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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

Take a Look at Prairie and You Might See Greener Grass on the Other Side – Malcolm Stacey, ShareProphets

Hello Share Splurgers. The name Prairie Mining (PDZ) might give an impression that it’s a green company. Yet it deals in coal. But this coal is ideal for making coke, and from school days I think this is a cleaner alternative to the stuff we burned to keep the ‘frost flowers’ from the inside of our windows in the ‘fifties.

Since I bought into Prairie in December, the shares have risen from 30p to 39p. Which is up by about a third. Not bad. But I have grounds for believing that the jolly action isn’t over yet. Luckily, Prairie was one of my Shareprophets tips for 2018 and I continue to have great faith in this lot.

Coke is used to make steel. You’ll be aware that sales of steel, so depressed a few years ago, are making a comeback. It’s all this structural work being done by the emerging nations. As well as big projects in the developed world – including that big new rail plan here in Blighty. But that was known when I bought the share. What has given further impetus since then has been an RNS this month saying Prairie had been talking to a big polish miner called JSW. The idea was to co-operate, though this has yet to be confirmed.

According to rumours, JSW might even buy Prairie’s coke mine in Debiensko – it’s valued at £350 million, but there’s no firm word from Prairie on this story. And also China Coal is also interested in Prairie. Enough, it seems to order a bankable feasibility study – once again China helps to boost a share price.

I’ve not heard that either of Prairie’s two big mines are yet producing the black lumps in commercial quantities, but they will be doing that soon and, ok, investing in miners isn’t always hugely successful for private shareholders like us, but this one does seem to harbour the possibility of becoming a bagger of some kind (if all goes to plan).

And now to the coal fire in the Punter’s Return.

Link here to view the article on the ShareProphets website

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 – Statement regarding possible co-operation with JSW

Prairie Mining Limited #PDZ notes the recent press articles regarding possible co-operation between the Company and Jastrzębska Spółka Węglowa SA (“JSW”) to progress the development and exploitation of the Company’s Polish coal assets.

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.

The Company will continue to comply with its continuous disclosure obligations and will make announcements to the market as required.

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

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Prairie Mining #PDZ – December 2017 Quarterly Report

DECEMBER 2017 QUARTERLY REPORT

HIGHLIGHTS FROM AND SUBSEQUENT TO THE QUARTER END:

Debiensko Mine (Premium Hard Coking Coal)

  • During the quarter Poland’s newly appointed Prime Minister, Mr Mateusz Morawiecki, officially presented the Ministry of Development’s “Program for Silesia” in December 2017 which included a strategy for the re-start of a major coking coal mine in the Upper Silesian region, where Prairie’s Debiensko project is located, and highlighted the positive social and economic impacts that mine development would have on the region
  • Mine site redevelopment planning continued 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 steel makers and coke producers throughout the quarter for future coking coal sales and offtake

Jan Karski Mine (Semi-Soft Coking Coal)

  • Environmental permitting for Jan Karski advanced following successful submission of the Environmental and Social Impact Assessment to the Lublin Regional Environment Directorate for Environmental Consent
  • Preparation of the Mining Concession application is underway and anticipated to be lodged during the first quarter of 2018
  • Prairie initiated public consultations in local municipalities for the development of the Jan Karski Mine, demonstrating that a new mine would bring significant employment opportunities and economic development
  • China Coal’s technical studies for the construction of the Jan Karski Mine 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
  • During the quarter, Prairie hosted a delegation in Poland including China Coal and Jinan Mine Design Institute during which offers for project works involving Polish subcontractors were finalised

Robust Coking Coal Fundamentals

  • 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
  • The Polish Government strongly supports development of new, modernised coal mines, as announced in the “Program for Silesia” produced by Poland’s Ministry for Development

Corporate

  • Prairie remains in a financially strong position with cash reserves of A$15.1 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 well positioned to progress with its planned development activities at Debiensko and Jan Karski

Ben Stoikovich, Chief Executive Officer commented Following the submission of the ESIA and initiation of public consultations, Prairie continues towards applying for a Mining Concession to commence construction of the Jan Karski Mine together with our strategic partner China Coal. China Coal’s Technical and Economic Studies have progressed positively, and our team is in the process of preparing a full Mining Concession application for Jan Karski. At Debiensko, we continue to plan our mine site redevelopment program in a positive market environment with increased coking coal demand from Europe’s steel producers coupled with reducing European supply. We welcome the news that the Polish government have officially included the re-start of a coking coal mine in the “Program for Silesia”, the region where our Debiensko project is located.

