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Audited annual consolidated financial statements COAL OF AFRICA LIMITED (Incorporated and registered in Australia) Registration number ABN 008 905 388 ISIN: AU000000CZA6 JSE/ASX/AIM share code: CZA ("CoaL or the "Company" or the "Group") AUDITED ANNUAL CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2016 (Expressed in United States Dollars unless otherwise stated) DIRECTORS' REPORT The directors of Coal of Africa Limited ("CoAL" or the "Company") submit herewith the annual report of the Company and the entities controlled by the Company (its subsidiaries), collectively referred to as the "Group" or the "Consolidated Entity," for the financial year ended 30 June 2016. All balances are denominated in United States dollars unless otherwise stated. In order to comply with the provisions of the Corporations Act 2001, the directors report as follows: Information about the directors and key management personnel The names and particulars of the directors of the Company during or since the end of the financial year are set out below. Unless otherwise stated, the directors held office during the whole of the financial year: Bernard Robert Pryor Independent Non-Executive Chairman Mr Pryor is currently the chief executive officer of Alufer Mining Limited and was previously the chief executive officer of African Minerals Limited and prior to that the chief executive of Q Resources plc. Between 2006 and 2010 he held senior executive positions within Anglo American Plc as head of business development, and CEO of Anglo Ferrous Brazil Inc. David Hugh Brown Executive Director and Chief Executive Mr Brown is a Chartered Accountant, CA (SA) and Officer completed his articles with Ernst & Young, graduating from the University of Cape Town. Mr Brown joined CoAL following a tenure of almost 14 years at Impala Platinum Holdings Limited ("Implats"). He joined the Impala Group in 1999 and served as chief financial officer and financial director of Implats before being appointed chief executive officer in 2006. He is currently an independent non-executive director of Vodacom Group Limited. In the past he has served as a non- executive director of Simmer & Jack Limited, as well as Edcon Holdings Limited and chairman of ASX listed Zimplats Holdings Limited. De Wet Olivier Schutte Executive Director and Chief Financial Mr De Wet Schutte is a Chartered Accountant, CA Officer (SA) and completed an MBA at the University of Virginia in 2002. He has been involved at the senior level in the mining and natural resources industry for the past 16 years, most notably as Managing Director, Natural Resources at Macquarie Bank and CFO at the listed platinum producer, Atlatsa Resources Corporation. Prior to these positions he worked for Harmony Gold Mining (Pty) Ltd as its New Business and Exploration Executive for a period of three years. Peter George Cordin Independent Non-Executive Director Mr Cordin has a Bachelor of Engineering from the University of Western Australia and is experienced in the evaluation, development and operation of resource projects within Australia and overseas. He is a non-executive director of Vital Metals Limited and Aurora Minerals Limited. Khomotso Brian Independent Non-Executive Director Mr Mosehla is a Chartered Accountant, CA (SA) Mosehla and completed his articles with KPMG. Mr Mosehla worked for five years at African Merchant Bank Limited, where he gained a broad range of experience, including management buy- out, leveraged buy-out and capital restructuring/raising transactions. In 2003, he established Mvelaphanda Corporate Finance, for the development of Mvelaphanda's mining and non-mining interests. Mr Mosehla served as a director on the boards of several companies, including Mvelaphanda Resources Limited, and he is currently the Chief Executive Officer of Mosomo Investment Holdings Proprietary Limited. Mr Mosehla is currently s director of Northam Platinum Ltd as well as Zambezi Platinum Limited. Rudolph Henry Torlage Non-Executive Director Mr Torlage is a Chartered Accountant and has over twenty years experience with ArcelorMittal South Africa. He is currently General Manager, Strategy and Special Projects and a Board member of various unlisted ArcelorMittal Group companies. He was previously the Executive Director Finance at ArcelorMittal South Africa. Andrew David Mifflin Independent Non-Executive Director Mr Mifflin obtained his BSc. (Hons) Mining Engineering from Staffordshire University and has a Master's Degree in Business Administration. Andrew has over 30 years' experience specifically in the coal mining arena. His experience spans across various organisations such as British Coal Corporation, Xstrata and more recently GVK Resources. He has gained in depth knowledge in coal operations, both thermal and hard coking coal as well as in project development. Thabo Felix Mosololi Independent Non-Executive Director Mr Mosololi is a Chartered Accountant, CA (SA) qualified in South Africa and brings considerable expertise as a director of various companies as well as from his time as Finance Director and Operations Director with Tsogo Sun. Thabo has 20 years of experience within the South African corporate environment. Mr Mosololi is currently a director of Pan African Resources PLC. No directors were appointed or resigned during the financial year end 30 June 2016. Directorships of other listed companies