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Prairie Mining #PDZ – Half Year report

PRAIRIE MINING LIMITED

Interim Financial Report for the Half-Year Ended 31 December 2018

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Śródroczny raport finansowy za drugie półrocze zakończone 31 grudnia 2018

ABN 23 008 677 852

 

CORPORATE DIRECTORY | ZBIÓR DANYCH KORPORACYJNYCH

 

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

Tel: +44 207 487 3900

 

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: +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

Directors’ Declaration

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

Notes to the Consolidated Financial Statements

The following sections are available in the full version of the Interim Financial Report on our website at www.pdz.com.au:  

Auditor’s Independence Declaration

Independent Auditor’s Review Report

 

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 during the half-year ended 31 December 2018 (“Consolidated Entity” or “Group”).

DIRECTORS

The names and details of the Company’s Directors in office at any time during the half-year and until the date of this report 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


Unless otherwise shown, all Directors were in office from the beginning of the half-year until the date of this report.

OPERATING AND FINANCIAL REVIEW

Operations 

Highlights during, and subsequent to, the end of the half-year include:

Possible Prairie and JSW Co-Operation

·      During the half-year, Prairie and JSW jointly reported that JSW’s due diligence had confirmed semi-soft coking coal quality at Jan Karski which JSW could potentially utilise, and had also indicated the technical feasibility and potential synergies in accessing Debiensko via JSW’s existing infrastructure. JSW estimates such synergies could potentially enable production within 18 months from all relevant permits and concession amendments being granted.

·      Prairie and JSW signed an extension to a non-disclosure agreement (“NDA”) in order to discuss a deal structure and commercial terms for any co-operation or transaction and for the adaption of mine plans for both Debiensko and Jan Karski to align with JSW’s development concepts and to maximise potential synergies.

·      There can be no certainty as to whether any transaction(s) will be agreed, or the potential form of such transaction(s). The Company will continue to comply with its continuous disclosure obligations and will make announcements to the market as required.

Debiensko Mine (Premium Hard Coking Coal)

·      In December 2016, following the acquisition of Debiensko, Prairie applied to the Ministry of Environment to amend the 50-year Debiensko mining concession to extend the time stipulated in the mining concession for first production of coal from 2018 to 2025. In January 2019, Prairie received a final “second instance” decision from the Ministry of Environment that has denied the amendment application.

·      The 50-year Debiensko mining concession remains in place and Prairie will strongly defend its position and continue to take relevant actions to pursue its legal rights regarding the Debiensko concession amendment, which includes an appeal that has been filed with Poland’s Administrative Court.

Jan Karski Mine (Semi-Soft Coking Coal)

·      Poland’s Supreme Administrative Court finally and fully rejected Bogdanka’s administrative complaints against Poland’s Ministry of Environment regarding the refusal of Bogdanka’s 2013 application for a mining concession over the K-6-7 deposit at Jan Karski.

·      The Supreme Administrative Court has also upheld the 2016 Regional Administrative Court decision that obliged the Ministry of Environment to approve Prairie’s Addendum No.3 for the K-6-7 deposit. Addendum No.3 is a detailed resource estimate for the K-6-7 deposit according to Polish geological reporting standards and is based on the results of Prairie’s exploration program at the deposit.

Corporate

·      Cash on hand of $8.6 million and CD Capital’s right to invest a further $68 million as a cornerstone investor.

Debiensko Mine

The Debiensko Mine (“Debiensko”) is a 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 opened in 1898 and was 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 Ministry of Environment (“MoE”) granted a 50-year mining concession 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.

Update on Concession Amendment Application

In December 2016, following the acquisition of Debiensko, Prairie applied to the MoE to amend the 50-year Debiensko mining concession.

The purpose of the concession amendment was to extend the time stipulated in the mining concession for first production of coal from 2018 to 2025. Prairie has now received a final “second instance” decision from the MoE that has denied the Company’s amendment application. Not meeting the production timeframe stipulated in the concession does not automatically infringe on the validity and expiry date of the Debiensko mining concession, which is June 2058. Prairie also holds a valid environmental consent decision enabling mine construction and continues to have valid tenure and ownership of land at Debiensko. In accordance with Polish law, the concession authority is required to provide an achievable and reasonable timeframe to remedy any non-compliance taking into account the nature of the non-compliance. Nevertheless, the second instance decision may result in the commencement of proceedings by the MoE to limit or withdraw the Debiensko mining concession.

Prairie will strongly defend its position and continue to take relevant actions to pursue its legal rights regarding the Debiensko concession, which includes an appeal that has been filed with Poland’s Administrative Court. Furthermore, Prairie has formally notified the Polish government that there exists an investment dispute between Prairie and the Polish Government. Prairie’s notification calls for prompt negotiations with the government to amicably resolve the dispute, and indicates Prairie’s right to submit the dispute to international arbitration in the event the dispute is not resolved amicably. The dispute arises out of certain measures taken by Poland in breach of the Energy Charter Treaty, the UK-Poland Bilateral Investment Treaty and the Australia-Poland Bilateral Investment Treaty.

The Company advises that it is not in a position to comment on the potential size of the claim that may be made against the Polish Government should the dispute not be resolved amicably. Prairie will update the market when it is in a position to do so.

Prairie can confirm that it is taking all necessary actions to preserve its rights and protect its investments in Poland. We remain hopeful that the dispute with the Polish Government can be resolved amicably. The Company will consider any other actions necessary to ensure its rights are preserved.

Prairie will continue to update the market in relation to this matter as required.

Jan Karski Mine

The Jan Karski Mine (“Jan Karski”) is a large scale semi-soft coking coal project located in the Lublin Coal Basin in south east Poland. The Lublin Coal Basin is an established coal producing province which is well serviced by modern and highly efficient infrastructure, offering the potential for low capital intensity mine development. Jan Karski is situated adjacent to Lubelski Węgiel BOGDANKA S.A.’s (“Bogdanka”) Bogdanka coal mine which has been in commercial production since 1982 and is the lowest cost hard coal producer in Europe.

Prairie’s use of modern exploration techniques continues to transform Jan Karski with latest drill results re-affriming the capability of the the project to produce high value ultra-low ash semi-soft coking coal (“SSCC”), known as Type 34 coal in Poland whilst confirming Jan Karski as a globally significant SSCC / Type 34 coking coal deposit with the potential to produce a high value ultra-low ash SSCC with a coking coal product split of up to 75%.

Key benefits for the local community and the Lublin and Chelm regions associated with the development, construction and operation of Jan Karski have been recognised as the following:

·        creation of 2,000 direct employment positions and 10,000 indirect jobs for the region once operational;

·        increasing skills of the workforce through the implementation of International Standard training programmes;

·        stimulating the development of education, health services and communications within the region; and

·        building a mine that creates new employment for generations to come and career paths for families to remain in the region.

 

Positive Rulings in Supreme Administrative Court

Poland’s Supreme Administrative Court has finally and fully rejected Bogdanka’s administrative complaints against Poland’s MoE regarding the refusal of Bogdanka’s 2013 application for a mining concession over the K-6-7 deposit at Jan Karski.

This Supreme Administrative Court decision is final, cannot be appealed and has upheld the 2016 Regional Administrative Court decision that confirms the original 2015 decision, which denied Bogdanka’s mining concession application. It has been concluded that granting a mining concession to Bogdanka would be a serious violation of the provisions of Poland’s Geological and Mining Law (“GML”), and would be contrary to the rule of law as embodied in the Polish constitution.

In a second ruling, the Supreme Administrative Court has upheld the 2016 Regional Administrative Court decision that obliged the MoE to approve Prairie’s submitted Addendum No.3 for the K-6-7 deposit. Addendum No.3 is a detailed resource estimate for the K-6-7 deposit according to Polish geological reporting standards and is based on the results of Prairie’s exploration program at the deposit. This complaint was brought against the MoE by Prairie in 2015.

The Court’s ruling will now be passed back to the MoE, and the MoE is obliged to promptly reassess the original decision taking into account the court’s verdict i.e., to issue a positive decision approving Addendum No.3.

The significance of this Supreme Administrative Court decision is that Bogdanka’s 2018 application for a mining concession over K-6-7 is now entirely inadmissible under Polish law (Bogdanka’s application was suspended following an injunction awarded in Prairie’s favour (see news release dated 26 April 2018) and requires the MoE to reject Bogdanka’s mining concession application).

The Supreme Administrative Court’s rulings re-affirm, beyond doubt, that Bogdanka’s claims over K-6-7 are without merit and inadmissible. The Board notes that Bogdanka’s claims have been rejected by the Polish courts in multiple rulings. Furthermore, the Court’s decision obliging the MoE to approve Addendum No.3 demonstrates that the MoE has acted illegally and failed to correctly implement Poland’s own mining laws.

Injunction against Poland’s Ministry of Environment Remains in Force

In April 2018, Prairie commenced legal proceedings against the MoE due to its failure to grant Prairie a Mining Usufruct Agreement over the concessions which form the Jan Karski Mine and in order to protect the Company’s security of tenure over the project.

Pursuant to the initiated legal proceedings:

·      the Polish Civil Court ruled in Prairie’s favour by granting an injunction preventing the MoE from granting prospecting, exploration or mining concessions and concluding usufruct agreements with any other party until full court proceedings are concluded; and

·      the decision provides security of tenure over the Jan Karski concessions and effectively safeguards Prairie’s rights at the project until full court proceedings have concluded which are anticipated to take 12 months or more to complete.

 

Possible Co-Operation between Prairie and JSW

Discussions continued throughout the half-year and remain ongoing between Prairie and JSW. JSW’s due diligence process at Jan Karski has confirmed that part of the “Lublin” deposit contains semi-soft coking coal (Type 34), which can be potentially utilised by JSW.

JSW has stated that due diligence at Debiensko has also indicated the technical feasibility and potential synergies of accessing initial seams at the Debiensko deposit utilising the existing infrastructure at JSW’s adjacent Knurow-Szczyglowice mine. Exploiting those synergies would require modifications to project configuration and obtaining relevant approvals, including concession modifications. JSW estimates that access via the Szczyglowice mine potentially enables the production of hard coking coal (Type 35) from Debiensko in up to 18 months from the time that relevant administrative permits and concession amendments are granted.

Subsequent to the half-year end, Prairie and JSW signed an extension to an NDA, with the term of the NDA now ending on 28 September 2019, in order to discuss a deal structure and commercial terms for any co-operation or transaction and for the adaption of mine plans for both Debiensko and Jan Karski to align with JSW’s development concepts and to maximise potential synergies

There can be no certainty as to whether any transaction(s) or co-operation will be agreed, or the potential form of such transaction(s) or co-operation. It is emphasised that any potential transaction(s), should they occur, may be subject to a number of conditions including, but not limited to, obtaining necessary corporate approvals, consents and approvals related to funding, consents from Poland’s Office of Competition and Consumer Protection (UOKiK) if required, and any other requirements that may relate to the strategy, objectives and regulatory regimes applicable to the respective issuers.

Results of Operations

The net loss of the Consolidated Entity for the half-year ended 31 December 2018 was $2,274,344 (31 December 2017: $5,297,797). Significant items contributing to the current half-year loss and the substantial differences from the previous half-year include to the following:

 

(i)         Exploration and evaluation expenses of $1,820,738 (31 December 2017: $4,047,621), 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;

 

(ii)        Business development expenses of $228,795 (31 December 2017: $512,267) which includes expenses relating to the Group’s investor relations activities during the six months to 31 December 2018 including brokerage fees, public relations, digital marketing, travel costs, attendances at conferences and business development consultant costs;

 

(iii)       Non-cash share-based payment gain of $162,766 (31 December 2017: expense of $200,422) 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. At 31 December 2018, 3.1 million unvested performance rights were forfeited with $1.3 million being reversed from the reserve to profit and loss;

 

(iv)       Non-cash fair value loss of nil (31 December 2017: $212,687) attributable to the conversion right of the original CD Capital convertible loan note (“Loan Note 1”) previously accounted for as a financial liability at fair value through profit and loss which was derecognised during the 2018 financial year following the conversion of Loan Note 1. The instrument was a non-cash derivative liability which was settled during the previous financial year via the issue of 44,776,120 Ordinary Shares and 22,388,060 unlisted options exercisable at $0.60 each on or before 30 May 2021 (“CD Options”) to CD Capital pursuant to the investment agreement completed in September 2015.

 

The Company did not pay any cash to settle the liability with the Company’s cash reserve unaffected by the derecognition of the conversion right; and

(v)        Revenue of $290,957 (31 December 2017: $441,023) consisting of interest revenue of $115,747 (31 December 2017: $189,164) and the receipt of $175,210 (31 December 2017: $251,859) of gas and property lease income derived at Debiensko.

Financial Position

At 31 December 2018, the Group had cash reserves of $8,582,124 (30 June 2018: $11,022,333).

At 31 December 2018, the Company had net assets of $10,037,917 (30 June 2018: $12,445,698) a decrease of approximately 19% compared with 30 June 2018. This is largely attributable to the decrease in cash reserves following operating expenditure.

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 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:

·        Continue in its discussions with JSW with respect to potential co-operation regarding Debiensko and Jan Karski; and

·        Continue project permitting activities including obtaining an Environmental Consent Decision at Jan Karski.

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. Furthermore, Prairie will continue to take all necessary actions to preserve the Company’s rights and protect its investments in Poland, if and as required.  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:

·        Risk of maintaining project concessions – The Company’s mining exploration and development activities at Debiensko and Jan Karski 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, in July 2015, Prairie announced that it had secured the Exclusive Right to apply for a Mining Concession for Jan Karski as a result of its Geological Documentation for the Jan Karski deposit being approved by Poland’s MoE.

The approved Geological Documentation covers areas of all four original Exploration Concessions granted to Prairie (K-4-5, K-6-7, K-8 and K-9) and includes the full extent of the targeted resources within the mine plan for Jan Karski. As a result of the Exclusive Right, Prairie was the only entity with a legal right to lodge a Mining Concession application over Jan Karski for the period up and until 2 April 2018. Under the Polish GML, a Mining Concession application comprises the submission of a Deposit Development Plan (“DDP”), approval of a spatial development plan (rezoning of land for mining use) and an Environmental Consent decision. Prairie has previously announced that the DDP and spatial development plans for Jan Karski have already been approved. However, as of the date of this report, Prairie has not yet received the required Environmental Consent decision, which remains pending. Prairie completed an Environmental and Social Impact Assessment and made submissions to RDOS for an Environmental Consent decision in October 2017. Prairie has not been able to apply for a Mining Concession for Jan Karski due to the delay in the issuance of an Environmental Consent decision. However, the Environmental Consent proceedings continue to progress and the Company has received notice from the RDOS to provide supplementary information to the originally submitted Environmental & Social Impact Assessment. There are no assurances that the Environmental Consent Decision will be awarded to the Company.

The approval of Prairie’s Geological Documentation in 2015 also conferred upon Prairie the legal right to apply for a Mining Usufruct Agreement over Jan Karski for an additional 12-month period beyond April 2018, which precludes any other parties being granted any licence over all or part of the Jan Karski concessions. Under Polish law, the MoE is strictly obligated, within three months of Prairie making an application for a Mining Usufruct Agreement, to grant the agreement. It should be noted that the MoE confirmed Prairie’s priority right in two written statements (i.e. in a final administrative decision dated 11 February 2016 and in a formal letter dated 13 April 2016). Prairie applied to the MoE for a Mining Usufruct Agreement over Jan Karski in late December 2017. As of the date of this report the MoE has not made available to Prairie a Mining Usufruct Agreement for Jan Karski, therefore breaching the three-month obligatory period for the agreement to be concluded.

Advice provided to Prairie concludes that failure of the MoE to grant Prairie the Mining Usufruct Agreement is a breach of Polish law. Accordingly, the Company commenced legal proceedings against the MoE through the Polish courts in order to protect the Company’s security of tenure over the Jan Karski concessions. Since the MoE has not provided a decision within three months from submission of Prairie’s Mining Usufruct application, the Polish civil court has the power to enforce conclusion of a Usufruct Agreement in place of the MoE. In the event that a Mining Usufruct Agreement is not made available to the Company on acceptable terms or the Company does not enter into a Mining Usufruct Agreement for any other reason, other parties may be able to apply for exploration or mining rights for all or part of the Jan Karski concession area. However, given that the Civil Court has approved Prairie’s motion for an injunction against the MoE, as described above, the MoE is now prevented from entering into a Usufruct agreement or concession with any other party besides Prairie until the full court proceedings are concluded.

Under the terms of the Debiensko Mining Concession issued in 2008 by the MoE (which is valid for 50 years from grant date), commencement of production was to occur by 1 January 2018. In December 2016, following the acquisition of Debiensko, Prairie applied to the MoE to amend the 50 year Debiensko Mining Concession. The purpose of the concession amendment was to extend the time stipulated in the Mining Concession for first production of coal from 2018 to 2025. Prairie has now received a final “second instance” decision from the MoE that has denied the Company’s amendment application. However, Prairie does still continue to have valid tenure and ownership of land at Debiensko. Not meeting the production timeframe stipulated in the concession does not automatically infringe on the validity and expiry date of the Debiensko mining concession, which is June 2058. Prairie also holds a valid environmental consent decision enabling mine construction. In accordance with Polish law, the concession authority is required to provide an achievable and reasonable timeframe to remedy any non-compliance taking into account the nature of the non-compliance. Nevertheless, the second instance decision may result in the commencement of proceedings by the MoE to limit or withdraw the Debiensko mining concession. Prairie will strongly defend its position and continue to take relevant actions to pursue its legal rights regarding the Debiensko concession, including an appeal that has been filed with Poland’s Administrative Courts and pursuing safeguards and protections under international law. Preliminary advice obtained by Prairie indicates that the MoE’s decision is fundamentally flawed, fails to comply with Polish, EU and international law, and demonstrates yet further evidence of the discriminatory treatment faced by Prairie as a foreign investor in Poland.

The MoE’s negative “second instance” decision may lead to the commencement of proceedings by the MoE to limit or withdraw the Debiensko concession. Prairie has also filed an appeal to Poland’s administrative courts. For this and other reasons, Prairie has formally notified the Polish government that there exists an investment dispute between Prairie and the Polish Government. The dispute arises out of certain measures taken by Poland in breach of the Energy Charter Treaty, the UK-Poland Bilateral Investment Treaty and the Australia-Poland Bilateral Investment Treaty. Prairie’s notification calls for prompt negotiations with the government to amicably resolve the dispute, and indicates Prairie’s right to submit the dispute and lodge a claim to international arbitration in the event the dispute is not resolved amicably.

There is however no assurance that any such appeals, legal proceedings, disputes, financial claims, applications (or renewals or alterations) of the Company concessions will be successful or that such applications, renewals, alterations, rights and title interests will not be revoked or significantly altered. If such appeals, legal proceedings, disputes, claims, applications, renewals or alterations of concessions applied for are not successful or granted or are in fact revoked as the case may be in the future, there is a risk that this may have a material adverse effect on the financial performance and operations at Jan Karski, Debiensko, the Company and on also the value of the Company’s securities.

·        Co-operation between Prairie and JSW may not occur – The Company and JSW have been in discussions for over 12 months in relation to a co-operation transaction with the current intention to continue negotiations over the coming months, with areas covered including potential deal structure and commercial terms for any co-operation or transaction and adaption of mine plans for both Debiensko and Jan Karski to align with JSW’s development concepts and maximise potential synergies. Any transaction(s), should it/they occur, may be subject to a number of conditions including, but not limited to, obtaining positive evaluations and expert opinions, necessary corporate approvals, consents and approvals related to funding, consents from Poland’s Office of Competition and Consumer Protection (UOKiK) if required, and any other requirements that may relate to the strategy, objectives and regulatory regimes applicable to the respective issuers, and which could also prevent a transaction from occurring or even completing. The non-occurrence of a transaction could also have a material impact on the value of the Company’s securities.

·        The Company’s activities will require further capital in future years – At the date of this report, the Company has cash of approximately $8.6 million. 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 their $0.60 CD Options. 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. 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 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 Exploration Concession which comprises of the Jan Karski Mine). All applications and appeals previously made by Bogdanka have been outright rejected including during the period when Poland’s Supreme Administrative Court has finally and fully rejected their administrative complaints against MoE regarding the refusal of Bogdanka’s application for a mining concession over the K-6-7 Exploration Concession. There is however no guarantee that Bogdanka will not seek to file further appeals against future decisions or submit further applications for a Mining Concession over the K-6-7 Exploration Concession.

·        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, foreign ownership of coal projects and the movement to a nationalistic policy may adversely affect the permitting, approvals process, operations and/or profitability of the Company. The Company continues to consult with the various levels of Government but there can be no assurances that current or 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. For example, recent legislative changes and proposed legislative changes initiated by Poland’s governing Law and Justice party have called into question the independence of the judiciary and subsequently the rule of law in Poland. In December 2017, the Council of Europe’s Commission for Democracy through Law (“Venice Commission”) found that the cumulative effect of proposed reforms to two laws and recently adopted amendments to a third law “puts at serious risk” the independence of “all parts” of the Polish judiciary.

The opinion concerned two drafts recently submitted by the Polish President to the Sejm (Polish Parliament), to amend the Act on the National Council of the Judiciary and the Act on the Supreme Court, as well as recently already adopted amendments to the Act on Ordinary Courts. Additionally, and during the half-year, the European Commission formally notified Poland that it had initiated infringement proceedings against the country because of the adoption of the controversial amendments to the Supreme Court Act.

·        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.

SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD

 

(i)         On 18 January 2019, the Company announced that Poland’s Supreme Administrative Court had finally and fully rejected Bogdanka’s appeal against Poland’s MoE regarding the rejection of Bogdanka’s 2013 application for a mining concession over the K-6-7 deposit at the Jan Karski;

 

(ii)        On 18 January 2019, the Company announced that it had received a final “second instance” decision from the MoE denying the Company’s amendment application to extend the time stipulated in the Debiensko mining concession for first production of coal from 2018 to 2025. Prairie will strongly defend its position and continue to take relevant actions to pursue its legal rights regarding the Debiensko concession, which includes an appeal that has been filed with Poland’s Administrative Court; and

 

(iii)       On 13 February 2019, the Company announced that it had formally notified the Polish government that there exists an investment dispute between Prairie and the Government. Prairie’s notification calls for prompt negotiations with the government to amicably resolve the dispute, and indicates Prairie’s right to submit the dispute to international arbitration in the event the dispute is not resolved.

Other than the above, there were no significant events occurring after balance date requiring disclosure.

 

AUDITOR’S INDEPENDENCE DECLARATION

Section 307C of the Corporations Act 2001 requires our auditors, Ernst and Young, to provide the Directors of Prairie Mining Limited with an Independence Declaration in relation to the review of the half-year financial report. This Independence Declaration is on page 23 and forms part of this Directors’ Report.

Signed in accordance with a resolution of the Directors.

 

BEN STOIKOVICH

Director

 

 

12 March 2019

Forward Looking Statements

This report 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.

DIRECTORS’ DECLARATION

In accordance with a resolution of the Directors of Prairie Mining Limited, I state that:

In the reasonable opinion of the Directors and to the best of their knowledge:

(a)        the attached financial statements and notes thereto for the period ended 31 December 2018 are in accordance with the Corporations Act 2001, including:

(i)         complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001; and

(ii)        giving a true and fair view of the financial position of the Group as at 31 December 2018 and of its performance for the half-year ended on that date; and

(b)        The Directors Report, which includes the Operating and Financial Review, includes a fair review of the information required by:

(i)      DTR4.2.7R of the Disclosure and Transparency Rules in the United Kingdom, being an indication of important events during the first six months of the current financial year and their impact on the half-year financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and

(ii)     DTR4.2.8R of the Disclosure and Transparency Rules in the United Kingdom, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Group during that period, and any changes in the related party transactions described in the last annual report that could have such a material effect; and

(c)        there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

On behalf of the Board

  

BEN STOIKOVICH

Director

  

12 March 2019

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE HALF-YEAR ENDED 31 DECEMBER 2018

 

 

Note

Half-Year Ended
31 December 2018
$

Half-Year Ended
31 December 2017
$

Revenue

4(a)

290,957

441,023

Exploration and evaluation expenses

(1,820,738)

(4,047,621)

Employment expenses

(216,730)

(260,878)

Administration and corporate expenses

(138,566)

(270,671)

Occupancy expenses

(293,288)

(234,274)

Share-based payment expenses

162,766

(200,422)

Business development expenses

(228,795)

(512,267)

Other expenses

(29,950)

Fair value movements

5

(212,687)

Loss before income tax

(2,274,344)

(5,297,797)

Income tax expense

Net loss for the period

(2,274,344)

(5,297,797)

Net loss attributable to members of Prairie Mining Limited

(2,274,344)

(5,297,797)

Other comprehensive income

Items that may be reclassified subsequently to profit or loss:

Exchange differences on translation of foreign operations

68,214

42,842

Total other comprehensive income/(loss) for the period

68,214

42,842

Total comprehensive loss for the period

(2,206,130)

(5,254,955)

Total comprehensive loss attributable to members of Prairie Mining Limited

(2,206,130)

(5,254,955)

Basic and diluted loss per share (cents per share)

(1.04)

(3.16)

 

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 31 DECEMBER 2018

 

Note

31 December 2018
$

30 June
2018

$

ASSETS

Current Assets

Cash and cash equivalents

8,582,124

11,022,333

Trade and other receivables

6

778,122

953,528

Total Current Assets

9,360,246

11,975,861

Non-Current Assets

Property, plant and equipment

7

2,402,928

2,363,151

Exploration and evaluation assets

8

2,758,785

2,656,968

Total Non-Current Assets

5,161,713

5,020,119

TOTAL ASSETS

14,521,959

16,995,980

LIABILITIES

Current Liabilities

Trade and other payables

676,593

865,265

Provisions

10(a)

448,905

532,820

Other financial liabilities

9

1,946,687

1,891,573

Total Current Liabilities

3,072,185

3,289,658

Non-Current Liabilities

Provisions

10(b)

1,411,857

1,260,624

Total Non-Current Liabilities

1,411,857

1,260,624

TOTAL LIABILITIES

4,484,042

4,550,282

NET ASSETS

10,037,917

12,445,698

EQUITY

Contributed equity

11

75,486,915

75,525,800

Reserves

12

3,488,922

3,583,474

Accumulated losses

(68,937,920)

(66,663,576)

TOTAL EQUITY

10,037,917

12,445,698

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

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE HALF-YEAR ENDED 31 DECEMBER 2018

 

Contributed Equity

Share-based Payments Reserve

Foreign Currency Translation Reserve

Accumulated Losses

Total
Equity

$

$

$

$

$

Balance at 1 July 2018

75,525,800

2,486,718

1,096,756

(66,663,576)

12,445,698

Net loss for the period

(2,274,344)

(2,274,344)

Other comprehensive income for the half-year

Exchange differences on translation of foreign operations

68,214

68,214

Total comprehensive income/(loss) for the period

68,214

(2,274,344)

(2,206,130)

Share issue costs

(38,885)

(38,885)

Forfeiture of performance rights

(1,266,880)

(1,266,880)

Recognition of share-based payments

1,104,114

1,104,114

Balance at 31 December 2018

75,486,915

2,323,952

1,164,970

(68,937,920)

10,037,917

Balance at 1 July 2017

58,477,713

1,529,894

728,445

(47,640,922)

13,095,130

Net loss for the period

(5,297,797)

(5,297,797)

Other comprehensive income for the half-year

Exchange differences on translation of foreign operations

42,842

42,842

Total comprehensive income/(loss) for the period

42,842

(5,297,797)

(5,254,955)

Issue of convertible notes (Loan Note 2) (Note 11)

2,627,430

2,627,430

Convertible note issue costs

(27,418)

(27,418)

Share issue costs

(5,869)

(5,869)

Forfeiture of performance rights

(1,134,010)

(1,134,010)

Recognition of share-based payments

1,334,432

1,334,432

Balance at 31 December 2017

61,071,856

1,730,316

771,287

(52,938,719)

10,634,740 

 

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

 

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE HALF-YEAR ENDED 31 DECEMBER 2018

 

Half-Year Ended
31 December 2018
$

Half-Year Ended
31 December 2017
$

Cash flows from operating activities

Payments to suppliers and employees

(2,675,465)

(5,078,182)

Proceeds from property and gas sales

122,475

248,859

Interest revenue from third parties        

179,715

202,758

Net cash outflow from operating activities

(2,373,275)

(4,626,565)

Cash flows from investing activities

Purchase of plant and equipment

(60,008)

Proceeds from sale of property

495,008

Net cash inflow from investing activities

435,000

Cash flows from financing activities

Proceeds from issue of convertible note

2,627,430

Payments for issue of convertible note

(54,611)

Payments for share issue costs

(66,934)

(61,342)

Net cash inflow/(outflow) from financing activities

(66,934)

2,511,477

Net decrease in cash and cash equivalents

(2,440,209)

(1,680,088)

Cash and cash equivalents at the beginning of the period

11,022,333

16,826,854

Cash and cash equivalents at the end of the period

8,582,124

15,146,766

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

 

NOTES TO THE CONSOLIDATED

FINANCIAL STATEMENTS

FOR THE HALF-YEAR ENDED 31 DECEMBER 2018

 

1.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)        Statement of Compliance

The interim consolidated financial statements of the Group for the half-year ended 31 December 2018 were authorised for issue in accordance with the resolution of the Directors.

