the event of termination for material breach of contract, gross misconduct or neglect. Cheyney receives an annual consultancy fee of £160,000 and will be eligible for a cash incentive of up to £50,000 per annum to be paid upon successful completion of KPIs. In addition, Cheyney, will be entitled to receive a payment incentive worth 6 months of the annual consultancy fee in the event of a change of control clause being triggered with the Company.

Mr Browne, Company Secretary, has a letter of appointment dated 1 October 2015 confirming the terms and conditions of his appointment. Mr Browne's appointment letter is terminable pursuant to the Company's Constitution. Mr Browne receives a fee of £6,000 per annum pursuant to this appointment letter. In addition Candyl Limited ('Candyl'), a company of which Mr Browne is a director and shareholder, has a consultancy agreement with the Company, which specifies the duties and obligations to be fulfilled by Mr Browne as the Company Secretary. Either party may terminate the agreement with three months written notice. No amount is payable in the event of termination for material breach of contract, gross misconduct or neglect. Candyl receives an annual consultancy fee of £63,000.

Loans from Key Management Personnel


No loans were provided to or received from Key Management Personnel during the year ended 30 June 2017 (2016: Nil).

 

Other Transactions

 

Apollo Group Pty Ltd, a Company of which Mr Mark Pearce is a Director and beneficial shareholder, was paid or is payable $150,000 (2016: $217,000) for the provision of serviced office facilities and administration services. The amount is based on a monthly retainer due and payable in advance, with no fixed term, and is able to be terminated by either party with one month's notice. This item has been recognised as an expense in the Statement of Profit or Loss and other Comprehensive Income. At 30 June 2017, $12,500 (2016: $12,500) was included as a current liability in the Statement of Financial Position.

 

As founder and controller of CD Capital, Ms Daniele has an interest in Loan Note 1 (the right of CD Capital to acquire 44,776,119 Ordinary Shares and 21,388,060 $0.60 CD Options which may result in the issue of an additional 21,388,060 Ordinary Shares). Subsequent to the end of the financial year, Ms Daniele also acquired an interest for CD Capital to acquire Loan Note 2 (a further 5,711,804 Ordinary shares through the issue of a $0.46 convertible note).

 

Equity instruments held by KMP

Incentive Option and Performance Right holdings of Key Management Personnel

2017

Held at
1 July 2016

Granted as Remuner-ation

Vested Options and Rights Exercised

Net Other Change

Held at
30 June 2017

Vested and exercise-  able at 30 June 2017

Directors







Ian Middlemas

-

-

-

-

-

-

Benjamin Stoikovich

5,500,000

-

(1,500,000)

(2,500,000)1

1,500,000

-

Carmel Daniele

-

-

-

-

-

-

Thomas Todd

1,400,000

-

-

-

1,400,000

-

Mark Pearce

-

-

-

-

-

-

Todd Hannigan

1,400,000

-

-

-

1,400,000

-

Emil Morfett

-

-

-

-

-2

-

Other KMP







Miroslaw Taras

850,0003

-

-

(150,000)4

700,000

-

Artur Kluczny

925,000



(475,000)4

450,000

-

Simon Kersey

-5

660,000

-

-

660,000

-

Dylan Browne

875,000

-

(160,000)

(365,000)4

350,000

-

Janusz Jakimowicz

2,400,000

-

-

-

2,400,0006

-

Notes:

1  On 30 June 2017, 1,500,000 Incentive Options exercisable at $0.45 each and 1,000,000 Performance Rights expired and were forfeited respectively.   

2     As at date of resignation being 31 July 2016.

3   As at date of appointment being 13 October 2016.

4   Forfeiture of Performance Rights on 30 June 2017 as the performance conditions had not been achieved.

5   As at appointment date being 1 April 2017.

6   As at date of resignation being 13 July 2016.

Shareholdings of Key Management Personnel

2017

Held at
1 July 2016

Granted as Remuneration

Options Exercised/
Rights Converted

Net Other Change

Held at
30 June 2017

Directors






Ian Middlemas

10,600,000

-

-

-

10,600,000

Benjamin Stoikovich

-

-

1,500,000

-

1,500,000

Carmel Daniele

-

-

-

-

-

Thomas Todd

2,800,000

-

-

-

2,800,000

Mark Pearce

3,000,000

-

-

-

3,000,000

Todd Hannigan

3,504,223

-

-

-

3,504,223

Emil Morfett

-

-

-

-

-1

Other KMP






Miroslaw Taras

150,0002

-

-

-

150,000

Artur Kluczny

570,238

-

-

-

570,238

Simon Kersey

370,0003

-

-

-

370,000

Dylan Browne

-

-

160,000

-

160,000

Janusz Jakimowicz

3,451,931

-

-

-

3,451,9314

Notes:

1   As at date of resignation being 31 July 2016.

2     As at date of appointment being 13 October 2016.

3   As at date of appointment being 1 April 2017.

4   As at date of resignation being 16 July 2016.

End of Remuneration Report

DIRECTORS' MEETINGS

The number of meetings of Directors held during the year and the number of meetings attended by each Director was as follows:

 


Board Meetings


Number eligible to attend

Number attended

Ian Middlemas

4

4

Benjamin Stoikovich

4

4

Carmel Daniele

4

3

Thomas Todd

4

4

Mark Pearce

4

4

Todd Hannigan (Alternate director to Mr Todd)

-

-

 

There were no Board committees during the financial year. The Board as a whole currently performs the functions of an Audit Committee, Risk Committee, Nomination Committee, and Remuneration Committee, however this will be reviewed should the size and nature of the Company's activities change.

NON-AUDIT SERVICES

Non-audit services provided by our auditors, Ernst & Young and related entities, are set out below. The Directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised.

 


2017

$

2016

$

Preparation of income tax return

13,905

8,000

DIVIDENDS

No dividends have been declared, provided for or paid in respect of the financial year ended 30 June 2017 (2016: nil).

AUDITOR'S INDEPENDENCE DECLARATION

The lead auditor's independence declaration for the year ended 30 June 2017 has been received and can be found on page 30 of the Directors' Report.

 

Signed in accordance with a resolution of the Directors.

 

 

 

Benjamin Stoikovich

Director

 

29 September 2017

 

 

Forward Looking Statements

This release may include forward-looking statements. These forward-looking statements are based on Prairie's expectations and beliefs concerning future events. Forward looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside the control of Prairie, which could cause actual results to differ materially from such statements. Prairie makes no undertaking to subsequently update or revise the forward-looking statements made in this release, to reflect the circumstances or events after the date of that release.

 

Cautionary Statement

The primary purpose of the Scoping Study is to establish whether or not to proceed to the next stage of feasibility studies and has been prepared to an accuracy level of ±30%. The Scoping Study results should not be considered a profit forecast or production forecast.

The Scoping Study is a preliminary technical and economic study of the potential viability of Debiensko. In accordance with the ASX listing rules, the Company advises that the Scoping Study referred to in this report is based on lower-level technical and preliminary economic assessments, and is insufficient to support estimation of Ore Reserves or to provide assurance of an economic development case at this stage, or to provide certainty that the conclusions of the Scoping Study will be realised.

The Production Target referred to in this report is based on 64% Indicated Resources and 36% Inferred Resources for the mine life covered under the Scoping Study. In accordance with the 26 year mine plan incorporated into the Scoping Study, the first 14 years of production will come exclusively from Indicated Resources. There is a low level of geological confidence associated with Inferred Mineral Resources and there is no certainty that further exploration work will result in the determination of Measured or Indicated Mineral Resources or that the Production Target or preliminary economic assessment will be realised.

The Scoping Study is based on the material assumptions outlined elsewhere in this report. These include assumptions about the availability of funding. While the Company considers all the material assumptions to be based on reasonable grounds, there is no certainty that they will prove to be correct or that the range of outcomes indicated by the Scoping Study will be achieved.

To achieve the potential mine development outcomes indicated in the Scoping Study, additional funding will be required. Investors should note that there is no certainty that the Company will be able to raise funding when needed however the Company has concluded it has a reasonable basis for providing the forward looking statements included in this announcement and believes that it has a "reasonable basis" to expect it will be able to fund the development of Debiensko. Given the uncertainties involved, investors should not make any investment decisions based solely on the results of the Scoping Study.

Competent Person Statements

Debiensko

The information in this report that relates to Mining, Coal Preparation, Infrastructure, Production Targets and Cost Estimation was extracted from Prairie's announcement dated 16 March 2017 entitled "Scoping Study Indicates Debiensko Mine Restart Will Deliver Lowest Cost Hard Coking Coal into Europe". The information in this announcement that relates to Exploration Results and Coal Resources was extracted from Prairies announcement dated 1 February 2017 entitled "Maiden 301 Million Tonnes Hard Coking Coal Resource Confirmed at Debiensko". Both announcements referred to above are available to view on the Company's website at www.pdz.com.au.