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 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 (“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.

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

Prairie notes that on 11 December 2017, 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 Development and Finance in Poland. Prairie also notes that on the 9 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 Ministry of Environment.

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, and 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 in the previous quarter, 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 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 quarter 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.

Sale of Non-Core Land

Through the acquisition of Debiensko in 2016, Prairie obtained land tenements within the village of Kaczyce which were considered non-core to the construction, restart and operations of the Debiensko Mine. During the quarter, the Company agreed the sale of the non-core land for consideration of PLN1.4 million (~A$500,000). Prairie has received the consideration and ownership of the land is expected to be transferred by the end of the next quarter.

JAN KARSKI MINE

Submission of ESIA & Initiation of Public Consultation

An application for issuing the environmental decision together with the Environmental and Social Impact Assessment (“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 the Jan Karski Mine (“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 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 quarter 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.

CORPORATE

Financial Position

Prairie has cash reserves of A$15.1 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.

APPENDIX 1 – EXPLORATION TENEMENT INFORMATION

As at 31 December 2017, 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

Jan Karski, Poland

Sawin-Zachód

100

Granted

Exploration

Debiensko, Poland

Debiensko 1**

100

Granted

Mining

Debiensko, Poland

Kaczyce 1

100

Mining & Exploration (includes gas rights)

*  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 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 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 has been surrendered by the Company when the K-6-7 exploration concession expired during the quarter. The Company intends to submit a mining concession application, over the mine plan area at Jan Karski (which includes K-6-7) within the next 12 months. 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.

 

**             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 December 2017

Consolidated statement of cash flows

Current quarter $A’000

Year to date             (6 months)
$A’000

1.

Cash flows from operating activities

1.1

Receipts from customers

1.2

Payments for

(1,339)

(2,954)

(a)   exploration & evaluation

(b)   development

(c)   production

(d)   staff costs

(478)

(1,083)

(e)   administration and corporate costs

(200)

(440)

1.3

Dividends received (see note 3)

1.4

Interest received

83

203

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

(208)

107

(526)

248

1.9

Net cash from / (used in) operating activities

(2,035)

(4,552)

2.

Cash flows from investing activities

(40)

(62)

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:

272

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

232

435

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

(179)

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

2,448

4.

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

16,943

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)

(2,035)

(4,552)

4.3

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

232

435

4.4

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

2,448

4.5

Effect of movement in exchange rates on cash held

4.6

Cash and cash equivalents at end of period

15,140

15,140

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

3,640

5,443

5.2

Call deposits

11,500

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)

15,140

16,943

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

(169)

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

(1,500)

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

(2,400)

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 January 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 CEO Ben Stoikovich discusses the company and developments with Jeremy Naylor at IG TV

IG TV’s Jeremy Naylor is joined by Ben Stoikovich, Prairie Mining #PDZ, to discuss its production of coking coal in Poland. It says that it has the economic dynamic that will enable it to undercut almost all other coking coal suppliers.

Prairie Mining #PDZ – Reports on Payments to Governments

Prairie Mining Limited and its controlled entities provides information in accordance with London Stock Exchange Listing Rule DTR 4.3A in respect of payments made by the Company to governments for the year ended 30 June 2017 and in compliance with The Reports on Payments to Governments Regulations and its amendment in 2015. 

The following schedule details payments made to Polish government entities by its wholly owned Polish subsidiaries PD Co sp. z o.o. and Karbonia S.A. Further, due to the operational focus of the Group during the year ended 30 June 2017, the Polish government is the only relevant party to whom payments are made.

 

Total Payments
30 June 2017

Reporting Category

PD Co:
Jan Karski Mine

A$

Karbonia:
Debiensko Mine

A$

Total

A$

Production entitlements

Income Taxes

Royalties

Dividends

Signature/discovery/production bonuses

Licence fees (including mining usufruct payments)

324,215

121,695

445,910

Property taxes to local municipalities

342,684

342,684

Infrastructure improvements

Total

324,215

464,379

788,594

 

This report is also available for download at www.pdz.com.au.