Directorships of other listed companies held by the directors in the three years immediately before the end of the financial year are as follows: Director Company Period of directorship Bernard Robert Pryor African Minerals Limited 2011 - 2014 David Hugh Brown Vodacom Group Limited 2012 - Present De Wet Olivier Schutte None Peter George Cordin Dragon Mining Limited 2006 - 2014 Vital Metals Limited 2009 - Present Aurora Minerals Limited 2014 - Present Khomotso Brian Mosehla Northam Platinum Limited 2015 - Present Zambezi Platinum Limited 2015 - Present Rudolph Henry Torlage None Andrew David Mifflin None Thabo Felix Mosololi Evraz Highveld Steel & Vanadium Limited 2013 - 2015 Pan African Resources PLC 2014 - Present Directors' shareholdings The following table sets out each director's relevant interest in shares or options in shares or debentures of the Company as at the date of this report. Director Ordinary shares Performance Grants Unlisted options B Pryor(1) 150,000 - 1,000,000 D Brown(2) 825,000 9,714,021 10,575,000 D Schutte(3) - 5,449,944 - P Cordin(4) 1,371,059 - 1,000,000 K Mosehla(5) - - 1,000,000 R Torlage - - - A Mifflin(6) - - 1,000,000 T Mosololi(7) 10,000 - 1,000,000 2,356,059 15,163,965 15,575,000 *Subject to shareholder approval 1. Mr Pryor was issued with the following share options: - 1,000,000 share options on 28 November 2012 with an exercise price of GBP0.25 expiring three years from date of issue. These share options expired during the current financial period. - 1,000,000 share options with an exercise price GBP0.375, and expiring three years from date of issue, were due to Mr Pryor on 6 August 2015. Mr Pryor has agreed to forfeit these options prior to issue and therefore will not be included for shareholder approval. - 1,000,000 share options with an exercise price of GBP0.055, and expiring three years from date of issue, issued on 27 November 2015. 2. Mr Brown was issued with the followings share options: - 2,500,000 share options on 28 November 2012 with an exercise price of GBP0.25 expiring three years from date of issue, vesting immediately. These share options expired during the current financial period. - On appointment as Chief Executive Officer and Executive Director on 1 February 2014, Mr Brown received 10,575,000 options in accordance with the Company's employee share option plan exercisable in three equal tranches over a three-year period. The first tranche of 3,525,000 options are exercisable on 1 February 2015 at ZAR1.20 each, a further 3,525,000 options are exercisable on 1 February 2016 at an exercise price of ZAR1.32 per option and the remaining 3,525,000 options are exercisable on 1 February 2017 at an exercise price of ZAR1.45. All 10,575,000 options expire on 1 February 2019. - 9,714,021 unlisted conditional performance rights ("Performance Rights") were granted on 30 November 2015. The Performance Rights will be granted for no consideration. No exercise price is payable upon exercise of the Performance Rights. 3. Mr Schutte was issued with the following share options: - On appointment as Chief Financial Officer and Executive Director on 22 June 2015 Mr Schutte received 6,600,000 options in accordance with the Company's employee share option plan. The options vest in three equal tranches over a three-year period and are subject to shareholder approval. The first tranche of 2,200,000 options are exercisable on 21 June 2016 at ZAR1.20 each, a further 2,200,000 options are exercisable on 21 June 2017 at ZAR1.32 per option and the remaining 2,200,000 options are exercisable on 21 June 2018 at an exercise price of ZAR1.45 each. These options are still subject to shareholder approval. All 6,600,000 options expire on 22 June 2020. - 5,449,944 unlisted conditional performance rights granted on 30 November 2015. The Performance Rights will be granted for no consideration. No exercise price is payable upon exercise of the Performance Rights. 4. 958,300 shares are held by the Cordin Pty Ltd (The Cordin Family Trust) and 412,759 shares held by Cordin Pty Ltd (The Cordin Superannuation Fund). Mr Cordin is a beneficiary of both the trust and superannuation fund. Mr Cordin was issued 1,000,000 share options with an exercise price of GBP0.055, and expiring three years from date of issue, issued on 27 November 2015. 5. Mr Mosehla was issued 1,000,000 share options with an exercise price of GBP0.055, and expiring three years from date of issue, issued on 27 November 2015. 6. Mr Mifflin was issued 1,000,000 share options with an exercise price of GBP0.055, and expiring three years from date of issue, issued on 27 November 2015. 