 

This general purpose condensed financial report for the interim half-year reporting period ended 31 December 2018 has been prepared in accordance with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001.

 

This interim financial report does not include all the notes of the type normally included in an annual financial report.  Accordingly, this report is to be read in conjunction with the annual report of Prairie Mining Limited for the year ended 30 June 2018 and any public announcements made by the Group and its controlled entities during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

 

2.         BASIS OF PREPARATION AND CHANGES TO THE GROUP’S ACCOUNTING POLICIES

(a)        Basis of Preparation of Half-Year Financial Report

The consolidated financial statements have been prepared on the basis of historical cost, except for the revaluation of certain non-current assets, labilities and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars.

The Group has updated the classification of expenses to make the Statement of Profit or Loss and other Comprehensive Income more relevant to users of the financial report. This has resulted in the reclassification of some items in the prior year, however, has not impacted the reported loss for the year or earnings per share.

(b)        New Standards, interpretations and amendments thereof, adopted by the Group

The accounting policies and methods of computation adopted in the preparation of the consolidated half-year financial report are consistent with those adopted and disclosed in the company’s annual financial report for the year ended 30 June 2018, other than as detailed below.

In the current period, the Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the “AASB”) that are relevant to its operations and effective for annual reporting periods beginning on or after 1 July 2018.

 

New and revised Standards and amendments thereof and Interpretations effective for the current half-year that are relevant to the Group include:

 

·           AASB 9 Financial Instruments, and relevant amending standards;

·           AASB 15 Revenue from Contracts with Customers, and relevant amending standards;

·           AASB 2016-5 Amendments to Australian Accounting Standards – Classification and Measurement of Share-based Payment Transactions; and

·           AASB Interpretation 22 Foreign Currency Transactions and Advance Consideration.

The adoption of these new and revised standards has not resulted in any significant changes to the Group’s accounting policies or to the amounts reported for the current or prior periods. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. A discussion on the impact of the adoption of AASB 9 is included below.

(c)        Changes in Accounting Policies

The accounting policies adopted in the preparation of the half-year financial report are consistent with those applied in the preparation of the Group’s annual financial report for the year ended 30 June 2018, except for new standards, amendments to standards and interpretations effective 1 January 2018 as set out in this note 2(c). The Company has set out below the main changes due to the adoption of AASB 9.

Impact of Changes – AASB 9 Financial Instruments

The Company has adopted AASB 9 from 1 July 2018 which have resulted in changes to accounting policies and the analysis for possible adjustments to amounts recognised in the Interim Financial Reports. In accordance with the transitional provisions in AASB 9, the reclassifications and adjustments are not reflected in the balance sheet as at 30 June 2018 but recognised in the opening balance sheet as at 1 July 2018. As per the new impairment model introduced by AASB 9, the Company has not recognised a loss allowance on trade and other receivables.

Classification and Measurement

On 1 July 2018, the Company has assessed which business models apply to the financial instruments held by the Company and have classified them into the appropriate AASB 9 categories. The main effects resulting from this reclassification are shown in the table below.

On adoption of AASB 9, the Company classified financial assets and liabilities as subsequently measured at either amortised cost or fair value, depending on the business model for those assets and on the asset’s contractual cash flow characteristics. There were no changes in the measurement of the Company’s financial instruments.

There was no impact on the statement of comprehensive income or the statement of changes in equity on adoption of AASB 9 in relation to classification and measurement of financial assets and liabilities.

The following table summarises the impact on the classification and measurement of the Group’s financial instruments at 1 July 2018:

Presented in statement of financial position

Financial Asset/liability

AASB 139

AASB 9

Reported $

Restated $

Cash and cash equivalents

Bank deposits

Loans and receivables

Amortised Cost

No change

No change

Trade and other receivables/payables

Loans and receivables

Loans and receivables

Amortised Cost

No change

No change

Financial liabilities at amortised cost

Financial liability

Amortised Cost

Amortised Cost

No change

No change

The Company does not currently enter into any hedge accounting and therefore there is no impact to the Company’s Interim Financial Reports.

Impairment

AASB 9 introduces a new expected credit loss (“ECL”) impairment model that requires the Company to adopt an ECL position across the Company’s financial assets at 1 July 2018. The Company’s receivables balance consists of GST refunds from the Australian Tax Office, interest receivables from recognised Australian banking institutions and gas and property income from a single customer. While cash and cash equivalents are also subject to the impairment requirements of AASB 9, an impairment loss would be considered immaterial.

The loss allowances for financial assets are based on the assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Company’s past history, existing market conditions as well as forward looking estimates at the end of each reporting period. Given the Company’s receivables are from the Australian Tax Office, recognised Australian banking institutions and a single customer with no history of non-payment, the Company has assessed that the risk of default is minimal and as such, no impairment loss has been recognised against these receivables as at 31 December 2018.

Impact of Changes – AASB 15 Revenue

AASB 15 established a comprehensive framework for determining whether, how much, and when revenue is recognised. It replaced AASB 118 Revenue and AASB 111 Construction Contracts and related interpretations. The Group has adopted AASB 15 from 1 July 2018 which has resulted in changes to its accounting policy. However, there have been no adjustments to amounts recognised in the half-year consolidated financial statements as revenue from customer contracts is considered to be immaterial.

(d)        Issued standards and interpretations not early adopted

Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted by the Company for the reporting period ended 31 December 2018. Those which may be relevant to the Company are set out in the table below, but these are not expected to have any significant impact on the Company’s financial statements:

Standard/Interpretation

Application Date of Standard

Application Date for Company

AASB 16 Leases

1 January 2019

1 July 2019

Interpretation 23 Uncertainty over Income Tax Treatments

1 January 2019

1 July 2019

AASB 2017-7 Amendments – Long-term Interests in Associates and Joint Venture Amendments to IAS 28 and Illustrative Example – Long-term Interests in Associates and Joint Ventures

1 January 2019

1 July 2019

AASB 2018-1 Amendments – Annual Improvements 2015-2017 Cycle

1 January 2019

1 July 2019

AASB 2018-2 Amendments – Plan Amendment, Curtailment or Settlement (AASB 119)

1 January 2019

1 July 2019

 

AASB 16 Leases

AASB 16 Leases will replace existing accounting requirements for leases under AASB 117 Leases. Under current requirements, leases are classified based on their nature as either finance leases which are recognised on the Statement of Financial Position, or operating leases, which are not recognised on the Statement of Financial Position.

Under AASB 16 Leases, the Company’s accounting for operating leases as a lessee will result in the recognition of a right-of-use (“ROU”) asset and an associated lease liability on the Statement of Financial Position. The lease liability represents the present value of future lease payments, with the exception of short-term and low value leases. An interest expense will be recognised on the lease liabilities and a depreciation charge will be recognised for the ROU assets. There will also be additional disclosure requirements under the new standard.

Although the Company is yet to complete its assessment, the adoption of AASB 16 is expected to have an immaterial impact on the financial statements of the Company due to the minimal number, if any, of non-cancellable leases currently entered into by the Company which would not fall under a short-term or low value exception.

Transition

The Company will initially apply AASB 16 on 1 July 2019, using the modified retrospective approach. Therefore, the cumulative effect of adopting AASB 16 will be recognised as an adjustment to the opening balance of retained earnings at 1 July 2019, with no restatement of comparative information.

When applying the modified retrospective approach to leases previously classified as operating leases under AASB 117, the Company can elect, on a lease-by-lease basis, whether to apply a number of practical expedients on transition. The Company is assessing the potential impact of using these practical expedients.

 

Although the Company is yet to complete its assessment, it is expected that the adoption of AASB 16 will have minimal impact if any on the financial statements of the Company. The actual impact of applying AASB 16 on the financial statements in the period of initial application will depend however on future economic conditions, including the Company’s borrowing rate, the composition of the Company’s lease portfolio, the extent to which the Company elects to use practical expedients and recognition exemptions, and the new accounting policies, which are subject to change until the Company presents its first financial statements that include the date of initial application.

 

3.         SEGMENT INFORMATION

AASB 8 requires operating segments to be identified on the basis of internal reports about components of the Consolidated Entity that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance.

The Consolidated Entity operates in one segment, being mineral exploration. This is the basis on which internal reports are provided to the Chief Executive Officer for assessing performance and determining the allocation of resources within the Consolidated Entity.

 

                        

Half-Year ended 31 December 2018
$

Half-Year Ended
31 December 2017
$

4.         REVENUE AND OTHER INCOME

     

(a)        Revenue

Interest Income

115,747

189,164

Gas and property lease income

175,210

251,859

290,957

441,023

 

                        

Half-Year ended 31 December 2018
$

Half-Year Ended
31 December 2017
$

5.         FAIR VALUE MOVEMENTS

Fair value loss on financial liabilities at fair value through profit and loss1

(212,687)

Notes:

1            The fair value movements were previously as result of the fair value measurements of the conversion rights (i.e. the right to receive Ordinary Shares and the CD Options) associated with Loan Note 1. During the 2018 financial year, Loan Note 1 was converted into Ordinary Shares, the Company issued the CD Options and the associated financial liabilities were reclassified from a liability to equity and required no cash settlement.

 

 

 

31 December 2018
$

30 June
2018
$

6.         TRADE AND OTHER RECEIVABLES

Trade receivables

198,916

309,545

Accrued interest

31,686

38,414

Deposits/prepayments

355,856

437,402

GST and other receivables

191,664

168,167

778,122

953,528

 

 

 

31 December 2018
$

30 June
2018
$

7.         PROPERTY, PLANT AND EQUIPMENT

     

(a)        Property, Plant and Equipment

Gross carrying amount at cost

2,642,828

2,605,064

Accumulated depreciation

(239,900)

(241,913)

Carrying amount at end of the period

2,402,928

2,363,151

(b)        Reconciliation

Carrying amount at beginning of the period, net of accumulated depreciation

2,363,151

2,779,526

Additions

65,450

Disposals/write-offs

(15,271)

(457,979)

Depreciation charge

(48,840)

(106,716)

Exchange differences on translation of foreign operations

103,888

82,870

Carrying amount at end of the period

2,402,928

2,363,151

 

 

 

31 December 2018
$

30 June
2018
$

8.         EXPLORATION AND EVALUATION ASSETS

     

(a)        Areas of Interest

Jan Karski Mine1

530,000

530,000

Debiensko Mine2

2,228,785

2,126,968

Carrying amount at end of the period3

2,758,785

2,656,968

(b)        Reconciliation

Carrying amount at beginning of the period

2,656,968

2,603,172

Exchange differences on translation of foreign operations

101,817

53,796

Carrying amount at end of the period3

2,758,785

2,656,968

Notes:

1                  In July 2015, Prairie announced that it had secured the Exclusive Right to apply for a Mining Concession for Jan Karski as a result of its Geological Documentation for the Jan Karski deposit being approved by Poland’s MoE. The approved Geological Documentation covers areas of all four original Exploration Concessions granted to Prairie (K-4-5, K-6-7, K-8 and K-9) and includes the full extent of the targeted resources within the mine plan for Jan Karski. As a result of the Exclusive Right, Prairie was the only entity with a legal right to lodge a Mining Concession application over Jan Karski for the period up and until 2 April 2018. Under the Polish GML, a Mining Concession application comprises the submission of a Deposit Development Plan (“DDP”), approval of a spatial development plan (rezoning of land for mining use) and an Environmental Consent decision. Prairie has previously announced that the DDP and spatial development plans for Jan Karski have already been approved.

 

However, as of the date of this report, Prairie has not yet received the required Environmental Consent decision, which remains pending. Prairie completed an Environmental and Social Impact Assessment and made submissions to RDOS for an Environmental Consent decision in October 2017. Prairie has not been able to apply for a Mining Concession for Jan Karski due to the delay in the issuance of an Environmental Consent decision. However, the Environmental Consent proceedings continue to progress and the Company has provided to RDOS supplementary information to the originally submitted Environmental & Social Impact Assessment, as requested by RDOS.

 

The approval of Prairie’s Geological Documentation in 2015 also conferred upon Prairie the legal right to apply for a Mining Usufruct Agreement over Jan Karski for an additional 12-month period beyond April 2018, which precludes any other parties being granted any licence over all or part of the Jan Karski concessions. Under Polish law, the MoE is strictly obligated, within three months of Prairie making an application for a Mining Usufruct Agreement, to grant the agreement. It should be noted that the MoE confirmed Prairie’s priority right in two written statements (i.e. in a final administrative decision dated 11 February 2016 and in a formal letter dated 13 April 2016). Prairie applied to the MoE for a Mining Usufruct Agreement over Jan Karski in late December 2017. As of the date of this report the MoE has not made available to Prairie a Mining Usufruct Agreement for Jan Karski, therefore breaching the three-month obligatory period for the agreement to be concluded. Advice provided to Prairie concludes that failure of the MoE to grant Prairie the Mining Usufruct Agreement is a breach of Polish law. Accordingly, the Company commenced legal proceedings against the MoE through the Polish courts in order to protect the Company’s security of tenure over the Jan Karski concessions.

 

Since the MoE has not provided a decision within three months regarding Prairie’s Mining Usufruct application, the Polish civil court has the power to enforce conclusion of a Usufruct Agreement in place of the MoE. In the event that a Mining Usufruct Agreement is not made available to the Company on acceptable terms or the Company does not enter into a Mining Usufruct Agreement for any other reason, other parties may be able to apply for exploration or mining rights for all or part of the Jan Karski concession area. However, given that the Civil Court has approved Prairie’s motion for an injunction against the MoE, as described above, the MoE is now prevented from entering into a Usufruct agreement or concession with any other party besides Prairie until the full court proceeding has concluded (which is expected to take 12 months to conclude).

 

2                  Under the terms of the Debiensko Mining Concession issued in 2008 by the MoE (which is valid for 50 years from grant date), commencement of production was to occur by 1 January 2018. In December 2016, following the acquisition of Debiensko, Prairie applied to the MoE to amend the 50 year Debiensko Mining Concession. The purpose of the concession amendment was to extend the time stipulated in the Mining Concession for first production of coal from 2018 to 2025. Prairie has now received a final “second instance” decision from the MoE that has denied the Company’s amendment application. However, Prairie does still continue to have valid tenure and ownership of land at Debiensko. Not meeting the production timeframe stipulated in the concession does not automatically infringe on the validity and expiry date of the Debiensko mining concession, which is June 2058. Prairie also holds a valid environmental consent decision enabling mine construction. However, the concession authority now has the right to request the concession holder to remove any infringements related to non-compliance with the conditions of the mining concession and determine a reasonable date for removal of the infringements. In accordance with Polish law, the concession authority is required to provide an achievable and reasonable timeframe to remedy any non-compliance taking into account the nature of the non-compliance. Nevertheless, the second instance decision may result in the commencement of proceedings by the MoE to limit or withdraw the Debiensko mining concession. Prairie will strongly defend its position and continue to take relevant actions to pursue its legal rights regarding the Debiensko concession, including filing an appeal to Poland’s Administrative Courts and pursuing safeguards and protections under international law. Prairie believes that the MoE’s decision is fundamentally flawed, fails to comply with Polish, EU and international law, and demonstrates yet further evidence of the discriminatory treatment faced by Prairie as a foreign investor in Poland. The Company will consider any other actions necessary to ensure its concession rights are preserved, which may result in the Company taking further action against the MoE and the Government of Poland, including invoking the protection afforded to the Company under relevant bi-lateral or multi-lateral investment treaties.

 

3            The ultimate recoupment of costs carried for exploration and evaluation expenditure is dependent on the successful development and commercial exploitation or sale of the respective areas.

 

 

 

31 December 2018
$

30 June
2018
$

9.         OTHER FINANCIAL LIABILITIES

Financial liabilities at fair value through profit or loss:

Contingent consideration carried at amortised cost1

1,946,687

1,891,573

Notes:

1                  In the 2017 financial year the Company acquired 100% of the shares of Karbonia for upfront cash consideration of €500,000 ($742,367) and by agreeing to pay a contingent cash consideration component of €1,500,000 upon certain project specific milestones being achieved. As at the acquisition date, the fair value of the contingent consideration was estimated to be €1,200,000 ($1,781,680) based on the probability of meeting the project milestones and being granted approval to amend the Debiensko Mining Concession. As at the reporting date, and due to fluctuations in the foreign exchange rates between the Euro and Australian Dollar, the carrying value of the contingent consideration was estimated to be $1,946,687 (30 June 2018: 1,891,573) and is disclosed as an other financial liability. The loss arising from the remeasurement in the carrying value of the contingent consideration was $25,164 for the half-year. Exchange differences on translation of foreign operations for the half-year amounted to $29,950.

 

 

 

31 December 2018
$

30 June
2018
$

10.       PROVISIONS

     

(a)        Current Provisions:

Provisions for the protection against mining damage at Debiensko1

181,412

195,463

Annual leave provision

42,098

122,251

Other2

225,395

215,106

448,905

532,820

(b)        Non-Current Provisions:

Provisions for the protection against mining damage at Debiensko1

1,411,857

1,260,624

1,411,857

1,260,624

Notes:

1            As Debiensko was previously an operating mine, Karbonia is required to pay out mining land damages to any surrounding land owner who makes a legitimate claim under Polish law.

 

2            In April 2012, Karbonia signed a power connection contract with the local power grid operator. The purpose of the contract was to connect Karbonia’s future mining facilities at Debiensko to the power operator’s power lines. The operator has incurred expenses amounting to PLN597,614 ($225,395) of which Karbonia would owe to the operator in the event that the contract is terminated (which both parties are entitled to do), or if power is not purchased from Tauron prior to 30 November 2019.

 

Note

31 December 2018
$

30 June
2018
$

11.       CONTRIBUTED EQUITY

     

(a)        Issued and Unissued Capital

212,275,089 (30 June 2018: 212,275,089) fully paid ordinary shares

11(b)

66,679,410

66,718,295

Loan Note 2 exchangeable into fully paid ordinary shares at $0.46 per share, net of transaction costs1

2,600,012

2,600,012

Issue of CD Options2

6,207,493

6,207,493

Total Contributed Equity

75,486,915

75,525,800

Notes:

1                  On 2 July 2017, Prairie and CD Capital completed an investment of US$2.0 million (A$2.6 million) in the form of the non-redeemable, non-interest-bearing convertible Loan Note 2. The Loan Note 2 is convertible into ordinary shares of Prairie at an issue price of A$0.46 per share.

Other key terms of the Loan Note 2 include the following:

·             Loan Note 2 is non-interest bearing;

·             Loan Note 2 is only repayable in an event of breach of the terms of the Loan Note 2 agreements;

·             Loan Note 2 cannot be converted until after 1 April 2018 by either party;

·             Prairie has the right, whilst no Event of Default exists, to convert all or part of the outstanding principal amount of Loan Note 2 into shares at the conversion price of $0.46 per share:

o     in the event of an unconditional takeover of the Company (acquisition of a relevant interest in at least 50% of Prairie shares pursuant to a takeover bid or by an Australian court approving a merger by way of a scheme of arrangement); or

o     at any time after 1 April 2018 provided that the 30 day VWAP of Prairie’s shares exceeds the conversion price of $0.46 per share.

·             Loan Note 2 does not provide CD Capital with any right to participate in any new issues of securities.

·             CD Capital has the right to convert all or part of the outstanding principal amount of the Notes into shares at the conversion price of $0.46 per share provided that:

o     Loan Note 1 has been converted into Prairie shares; and

o     The CD Options have been exercised into Prairie shares.

·             If the Company reorganises its capital structure, such as by subdividing or consolidating the number of its shares, conducts a pro-rata offer to existing shareholders or distributes assets or securities to Shareholders, then the conversion price of $0.46 of Loan Note 2 will be adjusted so that the number of Prairie shares received by CD Capital on conversion of Loan Note 2 is the same as if Loan Note 2 were converted prior to relevant event.

·             The occurrence of an Event of Default entitles CD Capital to declare the principal amount of the Loan Note 2 immediately due and payable and exercise any other rights or remedies (including bringing proceedings) against the Company.

·             Each of the following events is an “Event of Default” in relation to the Loan Note 2:

o     If any representation or warranty made by Prairie is false or misleading which is reasonably likely to be a Material Adverse Effect, and if such breach is capable of remedy, it is not remedied within 45 days;

o     If the Company breaches a covenant or condition of the Notes or associated agreements which is a Material Adverse Effect, and if such breach is capable of remedy, it is not remedied within 45 days;

o     An Insolvency Event occurs (i.e. winding up) in relation to the Group;

o     If the Group ceases to carry on a business; or

o     If the Group does not maintain the listing and trading of its shares on at least one of the ASX, LSE or WSE.

·             CD Capital may assign, transfer or encumber in whole or in part (in amounts of at least A$1 million) its rights under Loan Note 2 to any third party by giving written notice to Prairie provided the third party has provided a deed of assumption. Assignment of Loan Note 2 will not result in the assignment of the rights and obligations under the subscription agreement or investment agreement from Loan Note 1.

·             A Material Adverse Effect means a material adverse effect on:

o     the Company or PDZ Holding’s ability to perform any of their obligations under Loan Note 2, the and all other Transaction Document;

o     the validity or enforceability of a Transaction Document; or

o     the assets, business, condition (financial or otherwise), prospects or operations of the Group.

·             An Insolvency Event in relation to the Group means:

o     An order being made, or the Group passing a resolution, for its winding up.

2                  On 25 May 2018, following conversion of Loan Note 1 the company issued the CD Options, which are exercisable at $0.60 each on or before 30 May 2021. The options are freely transferable provided the transfer complies with the Corporations Act 2001.

(b)        Movements in fully paid ordinary shares during the past six months

 

Date

Details

Number of Shares

$

1 Jul 18

Opening Balance

212,275,089

66,718,295

Jul 18 to Dec 18

Share issue costs

(38,885)

31 Dec 18

Closing Balance

212,275,089

66,679,410

 

Note

31 December 2018
$

30 June
2018
$

12.       RESERVES

Share-based payments reserve

12(a)

2,323,952

2,486,718

Foreign currency translation reserve

1,164,970

1,096,756

3,488,922

3,583,474

(a)        Movements in share-based payments reserve during the past six months

 

Date

Details

Number of Incentive Options

Number of Performance Rights

$

1 Jul 18

Opening Balance

1,800,000

10,675,000

2,486,718

31 Dec 18

Forfeiture of Performance Rights

(3,075,000)

(1,266,880)

Jul 18 to Dec 18

Share-based payments expense

1,104,114

31 Dec 18

Closing Balance

1,800,000

7,600,000

2,323,952

The Incentive Options outstanding at the end of the half-year have the following exercise prices and expiry dates:

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

·     900,000 Incentive Options exercisable at $0.60 each on or before 31 March 2020; and

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

The Performance Rights outstanding at the end of the half-year have the following expiry dates:

·     3,200,000 Performance Rights expiring 31 December 2019; and

·     4,400,000 Performance Rights expiring on 31 December 2020.

The Company also has a number of other unlisted securities (not accounted for as share-based payments) on issue which includes the following:

·     22,388,060 CD Options exercisable at $0.60 each expiring 30 May 2021; and

·     A 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).

13.       CONTINGENT ASSETS AND LIABILITIES

There have been no changes to contingent assets or liabilities since the date of the last annual report.

14.       FINANCIAL INSTRUMENTS

The Group’s financial assets and liabilities, which comprise of cash and cash equivalents, trade and other receivables, trade and other payables and other financial liabilities, may be impacted by foreign exchange movements. At 31 December 2018 and 30 June 2018, the carrying value of the Group’s financial assets and liabilities approximate their fair value. Please refer to notes 5 and 9 for further disclosure.

15.       DIVIDENDS PAID OR PROVIDED FOR

No dividend has been paid or provided for during the half-year (31 December 2017: nil).

16.       SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD

(i)         On 18 January 2019, the Company announced that Poland’s Supreme Administrative Court had finally and fully rejected Bogdanka’s appeal against Poland’s MoE regarding the rejection of Bogdanka’s 2013 application for a mining concession over the K-6-7 deposit at the Jan Karski;

 

(ii)        On 18 January 2019, the Company announced that it had received a final “second instance” decision from the MoE denying the Company’s amendment application to extend the time stipulated in the Debiensko mining concession for first production of coal from 2018 to 2025. Prairie will strongly defend its position and continue to take relevant actions to pursue its legal rights regarding the Debiensko concession, which includes an appeal that has been filed with Poland’s Administrative Court; and

 

(iii)       On 13 February 2019, the Company announced that it had formally notified the Polish Government that there exists an investment dispute between Prairie and the Government. Prairie’s notification calls for prompt negotiations with the government to amicably resolve the dispute, and indicates Prairie’s right to submit the dispute to international arbitration in the event the dispute is not resolved.

Other than the above, there were no significant events occurring after balance date requiring disclosure.

 

The following sections in the full version of the Interim Financial Report, along with all figures and illustrations, are available on our website at www.pdz.com.au  

Auditor’s Independence Declaration

Independent Auditor’s Review Report

Prairie Mining #PDZ – Annual Report

                  Annual Report

CONTENTS | ZAWARTOŚĆ

Directors’ Report

Auditor’s Independence Declaration

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 2018 Annual Report on the Company’s website at http://www.pdz.com.au/company-reports

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

 

DIRECTORS’ REPORT

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 2018 (“Consolidated Entity” or “Group”).

 

OPERATING AND FINANCIAL REVIEW 

Operations

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

Possible Co-operation between Prairie and JSW

·      During the year, Prairie and Jastrzębska Spółka Węglowa SA (“JSW”) entered into a non-disclosure agreement to exchange technical and commercial information in order to facilitate substantial and more advanced discussions regarding any potential co-operation or transaction(s) options in respect of Prairie’s Polish coking coal projects.

·      A number of meetings were held during the year between the Company and JSW while Prairie made available information to JSW in relation to both the Debiensko Mine (“Debiensko”) and Jan Karski Mine (“Jan Karski”) to allow JSW to conduct assessments of their feasibility and economics.

·      In the latest public statement made by JSW, they reported that their due diligence had been finalised and, together with their advisors, were working on an asset valuation. They also disclosed that their completed technical due diligence of Debiensko and Jan Karski showed that both these projects meet JSW’s expectations as to the quality of coal. JSW also announced that further steps towards a possible transaction between Prairie and JSW would likely take place from October.

Debiensko Mine (Premium Hard Coking Coal)

·      Mine site redevelopment planning continued at Debiensko throughout the year towards the completion of initial demolition works, pre-qualification of study contractors, and preparation for an infill drill program to increase JORC Measured and Indicated Resources.

·      Prairie held discussions with regional steel makers and coke producers for future coking coal sales and offtake.

·      Hard coking coal prices traded at price levels of ~US$180/t FOB Australia.