The information in the original announcement that relates to Mining, Coal Preparation, Infrastructure, Production Targets and Cost Estimation is based on, and fairly represents, information compiled or reviewed by Mr Maarten Velzeboer, a Competent Person, Member of the Institute of Materials, Minerals and Mining (MIMMM). Mr Velzeboer has worked in deep coal mines in New South Wales and Queensland in Australia and the Karaganda Coalfield in Kazakhstan. Mr Velzeboer has been engaged in a senior capacity in the design and development of proposed mines in Queensland, Australia, Botswana and Venezuela. Mr Velzeboer is employed by independent consultants Royal HaskoningDHV. Mr Velzeboer has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration andto the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.

The information in the original announcement that relates to Exploration Results and Coal Resources is based on, and fairly represents information compiled or reviewed by Mr Jonathan O'Dell, a Competent Person who is a Member of The Australasian Institute of Mining and Metallurgy who is a consultant of the Company. Mr O'Dell has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.

Prairie confirms that: a) it is not aware of any new information or data that materially affects the information included in the original announcements and; b) all material assumptions and technical parameters underpinning the Production Target, Coal Resource and related forecast financial information derived from the Production Target included in the original announcements continue to apply and have not materially changed; c) the form and context in which the relevant Competent Persons findings are presented in this announcement has not been materially modified from the original announcements.

Jan Karski

The information in this report that relates to Exploration Results was extracted from Prairie's announcement dated 1 May 2017 entitled "Coking Coal Quality Results Establish Jan Karski as A High Value Ultra-Low Ash Coking Coal Mine" which is available to view on the Company's website at www.pdz.com.au.

The information in the original announcement that relates to Exploration Results is based on, and fairly represents information compiled or reviewed by Mr Jonathan O'Dell, a Competent Person who is a Member of The Australasian Institute of Mining and Metallurgy. Mr O'Dell is a part time consultant of the Company. Mr O'Dell has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'.

Prairie confirms that: a) it is not aware of any new information or data that materially affects the information included in the original announcements; b) all material assumptions and technical parameters of the Exploration Results included in the original announcements continue to apply and have not materially changed; and c) the form and context in which the relevant Competent Persons' findings are presented in this presentation have not been materially modified from the original announcements.

 


CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2017

 


 

Note

 

2017

 

2016



$

$





Revenue

2(a)

1,340,749

309,969

Other income

2(b)

650,000

-

Exploration and evaluation expenses


(6,560,343)

(4,830,109)

Employment expenses

3

(156,171)

(289,008)

Administration and corporate expenses


(454,807)

(310,083)

Occupancy expenses


(433,201)

(465,018)

Share-based payment expenses

20

392,275

(1,723,271)

Business development expenses


(1,474,077)

(1,219,309)

Other expenses


(521,502)

-

Non-cash fair value movements

4

(4,264,925)

1,765,429

Loss before income tax


(11,482,002)

(6,761,400)

Income tax expense

5

-

-

Net loss for the year


(11,482,002)

(6,761,400)





Net loss attributable to members of Prairie Mining Limited


(11,482,002)

(6,761,400)





Other comprehensive income




Items that may be reclassified subsequently to profit or loss:




Exchange differences on translation of foreign operations


695,252

10,230

Total other comprehensive income for the year, net of tax


695,252

10,230

Total comprehensive loss for the year, net of tax


(10,786,750)

(6,751,170)





Total comprehensive loss attributable to members of Prairie Mining Limited


(10,786,750)

(6,751,170)





Basic and diluted loss per share from (cents per share)

16

(7.42)

(4.52)

 

The above Consolidated Statement of Profit or Loss and other Comprehensive Income should be read in conjunction with the accompanying notes

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2017

 



 

2017

 

2016


Note

$

$

ASSETS




Current Assets




Cash and cash equivalents

15(b)

16,826,854

18,063,119

Trade and other receivables           

6

1,094,997

265,635

Other financial assets

7

-

-

Total Current Assets


17,921,851

18,328,754





Non-current Assets




Property, plant and equipment

8

2,779,526

98,140

Exploration and evaluation assets

9

2,603,172

530,000

Total Non-current Assets


5,382,698

628,140





TOTAL ASSETS


23,304,549

18,956,894





LIABILITIES




Current Liabilities




Trade and other payables

10

2,109,127

805,313

Provisions

12

580,129

-

Other financial liabilities - cash settlement

11

1,783,283

-

Other financial liabilities - non-cash settlement

11

4,600,746

335,821

Total Current Liabilities


9,073,285

1,141,134





Non-Current Liabilities




Provisions

12

1,136,134

-

Total Current Liabilities


1,136,134

-





TOTAL LIABILITIES


10,209,419

1,141,134





NET ASSETS


13,095,130

17,815,760





EQUITY




Contributed equity

13

58,477,713

51,298,932

Reserves

14

2,258,339

3,043,493

Accumulated losses


(47,640,922)