7. Mr Mosololi was issued 1,000,000 share options with an exercise price of GBP0.055, and expiring three years from date of issue, issued on 27 November 2015. Remuneration of directors and key management personnel Information about the remuneration of directors and key management personnel is set out in the remuneration report of this directors' report, on pages 12 to 23. Share options granted to directors and senior management During and since the end of the financial year, share options and performance rights were granted to directors and key management personnel of the Company and of its controlled entities as part of their remuneration. Details of options and performance rights granted to directors and senior management are set out on page 82. Company secretary Mr Tony Bevan, a qualified Chartered Accountant with over 25 years' experience, is the Company Secretary and works with Endeavour Corporate Pty Ltd, the company engaged to provide contract secretarial, accounting and administration services to CoAL. Principal activities The Company is a limited company incorporated in Australia. Its common shares are listed on the Australian Securities Exchange ("ASX"), the AIM Market of the London Stock Exchange ("AIM") and the Johannesburg Stock Exchange ("JSE") in South Africa. The principal activities of the Company and its subsidiaries are the acquisition, exploration, development and operation of metallurgical and thermal coal projects in South Africa. The Group's principal assets and projects include: - The Makhado hard coking and thermal coal project that has been granted a New Order Mining Right and has the potential to produce approximately 5.5 million tonnes per annum of saleable product; - The Vele Colliery, a semi soft coking and thermal coal mine currently under care and maintenance with the potential to supply approximately 1.2million tonnes per annum of saleable product once all regulatory approvals have been obtained and plant modification completed; - four exploration and development stage coking and thermal coal projects, namely Chapudi, Generaal, Mopane, and Telema and Gray in the Soutpansberg Coalfield; and - the Mooiplaats colliery currently on care and maintenance and subject to a formal sale process which is expected to be completed by 30 June 2017. Review of operations The Company undertook the following activities during the year: Operational salient features - No Fatalities (FY2015: none) and no lost time injuries recorded during the year (FY2015: none). - Mooiplaats Colliery is still on care and maintenance and is subject to a formal sale process. - The Integrated Water Use Licence ("IWUL") for its Vele Colliery in the Limpopo Province has been renewed for a further twenty years. - IWUL for its Makhado Project has been granted by the Department of Water and Sanitation ("DWS") for a period of 20 years. The IWUL was automatically suspended following an appeal to the DWS submitted by the Vhembe Mineral Resources Forum. - The South African Minister of the Department of Environmental Affairs ("DEA"), has dismissed the Appeal against the Environmental Authorisation ("EA") Amendment for the Vele Colliery in the Limpopo Province. - The Optimisation Study and Front End Engineering and Design ("FEED") for the Makhado Project has been completed by the International engineering and project delivery group DRA Projects South Africa ("DRA"). - The Company signed a non-binding Memorandum of Understanding ("MOU") with Qingdao Hengshun Zhongsheng Group Co Ltd ("Hengshun") with respect to a proposed equity investment in Baobab Mining and Exploration (Pty) ("Baobab") a subsidiary of the Company. Baobab is the subsidiary of CoAL that owns the mining right for the Makhado Project. Corporate salient features - The Company agreed the terms of a recommended offer to be made by CoAL for the entire issued and to be issued share capital of Universal Coal Plc ("Universal"). Legal - During the year the Company received a notice from Rio Tinto Minerals Development Limited ("Rio Tinto") and Kwezi Mining Proprietary Limited alleging that the Company is in breach of an obligation under the agreements pursuant to the acquired interests in Chapudi Coal Pty Ltd and Kwezi Mining Exploration Pty Ltd, and therefore all amounts owed by CoAL and MbeuYashu were claimed as due and payable. New payment terms have been negotiated with Rio Tinto for the outstanding liability FY2016: $16.5million (FY2015: $19.8 million) owing to Rio Tinto with the balance to be paid in monthly instalments of at least $650,000 plus interest, and final settlement date of June 2017 has remained unchanged. Subsequent events Post year end, the following significant operational events took place: - The Company announced on 15 July 2016 that the recommended offer by CoAL for the entire issued and to be issued share capital of Universal had lapsed. There have been no other events between 30 June 2016 and the date of this report which necessitate adjustment to the consolidated statements of comprehensive income, consolidated statements of financial position, consolidated statements of changes in equity and the consolidated statements of cash flows at that date. Financial review - No revenue was generated during the year as result of all operations on care and maintenance (FY 2015 $nil). - Non-cash charges of $12.8 million (FY2015: $7.5 million) including: - Depreciation and amortisation of $1.2 million (FY2015: $1.4 million); - Unrealised foreign exchange loss of $9.5 million (FY2015: $18.9 million gain) as a result of the South African rand weakening against the United States dollar; and - Share based payment expense of $0.2 million (FY2015: $3.1 million). - Total unrestricted cash balances at year-end, including cash held by operations available for sale of $19.5 million (FY2015: $17.8 million). Future developments The NOMR for the Makhado Project was granted in May 2015 as well as a section 11 approval for the transfer of the right to CoAL's 74% owned subsidiary, Baobab Mining. The Company was granted the IWUL in January 2016 for the period equal to life of mine. The Company completed a Definitive Feasibility Study ("DFS") for Makhado during FY2013 which indicates that the project has 344.8 million