·      Market analysts forecast underinvestment in new coking coal mine development has potential to result in sustained high coking coal prices.

·      European Commission continues to designate coking coal as a Critical Raw Material.

Jan Karski Mine (Semi-Soft Coking Coal)

·      Prairie continued to use modern exploration techniques to transform Jan Karski with drill results re-affirming the capability of the project to produce high value ultra-low ash semi-soft coking coal, known as Type 34 coal in Poland. Coking coal quality results announced during the year are superior to the drill results announced in May 2017, and further confirm that Jan Karski is a globally significant semi-soft coking coal / Type 34 coking coal deposit with the potential to produce a high value ultra-low ash SSCC with an exceptional CSR and a high 75% coking coal product split.

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

·      Following legal proceedings filed against Poland’s Ministry of Environment (“MoE”) due to its failure to grant Prairie with a Mining Usufruct Agreement at the Jan Karski Mine:

o  the Polish Civil Court ruled in Prairie’s favour by granting an injunction preventing the MoE from granting any prospecting, exploration or mining concession and concluding usufruct agreements with any other party until the full court proceeding has concluded; and

o  the decision provides security of tenure over the Jan Karski concessions and effectively safeguards Prairie’s rights at the project until full court proceedings are concluded.

·      The Lublin Regional Director for the Environment issued an official notification indicating that the process to establish an Environmental Consent decision for Jan Karski would be extended past 30 June 2018 due to further information requests to supplement Prairie’s original Environmental and Social Impact Assessment and ongoing local authority and public consultation.

Corporate

·      In July 2017, Prairie and CD Capital completed an additional investment of US$2.0 million ($2.6 million) in the form of a non-redeemable, non-interest-bearing convertible loan note (“Loan Note 2”).

·      Prairie remains in a financially strong position with cash reserves of A$11 million at 30 June 2018.

Debiensko Mine

Debiensko, is a 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 JSW, Europe’s leading producer of hard coking coal.

The Debiensko mine was historically 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 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.

Preparation for the Next Phase of Project Studies

Prairie continues to analyse the drill hole data which will be used for engineering design of foundations of structures associated with the shafts, coal handling and preparation plant (“CHPP”) and other surface facilities. These holes are essential in order to assess the soil conditions, properly design structural foundations and thus provide more accurate pricing in the tenders as required for a feasibility study.

Prairie’s team have also designed an infill drilling program that when undertaken will upgrade more of the resource base at Debiensko to the Measured and Indicated resource categories and support JORC compliant reserve estimation.

Jan Karski Mine

Jan Karski is a large scale semi-soft coking coal project located in the Lublin Coal Basin in south east Poland. The Lublin Coal Basin is an established coal producing province which is well serviced by modern and highly efficient infrastructure, offering the potential for low capital intensity mine development. Jan Karski is situated adjacent to the Bogdanka coal mine which has been in commercial production since 1982 and is the lowest cost hard coal producer in Europe. 

Prairie’s use of modern exploration techniques continues to transform Jan Karski with latest drill results re-affirming the capability of the project to produce high value ultra-low ash semi-soft coking coal (“SSCC”), known as Type 34 coal in Poland whilst confirming Jan Karski as a globally significant SSCC / Type 34 coking coal deposit with the potential to produce a high value ultra-low ash SSCC with a coking coal product split of up to 75%.

Key benefits for the local community and the Lublin and Chelm regions associated with the development, construction and operation of Jan Karski have been recognised as the following:

·      creation of 2,000 direct employment positions and 10,000 indirect jobs for the region once operational;

·      increasing skills of the workforce through the implementation of International Standard training programmes;

·      stimulating the development of education, health services and communications within the region; and

·      building a mine that creates new employment for generations to come and career paths for families to remain in the region.

Polish Civil Court Grants Injunction in Prairie’s Favour against Poland’s Ministry of Environment

On 3 April 2018, Prairie announced that it had commenced legal proceedings against Poland’s MoE due to its failure to grant Prairie a Mining Usufruct Agreement over the concessions which form the Jan Karski Mine and in order to protect the Company’s security of tenure over the project.

Pursuant to the initiated legal proceedings:

·      The Regional Civil Court in Warsaw ruled in Prairie’s favour by granting an injunction preventing the MoE from granting prospecting, exploration or mining concessions and concluding usufruct agreements with any other party until full court proceedings are concluded; and 

·      The decision provides security of tenure over the Jan Karski concessions and effectively safeguards Prairie’s rights at the project until full court proceedings are concluded.

The Regional Civil Court in Warsaw has issued a verdict that forms an injunction preventing the MoE from concluding exploration or mining usufruct agreement(s) regarding the Jan Karski Mine area (including the “Lublin” deposit, as well as the former K-4-5, K-6-7, K-8 and K-9 concession areas) with any party, other than PD Co Sp. z. o.o. (Prairie Mining’s wholly owned Polish subsidiary). The Court has also ordered that the MoE does not grant any concessions (for prospecting, exploration and/or mining) to any party other than PD Co Sp. z. o.o. This highly favourable court ruling was issued in response to Prairie’s application submitted as part of the legal proceedings commenced by Prairie to protect its tenure at Jan Karski.

As a result of the ruling by the Regional Civil Court in Warsaw, security of tenure over the Jan Karski concessions will be safeguarded until the full court proceeding is concluded. It is anticipated that full court proceeding could take 12 months or more to complete.

In the justification to the Court’s ruling, the judge stated that: “Based on the evidence one may at this point state that theplaintiff (being Prairie) enjoys the right to request conclusion of the requested mining usufruct agreement for the “Lublin” hard coal area (otherwise known as Jan Karski) resulting from Article 15 of the Geological and Mining Law.”

Prairie has provided the MoE with all documents required by Polish Law to conclude a Mining Usufruct Agreement, including the Geological Documentation approval and an official application for a Mining Usufruct Agreement.

To date the MoE has not provided Prairie with a Mining Usufruct Agreement for Jan Karski.

Based on professional advice, Prairie considers that the MoE has breached the Polish Geological and Mining Law (“GML”) and other Polish laws and is strongly defending its position.

The Company will also consider any other actions necessary to ensure its concession rights are reserved which may result in the Company taking further action against the MoE including invoking the protection afforded to the Company under any relevant bi-lateral or multi-lateral investment treaties or such other actions as the Company may consider appropriate at the relevant time.

Regional Director for the Environment sets a new deadline for issuing an Environmental Consent Decision

Prairie completed an Environmental and Social Impact Assessment and made submissions to the Lublin Regional Director for the Environment (“RDOS”) for an Environmental Consent decision for Jan Karski in October 2017. During the year, the RDOS issued a notice indicating that the Environmental Proceedings would be delayed further, subject to the receipt of additional information requested by the RDOS which the Company, together with its appointed environmental consultants, are working to provide. During the year, there was a change of personnel fulfilling the functions of the Chairman and Deputy Chairman of the Lublin RDOS.

Corporate 

Possible Co-Operation between Prairie and JSW

During the year, Prairie and JSW entered into a Non-Disclosure Agreement (“NDA”) with respect to potential co-operation regarding Prairie’s two Polish coal projects. The purpose of the NDA was to allow for the exchange of technical and commercial information in order to facilitate substantial and more advanced discussions regarding any potential transaction(s) options in respect of Prairie’s projects. 

Possible Co-Operation between Prairie and JSW (Continued)

Subsequent to the end of the year, Prairie noted press articles regarding comments by representatives from JSW on possible transaction(s) between the Company and JSW with respect to Prairie’s Polish coal projects.

The Company advises that discussions continue to take place as part of the exchange of technical and commercial information. Commercial discussions continue to be at a preliminary stage and that even if they move onto discussions of specific transactions terms there can be no certainty as to whether any transaction(s) will be agreed, or the potential form of such transaction(s). The Company expects further exchange of information will continue with JSW.

In the latest public statement made by JSW, they reported that their due diligence had been finalised and, together with their advisors, were working on an asset valuation. They also disclosed that their completed technical due diligence of Debiensko and Jan Karski showed that both these projects meet JSW’s expectations as to the quality of coal. JSW also announced that further steps towards a possible transaction between Prairie and JSW would likely take place in October.

Any potential transaction(s), should they occur, may be subject to a number of conditions including, but not limited to, obtaining positive evaluations and expert opinions, necessary corporate approvals, consents and approvals related to funding, consents from Poland’s Office of Competition and Consumer Protection (UOKiK) if required, and any other requirements that may relate to the strategy, objectives and regulatory regimes applicable to the respective issuers.

The NDA, signed at the end of March 2018, provides for the initial due diligence process to be conducted until the end of September 2018, which may be extended by mutual agreement of both parties. Commercial discussions, if any, may then take place subsequent to September 2018.

Results of Operations

The net loss of the Consolidated Entity for the year ended 30 June 2018 was $19,382,454 (2017: $11,482,002). Significant items contributing to the current year loss and the substantial differences from the previous financial year include: 

(i)    Non-cash fair value loss of $9,884,328 (2017: $4,264,925) attributable to 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 which was derecognised during the year following the conversion of Loan Note 1. The instrument was a non-cash derivative liability which was settled during the year via the issue of 44,776,120 Ordinary Shares and 22,388,060 unlisted options exercisable at $0.60 each on or before 30 May 2021 (“CD Options”) to CD Capital pursuant to the investment agreement completed in September 2015.

The Company did not pay any cash to settle the liability with the Company’s cash reserve unaffected by the derecognition of the conversion right

The commercial intentions of both CD Capital and the Company were to always enter into an equity type arrangement however to be in compliance with the accounting standards, the conversion right has, up and until derecognition, been accounted for as a financial liability with the non-cash fair value movements being recognised in profit and loss. 

(ii)   Exploration and Evaluation expenses of $6,774,136 (2017: $6,560,343), 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) completed drilling at Jan Karski which re-affirmed the capability of the project to produce SSCC; (ii) permitting activities continued at Jan Karski including submission of an ESIA and approval of spatial development plans; and (iii) mine site redevelopment planning continued at Debiensko including advancement of demolition works pre-qualification of study contractors and preparation for an infill drill program to increase JORC Measured and Indicated Resources;

(iii)  Business development expenses of $738,097 (2017: $1,474,077) 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;

(iv)   Other expenses of $18,443 (2017: $521,502) which in 2017 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;

(v)    Non-cash share-based payment expense of $1,316,624 (2017: gain of $392,275) 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 expense in share-based payments in 2018 compared to an expense in 2017 is attributable to the forfeiture of 4.4 million unvested Performance Rights in 2017;

(vi)   Revenue of $826,883 (2017: $1,340,749) consisting of interest income of $333,291 (2017: $368,380) and the receipt of $493,592 (2017: $972,369) of gas and property lease income derived since acquiring Karbonia in October 2016; and 

(vii)  Other income of nil (2017: $650,000) which was attributable to the receipt of $650,000 in 2017 for the sale of the base metals project.

 

Financial Position

At 30 June 2018, the Company had cash reserves of $11,022,333 (2017: $16,826,854) placing it in a strong financial position.

At 30 June 2018, the Company had net assets of $12,445,698 (2017: $13,095,130), a decrease of 5% compared with the previous year. This is largely attributable to the decrease cash reserves and receivables which was slightly offset by the decrease in financial liabilities.

 

Business Strategies and Prospects for Future Financial Years

Prairie’s strategy is to create long-term shareholder value by 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:

·        Continue in its discussions with JSW with respect to potential co-operation regarding Debiensko and Jan Karski;

·        Continue with the legal proceedings and appeals against the MoE with respect to Debiensko and Jan Karski;

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

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

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

·        Continue project permitting activities including obtaining an Environmental Consent Decision at Jan Karski.

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: 

Business Strategies and Prospects for Future Financial Years (Continued)

Risk of maintaining project concessions – The Company’s mining exploration and development activities at Debiensko and Jan Karski 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, in July 2015, Prairie announced that it had secured the Exclusive Right to apply for a Mining Concession for Jan Karski as a result of its Geological Documentation for the Jan Karski deposit being approved by Poland’s MoE. The approved Geological Documentation covers areas of all four original Exploration Concessions granted to Prairie (K-4-5, K-6-7, K-8 and K-9) and includes the full extent of the targeted resources within the mine plan for Jan Karski. As a result of the Exclusive Right, Prairie was the only entity with a legal right to lodge a Mining Concession application over Jan Karski for the period up and until 2 April 2018. Under the Polish GML, a Mining Concession application comprises the submission of a Deposit Development Plan (“DDP”), approval of a spatial development plan (rezoning of land for mining use) and an Environmental Consent decision. Prairie has previously announced that the DDP and spatial development plans for Jan Karski have already been approved.

However, as of the date of this report, Prairie has not yet received the required Environmental Consent decision, which remains pending. Prairie completed an Environmental and Social Impact Assessment and made submissions to RDOS for an Environmental Consent decision in October 2017. Prairie has not been able to apply for a Mining Concession for Jan Karski due to the delay in the issuance of an Environmental Consent decision. However, the Environmental Consent proceedings continue to progress and the Company has received notice from the RDOS to provide supplementary information to the originally submitted Environmental & Social Impact Assessment. There are no assurances that the Environmental Consent Decision will be awarded to the Company.

The approval of Prairie’s Geological Documentation in 2015 also conferred upon Prairie the legal right to apply for a Mining Usufruct Agreement over Jan Karski for an additional 12-month period beyond April 2018, which precludes any other parties being granted any licence over all or part of the Jan Karski concessions. Under Polish law, the MoE is strictly obligated, within three months of Prairie making an application for a Mining Usufruct Agreement, to grant the agreement. It should be noted that the MoE confirmed Prairie’s priority right in two written statements (i.e. in a final administrative decision dated 11 February 2016 and in a formal letter dated 13 April 2016). Prairie applied to the MoE for a Mining Usufruct Agreement over Jan Karski in late December 2017. As of the date of this report the MoE has not made available to Prairie a Mining Usufruct Agreement for Jan Karski, therefore breaching the three-month obligatory period for the agreement to be concluded. Legal advice provided to Prairie concludes that failure of the MoE to grant Prairie the Mining Usufruct Agreement is a breach of Polish law. Accordingly, the Company commenced legal proceedings against the MoE through the Polish courts in order to protect the Company’s security of tenure over the Jan Karski concessions. Since the MoE has not provided a decision within three months regarding Prairie’s Mining Usufruct application, the Polish civil court has the power to enforce conclusion of a Usufruct Agreement in place of the MoE. In the event that a Mining Usufruct Agreement is not made available to the Company on acceptable terms or the Company does not enter into a Mining Usufruct Agreement for any other reason, other parties may be able to apply for exploration or mining rights for all or part of the Jan Karski concession area.

However, given that the Civil Court has approved Prairie’s motion for an injunction against the MoE, as described above, the MoE is now prevented from entering into a Usufruct agreement or concession with any other party besides Prairie until the full court proceedings are concluded.

Under the terms of the Debiensko Mining Concession issued in 2008 by the MoE (which is valid for 50 years from grant date), commencement of production was to occur by 1 January 2018. In December 2016, following the acquisition of Debiensko, Prairie applied to the MoE to amend the 50 year Debiensko Mining Concession. The purpose of the concession amendment was to extend the time stipulated in the Mining Concession for first production of coal from 2018 to 2025. Prairie has now received an initial and appealable, first instance decision from the MoE that has denied the Company’s amendment application. However, Prairie continues to have valid tenure and ownership of land at Debiensko. Not meeting the production timeframe stipulated in the concession does not immediately infringe on the validity and expiry date of the Debiensko Mining Concession, which is June 2058. Prairie also holds a valid environmental consent decision enabling mine construction. Prairie has appealled the MoE’s decision on the basis that its justification for denial is fundamentally flawed for a number of reasons including failure to consider the requirements of the law and public interest in Poland, and the relevant facts of the Company and its amendment application. Prairie will strongly defend its position and continue to take relevant actions to pursue its legal rights regarding the Debiensko concession. Prairie’s legal team has lodged an appeal, which points out the deficiencies of the MoE’s first instance decision. As at the date of this report, Prairie has not received an official response in relation to this appeal.

However, if Prairie’s appeal is unsuccessful, then this may lead to the commencement of proceedings by the MoE to limit or withdraw the Debiensko concession. Prairie also has the right of further appeal to Poland’s administrative courts. The Company will consider any other actions necessary to ensure its concession rights are preserved, which may result in the Company taking further action against the MoE including invoking the protection afforded to the Company under any relevant bi-lateral or multi-lateral investment treaties or such other actions as the Company may consider appropriate at the relevant time. There is however no assurance that such appeals, legal proceedings, applications (or renewals or alterations) of the Company concessions will be granted or that such applications, renewals, alterations, rights and title interests will not be revoked or significantly altered. If such appeals, legal proceedings, applications, renewals or alterations of concessions applied for are not successful or granted or are in fact revoked as the case may be in the future, there is a risk that this may have a material adverse effect on the financial performance and operations at Jan Karski, Debiensko, the Company and on also the value of the Company’s securities.

·        Co-operation between Prairie and JSW may not occur – Any transaction(s), should it/they occur, may be subject to a number of conditions including, but not limited to, obtaining positive evaluations and expert opinions, necessary corporate approvals, consents and approvals related to funding, consents from Poland’s Office of Competition and Consumer Protection (UOKiK) if required, and any other requirements that may relate to the strategy, objectives and regulatory regimes applicable to the respective issuers, and which could also prevent a transaction from occurring or even completing. The non-occurrence of a transaction could also have a material impact on the value of the Company’s securities.

·        The Company’s activities will require further capital in future years – At the date of this report, the Company has cash of approximately $11 million which places it in a strong 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 their $0.60 CD Options. 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. 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 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 Exploration Concession which comprises of the Jan Karski Mine). 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’s decision, the MoE will be required to re-assess Bogdanka’s Mining Concession application. As discussed above Bogdanka has in the past raised several appeals challenging the Company’s title to the Exploration Concessions comprising the 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 the Jan Karski Mine development timeline. Furthermore, during the financial year, Bogdanka filed a mining concession application for the K-6-7 area subsequent to the MoE not providing Prairie with a Mining Usufruct Agreement as discussed above. However, given that the Civil Court has approved Prairie’s motion for an injunction against the MoE, the MoE is unable to grant a mining concession for K-6-7 to Bogdanka (or any other party other than Prairie) until the full court proceedings are concluded.

·        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, foreign ownership of coal projects and the movement to a nationalistic policy may adversely affect the permitting, approvals process, operations and/or profitability of the Company. The Company continues to consult with the various levels of Government but there can be no assurances that current or 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. For example, recent legislative changes and proposed legislative changes initiated by Poland’s governing Law & Justice party have called into question the independence of the judiciary and subsequently the rule of law in Poland. In December 2017, the Council of Europe’s Commission for Democracy through Law (“Venice Commission”) found that the cumulative effect of proposed reforms to two laws and  recently adopted amendments to a third law “puts at serious risk” the independence of “all parts” of the Polish judiciary. The opinion concerned two drafts recently submitted by the Polish President to the Sejm (Polish Parliament), to amend the Act on the National Council of the Judiciary and the Act on the Supreme Court, as well as recently already adopted amendments to the Act on Ordinary Courts. Additionally, and subsequent to the end of the financial year, the European Commission formally notified Poland that it had initiated infringement proceedings against the country because of the adoption of the controversial amendments to the Supreme Court Act.

·        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

 

Unless otherwise stated, Directors held their office from 1 July 2017 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 Constellation Resources Limited (November 2017 – present), 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) and Syntonic Limited (April 2010 – June 2017).

 

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 held a directorship 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 Constellation Resources Limited (July 2016 – present), Apollo Minerals Limited (July 2016 – present), Salt Lake Potash Limited (August 2014 – present), Equatorial Resources Limited (November 2009 – present), Sovereign Metals Limited (July 2006 – present), Odyssey Energy Limited (September 2005 – present), Piedmont Lithium Limited (September 2009 – August 2018) 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 (Chartered Secretary) 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 exploration and development companies operating in the resources sector, based from London and Perth, including Apollo Minerals Limited, Berkeley Energia Limited and Papillon Resources Limited. Mr Browne successfully listed Prairie on the Main Board of the London Stock Exchange and the Warsaw Stock Exchange in 2015 and recently oversaw Berkeley’s listings on the Main Board LSE and the Madrid, Barcelona, Bilboa and Valencia Stock Exchanges. 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 Debiensko and Jan Karski. No significant change in nature of these activities occurred during the year. 

EARNINGS PER SHARE


2018
Cents


2017
Cents

Basic and diluted loss per share

(10.99)

(7.42)

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 (2017: nil).

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

(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;

(iii)     On 21 February 2018, Prairie announced that drill results re-affirming the capability of the project to produce high value ultra-low ash SSCC (instead of thermal coal) known as Type 34 coal in Poland; and

(iv)      On 30 May 2018, the Company announced that Loan Note 1 issued to CD Capital had converted via the issue of 44,776,120 Ordinary Shares and 22,388,060 CD Options.

SIGNIFICANT EVENTS AFTER BALANCE DATE

At the date of this report, there are no matters or circumstances, which have arisen since 30 June 2018 that have significantly affected or may significantly affect:

·      the operations, in financial years subsequent to 30 June 2018, of the Consolidated Entity;

·      the results of those operations, in financial years subsequent to 30 June 2018, of the Consolidated Entity; or

·      the state of affairs, in financial years subsequent to 30 June 2018, 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

2,100,000

Ms Carmel Daniele4

44,776,120

22,388,0605

Mr Thomas Todd

2,800,000

Mr Mark Pearce

3,000,000

Mr Todd Hannigan

3,504,223

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 also has an interest in a convertible note (Loan Note 2) and the right of CD Capital to acquire 5,711,804 Ordinary shares through the issue of a $0.46 convertible note.

5   As part of the investment agreement completed with CD Capital in September 2015 and following conversion of Loan Note 1 in May 2018, CD Capital were issued with 22,388,060 unlisted options exercisable at $0.60 each on or before 30 May 2021 (CD Options).

SHARE OPTIONS AND PERFORMANCE RIGHTS

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

·        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;

·        22,388,060 CD Options exercisable at $0.60 each on or before 30 May 2021;

·        10,675,000 Performance Rights with various vesting conditions and expiry dates between 31 December 2018 and 31 December 2020; 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 2018, nil Ordinary Shares have been issued as a result of the exercise of Incentive Options, nil Ordinary Shares have been issued as a result of the conversion of Performance Rights and 44,776,120 Ordinary Shares were issued on conversion of Loan Note 1. 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, nil Ordinary Shares have been issued as a result of the conversion of Performance Rights and nil Ordinary Shares have been issued on the conversion of Loan Note 2 or the CD Options.

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

 

Other KMP

Mr Miroslaw Taras                 Group Executive – Poland

Mr Simon Kersey                    Chief Financial Officer

Mr Dylan Browne                    Company Secretary

 

Unless otherwise disclosed, the KMP held their position from 1 July 2017 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 2018 financial year, a total cash incentive of $134,361 (2017: $256,487) was paid, or is payable, to KMP on achievement of KPIs as set by the Board which included: (i) completed drilling at Jan Karski which re-affirmed the capability of the project to produce SSCC; (ii) permitting activities continued at Jan Karski including submission of an ESIA and approval of spatial development plans; and (iii) mine site redevelopment planning continued at Debiensko including advancement of demolition works pre-qualification of study contractors and preparation for an infill drill program to increase JORC Measured and Indicated Resources.   

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)        Decision to Commence Construction means a Board decision for the commencement of construction activities (including securing adequate project finance to enable construction to commence) for Jan Karski (including but not limited to 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;

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

(c)        Decision to Commence Underground Mining Construction means a Board decision for the 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 (2017: $36,000) (excluding post-employment benefits).

Fees for Non-Executive Directors’ were set at $20,000 per annum (2017: $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 2018 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

2018

36,000

3,420

39,420

2017

36,000

3,420

39,420

Benjamin Stoikovich

2018

436,396

134,361

75,003

645,760

32.4

2017

376,963

169,233

(163,617)

382,579

44.2

Carmel Daniele1

2018

2017

Thomas Todd

2018

20,000

1,900

21,900

2017

20,000

1,900

21,900

Mark Pearce

2018

20,000

1,900

21,900

2017

20,000

1,900

21,900

Todd Hannigan

2018

2017

Other KMP

Miroslaw Taras

2018

117,213

72,582

189,795

38.2

2017

76,533

24,371

36,403

137,307

44.3

Simon Kersey

2018

278,927

107,455

386,382

27.8

2017

68,644

21,549

11,481

101,674

32.5

Dylan Browne

2018

118,393

14,133

132,526

10.7

2017

128,244

16,914

15,341

160,499

20.1

Total

2018

1,026,929

134,361

7,220

269,173

1,437,683

2017

726,384

232,067

7,220

(100,392)

865,279

Notes:

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

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:

2018

Security

 

Grant
Date

 

Expiry Date

 

Vesting Date

 

Exercise Price

$

Grant Date Fair Value1

$

Number Granted

 

Number Vested

 

Other KMP

Benjamin Stoikovich

Rights

21 Aug 17

31 Dec 19

3

0.500

640,000

Rights

21 Aug 17

31 Dec 20

4

0.500

960,000

Miroslaw Taras

Rights

21 Aug 17

31 Dec 18

5

0.500

100,000

Rights

21 Aug 17

31 Dec 19

3

0.500

300,000

Rights

21 Aug 17

31 Dec 20

4

0.500

300,000

Dylan Browne

Rights

21 Aug 17

31 Dec 19

3

0.500

130,000

Rights

21 Aug 17

31 Dec 20

4

0.500

195,000

Notes:

1   For details on the valuation of the Incentive Options and Performance Rights, including models and assumptions used, please refer to Note 19 to the financial statements.

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

3   Vest on satisfaction of the Debiensko Feasibility Study milestone.

4   Vest on satisfaction of the Decision to Commence Underground Mining Construction at Debiensko Milestone.

5   Vest on satisfaction of the Decision to Commence Construction at Jan Karski Milestone.

There were no Incentive Options granted or exercised by any KMP of the Group during the 2018 financial year.

Employment Contracts with Directors and KMP

During the financial year, Mr Stoikovich signed an updated appointment letter dated 21 June 2018, 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. Under the updated appointment letter, Mr Stoikovich receives a fixed fee of £25,000 per annum.

During the financial year, Windellama Capital Limited, a company of which Mr Stoikovich is a director and shareholder, had 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 is 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, was 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 could be terminated by either Windellama Capital Limited or the Company by giving twelve months’ notice. No amount was 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 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, had a letter of appointment dated 1 October 2015 confirming the terms and conditions of his appointment. Mr Browne’s appointment letter was terminable pursuant to the Company’s Constitution and he received a fee of £6,000 per annum pursuant to this appointment letter. In addition, Candyl Limited (“Candyl”), a company of which Mr Browne was a director and shareholder, had a consultancy agreement with the Company, which specified the duties and obligations to be fulfilled by Mr Browne as the Company Secretary. Either party could terminate the agreement with three months written notice. No amount was payable in the event of termination for material breach of contract, gross misconduct or neglect. Candyl received an annual consultancy fee of £63,000. Both the appointment letter and Candyl consulting agreement were terminated effective 31 October 2017. On 1 November 2017, Mr Browne entered into a new consulting agreement which specified the duties and obligations to be fulfilled by Mr Browne as the Company Secretary. Either party can terminate the new agreement with three months written notice or payment in lieu. No amount is payable in the event of termination for material breach of contract, gross misconduct or neglect. Under the new consultancy agreement, Mr Browne receives a consultancy fee of $10,000 per month.

Loans from Key Management Personnel


No loans were provided to or received from Key Management Personnel during the year ended 30 June 2018 (2017: 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 (2017: $150,000) for the provision of serviced office facilities and administration services. The amount is based on a monthly retainer of $12,500 (2017: $12,500) 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 2018, $12,500 (2017: $12,500) was included as a current liability in the Statement of Financial Position. From 1 July 2018, the monthly retainer was altered to $20,000 per month.