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

DEBIENSKO MINE (Hard Coking Coal)

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

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

The Debiensko mine was originally operated by various Polish mining companies until 2000 when mining operations were terminated due to a major government led restructuring of the coal sector caused by a downturn in global coal prices. In early 2006 New World Resources Plc 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.

JAN KARSKI MINE (Semi-Soft Coking Coal)

The Jan Karski Mine is a high-value ultra-low ash semi-soft coking coal project located in the Lublin Province in the south east of the Republic of Poland.

In November 2017, Prairie submitted the Environmental and Social Impact Assessment (“ESIA”) for Jan Karski. 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 at Jan Karski. Independent environmental consultants have confirmed Prairie has met all pre-requisite requirements and can expect an environmental permit in due course.

Prairie’s strategic partner, China Coal No.5 Construction Company Ltd, is set to complete all Technical and Economic Studies required and considered “bankable” by Chinese financing institutions. The studies will form the basis for provision of debt financing for the construction and development of Jan Karski. Upon completion of the Studies, Prairie and China Coal intend to seek Chinese bank credit approval to fund construction of Jan Karski and enter into a complete Engineering, Procurement, and Construction (“EPC”) contract under which China Coal will construct the Project.

An Independent assessment by specialist coking coal market consultants predicts that the Jan Karski ultra-low ash SSCC would potentially realise a 10% premium to international benchmark prices. Preliminary discussions between Prairie and select European steel makers have confirmed the suitability of ultra-low ash SSCC to be utilised in coke oven blends. Consequently, the Company is currently updating the marketing and sales strategy for the coal which will be produced at Jan Karski and will incorporate this strategy into the Studies.

Prairie Mining #PDZ – Tier 1 assets & perfect macro. Buy at 30p, target price 90p say Beaufort Securities

Prairie Mining recently published an update describing the coking coal macro in Europe and Poland. The release focused on the European Commission’s 2017 critical materials list, the global lack of new coking coal projects, and the Polish government’s support for new modern coal mines. We also note how the new Polish Prime Minister is pushing the Polish-Chinese business agenda, which will benefit Prairie Mining.

Mateusz Morawiecki recently became Prime Minister and he strongly supports Chinese investment into Poland. Amongst other things, he has recently said “to encourage Chinese companies to invest more capital in our country” and “Poland wants to actively participate in the One Belt, One Road project”.

This agenda fits perfectly with Prairie’s strategy of having China Coal construct Jan Karski using low-cost Chinese debt. And we believe support from the new Polish Prime Minister will ensure Jan Karski reaches the point of being fully permitted and funded. As with all major industrial projects, top level government support is essential.

Prairie Mining shares have underperformed our expectations in 2H17 (the shares increased 50% in 1H17). The lack of buying could be due to negative general media surrounding coal. However, Prairie is a coking coal not thermal coal company and has strong political and European macro support . We anticipate 2018 being a good year for Prairie shares and reiterate our BUY recommendation and 90p price target.

Full research note here Beaufort_PDZ_181217

Fancy Doing the Okey-Cokey with a Miner Called Prairie?

by Malcolm Stacey – ShareProphets

Hello, Share Sweetners. I rarely bring a developing miner to your further scrutiny. I prefer to leave all that to my mining expert colleague Gary. Also, I’ve been burned quite a lot by disappointing mineral and metal finds in the past. But any road up, let’s have a look at this one.

Coal miner Prairie Mining (PDZ) seems to have a good chance of success in the next few years. Based in Perth, it focuses on Poland. The firm claims it could eventually have one of the most advanced coking operations ‘in the Northern Hemisphere.’

Coke is used heavily by the steel industry. And we all know, from plant closures in the UK, that steel-making is currently not the most profitable undertaking in the world. There’s too much competition, including interest from our friends in China.

But manufacturing, construction and heavy engineering all need steel, as does the car industry. So coke, which heats up the raw material, is always going to be in demand. Can you imagine, for example, how much steel will be needed for that new HS2 rail link?

Prairie has a coal project called Debiensko, which in January will start producing a slightly lower grade coking coal than that of its other site, Jan Karski. The Karski mine is set to start producing next year also.

Both locations are at the centre of industrial Europe and have excellent access to infrastructure. The reserves at both mines have been estimated at $3.3 billion. Which is big compared to the company’s present valuation. Though one should be aware that such estimates, especially in the mining game, can go wrong.