mineable tonnes in situ and a 16 year life of mine. The opencast project is expected to produce 12.6Mtpa of ROM coal yielding 2.3Mtpa of hard coking coal and 3.2Mtpa of thermal coal for domestic and export markets. The Makhado project finalised the FEED during the current financial year and is currently engaged with investors to complete the funding for the project. Once funding is in place and regulatory approvals have been obtained the company expects board approval to commence construction by the second half of CY 2017. The Company will continue to progress all outstanding regulatory matters as they relate to both the Makhado project and the Vele Colliery. With respect to the Vele Colliery the extension and amendment of the Vele IWUL was granted during the year under review. Given the prevailing commodity market conditions the company applied for all approvals to cover future mining areas which includes the diversion of two non-perennial streams. When the latest approval is finalised (expected toward the end of CY2016) the company will make the decision on the commencement of the plant modification taking into account the prevailing market conditions. The exploration and development of the CoAL prospects in the Soutpansberg coalfield is the catalyst for the long-term growth of the Company. The DMR is considering the Company's NOMR applications for the Mopane, Generaal, Chapudi and Telema and Gray projects. Environmental regulations The Consolidated Entity's operations are not subject to any significant environmental regulations under either Commonwealth or State legislation and there has consequently been no breach. The Group is subject to numerous environmental regulations in South Africa, including the: - Environment Conservation Act (No. 73 of 1989), - National Water Act (No. 45 of 1965), - National Environmental Management Act (No. 107 of 1998), - the National Environmental Management Air Quality Act (No. 39 of 2004), - and the environmental provisions in the Mineral and Petroleum Resources Development Act (No 28 of 2002). There is uncertainty regarding the interrelationship between these statutes in the mining context and as such complete compliance with all simultaneously is often difficult. The Board believes that the Consolidated Entity has adequate systems in place for the management of its environmental impacts but from time to time statutory non-compliances may occur. The Board takes these seriously and undertook a thorough review of all its activities during FY2013 to bring them into compliance and continues to monitor compliance thereof. Dividends No dividend has been paid or proposed for the financial year ended 30 June 2016 (FY2015: nil). Shares under option or issued on exercise of options Details of unissued shares under option as at the date of this report are: Number of shares Class of shares Exercise price Expiry date under option ESOP Unlisted Options 2,670,000 Ordinary ZAR7.60 14 February 2017 ESOP Unlisted Options 3,932,928 Ordinary ZAR1.75 30 June 2017 Investec options 20,000,000 Ordinary ZAR1.32 21 October 2018 ESOP Unlisted Options 3,525,000 Ordinary ZAR1.20 1 February 2019 ESOP Unlisted Options 3,525,000 Ordinary ZAR1.32 1 February 2019 ESOP Unlisted Options 3,525,000 Ordinary ZAR1.45 1 February 2019 ESOP Unlisted Options 5,000,000 Ordinary GBP0.055 27 November 2018 Total Unlisted Options 42,177,928 The holders of these options do not have the right, by virtue of the option, to participate in any share issue of the Company or of any other body corporate or registered scheme. Details of unissued performance grants as at the date of this report are: Number of shares Class of shares Exercise price Expiry date under option ESOP Performance Grant 9,714,021 Ordinary Nil 1 December 2018 ESOP Performance Grant 5,449,944 Ordinary Nil 1 December 2018 ESOP Performance Grant 18,285,159 Ordinary Nil 1 December 2018 Total Performance Grant 33,449,124 No shares or interests were issued during or since the end of the financial year as a result of exercise of options. Indemnification of officers and auditors During the financial year, the Company paid a premium in respect of a contract insuring the directors of the Company, the company secretary, and all executive officers of the Company and of any related body corporate against a liability incurred by such a director, secretary or executive officer to the extent permitted by the Corporations Act 2001. The Company has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred by such an officer or auditor. Directors' meetings The following table sets out the number of directors' meetings (including meetings of committees of directors) held during the financial year and the number of meetings attended by each director (while they were a director or committee member). During the financial year, a total of nine board meetings were held, four scheduled and five unscheduled, zero placing and bid committee meetings, four nomination and remuneration committee meeting, four audit committee meetings and four safety and health committee meeting were held. Board Meetings Audit Committee Nomination and Safety, Health and Meetings Remuneration Environment Committee Meetings Committee Meetings Director Held Attended Held Attended Held Attended Held Attended B Pryor 9 9 4 4 4 4 - - D Brown 9 9 - - 4 4 4 4 D Schutte 9 9 - - - - - - P Cordin 9 9 - - - - 4 4 K Mosehla 9 6 4 2 - - - - R Torlage 9 8 - - - - - - A