As founder and controller of CD Capital, Ms Daniele has an interest in 22,388,060 $0.60 CD Options (which may result in the issue of an additional 22,388,060 Ordinary Shares) and an interest for CD Capital to convert Loan Note 2 into 5,711,804 Ordinary shares through the issue of the $0.46 convertible note.

Equity instruments held by KMP

Incentive Option and Performance Right holdings of Key Management Personnel

2018

Held at
1 July 2017

Granted as Remuner-ation

Options Exercised/
Rights Converted

Net Other Change

Held at
30 June 2018

Vested and exercise-  able at 30 June 2018

Directors

Ian Middlemas

Benjamin Stoikovich

1,500,000

1,600,000

(1,000,000)1

2,100,000

Carmel Daniele

22,388,0603

22,388,060

Thomas Todd

1,400,000

(1,400,000)2

Mark Pearce

Todd Hannigan

1,400,000

(1,400,000)2

Other KMP

Miroslaw Taras

700,000

700,000

(350,000)1

1,050,000

Simon Kersey

660,000

660,000

Dylan Browne

350,000

325,000

(200,000)1

475,000

Notes:

1     Forfeiture of Performance Rights on 31 December 2017 as the performance conditions had not been achieved prior to the expiry date.               

2     On 30 June 2018, 1,400,000 Incentive Options held jointly by Mr Todd and Mr Hannigan which were granted to them on 10 September 2014 expired.

3     As founder and controller of CD Capital, Ms Daniele was deemed to have an interest in the CD Options issued to CD Capital following conversion of Loan Note 1 during the year.

Shareholdings of Key Management Personnel

2018

Held at
1 July 2017

Granted as Remuneration

Options Exercised/
Rights Converted

Net Other Change

Held at
30 June 2018

Directors

Ian Middlemas

10,600,000

10,600,000

Benjamin Stoikovich

1,500,000

1,500,000

Carmel Daniele

44,776,1202

44,776,120

Thomas Todd

2,800,000

2,800,000

Mark Pearce

3,000,000

3,000,000

Todd Hannigan

3,504,223

3,504,223

Other KMP

Miroslaw Taras

150,000

150,000

Simon Kersey

370,000

(370,000)1

Dylan Browne

160,000

(160,000)1

Notes:

1   Sold on market.

2   As founder and controller of CD Capital, Ms Daniele was deemed to have an interest in the 44,776,120 Ordinary Shares issued to CD Capital on conversion of Loan Note 1 during the year.

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

2

2

Benjamin Stoikovich

2

2

Carmel Daniele

2

2

Thomas Todd

2

1

Mark Pearce

2

2

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. 

2018

$

2017

$

Preparation of income tax return

11,124

13,905

DIVIDENDS

No dividends have been declared, provided for or paid in respect of the financial year ended 30 June 2018 (2017: nil).

AUDITOR’S INDEPENDENCE DECLARATION

The lead auditor’s independence declaration for the year ended 30 June 2018 has been received and can be found on page 22 of the Directors’ Report in the Annual Report.

Signed in accordance with a resolution of the Directors.

Benjamin Stoikovich

Director

27 September 2018

 

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.

Competent Person Statements

The information in this report that relates to Exploration Results was extracted from Prairie’s announcement dated 21 February 2018 entitled “Drill Results Affirm Jan Karski’s Status As A Globally Significant Semi-Soft (Type 34) Coking Coal Project” 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 2018 

 

2018

 

2017

$

$

Revenue

826,883

1,340,749

Other income

650,000

Exploration and evaluation expenses

(6,774,136)

(6,560,343)

Employment expenses

(539,471)

(156,171)

Administration and corporate expenses

(380,021)

(454,807)

Occupancy expenses

(595,103)

(433,201)

Share-based payment expenses

(1,316,624)

392,275

Business development expenses

(738,097)

(1,474,077)

Other expenses

18,443

(521,502)

Non-cash fair value movements

(9,884,328)

(4,264,925)

Loss before income tax

(19,382,454)

(11,482,002)

Income tax expense

Net loss for the year

(19,382,454)

(11,482,002)

Net loss attributable to members of Prairie Mining Limited

(19,382,454)

(11,482,002)

Other comprehensive income

Items that may be reclassified subsequently to profit or loss:

Exchange differences on translation of foreign operations

368,311

695,252

Total other comprehensive income/(loss) for the year, net of tax

368,311

695,252

Total comprehensive loss for the year, net of tax

(19,014,143)

(10,786,750)

Total comprehensive loss attributable to members of Prairie Mining Limited

(19,014,143)

(10,786,750)

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

(10.99)

(7.42)

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2018 

 

2018

 

2017

$

$

ASSETS

Current Assets

Cash and cash equivalents

11,022,333

16,826,854

Trade and other receivables           

953,528

1,094,997

Total Current Assets

11,975,861

17,921,851

Non-current Assets

Property, plant and equipment

2,363,151

2,779,526

Exploration and evaluation assets

2,656,968

2,603,172

Total Non-current Assets

5,020,119

5,382,698

TOTAL ASSETS

16,995,980

23,304,549

LIABILITIES

Current Liabilities

Trade and other payables

865,265

2,109,127

Provisions

532,820

580,129

Other financial liabilities – cash settlement

1,891,573

1,783,283

Other financial liabilities – non-cash settlement

4,600,746

Total Current Liabilities

3,289,658

9,073,285

Non-Current Liabilities

Provisions

1,260,624

1,136,134

Total Current Liabilities

1,260,624

1,136,134

TOTAL LIABILITIES

4,550,282

10,209,419

NET ASSETS

12,445,698

13,095,130

EQUITY

Contributed equity

75,525,800

58,477,713

Reserves

3,583,474

2,258,339

Accumulated losses

(66,663,576)

(47,640,922)

TOTAL EQUITY

12,445,698

13,095,130

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

AS AT 30 JUNE 2018 

Contributed Equity

Share- Based Payments Reserve

Foreign Currency Translation Reserve

Accumulated Losses

Total
Equity

$

$

$

$

$

Balance at 1 July 2017

58,477,713

1,529,894

728,445

(47,640,922)

13,095,130

Net loss for the year

(19,382,454)

(19,382,454)

Other comprehensive income:

Exchange differences on translation of foreign operations

368,311

368,311

Total comprehensive income/(loss) for the period

368,311

(19,382,454)

(19,014,143)

Conversion right of Loan Note 1

8,283,582

8,283,582

Share issue costs

(43,000)

(43,000)

Issue of convertible note (note 12(a))

2,627,430

2,627,430

Convertible note issue costs

(27,418)

(27,418)

Issue of CD Options

6,207,493

6,207,493

Expiry of vested Incentive Options

(359,800)

359,800

Forfeiture of unvested Performance Rights

(1,194,000)

(1,194,000)

Recognition of share-based payments

2,510,624

2,510,624

Balance at 30 June 2018

75,525,800

2,486,718

1,096,756

(66,663,576)

12,445,698

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)

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

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2018

 

2018

 

2017

$

$

CASH FLOWS FROM OPERATING ACTIVITIES

Payments to suppliers and employees     

(9,589,237)

(10,411,638)

Proceeds from property and gas sales

504,702

498,094

Interest received from third parties

370,106

368,380

NET CASH FLOWS USED IN OPERATING ACTIVITIES

(8,714,429)

(9,545,164)

CASH FLOWS FROM INVESTING ACTIVITIES

Payments for plant and equipment

(65,450)

(219,071)

Proceed from sale of property

495,008

Purchase of controlled entity

(742,367)

Proceeds from sale of base metals project

650,000

Recovery of pre-paid land deposit

1,990,895

NET CASH FLOWS FROM IN INVESTING ACTIVITIES

429,558

1,679,457

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issue of shares

6,935,489

Payments for share issue costs

(92,469)

(332,431)

Proceeds from issues of convertible note

2,627,430

Payments for issue of convertible note

(54,611)

NET CASH FLOWS FROM FINANCING ACTIVITIES

2,480,350

6,603,058

Net increase/(decrease) in cash and cash equivalents

(5,804,521)

(1,262,649)

Net foreign exchange differences

26,384

Cash and cash equivalents at beginning of year

16,826,854

18,063,119

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

11,022,333

16,826,854

Prairie Mining #PDZ – June 2018 Quarterly Report

Highlights from and subsequent to the quarter end:

Possible Prairie and JSW Co-Operation

  • During the quarter, Prairie and JSW continued to exchange technical and commercial information in order to facilitate substantial and more advanced discussions regarding any potential co-operation or transaction(s) options in respect of Prairie’s Polish coking coal projects.
  • Further meetings were held between the Company and JSW while Prairie has made available information to JSW in relation to both the Debiensko and Jan Karski mines to allow JSW to conduct assessments of their feasibility and economics.
  • In a recent statement made by JSW, they disclosed that they expect to make a decision on any potential transaction with Prairie by the end of August 2018. There can be no certainty as to whether any transaction(s) will be agreed, or the potential form of such transaction(s). The Company will continue to comply with its continuous disclosure obligations and will make announcements to the market as required.

Jan Karski Mine

  • Following legal proceedings filed against Poland’s Ministry of Environment due to its failure to grant Prairie a Mining Usufruct Agreement at the Jan Karski Mine:
    • the Polish Civil Court ruled in Prairie’s favour by granting an injunction preventing the Ministry from granting any prospecting, exploration or mining concession and concluding usufruct agreements with any other party until full court proceedings are concluded; and
    • the decision provides security of tenure over the Jan Karski concessions and effectively safeguards Prairie’s rights at the project until full court proceedings are concluded.
  • The Lublin Regional Director for the Environment issued an official notification indicating that the process to establish an Environmental Consent decision for Jan Karski would be extended past 30 June 2018 due to further information requests to supplement Prairie’s original Environmental and Social Impact Assessment and ongoing local authority and public consultations.

Corporate

·    Prairie remains in a financially strong position with cash reserves of A$11 million.

For further information, please contact:

Prairie Mining Limited

+44 20 7478 3900

Ben Stoikovich, Chief Executive Officer

info@pdz.com.au

Sapan Ghai, Head of Corporate Development

DEBIENSKO MINE

The Debiensko Mine (“Debiensko”) is a 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 opened in 1898 and was 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 MoE granted a 50-year mine license for Debiensko.

In October 2016, Prairie Mining Limited’s (“Prairie” or “Company”) 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.

Preparation for the Next Phase of Project Studies

Prairie continues to analyse the drill hole data which will be used for engineering design of foundations of structures associated with the shafts, coal handling and preparation plant (“CHPP”) and other surface facilities. These holes are essential in order to assess the soil conditions, properly design structural foundations and thus provide more accurate pricing in the tenders as required for a feasibility study.

Prairie’s team have also designed an infill drilling program that when undertaken will upgrade more of the resource base at Debiensko to the Measured and Indicated resource categories and support JORC compliant reserve estimation.

JAN KARSKI MINE

The Jan Karski Mine (“Jan Karski”) is a large scale semi-soft coking coal project located in the Lublin Coal Basin in south east Poland. The Lublin Coal Basin is an established coal producing province which is well serviced by modern and highly efficient infrastructure, offering the potential for low capital intensity mine development. Jan Karski is situated adjacent to the Bogdanka coal mine which has been in commercial production since 1982 and is the lowest cost hard coal producer in Europe.

Prairie’s use of modern exploration techniques continues to transform Jan Karski with latest drill results re-affriming the capability of the the project to produce high value ultra-low ash semi-soft coking coal (“SSCC”), known as Type 34 coal in Poland whilst confirming Jan Karski as a globally significant SSCC / Type 34 coking coal deposit with the potential to produce a high value ultra-low ash SSCC with a coking coal product split of up to 75%.

Key benefits for the local community and the Lublin and Chelm regions associated with the development, construction and operation of Jan Karski have been recognised as the following:

  • creation of 2,000 direct employment positions and 10,000 indirect jobs for the region once operational;
  • increasing skills of the workforce and through the implementation of International Standard training programmes;
  • stimulating the development of education, health services and communications within the region; and
  • building a mine that creates new employment for generations to come and career paths for families to remain in the region.

Polish Civil Court Grants Injunction in Prairie’s Favour against Poland’s Ministry of Environment

On 3 April 2018, Prairie announced that it had commenced legal proceedings against Poland’s Ministry of Environment (“MoE”) due to its failure to grant Prairie a Mining Usufruct Agreement over the concessions which form the Jan Karski Mine and in order to protect the Company’s security of tenure over the project.

Pursuant to the initiated legal proceedings:

  • the Polish Civil Court ruled in Prairie’s favour by granting an injunction preventing the MoE from granting prospecting, exploration or mining concessions and concluding usufruct agreements with any other party until full court proceedings are concluded;
  • the decision provides security of tenure over the Jan Karski concessions and effectively safeguards Prairie’s rights at the project until full court proceedings have concluded.

The Regional Civil Court in Warsaw has issued a verdict that forms an injunction preventing the MoE from concluding exploration or mining usufruct agreement(s) regarding the Jan Karski Mine area (including the “Lublin” deposit, as well as the former K-4-5, K-6-7, K-8 and K-9 concession areas) with any party, other than PD Co Sp. z. o.o. (Prairie Mining’s wholly owned Polish subsidiary). The Court has also ordered that the MoE does not grant any concessions (for prospecting, exploration and/or mining) to any party other than PD Co Sp. z. o.o. This highly favourable court ruling was issued in response to Prairie’s application submitted as part of the legal proceedings commenced by Prairie to protect its tenure at Jan Karski.

As a result of the ruling by the Regional Civil Court in Warsaw, security of tenure over the Jan Karski concessions will be safeguarded until full court proceedings have concluded. It is anticipated that full court proceedings could take 12 months or more to complete.

In the justification to the Court’s ruling, the judge stated that: “Based on the evidence one may at this point state that the plaintiff [Prairie] enjoys the right to request conclusion of the requested mining usufruct agreement for the “Lublin” hard coal area (otherwise known as Jan Karski) resulting from Article 15 of the Geological and Mining Law.”

As discussed above, in April 2018, Prairie commenced legal action against the MoE for breaching the Polish Geological and Mining Law (2011) (“GML”) in relation to the award of a Mining Usufruct Agreement to Prairie at Jan Karski.

Prairie has provided the MoE with all documents required by Polish Law to conclude a Mining Usufruct Agreement, including the Geological Documentation approval and an official application for a Mining Usufruct Agreement.

To date the MoE has still not provided Prairie with a Mining Usufruct Agreement for Jan Karski.

Based on professional advice, Prairie considers that the MoE breached the GML and Polish law and is defending its position having commenced legal proceedings against the MoE through the Polish courts to protect its tenure at Jan Karski.

The Company will also consider any other actions necessary to ensure its concession rights are reserved which may result in the Company taking further action against the MoE including invoking the protection afforded to the Company under any relevant bi-lateral or multi-lateral investment treaties or such other actions as the Company may consider appropriate at the relevant time.

Prairie will continue to update the market in relation to this matter as required.

Regional Director for the Environment sets a new deadline for issuing an Environmental Consent Decision

Prairie completed an Environmental and Social Impact Assessment and made submissions to the Lublin Regional Director for the Environment (“RDOS”) for an Environmental Consent decision for Jan Karski in October 2017. During the quarter, the RDOS issued a notice indicating that the Environmental Proceedings would be delayed further, subject to the receipt of additional information requested by the RDOS which the Company, together with its appointed environmental consultants, are working to provide. During the quarter, there was a change of personnel fulfilling the functions of the Chairman and Deputy Chairman of the Lublin RDOS.

CORPORATE

Possible Co-Operation between Prairie and JSW

Prairie and JSW have entered into a Non-Disclosure Agreement (“NDA”) with respect to potential co-operation regarding Prairie’s two Polish coal projects. The purpose of the NDA is to allow for the exchange of technical and commercial information in order to facilitate substantial and more advanced discussions regarding any potential transaction(s) options in respect of Prairie’s projects.

Prairie will make available information in relation to the hard coking coal project under the Debiensko concession, to allow JSW to conduct an assessment of its feasibility and economics, taking into consideration factors including, but not limited to: its stage of development, conditions of the mining concession, environmental permits, and the mining usufruct contract. JSW will also assess other various risks and opportunities, including JSW’s existing infrastructure at the neighbouring Knurów-Szczygłowice mine.

Prairie will also make available to JSW information in relation to the Jan Karski project in the Lublin Coal Basin, to allow JSW to conduct an assessment of the project’s feasibility and economics regarding coking coal, taking into consideration factors including, but not limited to: its phase of development, the physical and chemical parameters of the coal (in particular its coking parameters), the timeframe and conditions with regards to obligations to obtain a mining concession, as well as other various risks and opportunities.

It is emphasised that any potential transaction(s), should they occur, may be subject to a number of conditions including, but not limited to, obtaining positive evaluations and expert opinions, necessary corporate approvals, consents and approvals related to funding, consents from Poland’s Office of Competition and Consumer Protection (UOKiK) if required, and any other requirements that may relate to the strategy, objectives and regulatory regimes applicable to either Prairie Mining or JSW.

In a recent statement made by JSW, they disclosed that they expect to make a decision on any potential transaction with Prairie by the end of August 2018. There can be no certainty as to whether any transaction(s) will be agreed, or the potential form of such transaction(s).

The NDA, signed at the end of March 2018, provides for discussions to be conducted for an initial period up to 6 months, which may be extended by mutual agreement of both parties. The companies will continue to comply with their respective disclosure obligations to the relevant markets, as required.

Financial Position and Balance Sheet

Prairie has cash reserves of A$11 million. With CD Capital’s right to invest a further A$68 million as a cornerstone investor, Prairie is in a strong financial position to progress with its planned activities at Debiensko and Jan Karski.

During the quarter, the convertible loan note held by CD Capital with a principal amount of A$15 million was converted into 44.8 million ordinary shares and the subsequent issue of 22.4 million A$0.60 unlisted options.

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.

Competent Person Statements

The information in this announcement that relates to Exploration Results was extracted from Prairie’s announcement dated 21 February 2018 entitled “Drill Results Affirm Jan Karski’s Status as a Globally Significant Semi-Soft (Type 34) Coking Coal Project”. The information in the original announcement 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 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.

APPENDIX 1 – EXPLORATION TENEMENT INFORMATION

As at 30 June 2018, the Company has an interest in the following tenements:

Location

Tenement

Percentage Interest

Status

Tenement Type

Jan Karski, Poland

Jan Karski Mine Plan Area (K-4-5, K-6-7, K-8 and K-9)*

100

Granted

Exclusive Right to apply for a mining concession

Jan Karski, Poland

Kulik (K-4-5)

100

Granted

Exploration

Jan Karski, Poland

Syczyn (K-8)

100

Granted

Exploration

Jan Karski, Poland

Kopina (K-9)

100

Granted

Exploration

Debiensko, Poland

Debiensko 1**

100

Granted

Mining

Debiensko, Poland

Kaczyce 1

100

Granted

Mining & Exploration (includes gas rights)

 

*  In July 2015, Prairie announced that it had secured the Exclusive Right to apply for a Mining Concession for Jan Karski as a result of its Geological Documentation for the Jan Karski deposit being approved by Poland’s MoE. The approved Geological Documentation covers areas of all four original Exploration Concessions granted to Prairie (K-4-5, K-6-7, K-8 and K-9) and includes the full extent of the targeted resources within the mine plan for Jan Karski. As a result of the Exclusive Right, Prairie was the only entity with a legal right to lodge a Mining Concession application over Jan Karski for the period up and until 2 April 2018. Under the Polish GML, a Mining Concession application comprises the submission of a Deposit Development Plan (“DDP”), approval of a spatial development plan (rezoning of land for mining use) and an Environmental Consent decision. Prairie has previously announced that the DDP and spatial development plans for Jan Karski have already been approved. 

However, as of the date of this quarterly, Prairie has not yet received the required Environmental Consent decision, which remains pending. Prairie completed an Environmental and Social Impact Assessment and made submissions to RDOS for an Environmental Consent decision in October 2017. Prairie has not been able to apply for a Mining Concession for Jan Karski due to the delay in the issuance of an Environmental Consent decision. However, the Environmental Consent proceedings continue to progress and the Company has received notice from the RDOS to provide supplementary information to the originally submitted Environmental & Social Impact Assessment.

The approval of Prairie’s Geological Documentation in 2015 also conferred upon Prairie the legal right to apply for a Mining Usufruct Agreement over Jan Karski for an additional 12-month period beyond April 2018, which precludes any other parties being granted any licence over all or part of the Jan Karski concessions. Under Polish law, the MoE is strictly obligated, within three months of Prairie making an application for a Mining Usufruct Agreement, to grant the agreement. It should be noted that the MoE confirmed Prairie’s priority right in two written statements (i.e. in a final administrative decision dated 11 February 2016 and in a formal letter dated 13 April 2016). Prairie applied to the MoE for a Mining Usufruct Agreement over Jan Karski in late December 2017. As of the date of this quarterly the MoE has not made available to Prairie a Mining Usufruct Agreement for Jan Karski, therefore breaching the three-month obligatory period for the agreement to be concluded. Legal advice provided to Prairie concludes that failure of the MoE to grant Prairie the Mining Usufruct Agreement is a breach of Polish law. Accordingly, the Company commenced legal proceedings against the MoE through the Polish courts in order to protect the Company’s security of tenure over the Jan Karski concessions. Since the MoE has not provided a decision within three months regarding Prairie’s Mining Usufruct application, the Polish civil court has the power to enforce conclusion of a Usufruct Agreement in place of the MoE. In the event that a Mining Usufruct Agreement is not made available to the Company on acceptable terms or the Company does not enter into a Mining Usufruct Agreement for any other reason, other parties may be able to apply for exploration or mining rights for all or part of the Jan Karski concession area. However, given that the Civil Court has approved Prairie’s motion for an injunction against the MoE, as described above, the MoE is now prevented from entering into a Usufruct agreement or concession with any other party besides Prairie until the full court proceedings are concluded.

** Under the terms of the Debiensko Mining Concession issued in 2008 by the MoE (which is valid for 50 years from grant date), commencement of production was to occur by 1 January 2018. In December 2016, following the acquisition of Debiensko, Prairie applied to the MoE to amend the 50 year Debiensko Mining Concession. The purpose of the concession amendment was to extend the time stipulated in the Mining Concession for first production of coal from 2018 to 2025. Prairie has now received an initial and appealable, first instance decision from the MoE that has denied the Company’s amendment application. However, Prairie continues to have valid tenure and ownership of land at Debiensko. Not meeting the production timeframe stipulated in the concession does not immediately infringe on the validity and expiry date of the Debiensko Mining Concession, which is June 2058. Prairie also holds a valid environmental consent decision enabling mine construction. Prairie will appeal the MoE’s decision on the basis that its justification for denial is fundamentally flawed for a number of reasons including failure to take into account the requirements of the law and public interest in Poland, and the relevant facts of the Company and its amendment application. Prairie will strongly defend its position and continue to take relevant actions to pursue its legal rights regarding the Debiensko concession. Prairie’s legal team is in the process of preparing this appeal, which will point out the deficiencies of the MoE’s first instance decision. However, if Prairie’s appeal is unsuccessful, then this may lead to the commencement of proceedings by the MoE to limit or withdraw the Debiensko concession. Prairie also has the right of further appeal to Poland’s administrative courts. The Company will consider any other actions necessary to ensure its concession rights are preserved, which may result in the Company taking further action against the MoE including invoking the protection afforded to the Company under any relevant bi-lateral or multi-lateral investment treaties or such other actions as the Company may consider appropriate at the relevant time.

 

+Rule 5.5

Appendix 5B

Mining exploration entity and oil and gas exploration entity quarterly report

Introduced 01/07/96  Origin Appendix 8  Amended 01/07/97, 01/07/98, 30/09/01, 01/06/10, 17/12/10, 01/05/13, 01/09/16

Name of entity

PRAIRIE MINING LIMITED

ABN

Quarter ended (“current quarter”)

23 008 677 852

30 June 2018

Consolidated statement of cash flows

Current quarter $A’000

Year to date             (12 months)
$A’000

1.

Cash flows from operating activities

1.1

Receipts from customers

1.2

Payments for

(805)

(5,679)

(a)   exploration & evaluation

(b)   development

(c)   production

(d)   staff costs

(417)

(1,990)

(e)   administration and corporate costs

(360)

(1,076)

1.3

Dividends received (see note 3)

1.4

Interest received

73

370

1.5

Interest and other costs of finance paid

1.6

Income taxes paid

1.7

Research and development refunds

1.8

Other (provide details if material)

(a)  Business development costs

(b)  Property rental and gas sales

(104)

104

(777)

504

1.9

Net cash from / (used in) operating activities

(1,509)

(8,648)

2.

Cash flows from investing activities

(3)

(88)

2.1

Payments to acquire:

(a)   property, plant and equipment

(b)   tenements (see item 10)

(c)   investments

(d)   other non-current assets

2.2

Proceeds from the disposal of:

497

(a)   property, plant and equipment

(b)   tenements (see item 10)

(c)   investments

(d)   other non-current assets

2.3

Cash flows from loans to other entities

2.4

Dividends received (see note 3)

2.5

Other (provide details if material)

2.6

Net cash from / (used in) investing activities

(3)

409

3.

Cash flows from financing activities

3.1

Proceeds from issues of shares

3.2

Proceeds from issue of convertible notes

2,627

3.3

Proceeds from exercise of share options

3.4

Transaction costs related to issues of shares, convertible notes or options

(182)

3.5

Proceeds from borrowings

3.6

Repayment of borrowings

3.7

Transaction costs related to loans and borrowings

3.8

Dividends paid

3.9

Other (provide details if material)

3.10

Net cash from / (used in) financing activities

2,445

4.

Net increase / (decrease) in cash and cash equivalents for the period

12,529

16,809

4.1

Cash and cash equivalents at beginning of period

4.2

Net cash from / (used in) operating activities (item 1.9 above)

(1,509)

(8,648)

4.3

Net cash from / (used in) investing activities (item 2.6 above)

(3)

409

4.4

Net cash from / (used in) financing activities (item 3.10 above)

2,445

4.5

Effect of movement in exchange rates on cash held

(1)

1

4.6

Cash and cash equivalents at end of period

11,016

11,016

5.

Reconciliation of cash and cash equivalents
at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts

Current quarter
$A’000

Previous quarter
$A’000

5.1

Bank balances

3,016

2,029

5.2

Call deposits

8,000

10,500

5.3

Bank overdrafts

5.4

Other (provide details)

5.5

Cash and cash equivalents at end of quarter (should equal item 4.6 above)

11,016

12,529

6.

Payments to directors of the entity and their associates

Current quarter
$A’000

6.1

Aggregate amount of payments to these parties included in item 1.2

(188)

6.2

Aggregate amount of cash flow from loans to these parties included in item 2.3

Nil

6.3

Include below any explanation necessary to understand the transactions included in items 6.1 and 6.2

Payments include executive remuneration (including bonuses), director fees, superannuation and provision of a fully serviced office.

7.

Payments to related entities of the entity and their associates

Current quarter
$A’000

7.1

Aggregate amount of payments to these parties included in item 1.2

7.2

Aggregate amount of cash flow from loans to these parties included in item 2.3

7.3

Include below any explanation necessary to understand the transactions included in items 7.1 and 7.2

Not applicable

8.

Financing facilities available
Add notes as necessary for an understanding of the position

Total facility amount at quarter end
$A’000

Amount drawn at quarter end
$A’000

8.1

Loan facilities

8.2

Credit standby arrangements

8.3

Other (please specify)

8.4

Include below a description of each facility above, including the lender, interest rate and whether it is secured or unsecured. If any additional facilities have been entered into or are proposed to be entered into after quarter end, include details of those facilities as well.

9.

Estimated cash outflows for next quarter

$A’000

9.1

Exploration and evaluation

(1,000)

9.2

Development

9.3

Production

9.4

Staff costs

(500)

9.5

Administration and corporate costs

(200)

9.6

Other (provide details if material)
(a)        Business development costs

(100)

9.7

Total estimated cash outflows

(1,800)

10.