Prairie shares are now just over 30p. In March they were over 40p. This is not one of those mining shares which aims to serve a market which may not be all that big. Coke is vital for manufacturing. There are signs that the developing world, especially, is going to be making and building many more machines, buildings and heavy plant.

But, as with all miners, there just may be hidden snags along the way. And you should be aware of those risks.

As we all are in the Punter’s Return.

Link here to the article on the ShareProphets website

Prairie Mining (PDZ) – September 2017 quarterly report; Jan Karski mine one of the most advanced coking coal projects in Northern Hemisphere

September 2017 Quarterly Report

 

HIGHLIGHTS

Debiensko Mine (Premium Hard Coking Coal)

Geo-technical Drill Program Underway

  • In preparation for the upcoming next phase of project studies, a shallow geo-technical drill program was completed at Debiensko during the quarter.
  • Results will be used for detailed design and engineering of surface structures associated with the shafts, coal handling and preparation plant and other surface facilities during the upcoming feasibility study.

Mine Site Redevelopment Program Update

  • Focus during the quarter has been on planning the mine site’s redevelopment program, including:
    • preparation for an in-fill drill program to increase JORC Measured and Indicated resources to support future feasibility studies;
    • initial demolition works; and
    • pre-qualification of study contractors.

Offtake Discussions Advance

  • Prairie continued discussions with regional steel makers and coke producers for future coking coal sales and offtake.
  • Highly favourable market fundamentals remain prominent as Europe’s steel industry continues to consume 47 Mt of hard coking coal annually, 85% of which is imported.

 

Jan Karski Mine (Semi-Soft Coking Coal)

Transformational Coking Coal Quality Results

  • Coal quality results from latest drilling have transformed Jan Karski into a high-value ultra-low ash semi-soft coking coal project.
  • Updated marketing and coal sales strategies have begun in the quarter following Prairie’s latest successful drilling results with Jan Karski’s semi-soft coking coal product expected to attract a 10% premium to international benchmark pricesMarketing and coal sales are strategies to be used in preliminary offtake discussions between Prairie and steel makers.

China Coal Studies Near Completion

  • China Coal’s studies for the development of the Jan Karski Mine have significantly advanced and will incorporate the coal quality results from the latest drilling at Jan Karski. Studies are due to be finalised in the coming months.
  • Under the Strategic Co-operation Agreement between Prairie and China Coal, the studies will support China Coal’s EPC contract to construct the Jan Karski Mine and will underpin a Chinese bank financing package.

Jan Karski Most Advanced Coking Coal Project in Northern Hemisphere

  • 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.
  • Prairie remains on track to submit a Mining Concession application for Jan Karski in the coming months following submission of the Environmental and Social Impact Assessment during October 2017.

 

Robust Coking Coal Fundamentals

Strong Price Environment Continues

  • Coking coal price environment has remained strong throughout the quarter attributed to strong cash margins of Chinese steel mills, production cuts by some Chinese miners, and production disruptions in Australia.

Coking Coal Reconfirmed as a Critical Raw Material for Europe

  • In Europe, coking coal remains on the European Commission’s 2017 revised list of Critical Raw Materials as European steel makers – including the newly-formed ThyssenKrupp Tata Steel Joint Venture – look to supply a changing automobile industry and numerous infrastructure programs.
    • Increasing demand for ultra-low emission vehicles is expected to drive growth in steel supply to the European automobile industry – almost 0.5 tonnes of coking coal are required to produce the structural, electrical and plated steel for each electric car.
    • UK infrastructure projects including the High Speed 2 Rail Line and the construction of the Hinkley Point C Nuclear Power Station are expected to use over 3 million tonnes of steel – equivalent to 375 London Olympic Stadiums.
    • According to BHP Billiton, China’s Belt and Road Initiative to advance globalisation and trading – and which includes several European countries including Poland – could result in up to 150 million tonnes of incremental steel demand. 
  • Prairie’s two large-scale Tier One assets are ideally positioned to supply coking coal to meet Europe’s steel demand in the future.

 

Corporate

  • Prairie and CD Capital completed an additional investment of US$2.0 million (A$2.6 million) in the form of non-redeemable, non-interest-bearing convertible loan notes.
  • Prairie has cash reserves of A$17 million. With CD Capital’s right to invest a further A$55 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.