(36,526,665)

TOTAL EQUITY


13,095,130

17,815,760

 

The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

AS AT 30 JUNE 2017

 


Ordinary Shares

Share- Based Payments Reserve

Foreign Currency Translation Reserve

Accumulated Losses

Total
Equity


$

$

$

$

$







Balance at 1 July 2016

51,298,932

3,010,300

33,193

(36,526,665)

17,815,760







Net loss for the year

-

-

-

(11,482,002)

(11,482,002)

Other comprehensive income:






Exchange differences on translation of foreign operations

-

-

695,252

-

695,252

Total comprehensive income/(loss) for the period

-

-

695,252

(11,482,002)

(10,786,750)







Transactions with owners recorded directly in equity






Issue of ordinary shares

5,382,522

-

-

-

5,382,522

Exercise of Incentive Options

1,649,000

-

-

-

1,649,000

Share issue costs

(477,091)

-

-

-

(477,091)

Expiry of Incentive Options

-

(367,745)


367,745

-

Forfeiture of Performance Rights

-

(1,626,437)

-

-

(1,626,437)

Transfer from share-based payments

624,350

(624,350)

-

-

-

Recognition of share-based payments

-

1,138,126

-

-

1,138,126

Balance at 30 June 2017

58,477,713

1,529,894

728,445

(47,640,922)

13,095,130







Balance at 1 July 2015

36,649,571

2,597,720

22,963

(29,870,996)

9,399,258







Net loss for the year

-

-

-

(6,761,400)

(6,761,400)

Other comprehensive income:






Exchange differences on translation of foreign operations

-

-

10,230

-

10,230

Total comprehensive income/(loss) for the period

-

-

10,230

(6,761,400)

(6,751,170)







Transactions with owners recorded directly in equity






Issue of ordinary shares

321,248

-

-

-

321,248

Share issue costs

(4,900)

-

-

-

(4,900)

Issue of Convertible Note (Note 13)

15,000,000

-

-

-

15,000,000

Recognition of Conversion right attached to Convertible Note (Note 13)

(968,284)




(968,284)

Costs to issue convertible note

(903,663)

-

-

-

(903,663)

Transfer from share-based payments

1,204,960

(1,204,960)

-

-

-

Forfeiture of Performance Rights

-

(8,356)

-

8,356

-

Lapse of Incentive Options

-

(97,375)

-

97,375

-

Recognition of share-based payments

-

1,723,271

-

-

1,723,271

Balance at 30 June 2016

51,298,932

3,010,300

33,193

(36,526,665)

17,815,760

 

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.

 

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2017

 


Note

 

2017

 

2016



$

$

CASH FLOWS FROM OPERATING ACTIVITIES




Payments to suppliers and employees     


(10,411,638)

(7,304,600)

Proceeds from property and gas sales


498,094

-

Interest received from third parties


368,380

254,470

NET CASH FLOWS USED IN OPERATING ACTIVITIES

15(a)

(9,545,164)

(7,050,130)





CASH FLOWS FROM INVESTING ACTIVITIES




Payments for plant and equipment


(219,071)

(76,600)

Purchase of controlled entity

24

(742,367)

-

Proceeds from sale of BMP


650,000

-

Recovery of pre-paid land deposit


1,990,895

-

Proceeds from sale of listed securities


-

8,702,720

NET CASH FLOWS FROM IN INVESTING ACTIVITIES


1,679,457

8,626,120





CASH FLOWS FROM FINANCING ACTIVITIES




Proceeds from issue of shares


6,935,489

-

Payments for share issue costs


(332,431)

(16,135)

Proceeds from issues of convertible note


-

15,000,000

Payments for issue of convertible note


-

(566,735)

NET CASH FLOWS FROM FINANCING ACTIVITIES


6,603,058

14,417,130





Net increase/(decrease) in cash and cash equivalents


(1,262,649)

15,993,120

Net foreign exchange differences


26,384

(6,410)

Cash and cash equivalents at beginning of year


18,063,119

2,076,409

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

15(b)

16,826,854

18,063,119

 

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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