Changes in tenements
(items 2.1(b) and 2.2(b) above)

Tenement reference and location

Nature of interest

Interest at beginning of quarter

Interest at end of quarter

10.1

Interests in mining tenements and petroleum tenements lapsed, relinquished or reduced

10.2

Interests in mining tenements and petroleum tenements acquired or increased

Compliance statement

1        This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.

2        This statement gives a true and fair view of the matters disclosed.

                        [lodged electronically without signature]

Sign here:         ……………………………………………………                        Date: 31 July 2018

(Director/Company secretary)

Print name:       Dylan Browne

Notes

1.            The quarterly report provides a basis for informing the market how the entity’s activities have been financed for the past quarter and the effect on its cash position. An entity that wishes to disclose additional information is encouraged to do so, in a note or notes included in or attached to this report.

2.            If this quarterly report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 6: Exploration for and Evaluation of Mineral Resources and AASB 107: Statement of Cash Flows apply to this report. If this quarterly report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standards apply to this report.

3.            Dividends received may be classified either as cash flows from operating activities or cash flows from investing activities, depending on the accounting policy of the entity.

Prairie Mining #PDZ – Issue of shares on conversion of convertible note

Prairie Mining Limited #PDZ announces that 44,776,120 fully paid ordinary shares have been issued today upon conversion of the convertible loan 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 (Loan Note 1) and the subsequent issue of 22,388,060 unlisted options exercisable at $0.60 each on or before 30 May 2021 on conversion of Loan Note 1.

An application will be made to the London Stock Exchange for the new ordinary shares, which rank pari passu with the Company’s existing issued ordinary shares, in due course and in any event within 12 months.

Following admission, the Company’s issued ordinary share capital will be 212,275,089 ordinary shares.

The above figure of 212,275,089 ordinary shares may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the share capital of the Company, under the FCA’s Disclosure and Transparency Rules.

For further information, contact:

Prairie Mining Limited

Tel: +44 207 478 3900

Ben Stoikovich, Chief Executive Officer

Email: info@pdz.com.au

Sapan Ghai, Head of Corporate Development

 

Rule 2.7, 3.10.3, 3.10.4, 3.10.5

Appendix 3B

New issue announcement, application for quotation of additional securities and agreement

Information or documents not available now must be given to ASX as soon as available.  Information and documents given to ASX become ASX’s property and may be made public.

Introduced 01/07/96  Origin: Appendix 5  Amended 01/07/98, 01/09/99, 01/07/00, 30/09/01, 11/03/02, 01/01/03, 24/10/05, 01/08/12, 04/03/13

Name of entity

   PRAIRIE MINING LIMITED

ABN

   23 008 677 852

We (the entity) give ASX the following information.

Part 1 ‑ All issues

You must complete the relevant sections (attach sheets if there is not enough space).

1

+Class of +securities issued or to be issued

a) Ordinary shares

b) Unlisted options

2

Number of +securities issued or to be issued (if known) or maximum number which may be issued

a) 44,776,120

b) 22,388,060

3

Principal terms of the +securities (e.g. if options, exercise price and expiry date; if partly paid +securities, the amount outstanding and due dates for payment; if +convertible securities, the conversion price and dates for conversion)

a) Ordinary fully paid shares

b) Unlisted options exercisable at $0.60 each on     or before 30 May 2021

4

Do the +securities rank equally in all respects from the +issue date with an existing +class of quoted +securities?

If the additional +securities do not rank equally, please state:

·    the date from which they do

·    the extent to which they participate for the next dividend, (in the case of a trust, distribution) or interest payment

·    the extent to which they do not rank equally, other than in relation to the next dividend, distribution or interest payment

a) Yes

b) No – not listed

5

Issue price or consideration

See below

 

6

Purpose of the issue

(If issued as consideration for the acquisition of assets, clearly identify those assets)

Conversion of the convertible loan 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 (“Loan Note 1”) and the subsequent issue of unlisted options on conversion of Loan Note 1

6a

Is the entity an +eligible entity that has obtained security holder approval under rule 7.1A?

If Yes, complete sections 6b – 6h in relation to the +securities the subject of this Appendix 3B, and comply with section 6i

No

6b

The date the security holder resolution under rule 7.1A was passed

Not applicable

 

6c

Number of +securities issued without security holder approval under rule 7.1

Nil

6d

Number of +securities issued with security holder approval under rule 7.1A

Not applicable

 

6e

Number of +securities issued with security holder approval under rule 7.3, or another specific security holder approval (specify date of meeting)

67,164,180 – 21 September 2015

6f

Number of +securities issued under an exception in rule 7.2

Not applicable

6g

If +securities issued under rule 7.1A, was issue price at least 75% of 15 day VWAP as calculated under rule 7.1A.3?  Include the +issue date and both values.  Include the source of the VWAP calculation.

Not applicable

6h

If +securities were issued under rule 7.1A for non-cash consideration, state date on which valuation of consideration was released to ASX Market Announcements

Not applicable

6i

Calculate the entity’s remaining issue capacity under rule 7.1 and rule 7.1A – complete Annexure 1 and release to ASX Market Announcements

Rule 7.1 – 31,341,263

Rule 7.1A – Not applicable

7

+Issue dates

Note: The issue date may be prescribed by ASX (refer to the definition of issue date in rule 19.12).  For example, the issue date for a pro rata entitlement issue must comply with the applicable timetable in Appendix 7A.

Cross reference: item 33 of Appendix 3B.

30 May 2018

Number

+Class

8

Number and +class of all +securities quoted on ASX (including the +securities in section 2 if applicable)

212,275,089

Ordinary Shares

Number

+Class

9

Number and +class of all +securities not quoted on ASX (including the +securities in section 2 if applicable)

1,400,000

 

 

200,000

 

 

 

900,000

 

 

 

700,000

 

 

 

22,388,060

 

 

10,925,000

 

 

 

 

 

 

5,711,805

Options exercisable at $0.45 each on or before 30 June 2018

 

Options exercisable at $0.50 each on or before 31 March 2020

 

Options exercisable at $0.60 each on or before 31 March 2020

 

Options exercisable at $0.80 each on or before 31 March 2020

 

Options exercisable at $0.60 each on or before 30 May 2021

 

Performance share rights subject to various performance conditions to be satisfied prior to relevant milestones or expiry dates between 31 December 2018 and 31 December 2020

 

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”)

10

Dividend policy (in the case of a trust, distribution policy) on the increased capital (interests)

Not applicable

Part 2 ‑ Pro rata issue

11

Is security holder approval required?

Not applicable

12

Is the issue renounceable or non-renounceable?

Not applicable

13

Ratio in which the +securities will be offered

Not applicable

14

+Class of +securities to which the offer relates

Not applicable

15

+Record date to determine entitlements

Not applicable

16

Will holdings on different registers (or subregisters) be aggregated for calculating entitlements?

Not applicable

17

Policy for deciding entitlements in relation to fractions

Not applicable

18

Names of countries in which the entity has security holders who will not be sent new offer documents

Note: Security holders must be told how their entitlements are to be dealt with.

Cross reference: rule 7.7.

Not applicable

19

Closing date for receipt of acceptances or renunciations

Not applicable

 

 

 

 

 

 

20

Names of any underwriters

Not applicable

21

Amount of any underwriting fee or commission

Not applicable

22

Names of any brokers to the issue

Not applicable

23

Fee or commission payable to the broker to the issue

Not applicable

24

Amount of any handling fee payable to brokers who lodge acceptances or renunciations on behalf of security holders

Not applicable

25

If the issue is contingent on security holders’ approval, the date of the meeting

Not applicable

26

Date entitlement and acceptance form and offer documents will be sent to persons entitled

Not applicable

27

If the entity has issued options, and the terms entitle option holders to participate on exercise, the date on which notices will be sent to option holders

Not applicable

28

Date rights trading will begin (if applicable)

Not applicable

29

Date rights trading will end (if applicable)

Not applicable

30

How do security holders sell their entitlements in fullthrough a broker?

Not applicable

31

How do security holders sell part of their entitlements through a broker and accept for the balance?

Not applicable

32

How do security holders dispose of their entitlements (except by sale through a broker)?

Not applicable

33

+Issue date

Not applicable

 

Part 3 ‑ Quotation of securities

You need only complete this section if you are applying for quotation of securities

34

Type of +securities

(tick one)

(a)

+Securities described in Part 1

(b)

All other +securities

Example: restricted securities at the end of the escrowed period, partly paid securities that become fully paid, employee incentive share securities when restriction ends, securities issued on expiry or conversion of convertible securities

 

Entities that have ticked box 34(a)

Additional securities forming a new class of securities

Tick to indicate you are providing the information or documents

35

If the +securities are +equity securities, the names of the 20 largest holders of the additional +securities, and the number and percentage of additional +securities held by those holders

36

If the +securities are +equity securities, a distribution schedule of the additional +securities setting out the number of holders in the categories

1 – 1,000

1,001 – 5,000

5,001 – 10,000

10,001 – 100,000

100,001 and over

37

A copy of any trust deed for the additional +securities

 

Entities that have ticked box 34(b)

 

38

Number of +securities for which +quotation is sought

Not applicable

39

+Class of +securities for which quotation is sought

Not applicable

40

Do the +securities rank equally in all respects from the +issue date with an existing +class of quoted +securities?

If the additional +securities do not rank equally, please state:

·    the date from which they do

·    the extent to which they participate for the next dividend, (in the case of a trust, distribution) or interest payment

·    the extent to which they do not rank equally, other than in relation to the next dividend, distribution or interest payment

Not applicable

41

Reason for request for quotation now

Example: In the case of restricted securities, end of restriction period

(if issued upon conversion of another +security, clearly identify that other +security)

Not applicable

Number

+Class

42

Number and +class of all +securities quoted on ASX (including the +securities in clause 38)

Not applicable

 

Not applicable

Quotation agreement 

1          +Quotation of our additional +securities is in ASX’s absolute discretion.  ASX may quote the +securities on any conditions it decides.  

2          We warrant the following to ASX.

·           The issue of the +securities to be quoted complies with the law and is not for an illegal purpose. 

·           There is no reason why those +securities should not be granted +quotation.

·           An offer of the +securities for sale within 12 months after their issue will not require disclosure under section 707(3) or section 1012C(6) of the Corporations Act.

Note: An entity may need to obtain appropriate warranties from subscribers for the securities in order to be able to give this warranty

·           Section 724 or section 1016E of the Corporations Act does not apply to any applications received by us in relation to any +securities to be quoted and that no-one has any right to return any +securities to be quoted under sections 737, 738 or 1016F of the Corporations Act at the time that we request that the +securities be quoted.

·           If we are a trust, we warrant that no person has the right to return the +securities to be quoted under section 1019B of the Corporations Act at the time that we request that the +securities be quoted. 

3          We will indemnify ASX to the fullest extent permitted by law in respect of any claim, action or expense arising from or connected with any breach of the warranties in this agreement.

4          We give ASX the information and documents required by this form. If any information or document is not available now, we will give it to ASX before +quotation of the +securities begins.  We acknowledge that ASX is relying on the information and documents.  We warrant that they are (will be) true and complete.

 

                                      [signed electronically without signature]

Sign here:              ……………………………………………………           Date: 30 May 2018

                             (Director/Company secretary)

Print name:            Dylan Browne

== == == == ==

Appendix 3B – Annexure 1

Calculation of placement capacity under rule 7.1 and rule 7.1A for eligible entities

Introduced 01/08/12  Amended 04/03/13

Part 1

Rule 7.1 – Issues exceeding 15% of capital

Step 1: Calculate “A”, the base figure from which the placement capacity is calculated

Insert number of fully paid +ordinary securities on issue 12 months before the +issue date or date of agreement to issue

163,478,969

Add the following:

•    Number of fully paid +ordinary securities issued in that 12 month period under an exception in rule 7.2

•    Number of fully paid +ordinary securities issued in that 12 month period with shareholder approval

•    Number of partly paid +ordinary securities that became fully paid in that 12 month period

•    Include only ordinary securities here – other classes of equity securities cannot be added

•    Include here (if applicable) the securities the subject of the Appendix 3B to which this form is annexed

•    It may be useful to set out issues of securities on different dates as separate line items

 

570,000 ordinary shares (9 June 2017)

2,110,000 ordinary shares (16 June 2017)

1,340,000 ordinary shares (6 July 2017)

44,776,120 ordinary shares (30 May 2018)

Subtract the number of fully paid +ordinary securities cancelled during that 12 month period

Nil

“A”

212,275,089

Step 2: Calculate 15% of “A”

“B”

0.15

[Note: this value cannot be changed]

Multiply “A” by 0.15

31,841,263

Step 3: Calculate “C”, the amount of placement capacity under rule 7.1 that has already been used

Insert number of +equity securities issued or agreed to be issued in that 12 month period not counting those issued:

•    Under an exception in rule 7.2

•    Under rule 7.1A

•    With security holder approval under rule 7.1 or rule 7.4

•    This applies to equity securities, unless specifically excluded – not just ordinary securities

•    Include here (if applicable) the securities the subject of the Appendix 3B to which this form is annexed

•    It may be useful to set out issues of securities on different dates as separate line items

 

 

500,000 Incentive options (15 Sep 2017)

 

“C”

500,000

Step 4: Subtract “C” from [“A” x “B”] to calculate remaining placement capacity under rule 7.1

“A” x 0.15

Note: number must be same as shown in Step 2

31,841,263

Subtract “C”

Note: number must be same as shown in Step 3

500,000

Total [“A” x 0.15] – “C”

31,341,263

[Note: this is the remaining placement capacity under rule 7.1]

Part 2

Rule 7.1A – Additional placement capacity for eligible entities

Step 1: Calculate “A”, the base figure from which the placement capacity is calculated

“A”

Note: number must be same as shown in Step 1 of Part 1

Not applicable

Step 2: Calculate 10% of “A”

“D”

0.10

Note: this value cannot be changed

Multiply “A” by 0.10

Not applicable

Step 3: Calculate “E”, the amount of placement capacity under rule 7.1A that has already been used

Insert number of +equity securities issued or agreed to be issued in that 12 month period under rule 7.1A

•    This applies to equity securities – not just ordinary securities

•    Include here – if applicable – the securities the subject of the Appendix 3B to which this form is annexed

•    Do not include equity securities issued under rule 7.1 (they must be dealt with in Part 1), or for which specific security holder approval has been obtained

•    It may be useful to set out issues of securities on different dates as separate line items

Not applicable

“E”

Not applicable

Step 4: Subtract “E” from [“A” x “D”] to calculate remaining placement capacity under rule 7.1A

“A” x 0.10

Note: number must be same as shown in Step 2

Not applicable

Subtract “E”

Note: number must be same as shown in Step 3

Not applicable

Total [“A” x 0.10] – “E”

Not applicable

Note: this is the remaining placement capacity under rule 7.1A

 

Notice under Section 708A

30 May 2018

 

Prairie Mining Limited (“Company”) has today issued 44,776,120 fully paid ordinary shares. The issued securities are in a class of securities quoted on the Australian Securities Exchange (“ASX”). 

 

The Company gives this notice pursuant to Section 708A(5)(e) of the Corporations Act 2001 (Cwth)(the “Act”) that:

 

1.           the Company issued the securities without disclosure to investors under Part 6D.2 of the Act;

2.           as at the date of this notice, the Company has complied with the provisions of Chapter 2M of the Act as they apply to the Company, and section 674 of the Act; and

3.           as at the date of this notice, there is no information that is “excluded information” within the meaning of sections 708A(7) and 708A(8) of the Act.

Prairie Mining #PDZ – Debiensko concession amendment and application update

In December 2016, following the acquisition of the Debiensko Hard Coking Coal Mine, Prairie Mining Limited applied to the Ministry of Environment (“MoE”) to amend the 50 year Debiensko mining concession.

The purpose of the concession amendment was to extend the time stipulated in the mining concession for first production of coal from 2018 to 2025. Prairie has now received an initial (non-binding) and appealable, first instance decision from the MoE that has denied the Company’s amendment application.

Prairie continues to have valid tenure and ownership of land at Debiensko. Not meeting the production timeframe stipulated in the concession does not infringe on the validity and expiry date of the Debiensko mining concession, which is June 2058. Prairie also holds a valid environmental consent decision enabling mine construction.

Prairie will appeal the MoE’s decision on the basis that its justification for denial is fundamentally flawed for a number of reasons including failure to take into account the requirements of the law and public interest in Poland, and the relevant facts of the Company and its amendment application.

Prairie will strongly defend its position and continue to take relevant actions to pursue its legal rights regarding the Debiensko concession.

Discussions have continued with Jastrzębska Spółka Węglowa SA (“JSW”) regarding potential transaction(s) options in respect of Prairie’s tier 1 coking coal projects in Poland.

Debiensko Concession Amendment

Under the terms of the Debiensko mining concession issued in 2008 by the MoE (which is valid for 50 years from grant date), commencement of production was to occur by 1 January 2018. In December 2016, the Company submitted an application to the MoE to amend the Debiensko mining concession to alter the date for commencement of production from 2018 to 2025, and also provided the MoE with additional information requested. Not commencing production by January 2018 does not infringe on the validity and expiry date of the current mining concession, which is June 2058. However, the concession authority has the right to request the concession holder to remove any infringements related to non-conformance with the conditions of a mining concession and determine a reasonable date for removal of the infringements. In accordance with Polish law, the concession authority is required to provide an achievable and reasonable timeframe to remedy any non-compliance taking into account the nature of the non-conformance.

Prairie has now received notification from the MoE in an initial, first instance decision, that the concession amendment request has been denied. Prairie believes that the justification for this denial is flawed and does not take into account the requirements of law and the public interest in Poland, or the facts of the Company and its amendment application, which demonstrates yet further evidence of discriminatory treatment faced by Prairie as a foreign investor in Poland.

The MoE took over 17 months to provide the Company with a decision, whereas under Polish administrative law there is a maximum statutory deadline of two months for the MoE to provide such decision.

Prairie has a right to appeal the first instance decision of the MoE. Prairie’s legal team is in the process of preparing this appeal, which will point out the deficiencies of the MoE’s first instance decision. If Prairie’s appeal is unsuccessful, then this may lead to the commencement of proceedings by the MoE to limit or withdraw the Debiensko concession. Prairie also has the right of further appeal to Poland’s administrative courts.

The Company will consider any other actions necessary to ensure its concession rights are preserved, which may result in the Company taking further action against the MoE including invoking the protection afforded to the Company under any relevant bi-lateral or multi-lateral investment treaties or such other actions as the Company may consider appropriate at the relevant time.

Prairie will continue to update the market in relation to this matter as required.

Prairie has always conducted its business in Poland in accordance with the Polish law and continues to pioneer the application of international standards for development and feasibility work in Poland necessary to ensure the value of its Tier One coking coal projects are maximised for all stakeholders, meet the rigorous requirements for international financing and can ensure the production of high quality coking coal product to regional European steel makers.

Poland is multi-party representative democracy and has been a member of the European Union since 2004. Prairie Mining has been listed on the Warsaw Stock Exchange since September 2015 and enjoys a strong and increasing Polish shareholder base. Prairie benefits from strong support of local communities and regional governments, and our activities are in line with Polish national government policy that considers coal at the core of Poland’s raw material security, seeks to renew Polish industry and enhance economic development in Eastern Poland, where the Jan Karski Mine is located.

Australia also holds the status of “Most Favoured Nation” with Poland and the countries signed a Promotion and Protection of Investment Agreement in 1991 (a Bilateral Investment Treaty) which provides reciprocal protections for investments made by residents and entities of both countries, including licences for exploration and mining of natural resources. Prairie reserves the right to make future claims against the Polish state under the Promotion and Protection of Investment Agreement.

For further information, please contact:

Prairie Mining Limited

Tel: +44 207 478 3900

Ben Stoikovich, Chief Executive Officer

Email: info@pdz.com.au

Sapan Ghai, Head of Corporate Development

ABOUT THE DEBIENSKO MINE

The Debiensko mine  is a 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 JSW, Europe’s leading producer of hard coking coal.

The Debiensko mine was originally opened in 1898 and was 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 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.

Prairie Mining #PDZ – March 2018 quarterly report highlights

MARCH 2018 QUARTERLY REPORT

Highlights from and subsequent to the quarter end:

Possible Co-Operation between Prairie and JSW

  • During the quarter, Prairie noted press articles regarding possible co-operation between the Company and Jastrzębska Spółka Węglowa SA to progress the development and exploitation of the Company’s Polish coking coal assets. Prairie confirmed that meetings were held with JSW where preliminary discussions regarding co-operation took place.
  • Prairie and JSW have since entered into a Non-Disclosure Agreement to allow for the exchange of technical and commercial information in order to facilitate substantial and more advanced discussions regarding any potential co-operation or transaction(s) options in respect of Prairie’s projects.
  • Prairie has made available information in relation to both the Debiensko Mine and Jan Karski Project to allow JSW to conduct assessments of their feasibility and economics.
  • The NDA provides for discussions to be conducted for an initial period up to 6 months, which may be extended by mutual agreement of both parties.

Jan Karski Mine

  • As announced on 21 February 2018, Prairie continued to use modern exploration techniques to transform Jan Karski with latest drill results re-affirming the capability of the project to produce high value ultra-low ash semi-soft coking coal, known as Type 34 coal in Poland. Coking coal quality results announced during the quarter are superior to the drill results announced in May 2017, and further confirm that Jan Karski is a globally significant semi-soft coking coal / Type 34 coking coal deposit with the potential to produce a high value ultra-low ash SSCC with an exceptional CSR and a high 75% coking coal product split.
  • However, on 3 April 2018, Prairie announced that it had commenced legal proceedings against Poland’s Ministry of Environment due to its failure to grant Prairie a Mining Usufruct Agreement over the concessions which form the Jan Karski Mine and in order to protect the Company’s security of tenure over the project.
  • Pursuant to the initiated legal proceedings, the Company is pleased to announce that:
    • the Polish Civil Court has ruled in Prairie’s favour by granting an injunction preventing the MoE from granting any prospecting, exploration or mining concession and concluding usufruct agreements with any other party until full court proceedings are concluded;
    • this decision provides security of tenure over the Jan Karski concessions and effectively safeguards Prairie’s rights at the project until full court proceedings have concluded; and
    • the Lublin Regional Director for the Environment has issued an official notification indicating that the process to establish an Environmental Consent decision for Jan Karski will be concluded by 30 June 2018, being the final approval required for Prairie to submit a Mining Concession application.

Corporate

  • Prairie remains in a financially strong position with cash reserves of A$13 million.
  • With CD Capital’s right to invest a further A$68 million as a cornerstone investor, plus with the Strategic Co-operation Agreement between Prairie and China Coal for financing and construction of Jan Karski, Prairie is financially well positioned to progress with its planned development activities at Debiensko and Jan Karski.

Ben Stoikovich, Chief Executive Officer commented: “The latest drilling result continues to demonstrate that Jan Karski is a globally significant semi-soft / Type 34 coking coal project. This presents an outstanding economic development opportunity for the Lublin region, and Chelm province in particular, to become a leading European supplier of coking coal to the steel industry. At Jan Karski we are continuing with the Environmental Consent process, which is the final decision we require in order to apply for a Mining Concession. The injunction recently awarded in Prairie’s favor by the civil court in Warsaw against Poland’s Ministry of Environment effectively safeguards Prairie’s security of tenure at Jan Karski until full court proceedings have taken place. Our discussions with JSW are ongoing and we will continue to update the market in line with the relevant reporting requirements”.

For further information, please contact:

Prairie Mining Limited

+44 20 7478 3900

Ben Stoikovich, Chief Executive Officer

info@pdz.com.au

Sapan Ghai, Head of Corporate Development

 

JAN KARSKI MINE

The Jan Karski Mine is a large scale semi-soft coking coal project located in the Lublin Coal Basin in south east Poland. The Lublin Coal Basin is an established coal producing province which is well serviced by modern and highly efficient infrastructure, offering the potential for low capital intensity mine development. Jan Karski is situated adjacent to the Bogdanka coal mine which has been in commercial production since 1982 and is the lowest cost hard coal producer in Europe.

Prairie Mining Limited’s use of modern exploration techniques continues to transform Jan Karski with latest drill results re-affriming the capability of the the project to produce high value ultra-low ash semi-soft coking coal, known as Type 34 coal in Poland.

The coking coal quality results are superior to the drill results announced in May 2017, and further confirm that Jan Karski is a globally significant semi-soft coking coal (“SSCC”) / Type 34 coking coal deposit with the potential to produce a high value ultra-low ash SSCC with a coking coal product split of up to 75%.

Key benefits for the local community and the Lublin and Chelm regions associated with the development, construction and operation of Jan Karski  have been recognised as the following:

·       creation of 2,000 direct employment positions and 10,000 indirect jobs for the region once operational;

·       increasing skills of the workforce and through the implementation of International Standard training programmes;

·       stimulating the development of education, health services and communications within the region; and

·       building a mine that creates new employment for generations to come and career paths for families to remain in the region.

Polish Civil Court Grants Injunction in Prairie’s Favour against Poland’s Ministry of Environment

On 3 April 2018, Prairie announced that it had commenced legal proceedings against Poland’s Ministry of Environment (“MoE”) due to its failure to grant Prairie a Mining Usufruct Agreement over the concessions which form the Jan Karski Mine and in order to protect the Company’s security of tenure over the project.

Pursuant to the initiated legal proceedings, the Company is pleased to announce that:

·      the Polish Civil Court has ruled in Prairie’s favour by granting an injunction preventing the MoE from granting prospecting, exploration or mining concessions and concluding usufruct agreements with any other party until full court proceedings are concluded;

·      this decision provides security of tenure over the Jan Karski concessions and effectively safeguards Prairie’s rights at the Project until full court proceedings have concluded; and

·      the Lublin Regional Director for the Environment has issued an official notification indicating that the process to establish an Environmental Consent decision for Jan Karski will be concluded by 30 June 2018, being the final approval required for Prairie to submit a Mining Concession application.

The Regional Civil Court in Warsaw has issued a verdict that forms an injunction preventing the MoE from concluding exploration or mining usufruct agreement(s) regarding the Jan Karski Mine area (including the “Lublin” deposit, as well as the former K-4-5, K-6-7, K-8 and K-9 concession areas) with any party, other than PD Co Sp. z. o.o. (Prairie Mining’s wholly owned Polish subsidiary). The Court has also ordered that the MoE does not grant any concessions (for prospecting, exploration and/or mining) to any party other than PD Co Sp. z. o.o. This highly favourable court ruling was issued in response to Prairie’s application submitted as part of the legal proceedings commenced by Prairie to protect its tenure at Jan Karski.

As a result of the ruling by the Regional Civil Court in Warsaw, security of tenure over the Jan Karski concessions will be safeguarded until full court proceedings have concluded. It is anticipated that full court proceedings could take 12 months or more to complete.

In the justification to the Court’s ruling, the judge stated that: “Based on the evidence one may at this point state that the plaintiff [Prairie Mining] enjoys the right to request conclusion of the requested mining usufruct agreement for the “Lublin” hard coal area (otherwise known as Jan Karski) resulting from Article 15 of the Geological and Mining Law.”

As discussed above, in April 2018, Prairie commenced legal action against the MoE for breaching the Polish Geological and Mining Law (2011) (“GML”) in relation to the award of a Mining Usufruct Agreement to Prairie at Jan Karski.

Prairie has provided the MoE with all documents required by Polish Law to conclude a Mining Usufruct Agreement, including the Geological Documentation approval and an official application for a Mining Usufruct Agreement.

To date the MoE has still not provided Prairie with a Mining Usufruct Agreement for Jan Karski.

Based on professional advice, Prairie considers that the MoE breached the GML and Polish law and is defending its position having commenced legal proceedings against the MoE through the Polish courts to protect its tenure at Jan Karski.

The Company will also consider any other actions necessary to ensure its concession rights are reserved which may result in the Company taking further action against the MoE including invoking the protection afforded to the Company under any relevant bi-lateral or multi-lateral investment treaties or such other actions as the Company may consider appropriate at the relevant time.

Prairie will continue to update the market in relation to this matter as required.