Ben Stoikovich, Chief Executive Officer commentedFollowing coal quality testing that demonstrated premium quality ultra-low ash semi-soft coking coal at Jan Karski, it is clear that we hold one of the most advanced coking coal projects of significant scale in the Northern Hemisphere. Alongside our partner China Coal, we are nearing completion of all requisite studies required to facilitate already advanced discussions with Chinese debt providers. Jan Karski’s development will provide substantial economic and social benefits for Eastern Poland and we look forward to submitting our Mining Concession application shortly. At Debiensko, we continue works in order to restart the mine at a time when long term coking coal supply has become increasingly important to the European steel industry.

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 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.

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, neigbouring operational coking coal mines and the results of a suite of modern coking tests performed on selected seams from a fully cored borehole drilled by the previous owners in 2015/16. Two premium hard coking coal specifications have been delineated from select seams at Debiensko, namely Medium volatile matter hard coking coal (“Mid-vol HCC”) and Low volatile matter hard coking coal (“Low-vol HCC”). Future study phases will determine the precise Debiensko premium hard coking coal quality specification on a year by year basis depending on final adopted mine plan, mining schedule and extent of coal blending.

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

Preparation for the Next Phase of Project Studies

Drilling of 28 shallow geo-technical holes completed during the quarter. Information from the drill holes will be used for engineering design of foundations for 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 commenced during the quarter including:

  • Drilling contractors for the planned in-fill drilling program (to update measured and indicated resources);
  • CHPP;
  • Shafts and bulk coal winder;
  • Desalination plant; and
  • Surface facilities.

The tender process for construction of the desalination plant is now underway with final specifications near completion.

Demolition of old surface structures of the former Debiensko mine including the bathhouse, switchgear building and locomotive garage was completed during the quarter. Further structures including walkways and old administrative buildings have been earmarked for demolition during the following quarter.

JAN KARSKI MINE

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

Following the latest drilling results at the Jan Karski Mine, Prairie announced coal quality testwork which confirmed the mine to be a high-value ultra-low ash semi-soft coking coal project. An Independent assessment by specialist coking coal market consultants predicts that Jan Karski ultra-low ash SSCC would potentially realise a 10% premium to international benchmark prices.

Preliminary discussions between Prairie and select European steel makers have confirmed the suitability of ultra-low ash SSCC to be utilised in coke oven blends. Consequently, the Company is currently updating the marketing and sales strategy for the coal which will be produced at Jan Karski and will incorporate this strategy into the studies.

China Coal Progress and Financing Discussions

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

Under the terms of the agreement China Coal is set to complete all studies required by Chinese financing institutions earmarked to provide financing for the construction and development of Jan Karski. Drafts of the Studies were submitted to Prairie in the previous quarter following which the Company hosted two delegations in Poland from China including: leading underground mine construction company and partner of Prairie, China Coal No.5 Construction Company Ltd. (“CC5C”); Chinese Government’s officially authorised coal mine design institute Jinan Mine Design Institute (“Jinan”); and China’s first large scale foreign trade corporation specialising in international engineering contracting, China National Machinery Import & Export Corporation (“CMC”).

The Chinese delegations were welcomed by the government-appointed Governor of Lublin Province and elected regional government officials of the Lublin region. Prairie conducted various site visits and facilitated meetings with domestic Polish contractors and suppliers who could participate in the construction of Jan Karski.

Prairie and China Coal’s technical teams continue to work together to:

  • agree a final version of the Studies which will form the basis of Chinese bank credit approval for funding construction of Jan Karski;
  • enter into a complete Engineering, Procurement, and Construction (“EPC”) contract under which CC5C to construct Jan Karski; and
  • incorporate relevant Polish content into the design and construction phases which will include working with a range of Polish specialists, sub-contractors and business partners.

Spatial Planning (Rezoning) Approval

Following completion of community consultation and submission by Prairie of all applications required to change the local spatial development plan to affect the rezoning of land for mining use, the Gmina (Municipality) of Siedliszcze officially adopted a new spatial development plan that will allow for the construction of the Jan Karski mine site in the location of Kulik.

The Resolution of the Town Council of Siedliszcze on to adopt the zoning plan was passed during the quarter completing yet another significant milestone towards Prairie obtaining a Mining Concession for Jan Karski.