Regional Director for the Environment sets a new deadline for issuing an Environmental Consent Decision

Prairie completed an Environmental and Social Impact Assessment and made submissions to the Lublin Regional Director for the Environment (“RDOS”) for an Environmental Consent decision for Jan Karski in October 2017. RDOS has issued a notice indicating that the Environmental Proceedings in order to issue a decision for Environmental Consent will be concluded by 30 June 2018. RDOS also confirmed receipt of all necessary opinions from other government agencies, including the Regional Water Management Board in Lublin.

Subsequent to the commencement of legal proceedings, Prairie’s team has received a request for additional information from RDOS and, together with the appointed environmental consultants, are working to provide this information, which is expected to be completed within the coming weeks.

Latest Drill Results Affirm Jan Karski as a Semi-Soft Coking Coal Project

During the quarter, Prairie announced the results of enhanced coal quality analysis and test work from a recently completed borehole (Kulik 1) at Jan Karski. The coking coal quality results are superior to the drill results announced in May 2017, and further confirm that Jan Karski is a globally significant semi-soft coking coal (“SSCC”) / Type 34 coking coal deposit with the potential to produce a high value ultra-low ash SSCC with an exceptional CSR and a high 75% coking coal product split.

The Kulik 1 borehole was a large diameter borehole enabling sufficient quantities of coal from the 391 seam to be collected to meet the requirements for physical coke testing, specifically confirmation of Coke Strength after Reaction (“CSR”) and extended coal washability test work. Coke testing was conducted at Centralne Laboratorium Pomiarowo-Badawcze Sp. z o.o. (“CLPB”) laboratories in Poland which is controlled by JSW and is internationally accredited as a commercial coal and coke testing laboratory. Washability and other basic coal quality analyses were conducted in the UK.

CSR analysis is considered vital in testing for a coal’s coking properties and is 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 Table 1 below.

Table 1: Analysis results from Jan Karski Kulik 1 borehole – 391 seam

COKING PROPERTIES

FSI

7.0

Roga Index

82

CSR

%

54.0

CRI

%

36.5

Ash in Coke

%

5.8

Sulphur in Coke

%

0.78

Giesler Plastometer

Initial Softening

°C

404

Max Fluidity temp

°C

440

Resolidification

°C

463

Max Fluidity

ddpm

268

ASTM Dilation

Softening Temperature

°C

380

Max Contraction Temp

°C

420

Max Dilation Temp

°C

450

Max Dilation

% D

64

PROXIMATE ANALYSIS

Inherent moisture

adb%

1.73

Ash

adb%

3.45

Volatile Matter

adb%

35.5

OTHER COAL PROPERTIES

Sulphur

ar%

1.00

Rank (Ro)

0.85

Vitrinite

%

84

Washability analysis from the Kulik 1 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 is unique with ash product levels of 3.45% or less (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. Further, the exceptionally high CSR (54) of the 391 seam from Kulik 1 borehole at Jan Karski is at the very top end of the range for globally traded SSCC.

The ultra-low ash content increases the coal’s 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 as it reduces CO2 emissions per tonne of hot metal produced.

Prairie’s analysis predicts increasing global demand for ultra-low ash coking coal for blending with hard coking coal (“HCC”), due to a continuing trend of rising average ash levels in globally traded hard coking coals. Premium HCC 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 an advantage for European steelmakers where EU regulations focus on reduced CO2 emissions and compliance with other EU emissions directives. The trend of ever more stringent emissions standards for steelmakers imposed by the EU indicates a positive future for marketability of Jan Karski ultralow ash semi-soft / Type 34 coking coal.

Increased European Demand for Semi-Soft / Type 34 Coal

Polish demand for hard coal remained strong during 2017, with Poland being forced to import 13.3 million tonnes of hard coal to meet its own needs – an increase of 60% in hard coal imports year on year. This follows a steady trend in Poland over the last few years with domestic production of hard coal declining and increased reliance on imports.

Concurrently, declining production of Czech and Polish semi-soft / Type 34 coking coal has resulted in steel makers becoming more aware of the importance of security of supply of the raw material. Over the last 12 months, lack of delivery of semi-soft / Type 34 coking coal has forced some Central European steel makers to introduce urgent measures including changes in the coking charge mix and increased imports, thus generating additional costs and disturbing normal production.

Comparison of Jan Karski’s latest coking coal quality results to other mines in Poland and the Czech Republic that have historically produced SSCC or Type 34 coking coal show the great potential that Jan Karski has to meet European market demand for Type 34 semi-soft coking coal as production from other Czech and Polish mines continues to diminish over the coming years.

DEBIENSKO MINE

The 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 opened in 1898 and was 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.

Preparation for the Next Phase of Project Studies

Prairie continued to analyse the drill hole data which will be used for engineering design of foundations of structures associated with the shafts, coal handling and preparation plant (“CHPP”) and other surface facilities. These holes are essential in order to assess the soil conditions, properly design structural foundations and thus provide more accurate pricing in the tenders as required for a feasibility study.

Pre-qualification of contractors for the major components of the next phase of Debiensko studies also continued throughout the quarter.

Prairie’s team have also designed an infill drilling program that when undertaken will upgrade more of the resource base at Debienkso to the Measured and Indicated resource categories and support JORC compliant reserve estimation.

CORPORATE

Possible Co-Operation between Prairie and JSW

Prairie and JSW have entered into a Non-Disclosure Agreement (“NDA”) with respect to potential co-operation regarding Prairie’s two Polish coal projects. The purpose of the NDA is to allow for the exchange of technical and commercial information in order to facilitate substantial and more advanced discussions regarding any potential transaction(s) options in respect of Prairie’s projects.

Prairie will make available information in relation to the hard coking coal project under the Debiensko concession, to allow JSW to conduct an assessment of its feasibility and economics, taking into consideration factors including, but not limited to: its stage of development, conditions of the mining concession, environmental permits, and the mining usufruct contract. JSW will also assess other various risks and opportunities, including JSW’s existing infrastructure at the neighbouring Knurów-Szczygłowice mine.

Prairie will also make available to JSW information in relation to the Jan Karski project in the Lublin Coal Basin, to allow JSW to conduct an assessment of the project’s feasibility and economics regarding coking coal, taking into consideration factors including, but not limited to: its phase of development, the physical and chemical parameters of the coal (in particular its coking parameters), the timeframe and conditions with regards to obligations to obtain a mining concession, as well as other various risks and opportunities.

It is emphasised that discussions are at a preliminary stage and that even if they move onto discussions of specific transactions terms, any potential transaction(s), should they occur, may be subject to a number of conditions including, but not limited to, obtaining positive evaluations and expert opinions, necessary corporate approvals, consents and approvals related to funding, consents from Poland’s Office of Competition and Consumer Protection (UOKiK) if required, and any other requirements that may relate to the strategy, objectives and regulatory regimes applicable to either Prairie Mining or JSW.

There can be no certainty as to whether any transaction(s) will be agreed, or the potential form of such transaction(s).

The NDA provides for discussions to be conducted for an initial period up to 6 months, which may be extended by mutual agreement of both parties. The companies will continue to comply with their respective disclosure obligations to the relevant markets, as required.

 

Financial Position

Prairie has cash reserves of A$13 million. With CD Capital’s right to invest a further A$68 million as a cornerstone investor, plus with the Strategic Co-operation Agreement Prairie has with China Coal for financing and construction of Jan Karski, Prairie is in a strong financial position to progress with its planned development activities at Debiensko and Jan Karski.

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.

 

Competent Person Statements

The information in this announcement that relates to Exploration Results was extracted from Prairie’s announcement dated 21 February 2018 entitled “Drill Results Affirm Jan Karski’s Status as a Globally Significant Semi-Soft (Type 34) Coking Coal Project”. The information in the original announcement 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 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.

APPENDIX 1 – EXPLORATION TENEMENT INFORMATION

As at 31 March 2018, the Company has an interest in the following tenements:

Location

Tenement

Percentage Interest

Status

Tenement Type

Jan Karski, Poland

Jan Karski Mine Plan Area (K-4-5, K-6-7, K-8 and K-9)*

100

Granted

Exclusive Right to apply for a mining concession

Jan Karski, Poland

Kulik (K-4-5)

100

Granted

Exploration

Jan Karski, Poland

Syczyn (K-8)

100

Granted

Exploration

Jan Karski, Poland

Kopina (K-9)

100

Granted

Exploration

Debiensko, Poland

Debiensko 1**

100

Granted

Mining

Debiensko, Poland

Kaczyce 1

100

Granted

Mining & Exploration (includes gas rights)

 

*  In July 2015, Prairie announced that it had secured the Exclusive Right to apply for a Mining Concession for Jan Karski as a result of its Geological Documentation for the Jan Karski deposit being approved by Poland’s MoE. The approved Geological Documentation covers areas of all four original Exploration Concessions granted to Prairie (K-4-5, K-6-7, K-8 and K-9) and includes the full extent of the targeted resources within the mine plan for Jan Karski. As a result of the Exclusive Right, Prairie was the only entity with a legal right to lodge a Mining Concession application over Jan Karski for the period up and until 2 April 2018. Under the Polish GML, a Mining Concession application comprises the submission of a Deposit Development Plan (“DDP”), approval of a spatial development plan (rezoning of land for mining use) and an Environmental Consent decision. Prairie has previously announced that the DDP and spatial development plans for Jan Karski have already been approved. 

However, as of the date of this quarterly, Prairie has not yet received the required Environmental Consent decision, which remains pending. Prairie completed an Environmental and Social Impact Assessment and made submissions to RDOS for an Environmental Consent decision in October 2017. Prairie has not been able to apply for a Mining Concession for Jan Karski due to the delay in the issuance of an Environmental Consent decision. However, the Environmental Consent proceedings continue to progress and a decision for Environmental Consent will be concluded by 30 June 2018.

 

The approval of Prairie’s Geological Documentation in 2015 also conferred upon Prairie the legal right to apply for a Mining Usufruct Agreement over Jan Karski for an additional 12-month period beyond April 2018, which precludes any other parties being granted any licence over all or part of the Jan Karski concessions. Under Polish law, the MoE is strictly obligated, within three months of Prairie making an application for a Mining Usufruct Agreement, to grant the agreement. It should be noted that the MoE confirmed Prairie’s priority right in two written statements (i.e. in a final administrative decision dated 11 February 2016 and in a formal letter dated 13 April 2016). Prairie applied to the MoE for a Mining Usufruct Agreement over Jan Karski in late December 2017. As of the date of this quarterly the MoE has not made available to Prairie a Mining Usufruct Agreement for Jan Karski, therefore breaching the three-month obligatory period for the agreement to be concluded. Legal advice provided to Prairie concludes that failure of the MoE to grant Prairie the Mining Usufruct Agreement is a breach of Polish law. Accordingly, the Company commenced legal proceedings against the MoE through the Polish courts in order to protect the Company’s security of tenure over the Jan Karski concessions. Since the MoE has not provided a decision within three months regarding Prairie’s Mining Usufruct application, the Polish civil court has the power to enforce conclusion of a Usufruct Agreement in place of the MoE. In the event that a Mining Usufruct Agreement is not made available to the Company on acceptable terms or the Company does not enter into a Mining Usufruct Agreement for any other reason, other parties may be able to apply for exploration or mining rights for all or part of the Jan Karski concession area. However, given that the Civil Court has approved Prairie’s motion for an injunction against the MoE, as described above, the MoE is now prevented from entering into a Usufruct agreement or concession with any other party besides Prairie until the full court proceedings are concluded.

 

**             Under the terms of the Debiensko Mining Concession issued in 2008 by the MoE (which is valid for 50 years from grant date), commencement of production was to occur by 1 January 2018. Not commencing production by January 2018 does not immediately infringe on the validity and expiry date of the current Mining Concession, which is June 2058. However, the concession authority has the right to request the concession holder to reasonably remove any infringements related to non-conformance with the conditions of a Mining Concession and determine a reasonable date for removal of the infringements (under Polish law, the concession authority is required to provide a reasonable timeframe to remedy any non-compliance taking into account the nature of the non-conformance). Failure to remedy the infringements within any reasonable time frame prescribed by the concession authority may lead to commencement of proceedings to limit or withdraw of a concession. In December 2016, the Company submitted an application to the MoE to amend the Debiensko Mining Concession to alter the date for commencement of production from 2018 to 2025, and has provided the MoE with additional information requested. A decision from the MoE is currently pending following a change in the Polish Prime Minister in December 2017 and the appointment of a new Minister of Environment in January 2018.

 

+Rule 5.5

Appendix 5B

Mining exploration entity and oil and gas exploration entity quarterly report

Introduced 01/07/96  Origin Appendix 8  Amended 01/07/97, 01/07/98, 30/09/01, 01/06/10, 17/12/10, 01/05/13, 01/09/16

Name of entity

PRAIRIE MINING LIMITED

ABN

Quarter ended (“current quarter”)

23 008 677 852

31 March 2018

Consolidated statement of cash flows

Current quarter $A’000

Year to date             (9 months)
$A’000

1.

Cash flows from operating activities

1.1

Receipts from customers

1.2

Payments for

(1,921)

(4,875)

(a)   exploration & evaluation

(b)   development

(c)   production

(d)   staff costs

(489)

(1,572)

(e)   administration and corporate costs

(276)

(716)

1.3

Dividends received (see note 3)

1.4

Interest received

94

297

1.5

Interest and other costs of finance paid

1.6

Income taxes paid

1.7

Research and development refunds

1.8

Other (provide details if material)

(a)  Business development costs

(b)  Property rental and gas sales

(147)

151

(672)

399

1.9

Net cash from / (used in) operating activities

(2,588)

(7,140)

2.

Cash flows from investing activities

(22)

(84)

2.1

Payments to acquire:

(a)   property, plant and equipment

(b)   tenements (see item 10)

(c)   investments

(d)   other non-current assets

2.2

Proceeds from the disposal of:

497

(a)   property, plant and equipment

(b)   tenements (see item 10)

(c)   investments

(d)   other non-current assets

2.3

Cash flows from loans to other entities

2.4

Dividends received (see note 3)

2.5

Other (provide details if material)

2.6

Net cash from / (used in) investing activities

(22)

413

3.

Cash flows from financing activities

3.1

Proceeds from issues of shares

3.2

Proceeds from issue of convertible notes

2,627

3.3

Proceeds from exercise of share options

3.4

Transaction costs related to issues of shares, convertible notes or options

(3)

(182)

3.5

Proceeds from borrowings

3.6

Repayment of borrowings

3.7

Transaction costs related to loans and borrowings

3.8

Dividends paid

3.9

Other (provide details if material)

3.10

Net cash from / (used in) financing activities

(3)

2,445

4.

Net increase / (decrease) in cash and cash equivalents for the period

15,140

16,809

4.1

Cash and cash equivalents at beginning of period

4.2

Net cash from / (used in) operating activities (item 1.9 above)

(2,588)

(7,140)

4.3

Net cash from / (used in) investing activities (item 2.6 above)

(22)

413

4.4

Net cash from / (used in) financing activities (item 3.10 above)

(3)

2,445

4.5

Effect of movement in exchange rates on cash held

2

2

4.6

Cash and cash equivalents at end of period

12,529

12,529

5.

Reconciliation of cash and cash equivalents
at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts

Current quarter
$A’000

Previous quarter
$A’000

5.1

Bank balances

2,029

3,640

5.2

Call deposits

10,500

11,500

5.3

Bank overdrafts

5.4

Other (provide details)

5.5

Cash and cash equivalents at end of quarter (should equal item 4.6 above)

12,529

15,140

6.

Payments to directors of the entity and their associates

Current quarter
$A’000

6.1

Aggregate amount of payments to these parties included in item 1.2

(158)

6.2

Aggregate amount of cash flow from loans to these parties included in item 2.3

Nil

6.3

Include below any explanation necessary to understand the transactions included in items 6.1 and 6.2

Payments include executive remuneration (including bonuses), director fees, superannuation and provision of a fully serviced office.

7.

Payments to related entities of the entity and their associates

Current quarter
$A’000

7.1

Aggregate amount of payments to these parties included in item 1.2

7.2

Aggregate amount of cash flow from loans to these parties included in item 2.3

7.3

Include below any explanation necessary to understand the transactions included in items 7.1 and 7.2

Not applicable

8.

Financing facilities available
Add notes as necessary for an understanding of the position

Total facility amount at quarter end
$A’000

Amount drawn at quarter end
$A’000

8.1

Loan facilities

8.2

Credit standby arrangements

8.3

Other (please specify)

8.4

Include below a description of each facility above, including the lender, interest rate and whether it is secured or unsecured. If any additional facilities have been entered into or are proposed to be entered into after quarter end, include details of those facilities as well.

9.

Estimated cash outflows for next quarter

$A’000

9.1

Exploration and evaluation

(1,000)

9.2

Development

9.3

Production

9.4

Staff costs

(500)

9.5

Administration and corporate costs

(200)

9.6

Other (provide details if material)
(a)        Business development costs

(200)

9.7

Total estimated cash outflows

(1,900)

10.

Changes in tenements
(items 2.1(b) and 2.2(b) above)

Tenement reference and location

Nature of interest

Interest at beginning of quarter

Interest at end of quarter

10.1

Interests in mining tenements and petroleum tenements lapsed, relinquished or reduced

Sawin, Poland

Direct

100

10.2

Interests in mining tenements and petroleum tenements acquired or increased

 

Compliance statement

1        This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.

2        This statement gives a true and fair view of the matters disclosed.

                        [lodged electronically without signature]

Sign here:         ……………………………………………………                        Date: 30 April 2018

(Director/Company secretary)

Print name:       Dylan Browne

Notes

1.            The quarterly report provides a basis for informing the market how the entity’s activities have been financed for the past quarter and the effect on its cash position. An entity that wishes to disclose additional information is encouraged to do so, in a note or notes included in or attached to this report.

2.            If this quarterly report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 6: Exploration for and Evaluation of Mineral Resources and AASB 107: Statement of Cash Flows apply to this report. If this quarterly report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standards apply to this report.

3.            Dividends received may be classified either as cash flows from operating activities or cash flows from investing activities, depending on the accounting policy of the entity.

However, on 3 April 2018, Prairie announced that it had commenced legal proceedings against Poland’s Ministry of Environment due to its failure to grant Prairie a Mining Usufruct Agreement over the concessions which form the Jan Karski Mine and in order to protect the Company’s security of tenure over the project.

Prairie Mining #PDZ – Half Year Accounts

Interim Financial Report for the Half-Year Ended
31 December 2017

 

Śródroczny raport finansowy za drugie półrocze zakończone
31 grudnia 2017

ABN 23 008 677 852

CORPORATE DIRECTORY | ZBIÓR DANYCH KORPORACYJNYCH

 

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

Tel: +44 207 487 3900

 

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: +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

Directors’ Declaration

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 are available in the full version of the Interim Financial Report on our website at www.pdz.com.au  

Notes to the Consolidated Financial Statements

Auditor’s Independence Declaration

Independent Auditor’s Review Report

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 during the half-year ended 31 December 2017 (“Consolidated Entity” or “Group”).

DIRECTORS

The names and details of the Company’s Directors in office at any time during the half-year and until the date of this report 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


Unless otherwise shown, all Directors were in office from the beginning of the half-year until the date of this report.

OPERATING AND FINANCIAL REVIEW

Operations 

Highlights during, and subsequent to, the end of the half-year include:

Debiensko Mine (Premium Hard Coking Coal)

·      The newly appointed Prime Minister, Mateusz Morawiecki, officially presented the Ministry of Development’s “Program for Silesia” which included a strategy for the re-start of a major coking coal mine in the Upper Silesian region, where the Debiensko Mine (“Debiensko”) is located, and highlighted the positive social and economic impacts that mine development would have on the region.

·      Mine site redevelopment planning continued at the Debiensko to advance with completion of initial demolition works, pre-qualification of study contractors, and preparation for an infill drill program to increase JORC Measured and Indicated Resources.

·      Prairie continued discussions with regional steel makers and coke producers for future coking coal sales and offtake.

·      Hard coking coal prices continued to trade at price levels above US$225/t FOB Australia.

·      Market analysts forecast underinvestment in new coking coal mine development has potential to result in sustained high coking coal prices.

·      European Commission continues to designate coking coal as a Critical Raw Material in its 2017 review.

Jan Karski Mine (Semi-Soft Coking Coal)

·      Prairie’s use of modern exploration techniques continues to transform the Jan Karski Mine (“Jan Karski”) with latest drilling results re-affirming the capability of the project to produce high value ultra-low ash semi-soft coking coal.

·      Environmental permitting for Jan Karski advanced following successful submission of the Environmental and Social Impact Assessment (“ESIA”) to the Lublin Regional Environment Directorate for Environmental Consent.

·      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.

·      Preparation of the Mining Concession application is underway and anticipated to be lodged in the coming weeks, subject to the Company being issued with Environmental Consent.

·      China Coal’s technical studies for the construction of Jan Karski have significantly advanced and Prairie is currently reviewing study documents provided by China Coal. The studies will be revised to incorporate the latest coal quality results from drilling at Jan Karski as well as any conditions stipulated in the Environmental Consent and the Mining Concession to be granted for Jan Karski.

Corporate

·      In July 2017, Prairie and CD Capital completed an additional investment of US$2.0 million ($2.6 million) in the form of a non-redeemable, non-interest-bearing convertible loan note (“Loan Note 2”).

·      Cash on hand of $15.1 million and CD Capital’s right to invest a further $68 million as a cornerstone investor, plus with the Strategic Co-operation Agreement between Prairie and China Coal for financing and construction of Jan Karski, Prairie is well positioned to progress with its planned development activities at Debiensko and Jan Karski.

Debiensko Mine

Debiensko is a 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 opened in 1898 and was 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.

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 the 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

 

Re-start of a Coking Coal mine included in “Program for Silesia” and new political appointments in Poland

Prairie notes that during the half-year, the Polish Government appointed a new Prime Minister, Mr Mateusz Morawiecki, who immediately prior to his current role, was Deputy Prime Minister and Minister of Finance in Poland. Prairie also notes that in January 2018, a new Minister of Environment, Mr Henryk Kowalczyk, was appointed as part of a cabinet reshuffle under the new Prime Minister. In Poland, responsibility for exploration and Mining Concessions is the responsibility of the MoE.

 

Following his appointment, Prime Minister Mateusz Morawiecki, presented the Polish Ministry of Development’s “Program for Silesia” (“Program”) – a strategic document which anticipated the re-construction of a coking coal mine in the region of Upper Silesia, where Debiensko is located. The Program details the creation of 1,500 direct jobs in the region and indicates the social and economic benefits of re-construction of a coking coal mine, to potentially be funded by foreign and Polish capital.

 

Preparation for the Next Phase of Project Studies

Following completion of a 28 shallow geo-technical drill program during the period, Prairie continued to analyse the drill hole data which will be used for engineering design of foundations of structures associated with the shafts, coal handling and preparation plant (“CHPP”) and other surface facilities. These holes are essential in order to assess the soil conditions, properly design structural foundations and thus provide more accurate pricing in the tenders as required for a feasibility study.

 

Pre-qualification of contractors for the major components of the next phase of Debiensko studies also continued throughout the period including contractors for the:

 

·        In-fill drilling program (to update measured and indicated resources);

·        CHPP;

·        Shafts and bulk coal winder;

·        Desalination plant; and

·        Surface facilities.

 

Demolition works continued throughout the period specifically targeting old structures including walkways and old administrative buildings. To date, Prairie has completed demolition works on a number of old surface structures of the former Debiensko mine including the bathhouse, switchgear building and locomotive garage.

Jan Karski Mine

Latest Drill Results Affirm Jan Karski as a Semi-Soft Coking Coal Project

Prairie’s use of modern exploration techniques continues to transform Jan Karski with latest drill results re-affriming the capability of the the project to produce high value ultra-low ash semi-soft coking coal, known as Type 34 coal in Poland.

The coking coal quality results are superior to the drill results announced in May 2017, and further confirm that Jan Karski is a globally significant semi-soft coking coal (“SSCC”) / Type 34 coking coal deposit with the potential to produce a high value ultra-low ash SSCC with an exceptional CSR and a high 75% coking coal product split.

Submission of ESIA & Initiation of Public Consultation

An application for issuing the environmental decision together with the ESIA was submitted to the Regional Director for Environmental Protection (“RDOS”) in Lublin in October 2017. Taking into account the RDOS’s additional comments the motion and ESIA were supplemented in late November 2017. The Environmental Consent process has now officially been initiated by RDOS.

Prairie is now waiting for approval of the ESIA in the form of an Environmental Consent decision, which is the last component to meet all formal requirements to apply for the Mining Concession for construction for Jan Karski.

As part of the environmental permitting process, Prairie initiated public consultations in three municipalities, including Wierzbica, Siedliszcze and Cyców. Presentations on Jan Karski’s development plans were given by Mr Miroslaw Taras (Prairie’s Group Executive), Witold Wołoszyn (Prairie’s Environmental and Planning Manager) and specialists from the international environmental consulting group, Multiconsult Polska who prepared the ESIA. Key advantages for the local community related to employment opportunities and social benefits associated with the development, construction and operation of Jan Karski including:

 

·        creation of 2,000 direct employment positions and 10,000 indirect jobs for the region once operational;

·        increasing skills of the workforce and through the implementation of International Standard training programmes;

·        stimulating the development of education, health services and communications within the region; and

·        building a mine that creates new employment for generations to come and career paths for families to remain in the region.

China Coal Progress and Financing Discussions

In November 2017, the Company hosted a delegation in Poland including China Coal No.5 Construction Company Ltd (“China Coal”) and the Chinese Government’s officially authorised coal mine design institute Jinan Mine Design Institute, during which locally provided content for construction of Jan Karski was finalised alongside domestic Polish specialists, subcontractors and partners who will provide relevant Polish content.

China Coal’s non-JORC technical studies for the construction and funding of the Jan Karski Mine have significantly advanced and Prairie is currently reviewing study documents (“Studies”) received from China Coal subsequent to the half-year end. In accordance with the Strategic Co-operation Agreement between Prairie and China Coal, the Studies will form the basis for provision of debt financing out of China for the construction and development of Jan Karski. The Studies are being undertaken in accordance with Chinese official mine design and banking standards for coal mine projects, and to comply with domestic Polish engineering standards and standards for mechanical and electrical equipment. The terms of the Environmental Consent and Mining Concession for Jan Karski will be incorporated into the final engineering design, as well as results from the latest coal quality and hydrogeological drilling works being conducted by the Company.

Prairie and China Coal continue to advance discussions with Chinese banks to provide debt facilities to fund construction of the Project and enter into a complete Engineering, Procurement, and Construction (“EPC”) contract under which China Coal would construct the Jan Karski Mine.

Results of Operations

The net loss of the Consolidated Entity for the half-year ended 31 December 2017 was $5,297,797 (31 December 2016: $5,337,988). Significant items contributing to the current half-year loss and the substantial differences from the previous half-year include to the following:

 

(i)         Exploration and evaluation expenses of $4,047,621 (31 December 2016: $2,565,889), 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 half-year, the Group achieved key milestones including (i) completed drilling at Jan Karski which re-affirmed the capability of the project to produce SSCC; (ii) permitting activities continued at Jan Karski including submission of an ESIA and approval of spatial development plans which will form the basis of a Mining Concession application; (iii) substantial advancement of China Coal’s technical studies for construction of the Jan Karski Mine; and (iv) mine site redevelopment planning continued at Debiensko including advancement of demolition works pre-qualification of study contractors and preparation for an infill drill program to increase JORC Measured and Indicated Resources;

 

(ii)        Business development expenses of $512,267 (31 December 2016: $484,478) which includes expenses relating to the Group’s investor relations activities during the six months to 31 December 2017 including brokerage fees, public relations, digital marketing, travel costs, attendances at conferences and business development consultant costs;

 

(iii)       Other expenses of nil (31 December 2016: $500,236) 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 in 2016;

 

(iv)       Non-cash share-based payment expenses of $200,422 (31 December 2016: $167,060) 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. At 31 December 2017 1.2 million unvested performance rights were forfeited;

 

(v)        Non-cash fair value loss of $212,687 (31 December 2016: $1,847,018) which is attributable to the non-cash fair value movements on the conversion right of the first CD Capital convertible loan note (“Loan Note 1”) accounted as a financial liability at fair value through profit and loss. This financial liability increases in size as the share price of the Company increases. With the share price increasing by some 8% during the half-year, the size of the loss attributable to the financial liability has increased. When Loan Note 1 converts into shares and the CD Options are issued, the financial liability will be reclassified from a liability to equity and will require no cash settlement by the Company; and

 

(vi)       Revenue of $441,023 (31 December 2016: $403,179) consisting of interest revenue of $189,164 (31 December 2016: $208,330) and the receipt of $251,859 (31 December 2016: $194,849) of gas and property lease income derived at Debiensko.

Financial Position

At 31 December 2017, the Group had cash reserves of $15,146,766 (30 June 2017: $16,826,854) and with CD Capital’s right to invest a further $68 million in the Company as a strategic partner, this places the Group in a strong financial position to continue with its planned development activities at Debiensko and Jan Karski.

At 31 December 2017, the Company had net assets of $10,634,740 (30 June 2017: $13,095,130) a decrease of approximately 19% compared with 30 June 2017. This is largely attributable to the decrease in cash, the increase in other financial liabilities coupled with the loss for the six months to 31 December 2017.

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 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:

·           Commence a focused in-fill drill program to increase JORC measured and indicated resources to support future feasibility studies for Debiensko;

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

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

·           Formally lodge a Mining Concession application for Jan Karski in the coming weeks, subject to the Company being issued with Environmental Consent;

·           Furthering discussions with a select group of Chinese financing institutions as China Coal nears completion of its Studies; and

·           Based on the results of the Studies, enter into a complete EPC contract under which China Coal will construct the Jan Karski Mine.

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 – As at 31 December 2017, the Company has cash in excess of $15 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 (“CD 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 the CD 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 half-year, China Coal and Prairie continue to advance towards completion the Studies, 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 maintaining project concessions – The Company’s mining exploration and development activities at Debiensko and Jan Karski 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, in December 2016, to amend the Debiensko Mining Concession (which is valid until 2058) to alter the commencement of production from 1 January 2018 to 2025. Not commencing production by January 2018 does not immediately infringe on the validity and expiry date of the current Mining Concession, however, the concession authority has the right to request the concession holder to reasonably remove any infringements related to non-conformance with the conditions of a Mining Concession and determine a reasonable date for removal of the infringements (under Polish law, the concession authority is required to provide a reasonable timeframe to remedy any non-compliance taking into account the nature of the non-conformance). Failure to remedy the infringements within any reasonable time frame prescribed by the concession authority may lead to commencement of proceedings to limit or withdraw a concession. A decision from the MoE on the Company’s amendment application is currently pending following a change of the Polish Prime Minister in December 2017 and the appointment of a new Minister of Environment in January 2018. 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 Environmental Consent prior to being granted a Mining Concession) and is not in breach of the spatial development plan (Karbonia was granted with spatial approval prior to the award of the Debiensko Mining Concession).

On 1 July 2015, the Company announced that it had secured the Exclusive Right to apply for a Mining Concession for Jan Karski. As a result of its geological documentation for the Jan Karski deposit being approved, Prairie is currently the only entity that can lodge a Mining Concession application over Jan Karski within a three (3) year period up and until 2 April 2018. The approved geological documentation covers an area comprising of all four of the original Exploration Concessions granted to Prairie (K-4-5, K-6-7, K-8 and K-9) and includes the full extent of the targeted resources within the mine plan for Jan Karski. In this regard, no beneficial title interest was surrendered by the Company when the K-6-7 Exploration Concession expired in 2017. Under Polish mining law, and owing to the Exclusive Right the Company has secured, Prairie is currently the only entity that may apply for and be granted a Mining Concession with respect to the K-6-7 area (the Exclusive Right also applies to the K-4-5, K-8 and K-9 areas of Jan Karski). There is no requirement for the Company to hold an Exploration Concession in order exercise the Exclusive Right and apply for a Mining Concession. In addition, Prairie has the right to apply for and be granted, within 3 months of making an application, a mining usufruct agreement for an additional 12 month period that precludes any other parties being granted a licence over all or part of the Jan Karski concessions. Prairie applied for a mining usufruct agreement in December 2017 with the decision from the Polish MoE still pending. In the event that a mining usufruct agreement is not made available to the Company on acceptable terms or the Company does not enter in to a mining usufruct agreement for any other reason, other parties may be able to apply for a Mining Concession for all or part of the Jan Karski license area.

If, however, in a scenario where the MoE does not grant the Company with a mining usufruct in the required timeframe, legal advice sought by Company outlines that the Group will be in a position to file a civil law claim against the Polish authorities which could overturn the authority’s decision not to grant Prairie a mining usufruct. In any event, The Company intends to submit a Mining Concession application over the mine plan area at Jan Karski (which includes K-6-7), which is subject to the approval of the MoE, within the coming weeks subject to the Company being issued with Environmental Consent. There is no assurance that the Company will be issued Environmental Consent, however the Company believes that the Environmental Consent application, as submitted in October 2017 and supplemented in November 2017, was complete and complied with formal requirements of the relevant Polish environmental regulations.

There is also no assurance that such applications (or renewals or alterations) of the concessions 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 Jan Karski, Debiensko, the Company and on the value of the Company’s securities.

·           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 Exploration Concession which comprises of the Jan Karski Mine). 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 the 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 the Jan Karski Mine 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 current or 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.

SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD

 

(i)         On 9 February 2018, the Company issued an announcement, following recent press articles, regarding possible co-operation between the Company and JSW to progress the development and exploitation of the Company’s Polish coal projects. Prairie confirms that a meeting was held with JSW where preliminary discussions regarding co-operation took place. Discussions are at a very early stage and there can be no certainty as to whether any co-operation will be agreed in the future; and

 

(ii)        On 21 February 2018, the Company released drill results at Jan Karski which re-affirmed the capability of the project to produce high value ultra-low ash semi-soft coking coal.

Other than the above, there were no significant events occurring after balance date requiring disclosure.

 

AUDITOR’S INDEPENDENCE DECLARATION

Section 307C of the Corporations Act 2001 requires our auditors, Ernst and Young, to provide the Directors of Prairie Mining Limited with an Independence Declaration in relation to the review of the half-year financial report. This Independence Declaration is on page 22 and forms part of this Directors’ Report in the full version of the Interim Financial Report.

 

Signed in accordance with a resolution of the Directors.

BEN STOIKOVICH

Director

 

 

9 March 2018

Forward Looking Statements

This report 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.

DIRECTORS’ DECLARATION

 

In accordance with a resolution of the Directors of Prairie Mining Limited, I state that:

In the reasonable opinion of the Directors and to the best of their knowledge:

(a)        the attached financial statements and notes thereto for the period ended 31 December 2017 are in accordance with the Corporations Act 2001, including:

(i)         complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001; and

(ii)        giving a true and fair view of the financial position of the Group as at 31 December 2017 and of its performance for the half-year ended on that date; and

(b)        The Directors Report, which includes the Operating and Financial Review, includes a fair review of the information required by:

(i)      DTR4.2.7R of the Disclosure and Transparency Rules in the United Kingdom, being an indication of important events during the first six months of the current financial year and their impact on the half-year financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and

(ii)     DTR4.2.8R of the Disclosure and Transparency Rules in the United Kingdom, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Group during that period, and any changes in the related party transactions described in the last annual report that could have such a material effect; and

(c)        there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

 

 

On behalf of the Board

 

 

BEN STOIKOVICH

Director

 

9 March 2018

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE HALF-YEAR ENDED 31 DECEMBER 2017

 

 

Half-Year Ended
31 December 2017
$

Half-Year Ended
31 December 2016
$

Revenue

441,023

403,179

Other income

325,000

Exploration and evaluation expenses

(4,047,621)

(2,565,889)

Employment expenses

(66,680)

(68,774)

Administration and corporate expenses

(487,870)

(238,129)

Occupancy expenses

(211,273)

(194,583)

Share-based payment expenses

(200,422)

(167,060)

Business development expenses

(512,267)

(484,478)

Other expenses

(500,236)

Fair value movements

(212,687)

(1,847,018)

Loss before income tax

(5,297,797)

(5,337,988)

Income tax expense

Net loss for the period

(5,297,797)

(5,337,988)

Net loss attributable to members of Prairie Mining Limited

(5,297,797)

(5,337,988)

Other comprehensive income

Items that may be reclassified subsequently to profit or loss:

Exchange differences on translation of foreign operations

42,842

(150,679)

Total other comprehensive income/(loss) for the period

42,842

(150,679)

Total comprehensive loss for the period

(5,254,955)

(5,488,667)

Total comprehensive loss attributable to members of Prairie Mining Limited

(5,254,955)

(5,488,667)

Basic and diluted loss per share (cents per share)

(3.16)

(3.52)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2017

 

31 December 2017
$

30 June
2017

$

ASSETS

Current Assets

Cash and cash equivalents

15,146,766

16,826,854

Trade and other receivables

991,479

1,094,997

Total Current Assets

16,138,245

17,921,851

Non-Current Assets

Property, plant and equipment

2,444,548  

2,779,526

Exploration and evaluation assets

2,699,523

2,603,172

Total Non-Current Assets

5,144,071

5,382,698

TOTAL ASSETS

21,282,316

23,304,549

LIABILITIES

Current Liabilities

Trade and other payables

2,011,403

2,109,127

Provisions

616,795

580,129

Other financial liabilities

1,841,338

1,783,283

Non-cash other financial liabilities

4,813,433

4,600,746

Total Current Liabilities

9,282,969

9,073,285

Non-Current Liabilities

Provisions

1,364,607

1,136,134

Total Non-Current Liabilities

1,364,607

1,136,134

TOTAL LIABILITIES

10,647,576

10,209,419

NET ASSETS

10,634,740  

13,095,130

EQUITY

Contributed equity

61,071,856

58,477,713

Reserves

2,501,603 

2,258,339

Accumulated losses

(52,938,719)

(47,640,922)

TOTAL EQUITY

10,634,740  

13,095,130

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE HALF-YEAR ENDED 31 DECEMBER 2017

 

Contributed Equity

Share-based Payments Reserve

Foreign Currency Translation Reserve

Accumulated Losses

Total
Equity

$

$

$

$

$

Balance at 1 July 2017

58,477,713

1,529,894

728,445

(47,640,922)

13,095,130

Net loss for the period

(5,297,797)

(5,297,797)

Other comprehensive income for the half-year

Exchange differences on translation of foreign operations

42,842

42,842

Total comprehensive income/(loss) for the period

42,842

(5,297,797)

(5,254,955)

Transactions with owners recorded directly in equity

Issue of convertible notes (Loan Note 2) (Note 12)

2,627,430

2,627,430

Convertible note issue costs

(27,418)

(27,418)

Share issue costs

(5,869)

(5,869)

Forfeiture of performance rights

(1,134,010)

(1,134,010)

Recognition of share-based payments

1,334,432

1,334,432

Balance at 31 December 2017

61,071,856

1,730,316

771,287

(52,938,719)

10,634,740  

Balance at 1 July 2016

51,298,932

3,010,300

33,193

(36,526,665)

17,815,760

Net loss for the period

(5,337,988)

(5,337,988)

Other comprehensive income for the half-year

Exchange differences on translation of foreign operations

(150,679)

(150,679)

Total comprehensive income/(loss) for the period

(150,679)

(5,337,988)

(5,488,667)

Transactions with owners recorded directly in equity

Issue of ordinary shares

50,000

50,000

Share issue costs

(1,918)

(1,918)

Forfeiture of performance rights

(396,001)

(396,001)

Recognition of share-based payments

513,061

513,061

Balance at 31 December 2016

51,347,014

3,127,360

(117,486)

(41,864,653)

12,492,235

 

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE HALF-YEAR ENDED 31 DECEMBER 2017

 

Half-Year Ended
31 December 2017
$

Half-Year Ended
31 December 2016
$

Cash flows from operating activities

Payments to suppliers and employees

(5,078,182)

(4,890,288)

Proceeds from property and gas sales

248,859

94,849

Interest revenue from third parties        

202,758

231,437

Net cash outflow from operating activities

(4,626,565)

(4,564,002)

Cash flows from investing activities

Purchase of plant and equipment

(60,008)

Proceeds from sale of property

495,008

Purchase of controlled entity

(742,367)

Proceeds from sale of base metals project

325,000

Net cash inflow/(outflow) from investing activities

435,000

(417,367)

Cash flows from financing activities

Proceeds from issue of convertible note

2,627,430

Payments for issue of convertible note

(54,611)

Payments for share issue costs

(61,342)

Net cash inflow from financing activities

2,511,477

Net decrease in cash and cash equivalents

(1,680,088)

(4,981,369)

Net foreign exchange differences

(4,980)

Cash and cash equivalents at the beginning of the period

16,826,854

18,063,119

Cash and cash equivalents at the end of the period

15,146,766

 13,076,770

The following sections in the full version of the Interim Financial Report, along with all figures and illustrations, are available on our website at www.pdz.com.au  

Notes to the Consolidated Financial Statements

Auditor’s Independence Declaration

Independent Auditor’s Review Report

Paweł Różyński of RZECZ o BIZNESIE Polish business TV channel interviews Benjamin Stoikovich, CEO of Prairie Mining #PDZ

Paweł Różyński of RZECZ o BIZNESIE Polish business TV channel interviews Benjamin Stoikovich, CEO of Prairie Mining #PDZ

Prairie Mining #PDZ – Drilling Results Affirm Jan Karski as Semi-Soft Coking Coal

PRAIRIE MINING #PDZ – DRILL RESULTS AFFIRM JAN KARSKI’S STATUS AS A GLOBALLY SIGNIFICANT SEMI-SOFT (TYPE 34) COKING COAL PROJECT 

HIGHLIGHTS

  • Prairie’s use of modern exploration techniques continues to transform the Jan Karski Mine with latest drill results re-affirming the capability of the Project to produce high value ultra-low ash semi-soft coking coal, known as Type 34 coal in Poland
  • Outstanding results from coke oven testing demonstrate superior coal quality specification compared to typical parameters of internationally traded semi-soft coking coals and domestic Type 34 coals, including an exceptionally high Coke Strength after Reaction which is a parameter highly prized by steelmakers
  • Historically Poland’s Lublin Coal Basin has been associated with thermal coal production, however Prairie’s exploration program conducted according to international standards has demonstrated beyond doubt that the 391 coal seam at Jan Karski hosts a globally significant deposit of semi-soft / Type 34 coking coal
  • Washplant flow sheet design conducted as part of the China Coal technical studies anticipates mine production will be up to 75% ultra-low ash semi-soft / Type 34 coking coal, with outstanding overall saleable coal yield of 82%
  • Czech and Polish supply of semi-soft / Type 34 coking coal to the European steel industry has dramatically decreased over the last two years due to mine closures and declining production, with regional coke and steelmakers forced to replace the supply deficit with imports
  • Benchmarking analysis of Jan Karski’s ultra-low ash product against semi-soft coking coal produced in the Czech Republic and from recently closed Polish mines demonstrates the potential of the Jan Karski Type 34 coal to replace these coals in the regional market
  • The Company can now advance discussions with regional steelmakers and coke producers for future coking coal sales and offtake on the basis of selling ultra-low ash semi-soft / Type 34 coking coals from Jan Karski
  • Drill results will be incorporated in China Coal’s technical studies for the Jan Karski Mine

 

Prairie Mining Limited is pleased to announce the results of enhanced coal quality analysis and test work from a recently completed borehole (Kulik 1) at its 100% owned Jan Karski Mine. The coking coal quality results are superior to the drill results announced in May 2017, and further confirm that Jan Karski is a globally significant semi-soft coking coal (“SSCC”) / Type 34 coking coal deposit with the potential to produce a high value ultra-low ash SSCC with an exceptional CSR and a high 75% coking coal product split.

Comparison of the latest coking coal quality results to other mines in Poland and the Czech Republic that have historically produced SSCC or Type 34 coking coal show the great potential Jan Karski has to meet European market demand for Type 34 semi-soft coking coal as production from other Czech and Polish mines continues to diminish over the coming years.

Table 1: SSCC / Type 34 Coking Coal Quality – Jan Karski (Kulik 1) compared to other Czech and Polish Type 34 coals

Parameter

Jan Karski (Kulik 1)

Typical SSCC Coal (Upper Silesia – Poland)

Darkov

(Czech Republic)

Karvina CSA

(Czech Republic)

Rank (Ro)

0.85

0.82

1.15

1.00

VM %

35-37

38

27

28

Ash %

3.5

8.4

8.0

8.0

FSI

7.0

6.5

4.5

5

Roga Index

82

70

Vitrinite %

84

43

42

Dilatation

64

59

25

25

Fluidity

268

380

300

500

CSR

54

45-48

45-50

Type

34.2

34.2

These latest results will be incorporated into the non-JORC technical studies currently underway by Prairie’s strategic partner, China Coal.

Prairie’s CEO Ben Stoikovich commented: Prairie’s modern exploration program has demonstrated that Jan Karski is a globally significant semi-soft / Type 34 coking coal project, whereas historically the Lublin Coal Basin has been associated with thermal coal production only. This presents an outstanding economic development opportunity for the Lublin region, and Chelm province in particular, to become a leading European supplier of coking coal to the steel industry. Our latest studies anticipate that up to 75% of saleable production will be semi-soft / Type 34 coking coal, which is a high value product with the current benchmark FOB Australia price at ~USD135/t. With such a high proportion of saleable product from Jan Karski anticipated to be high value semi-soft / Type 34 coking coal, project economics are likely to be significantly enhanced compared to the 2016 Pre-Feasibility Study results. Coal tested from the Kulik 1 borehole demonstrated exceptional coking parameters, including CSR of 54, swelling index of 7.0 and fluidity of 268. With the ongoing closure of coal mines in the Czech Republic and Poland that produce semi-soft / Type 34 coking coal, there is a growing regional market opportunity for Jan Karski ultra-low ash semi-soft / Type 34 coking coals. Independent analysis has indicated that due to the superior coal quality of Jan Karski semi-soft / Type 34 coking coal, we have the potential to achieve market pricing of some 10% above the standard international SSCC benchmarks.

For further information, please contact:

Prairie Mining Limited

Tel: +44 207 478 3900

Ben Stoikovich, Chief Executive Officer

Email: info@pdz.com.au

Sapan Ghai, Head of Corporate Development

RESULTS FROM RECENT DRILLING AND EXPANDED COAL QUALITY ANALYSIS

Prairie has now completed drilling the Kulik 1 borehole at Jan Karski which was a large diameter borehole enabling sufficient quantities of coal from the 391 seam to be collected to meet the requirements for physical coke testing, specifically confirmation of Coke Strength after Reaction (“CSR”) and extended coal washability test work. Coke testing was conducted at Centralne Laboratorium Pomiarowo-Badawcze Sp. z o.o. (“CLPB”)laboratories in Poland which is controlled by Jastrzębska Spółka Węglowa (“JSW”) and is internationally accredited as a commercial coal and coke testing laboratory. Washability and other basic coal quality analyses were conducted in the UK. CSR analysis is considered vital in testing for a coal’s coking properties and is 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 Table 2 below:

Table 2: Analysis results from Jan Karski Kulik 1 borehole – 391 seam

COKING PROPERTIES

FSI

7.0

Roga Index

82

CSR

%

54.0

CRI

%

36.5

Ash in Coke

%

5.8

Sulphur in Coke

%

0.78

Giesler Plastometer

Initial Softening

°C

404

Max Fluidity temp

°C

440

Resolidification

°C

463

Max Fluidity

ddpm

268

ASTM Dilation

Softening Temperature

°C

380

Max Contraction Temp

°C

420

Max Dilation Temp

°C

450

Max Dilation

% D

64

PROXIMATE ANALYSIS

Inherent moisture

adb%

1.73

Ash

adb%

3.45

Volatile Matter

adb%

35.5

OTHER COAL PROPERTIES

Sulphur

ar%

1.00

Rank (Ro)

0.85

Vitrinite

%

84

 

JAN KARSKI COKING COAL KEY QUALITY ADVANTAGES

Ultra-low Ash

Washability analysis from the Kulik 1 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 is unique with ash product levels of 3.45% or less (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. Figure 1 (refer to www.pdz.com.au for figure 1) shows there is a range of ash specifications for semi-soft coking coals. Coal from the Kulik 1 borehole had ash of 3.45% at a float RD of 1.4, again demonstrating that Jan Karski SSCC is an ultra-low ash product compared to other SSCCs. 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 coal’s 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 as it reduces CO2 emissions per tonne of hot metal produced.

Prairie’s analysis predicts increasing global demand for ultra-low ash coking coal for blending with hard coking coal (“HCC”), due to a continuing trend of rising average ash levels in globally traded hard coking coals. Premium HCC 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 and compliance with other EU emissions directives. The trend of ever more stringent emissions standards for steelmakers imposed by the EU indicates a positive future for marketability of Jan Karski ultra-low ash semi-soft / Type 34 coking coal.

Exceptionally High CSR

The measured CSR (54) of the 391 seam from Kulik 1 borehole at Jan Karski is at the very top end of the range for globally traded SSCC. A CSR figure of 54 shows the coal has the ability to form a coherent coke mass, a sought after quality by steelmakers.

Other Positive Attributes

Other Jan Karski ultra-low ash SSCC quality positives are its high vitrinite content, high-range FSI (7.0), and fluidity of 268. The volatile matter is in the range typical for Australian traded SSCCs.

COMPARISON TO SEMI-SOFT COKING COALS PRODUCED IN THE CZECH REPUBLIC AND POLAND

SSCC is produced in the Czech Republic by mining company OKD, formerly New World Resources. Two SSCC brands are produced by OKD, Karvina CSA and Darkov. According to Prairie’s estimates, OKD currently produces approximately 1.8Mtpa of semi-soft / Type 34 coking coal. Indications are that these mines will cease production by 2022. Furthermore, during 2017 mine closures and production changes in Poland that have resulted in a reduction of availability of semi-soft / Type 34 coking coal in the domestic market of almost 2Mtpa.

Jan Karski ultra-low ash semi-soft / Type 34 coking coal quality parameters compare favourably with the coals currently and historically produced in the Czech Republic and Poland, with a summary comparison of coal qualities indicated in Table 3. These types of coals find wide acceptance in European coke ovens and particularly in stamp charging coke batteries which are widely used in Poland and across Central Europe.

Table 3: SSCC / Type 34 Coking Coal Quality – Jan Karski (Kulik 1) compared to other Czech and Polish mines

Parameter

Jan Karski (Kulik 1)

Typical SSCC Coal (Upper Silesia – Poland)

Darkov

(Czech Republic)

Karvina CSA

(Czech Republic)

Rank (Ro)

0.85

0.82

1.15

1.00

VM %

35-37

38

27

28

Ash %

3.45

8.4

8.0

8.0

FSI

7.0

6.5

4.5

5

Roga Index

82

70

Vitrinite %

84

43

42

Dilatation

64

59

25

25

Fluidity

268

380

300

500

CSR

54

45-48

45-50

Type

34.2

34.2

Increasing Polish Dependence on Hard Coal Imports

According to prominent Polish financial newspaper Parkiet Gazeta Gieldy, 2017 data from the EU’s statistical office Eurostat suggests Poland produced 65.8 million tonnes of hard coal in 2017, approximately 6 million tonnes less than in 2016. The decrease is attributed to the continued closure and restructuring of Polish coal mines. Conversely, Polish demand for hard coal remained strong during 2017, with Poland being forced to import 13.3 million tonnes of hard coal to meet its own needs – an increase of 60% in hard coal imports year on year. This follows a steady trend in Poland over the last few years with domestic production of hard coal declining and increased reliance on imports.

Increased European Demand for Type 34 Coal

Declining production of Czech and Polish semi-soft / Type 34 coking coal has resulted in steel makers becoming more aware of the importance of security of supply of the raw material. Over the last 12 months, lack of delivery of semi-soft / Type 34 coking coal has forced some Central European steel makers to introduce urgent measures including changes in the coking charge mix and increased imports, thus generating additional costs and disturbing normal production.

According to an article by Dziennik Gazeta Prawna, in February 2018 Lakshmi Mittal (Chairman and CEO of ArcelorMittal S.A. (“ArcelorMittal”)) met with Polish Prime Minister Mateusz Morawiecki during the World Economic Forum in Davos and informed the Prime Minister of the company’s concerns regarding the low availability of regionally produced semi-soft / Type 34 coking coal.  ArcelorMittal is reportedly considering further investment into steelmaking capacity in Poland following on from the completion of important modernisation investment projects at its Krakow unit in May 2017 totalling PLN 500 million including relining of the blast furnace for a new plant life of 20 years. However, security of supply of semi-soft / Type 34 coking coal remains an important consideration.

International and Polish Steel Sector Update

Global steel markets continued to strengthen in 2017 with groups such as Europe’s ArcelorMittal, Nucor Corporation of the US and South Korea’s POSCO all recently reporting higher profits. The recent rebound in the steel prices and increased demand have provided an ideal situation for steel makers. At the same time, North American and European steel makers have benefited from trade actions against dumping from China, which is responsible for half of global output, and continue to close underutilised and old-technology steel mills.

In December 2017, the President of the Board of Polish Steel Association estimated 2017 Polish steel product consumption to be approximately 13.5 million tonnes, up from 13.1 million tonnes in 2016 and forecast consumption rates to grow by over 11% over the next three years to reach 15 million tonnes. The increase was attributed to developments in the automobiles industry and household appliances sector, noting that Poland is Europe’s largest producer of such household appliances.

In 2016, Poland also imported 7.2 million tonnes of steel – an increase of 12% year on year and mainly from Ukraine, Russia and China – and exported 5.2 million tonnes of steel – a 6% increase year on year especially driven by exports to countries outside of the EU which increased by 16% from 2015 to 2016. This high level of demand for Polish steel from countries outside of the EU and particularly Ukraine, Russia and Turkey resulted in a negative trade balance of 4.5 million tonnes as Poland was unable to meet the demand.

PRICE BENCHMARKING

In 2017 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 based on the results of the Cycow 9 borehole. CRL took two approaches to price benchmarking. The first approach applied the method used by the S&P Global Platts (“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 values 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 SSCC product).

Both Platts benchmarking and value in use modelling show Jan Karski is a high value SSCC, 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 SSCC. 

COAL PROCESSING UPDATE AND COKING COAL YIELD

Dargo Associates, specialist coal handling and preparation consultants were appointed to re-evaluate the potential yields of ultra-low ash coking coal from Jan Karski and to develop a washplant flow sheet as part of the Chinese technical studies currently underway. To evaluate the yield of ultra-low ash coal, the washability tests were extended to give more information on separation in the lower density ranges.  Separating at low density increases the quantities of near density material and the extended washability test work was used to identify the most efficient wash plant process. The washability results from the recently drilled Kulik 1 borehole were consistent with the results from washability analysis conducted for all of the nine boreholes Prairie has drilled across Jan Karski, demonstrating exceptionally high yields of ultra-low ash (<3.5%) product coal at RD1.40 float.

Preliminary analysis has shown that the production of ultra-low ash SSCC (2.5 – 3.5%) results in an overall yield of saleable coal of 82%, which is similar overall yield as indicated in the original Jan Karski Pre-Feasibility Study (“PFS”) published in March 2016. Overall mine yields are hardly impacted by the ultra-low ash beneficiation as any coal lost due to the lowering of ash on the ultra-low ash SSCC product reports to the thermal product.

The predicted ratio of ultra-low ash SSCC to thermal coal is 75% coking coal to 25% thermal coal. The thermal coal product is anticipated to have 13% ash and will be in line with typical API2 specification export quality thermal coal. Should Prairie decide to sell a typically higher ash Polish domestic thermal coal of up to 25% ash, the overall yield will increase further.

BACKGROUND ON JAN KARSKI

In March 2016, Prairie announced the results of a PFS for Jan Karski confirming the technical viability and robust economics of the Project and highlighting its potential to become one of the lowest cost, large scale strategic coal suppliers to be developed in Europe.