The spatial planning approval process was conducted in parallel with approval by Poland’s Ministry of Agriculture for the rezoning of 56 hectares of agricultural land to be designated for industrial (mining) purposes. These 56 hectares are in the Kulik area where the Jan Karski mine shafts and major surface facilities will be located, as per the approved Jan Karski Deposit Development Plan (“DDP”) and the ongoing China Coal Bankable Feasibility Study.

Spatial planning approval was granted following the achievement by Prairie of another significant permitting milestone following official approval by the Lublin Regional Mining Authority of the Jan Karski DDP in May 2017 (refer to ASX announcement dated 25 May 2017).

Prairie remains on track to have its full application for a Mining Concession submitted for Jan Karski in the coming months. In Poland, a Mining Concession application comprises the approval of a DDP, a spatial development plan (rezoning of land for mining use), and an Environmental Social Impact Assessment (“ESIA”) in the form of an Environmental Consent decision.

Jan Karski’s DDP and Spatial Development Plan have now been officially approved and the ESIA was submitted following the quarter end. Granting of the Environmental Consent will fulfil all the regulatory prerequisites for the Company to submit a formal Mining Concession application.

CORPORATE

Additional Investment by CD Capital

In August 2017 following shareholder approval, Prairie completed the second convertible note investment with its cornerstone investor CD Capital Natural Resources Fund III LP (“CD Capital”). In July 2017, final investment terms were agreed for Prairie to issue a non-redeemable, non-interest-bearing, unsecured convertible loan notes for an aggregate principal amount of US$2.0 million (A$2.6 million) to CD Capital.

Financial Position

Prairie has cash reserves of A$17 million. With CD Capital’s additional U$2 million (A$2.6 million) investment now completed and their right to invest a further A$55 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.

APPENDIX 1 – EXPLORATION TENEMENT INFORMATION

As at 30 September 2017, 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

Jan Karski, Poland

Sawin-Zachód

100

Granted

Exploration

Debiensko, Poland

Debiensko 1**

100

Granted

Mining

Debiensko, Poland

100

Granted

Mining & Exploration (includes gas rights)

 *  On 1 July 2015, the Company announced that it had secured the Exclusive Right to apply for, and consequently be granted, a mining concession for Jan Karski. As a result of its geological documentation for Jan Karski deposit being approved, Prairie is now the only entity that can lodge a mining concession application over Jan Karski within a three (3) year period.

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 has been surrendered by the Company when the K-6-7 exploration concession expired during the quarter. The Company intends to submit a mining concession application, over the mine plan area at Jan Karski (which includes K-6-7) within the next 12 months. Under Polish mining law, and owing to the Exclusive Right the Company has secured, Prairie is 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.

** 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 is to occur by 1 January 2018. Not commencing production by 2018 will not infringe on the validity and expiry date (June 2048) of the Mining Concession, however in December 2016, the Company did make an application to the MoE to amend the Debiensko Mining Concession to alter the date for commencement of production from 2018 to 2025 with a decision still pending.

To view this announcement in full including all illustrations and figures please refer to www.pdz.com.

+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 September 2017

Consolidated statement of cash flows

Current quarter $A’000

Year to date
(3 months)
$A’000

1.

Cash flows from operating activities

1.1

Receipts from customers

1.2

Payments for

(1,456)

(1,456)

(a)   exploration & evaluation

(b)   development

(c)   production

(d)   staff costs

(605)

(605)

(e)   administration and corporate costs

(240)

(240)

1.3

Dividends received (see note 3)

1.4

Interest received

119

119

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

(317)

141

(317)

141

1.9

Net cash from / (used in) operating activities

(2,358)

(2,358)

2.

Cash flows from investing activities

(22)

(22)

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:

(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)

(22)

3.

Cash flows from financing activities

3.1

Proceeds from issues of shares

3.2

Proceeds from issue of convertible notes

2,627

2,627

3.3

Proceeds from exercise of share options

3.4

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

(179)

(179)

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)

66

66

3.10

Net cash from / (used in) financing activities

2,514

2,514

4.

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

16,809

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)

(2,358)

(2,358)

4.3

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

(22)

(22)

4.4

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

2,514

2,514

4.5

Effect of movement in exchange rates on cash held

4.6

Cash and cash equivalents at end of period

16,943

16,943

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

5,443

4,809

5.2

Call deposits

11,500

12,000

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)

16,943

16,809

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

(284)

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

(1,500)

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


(150)

9.7

Total estimated cash outflows

(2,350)

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 October 2017

(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.

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