The Study utilised an updated Coal Resource Estimate (“CRE”) for the Project which comprises a Global CRE of 728Mt including an Indicated Resource of 181Mt from two coal seams, the 391 and 389 seams. The PFS incorporated a mine plan based on an initial Marketable Ore Reserve Estimate generated from the indicated resources within the 391 and 389 seams.

Table 4: Jan Karski Mine Resource JORC Coal Resource and Reserve Estimate – 389 & 391 Seams

Coal Seam

Indicated Coal Resource

In-Situ (Mt)

389

17

391

164

Total

181

Probable Recoverable Coal Reserves (Mt)

170

Probable Marketable Coal Product (Mt)

139

To view all illustrations and figures, please refer to this announcement on the Company’s website at www.pdz.com.au 

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.

Competent Person Statements

The information in this 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’. Mr O’Dell consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

The information in this announcement that relates to the Coal Resources and Coal Reserves was extracted from Prairie’s announcement dated 8 March 2016 entitled “Pre-feasibility Study Confirms LCP As One of The Lowest Cost Global Coal Suppliers Into Europe” which is available to view on the Company’s website at www.pdz.com.au.

The information in the original announcement that relates to Coal Resources is based on, and fairly represents, information compiled or reviewed by, Mr Samuel Moorhouse, a Competent Person who is a Chartered Geologist and is employed by independent consultants Royal HaskoningDHV UK Limited. Mr Moorhouse has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to 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 Coal Reserves 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 and to 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’.

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 underpinning the Coal Resource and Coal Reserve 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.

 

JORC Code, 2012 Edition – Table 1

SECTION 1 SAMPLING TECHNIQUES AND DATA

(Criteria in this section apply to all succeeding sections.)

Criteria

JORC Code explanation

Commentary

Sampling techniques

·     Nature and quality of sampling (eg cut channels, random chips, or specific specialised industry standard measurement tools appropriate to the minerals under investigation, such as down hole gamma sondes, or handheld XRF instruments, etc). These examples should not be taken as limiting the broad meaning of sampling.

·     Include reference to measures taken to ensure sample representivity and the appropriate calibration of any measurement tools or systems used.

·     Aspects of the determination of mineralisation that are Material to the Public Report.

 

·     Coal cores were taken from continuous cores in the Carboniferous sections of the boreholes.

·     Assessment of coal quality and type is based on the results of laboratory tests of the coal samples taken from the borehole cores.

·     All seams equal to or thicker than 0.60 m were analysed.

·     Dirt (rock) partings in-seam less than 0.05 m were included in the coal sample and analysed with the coal.

·     Dirt partings equal to, or thicker than 0.05 m were analysed separately.

·     Average core yield was 100%. Core yield for the target seam 391 was 100%, confirmed by core measurement and geophysics.

Drilling techniques

·     Drill type (eg core, reverse circulation, open-hole hammer, rotary air blast, auger, Bangka, sonic, etc) and details (eg core diameter, triple or standard tube, depth of diamond tails, face-sampling bit or other type, whether core is oriented and if so, by what method, etc).

·     The borehole was drilled open hole to 16 m below the base of the Jurassic, approximately 707 m, and cased. Continuous coring was used in the in the coal measure strata below. Core diameter was 85 mm (PQ).

Drill sample recovery

·     Method of recording and assessing core and chip sample recoveries and results assessed.

·     Measures taken to maximise sample recovery and ensure representative nature of the samples.

·     Whether a relationship exists between sample recovery and grade and whether sample bias may have occurred due to preferential loss/gain of fine/coarse material.

·     During the drilling of the borehole, coal samples were collected from the drill core using methods that were standard for the coal industry in Poland (according to GWP and international standard ISO 14180:1998(E) – Solid mineral fuels – Guidance on the sampling of coal seams)

·     Core recovery was determined for the coal samples by measuring the lengths of recovered core and weighing broken/fragmentary core and calculating length to provide an overall recovery length and percentage as compared to the drilling depths. Final checks are provided by comparison with thicknesses determined from the suite of geophysical logs.

·     Core recoveries were recorded for each core run and for individual seams.

·     There is no known relationship between recovery and quality. 

·     All cores were photographed.

Logging

·     Whether core and chip samples have been geologically and geotechnically logged to a level of detail to support appropriate Mineral Resource estimation, mining studies and metallurgical studies.

·     Whether logging is qualitative or quantitative in nature. Core (or costean, channel, etc) photography.

·     The total length and percentage of the relevant intersections logged.

·     The cores have been logged and analysed in sufficient detail to support this announcement. Cores were analysed by Centralne Laboratorium Pomiarowo- – Badawcze Sp. z o.o. laboratories certified to Polish national standards and at Infrastructure and Energy, Socotec House Bretby who are certified to international standards. The results are considered fit for purpose.

·     Detailed borehole records are presented in the “Borehole Documentation” which contains the written description, graphic log (borehole card) and details of analyses and interpretations, including the final accepted seam thicknesses.

·     The Carboniferous section was fully cored and logged throughout.

Sub-sampling techniques and sample preparation

·     If core, whether cut or sawn and whether quarter, half or all core taken.

·     If non-core, whether riffled, tube sampled, rotary split, etc and whether sampled wet or dry.

·     For all sample types, the nature, quality and appropriateness of the sample preparation technique.

·     Quality control procedures adopted for all sub-sampling stages to maximise representivity of samples.

·     Measures taken to ensure that the sampling is representative of the in situ material collected, including for instance results for field duplicate/second-half sampling.

·     Whether sample sizes are appropriate to the grain size of the material being sampled.

·     Cores were not split but sampled as whole core as is standard practice with coal core. Detailed core recovery measurements were made allowing assessment of the representative nature of the core analysed. Cores were wrapped in plastic to prevent moisture loss prior to analysis. The target seam was sampled as soon as practicable, double packed in plastic bags which were purged with nitrogen gas and kept refrigerated during transport and prior to analysis. (In accordance with Australian best practice for the sampling of coking coals)

Quality of assay data and laboratory tests

·     The nature, quality and appropriateness of the assaying and laboratory procedures used and whether the technique is considered partial or total.

·     For geophysical tools, spectrometers, handheld XRF instruments, etc, the parameters used in determining the analysis including instrument make and model, reading times, calibrations factors applied and their derivation, etc.

·     Nature of quality control procedures adopted (eg standards, blanks, duplicates, external laboratory checks) and whether acceptable levels of accuracy (ie lack of bias) and precision have been established.

·     Laboratory procedures were to the standard industry practices.

·     Geophysical logs used in the boreholes include natural gamma, density (gamma gamma), acoustic scanner, dual laterolog and caliper logs.  These are of sufficient quality to be used for quantitative (i.e. seam thickness) determinations.

·     The laboratories used are accredited to national and international standards and have adequate quality control practices including analysis of standards and participation in “round robin” exercises.

Verification of sampling and assaying

·     The verification of significant intersections by either independent or alternative company personnel.

·     The use of twinned holes.

·     Documentation of primary data, data entry procedures, data verification, data storage (physical and electronic) protocols.

·     Discuss any adjustment to assay data.

·      Geological supervision over all drilling works was performed by geological staff contracted to PDCo, the Company’s 100% owned Polish subsidiary, who are qualified and licensed according to Polish Geological and Mining Law

·     These geological staff also performed detailed core logging.

·     Twinned boreholes were not used.

·     Primary data is held as hard copy (laboratory certificates etc.) and this has been transferred to electronic spreadsheets.

·     No adjustments have been made to assay data.

Location of data points

·     Accuracy and quality of surveys used to locate drill holes (collar and down-hole surveys), trenches, mine workings and other locations used in Mineral Resource estimation.

·     Specification of the grid system used.

·     Quality and adequacy of topographic control.

·     The borehole location has been accurately determined and surveyed in the Poland CS2000, zone 8 grid system.

·     Detailed topographic maps are available.

Data spacing and distribution

·     Data spacing for reporting of Exploration Results.

·     Whether the data spacing and distribution is sufficient to establish the degree of geological and grade continuity appropriate for the Mineral Resource and Ore Reserve estimation procedure(s) and classifications applied.

·     Whether sample compositing has been applied.

·     This announcement of exploration results relates to a single borehole, Kulik 1.

·     Sample compositing has not been used.

Orientation of data in relation to geological structure

·     Whether the orientation of sampling achieves unbiased sampling of possible structures and the extent to which this is known, considering the deposit type.

·     If the relationship between the drilling orientation and the orientation of key mineralised structures is considered to have introduced a sampling bias, this should be assessed and reported if material.

·     The borehole was nominally vertical and the coal seams have low to moderate dip and relatively simple structure and so there is no structural or orientation bias to the sampling.

·     The borehole has been surveyed for verticality with maximum deviation of approximately 29 m at a depth of 1037.50 m.

Sample security

·     The measures taken to ensure sample security.

·     All core samples were handled by staff contracted to PDCo under supervision of a licenced geologist. Core samples were marked for way up orientation placed in plastic in fully labelled wooden core boxes. These staff also undertook core sampling and in the case of the target seams this was supervised by consultants contracted to Prairie Mining.

Audits or reviews

·     The results of any audits or reviews of sampling techniques and data.

·     The data and techniques have been reviewed by the Competent Person and are considered adequate and appropriate.

SECTION 2 REPORTING OF EXPLORATION RESULTS

(Criteria listed in the preceding section also apply to this section.)

Criteria

JORC Code explanation

Commentary

Mineral tenement and land tenure status

·     Type, reference name/number, location and ownership including agreements or material issues with third parties such as joint ventures, partnerships, overriding royalties, native title interests, historical sites, wilderness or national park and environmental settings.

·     The security of the tenure held at the time of reporting along with any known impediments to obtaining a licence to operate in the area.

·     Prairie has held the exploration licences to five exploration concession areas that constitute the Jan Karski Mine: Cycow (K-6-7), Syczyn (K-8), Kulik (K-4-5), Kopina (K-9) and Sawin-Zachód.

·     On 1 July 2015, Prairie announced that it had secured the Exclusive Right to apply for, and consequently be granted, a mining concession for the Jan Karski Mine.

·     As a result of its geological documentation for the Jan Karski Mine deposit being approved, Prairie is now the only entity that can lodge a mining concession application over the Jan Karski Mine within a three (3) year period up and until April 2018. In addition, Prairie has the right to apply for and be granted a mining usufruct agreement for an additional 12 month period that precludes any other parties being granted a licence over all or part of the Jan Karski concessions. Prairie applied for a mining usufruct agreement in December 2017.

·     The approved geological documentation covers an area comprising all four of the original exploration concessions granted to Prairie (K-4-5, K-6-7, K-8 and K-9) and includes the full extent of the targeted resources within the mine plan for the Jan Karski Mine. In this regard, no beneficial title interest has been surrendered by the Company when the K-6-7 exploration concession expired last year. The Company intends to submit a mining concession application, over the mine plan area at Jan Karski (which includes K-6-7) prior to April 2018. Under Polish mining law, and owing to the Exclusive Right the Company has secured, Prairie is currently the only entity that may apply for and be granted a mining concession with respect to the K-6-7 area (the Exclusive Right also applies to the K-4-5, K-8 and K-9 areas of Jan Karski). There is no requirement for the Company to hold an exploration concession in order exercise the Exclusive Right and apply for a mining concession.

·     Prairie’s approved geological documentation did not include the Sawin-Zachód concession.

Exploration done by other parties

·     Acknowledgment and appraisal of exploration by other parties.

·     Not applicable.

Geology

·     Deposit type, geological setting and style of mineralisation.

·     The deposit is a Carboniferous hard coal consisting of coal seams separated by units of mudstone and sandstone.

Drill hole Information

·     A summary of all information material to the understanding of the exploration results including a tabulation of the following information for all Material drill holes:

o  easting and northing of the drill hole collar

o  elevation or RL (Reduced Level – elevation above sea level in metres) of the drill hole collar

o  dip and azimuth of the hole

o  down hole length and interception depth

o  hole length.

·     If the exclusion of this information is justified on the basis that the information is not Material and this exclusion does not detract from the understanding of the report, the Competent Person should clearly explain why this is the case.

·     X: 5678988 Y: 8444070 (Polish CS2000 zone 8)

·     H: 187.8 m a.s.l

·     Nominally vertical, deviation approximately 29 m at 113o at base of hole.

·     Hole length/depth – 1,037.50 m (drilling)

Data aggregation methods

·     In reporting Exploration Results, weighting averaging techniques, maximum and/or minimum grade truncations (eg cutting of high grades) and cut-off grades are usually Material and should be stated.

·     Where aggregate intercepts incorporate short lengths of high grade results and longer lengths of low grade results, the procedure used for such aggregation should be stated and some typical examples of such aggregations should be shown in detail.

·     The assumptions used for any reporting of metal equivalent values should be clearly stated.

·     Coal seams have normally been sampled as one continuous sample. Dirt partings of 5 cm in thickness or less have been sampled with the coal.

Relationship between mineralisation widths and intercept lengths

·     These relationships are particularly important in the reporting of Exploration Results.

·     If the geometry of the mineralisation with respect to the drill hole angle is known, its nature should be reported.

·     If it is not known and only the down hole lengths are reported, there should be a clear statement to this effect (eg ‘down hole length, true width not known’).

·     The boreholes are nominally vertical and the coal seams form part of a stratiform deposit dipping at approximately 0 – 5 degrees.

·     Intercept lengths used in the model are drill intercept lengths which will be modelled in 3D removing the need to calculate the true thickness. Because of the very low dip the difference between intercept thickness and true thickness is not significant.

Diagrams

·     Appropriate maps and sections (with scales) and tabulations of intercepts should be included for any significant discovery being reported These should include, but not be limited to a plan view of drill hole collar locations and appropriate sectional views.

·     Not applicable

Balanced reporting

·     Where comprehensive reporting of all Exploration Results is not practicable, representative reporting of both low and high grades and/or widths should be practiced to avoid misleading reporting of Exploration Results.

·     Not applicable.

Other substantive exploration data

·     Other exploration data, if meaningful and material, should be reported including (but not limited to): geological observations; geophysical survey results; geochemical survey results; bulk samples – size and method of treatment; metallurgical test results; bulk density, groundwater, geotechnical and rock characteristics; potential deleterious or contaminating substances.

·     Not applicable.

Further work

·     The nature and scale of planned further work (eg tests for lateral extensions or depth extensions or large-scale step-out drilling).

·     Diagrams clearly highlighting the areas of possible extensions, including the main geological interpretations and future drilling areas, provided this information is not commercially sensitive.

·     Prairie Mining may drill further boreholes if deemed appropriate.

 

Prairie Mining #PDZ – Appendix 3B – Issue of Performance Rights

Prairie Mining Limited (Company) announces that 1,500,000 unlisted Performance Rights have been issued today to key employees and consultants of the Company pursuant to the Company’s long-term incentive Performance Rights Plan.

No new Ordinary Shares are being issued.

The below figure of 167,498,969 Ordinary Shares can be continued to be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the share capital of the Company, under the FCA’s Disclosure and Transparency Rules.

For further information, please contact:

Prairie Mining Limited

Ben Stoikovich, Chief Executive Officer

Tel: +44 207 478 3900

Sapan Ghai, Head of Corporate Development

Email: info@pdz.com.au

 

Rule 2.7, 3.10.3, 3.10.4, 3.10.5

Appendix 3B

New issue announcement, application for quotation of additional securities and agreement

Information or documents not available now must be given to ASX as soon as available.  Information and documents given to ASX become ASX’s property and may be made public.

Introduced 01/07/96  Origin: Appendix 5  Amended 01/07/98, 01/09/99, 01/07/00, 30/09/01, 11/03/02, 01/01/03, 24/10/05, 01/08/12, 04/03/13

Name of entity

   PRAIRIE MINING LIMITED

ABN

   23 008 677 852

We (the entity) give ASX the following information.

Part 1 ‑ All issues

You must complete the relevant sections (attach sheets if there is not enough space).

1

+Class of +securities issued or to be issued

Performance share rights

2

Number of +securities issued or to be issued (if known) or maximum number which may be issued

1,500,000

3

Principal terms of the +securities (e.g. if options, exercise price and expiry date; if partly paid +securities, the amount outstanding and due dates for payment; if +convertible securities, the conversion price and dates for conversion)

Performance share rights which do not have an exercise price but are subject to various performance conditions (including: Jan Karski Construction; Debiensko Feasibility Study; and Debiensko Construction Milestones) to be satisfied prior to the relevant expiry dates between 31 December 2018 and 31 December 2020

4

Do the +securities rank equally in all respects from the +issue date with an existing +class of quoted +securities?

If the additional +securities do not rank equally, please state:

·    the date from which they do

·    the extent to which they participate for the next dividend, (in the case of a trust, distribution) or interest payment

·    the extent to which they do not rank equally, other than in relation to the next dividend, distribution or interest payment

No – not listed

 

5

Issue price or consideration

Nil – see below

 

6

Purpose of the issue

(If issued as consideration for the acquisition of assets, clearly identify those assets)

Issue of performance share rights to key employees and consultants of the Company

6a

Is the entity an +eligible entity that has obtained security holder approval under rule 7.1A?

If Yes, complete sections 6b – 6h in relation to the+securities the subject of this Appendix 3B, and comply with section 6i

No

6b

The date the security holder resolution under rule 7.1A was passed

Not applicable

 

6c

Number of +securities issued without security holder approval under rule 7.1

Not applicable

6d

Number of +securities issued with security holder approval under rule 7.1A

Not applicable

 

6e

Number of +securities issued with security holder approval under rule 7.3, or another specific security holder approval (specify date of meeting)

Not applicable

6f

Number of +securities issued under an exception in rule 7.2

Not applicable

6g

If +securities issued under rule 7.1A, was issue price at least 75% of 15 day VWAP as calculated under rule 7.1A.3?  Include the +issue date and both values.  Include the source of the VWAP calculation.

Not applicable

6h

If +securities were issued under rule 7.1A for non-cash consideration, state date on which valuation of consideration was released to ASX Market Announcements

Not applicable

6i

Calculate the entity’s remaining issue capacity under rule 7.1 and rule 7.1A – complete Annexure 1 and release to ASX Market Announcements

Rule 7.1 – 24,486,845

Rule 7.1A – Not applicable

7

+Issue dates

Note: The issue date may be prescribed by ASX (refer to the definition of issue date in rule 19.12).  For example, the issue date for a pro rata entitlement issue must comply with the applicable timetable in Appendix 7A.

Cross reference: item 33 of Appendix 3B.

7 February 2018

Number

+Class

8

Number and +class of all +securities quoted on ASX (including the +securities in section 2 if applicable)

167,498,969

Ordinary Shares

Number

+Class

9

Number and +class of all +securities not quoted on ASX (including the +securities in section 2 if applicable)

1,400,000

 

 

200,000

 

 

 

900,000

 

 

 

700,000

 

 

 

10,925,000

 

 

 

 

 

 

 

44,776,120

 

 

 

 

 

 

 

22,388,060

 

 

 

5,711,805

Options exercisable at $0.45 each on or before 30 June 2018

 

Options exercisable at $0.50 each on or before 31 March 2020

 

Options exercisable at $0.60 each on or before 31 March 2020

 

Options exercisable at $0.80 each on or before 31 March 2020

 

Performance share rights subject to various performance conditions to be satisfied prior to relevant milestones or expiry dates between 31 December 2018 and 31 December 2020

 

Convertible loan 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 unlisted options exercisable at $0.60 each expiring 3 years after conversion of Loan Note 1.

 

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”)

10

Dividend policy (in the case of a trust, distribution policy) on the increased capital (interests)

Not applicable

Part 2 ‑ Pro rata issue

11

Is security holder approval required?

Not applicable

12

Is the issue renounceable or non-renounceable?

Not applicable

13

Ratio in which the +securities will be offered

Not applicable

14

+Class of +securities to which the offer relates

Not applicable

15

+Record date to determine entitlements

Not applicable

16

Will holdings on different registers (or subregisters) be aggregated for calculating entitlements?

Not applicable

17

Policy for deciding entitlements in relation to fractions

Not applicable

18

Names of countries in which the entity has security holders who will not be sent new offer documents

Note: Security holders must be told how their entitlements are to be dealt with.

Cross reference: rule 7.7.

Not applicable

19

Closing date for receipt of acceptances or renunciations

Not applicable

 

 

 

 

 

 

20

Names of any underwriters

Not applicable

21

Amount of any underwriting fee or commission

Not applicable

22

Names of any brokers to the issue

Not applicable

23

Fee or commission payable to the broker to the issue

Not applicable

24

Amount of any handling fee payable to brokers who lodge acceptances or renunciations on behalf of security holders

Not applicable

25

If the issue is contingent on security holders’ approval, the date of the meeting

Not applicable

26

Date entitlement and acceptance form and offer documents will be sent to persons entitled

Not applicable

27

If the entity has issued options, and the terms entitle option holders to participate on exercise, the date on which notices will be sent to option holders

Not applicable

28

Date rights trading will begin (if applicable)

Not applicable

29

Date rights trading will end (if applicable)

Not applicable

30

How do security holders sell their entitlements in fullthrough a broker?

Not applicable

31

How do security holders sell part of their entitlements through a broker and accept for the balance?

Not applicable

32

How do security holders dispose of their entitlements (except by sale through a broker)?

Not applicable

33

+Issue date

Not applicable

Part 3 ‑ Quotation of securities

You need only complete this section if you are applying for quotation of securities

34

Type of +securities

(tick one)

(a)

+Securities described in Part 1

(b)

All other +securities

Example: restricted securities at the end of the escrowed period, partly paid securities that become fully paid, employee incentive share securities when restriction ends, securities issued on expiry or conversion of convertible securities

Entities that have ticked box 34(a) 

Additional securities forming a new class of securities

Tick to indicate you are providing the information or documents

35

If the +securities are +equity securities, the names of the 20 largest holders of the additional +securities, and the number and percentage of additional +securities held by those holders

36

If the +securities are +equity securities, a distribution schedule of the additional +securities setting out the number of holders in the categories

1 – 1,000

1,001 – 5,000

5,001 – 10,000

10,001 – 100,000

100,001 and over

37

A copy of any trust deed for the additional +securities

 

Entities that have ticked box 34(b)

 

38

Number of +securities for which +quotation is sought

Not applicable

39

+Class of +securities for which quotation is sought

Not applicable

40

Do the +securities rank equally in all respects from the +issue date with an existing +class of quoted +securities?

If the additional +securities do not rank equally, please state:

·    the date from which they do

·    the extent to which they participate for the next dividend, (in the case of a trust, distribution) or interest payment

·    the extent to which they do not rank equally, other than in relation to the next dividend, distribution or interest payment

Not applicable

41

Reason for request for quotation now

Example: In the case of restricted securities, end of restriction period

(if issued upon conversion of another +security, clearly identify that other +security)

Not applicable

Number

+Class

42

Number and +class of all +securities quoted on ASX (including the +securities in clause 38)

Not applicable

 

Not applicable

 

Quotation agreement

 

1          +Quotation of our additional +securities is in ASX’s absolute discretion.  ASX may quote the +securities on any conditions it decides. 

 

2          We warrant the following to ASX.

 

·           The issue of the +securities to be quoted complies with the law and is not for an illegal purpose.

 

·           There is no reason why those +securities should not be granted +quotation.

 

·           An offer of the +securities for sale within 12 months after their issue will not require disclosure under section 707(3) or section 1012C(6) of the Corporations Act.

Note: An entity may need to obtain appropriate warranties from subscribers for the securities in order to be able to give this warranty

 

·           Section 724 or section 1016E of the Corporations Act does not apply to any applications received by us in relation to any +securities to be quoted and that no-one has any right to return any +securities to be quoted under sections 737, 738 or 1016F of the Corporations Act at the time that we request that the +securities be quoted.

·           If we are a trust, we warrant that no person has the right to return the +securities to be quoted under section 1019B of the Corporations Act at the time that we request that the +securities be quoted.

 

3          We will indemnify ASX to the fullest extent permitted by law in respect of any claim, action or expense arising from or connected with any breach of the warranties in this agreement.

 

4          We give ASX the information and documents required by this form. If any information or document is not available now, we will give it to ASX before +quotation of the +securities begins.  We acknowledge that ASX is relying on the information and documents.  We warrant that they are (will be) true and complete.

 

                                      [signed electronically without signature]

Sign here:              ……………………………………………………           Date: 7 February 2018

                             (Director/Company secretary)

Print name:            Dylan Browne

== == == == ==

Appendix 3B – Annexure 1

Calculation of placement capacity under rule 7.1 and rule 7.1A for eligible entities

Introduced 01/08/12  Amended 04/03/13

Part 1

Rule 7.1 – Issues exceeding 15% of capital

Step 1: Calculate “A”, the base figure from which the placement capacity is calculated

Insert number of fully paid +ordinary securities on issue 12 months before the +issue date or date of agreement to issue

151,858,969

Add the following:

•    Number of fully paid +ordinary securities issued in that 12 month period under an exception in rule 7.2

•    Number of fully paid +ordinary securities issued in that 12 month period with shareholder approval

•    Number of partly paid +ordinary securities that became fully paid in that 12 month period

Note:

•    Include only ordinary securities here – other classes of equity securities cannot be added

•    Include here (if applicable) the securities the subject of the Appendix 3B to which this form is annexed

•    It may be useful to set out issues of securities on different dates as separate line items

 

11,500,000 Ordinary shares (3 April 2017)

570,000 ordinary shares (9 June 2017)

2,110,000 ordinary shares (16 June 2017)

1,340,000 ordinary shares (6 July 2017)

Subtract the number of fully paid +ordinary securities cancelled during that 12 month period

Nil

“A”

167,378,969

Step 2: Calculate 15% of “A”

“B”

0.15

[Note: this value cannot be changed]

Multiply “A” by 0.15

25,106,845

Step 3: Calculate “C”, the amount of placement capacity under rule 7.1 that has already been used

Insert number of +equity securities issued or agreed to be issued in that 12 month period not counting those issued:

•    Under an exception in rule 7.2

•    Under rule 7.1A

•    With security holder approval under rule 7.1 or rule 7.4

Note:

•    This applies to equity securities, unless specifically excluded – not just ordinary securities

•    Include here (if applicable) the securities the subject of the Appendix 3B to which this form is annexed

•    It may be useful to set out issues of securities on different dates as separate line items

 

 

120,000 Ordinary shares (17 Mar 2017)

500,000 Incentive options (15 Sep 2017)

 

“C”

620,000

Step 4: Subtract “C” from [“A” x “B”] to calculate remaining placement capacity under rule 7.1

“A” x 0.15

Note: number must be same as shown in Step 2

25,106,845

Subtract “C”

Note: number must be same as shown in Step 3

620,000

Total [“A” x 0.15] – “C”

24,486,845

[Note: this is the remaining placement capacity under rule 7.1]

Part 2

Rule 7.1A – Additional placement capacity for eligible entities

Step 1: Calculate “A”, the base figure from which the placement capacity is calculated

“A”

Note: number must be same as shown in Step 1 of Part 1

Not applicable

Step 2: Calculate 10% of “A”

“D”

0.10

Note: this value cannot be changed

Multiply “A” by 0.10

Not applicable

Step 3: Calculate “E”, the amount of placement capacity under rule 7.1A that has already been used

Insert number of +equity securities issued or agreed to be issued in that 12 month period under rule 7.1A

Notes:

•    This applies to equity securities – not just ordinary securities

•    Include here – if applicable – the securities the subject of the Appendix 3B to which this form is annexed

•    Do not include equity securities issued under rule 7.1 (they must be dealt with in Part 1), or for which specific security holder approval has been obtained

•    It may be useful to set out issues of securities on different dates as separate line items

Not applicable

“E”

Not applicable

Step 4: Subtract “E” from [“A” x “D”] to calculate remaining placement capacity under rule 7.1A

“A” x 0.10

Note: number must be same as shown in Step 2

Not applicable

Subtract “E”

Note: number must be same as shown in Step 3

Not applicable

Total [“A” x 0.10] – “E”

Not applicable

Note: this is the remaining placement capacity under rule 7.1A

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