Mifflin 9 9 - - - - 4 4 T Mosololi 9 7 4 4 4 4 - - Proceedings on behalf of the Company No persons applied for leave to bring or intervene in proceedings on behalf of the Company during or since the end of the financial year. Non-audit services Non-audit services were provided during the current financial year for services rendered relating to the offer for Universal and additional review procedures. Details of amounts paid or payable to the auditor for services provided during the year by the auditor are outlined in note 8 to the consolidated financial statements. Auditor's independence declaration The auditor's independence declaration is included on page 24 of these consolidated financial statements. Remuneration report (Audited) This remuneration report, which forms part of the directors' report, sets out information about the remuneration of Coal of Africa Limited's directors and its senior management for the financial year ended 30 June 2016. The prescribed details for each person covered by this report are detailed below under the following headings: - director and senior management details; - remuneration policy; - relationship between the remuneration policy and company performance; - remuneration of directors and senior management; and - key terms of employment contracts. The Board is responsible for establishing remuneration packages applicable to the Board members of the Company. The policy adopted by the Board is to ensure that remuneration properly reflects an individual's duties and responsibilities and that remuneration is competitive in attracting, retaining and motivating people of the highest calibre. Directors' remuneration packages are also assessed in the light of the condition of markets within which the Company operates, the Company's financial condition and the individual's contribution to the achievement of corporate objectives. Executive Directors are remunerated by way of a salary or consultancy fees, commensurate with their required level of service. Total remuneration for all Non-Executive Directors, excluding share-based payments, as approved by shareholders at the November 2010 General Meeting, is not to exceed A$1,000,000 per annum ($744,090). The Board has nominated a Nomination and Remuneration Committee which was made up as follows: Mr Pryor (Chairman), Mr Mosololi and Mr Brown. The Company does not have any scheme relating to retirement benefits for Executive or Non-Executive Directors. Director and key management personnel details The following persons acted as directors of the Company during or since the end of the financial year: - B Pryor Independent Chairman - D Brown Chief Executive Officer and Executive Director - D Schutte Chief Financial Officer and Executive Director - P Cordin Independent Non-Executive Director - K Mosehla Independent Non-Executive Director - R Torlage Non-Executive Director - A Mifflin Independent Non-Executive Director - T Mosololi Independent Non-Executive Director Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity. The term 'key management' is used in this remuneration report to refer to the following persons. - C Bronn Chief Operating Officer Except as noted, the named persons held their current position for the whole of the financial year and since the end of the financial year. Remuneration policy The remuneration policy of CoAL has been designed to align key management personnel objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives based on key performance areas affecting the consolidated Group's financial results. The Board of CoAL believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best key management personnel to run and manage the consolidated Group, as well as create goal congruence between Directors, key management and shareholders. The Board's policy for determining the nature and amount of remuneration for key management personnel of the consolidated Group is as follows: - The remuneration structure is developed by the Nomination and Remuneration Committee and approved by the Board after professional advice is periodically sought from independent external consultants. - All key management personnel receive a base salary (based on factors such as length of service and experience), options and performance incentives. - Incentives paid in the form of cash and options are intended to align the interests of the Directors, key management and the Company with those of the shareholders. The Nomination and Remuneration Committee reviews key management personnel packages annually by reference to the consolidated Group's performance, executive performance and comparable information from industry sectors. The performance of key management personnel is measured against criteria agreed annually with each executive and bonuses and incentives are linked to predetermined performance criteria. The performance criteria vary and are determined in line with each individual's performance contract. The Board may, however, exercise its discretion in relation to approving incentives, bonuses and options, and can recommend changes to the Nomination and Remuneration Committee's recommendations. Any changes must be justified by reference to measurable performance criteria. The policy is designed to attract the highest calibre of executives and reward them for performance results leading to long-term growth in shareholder wealth. All remuneration paid to key management personnel is valued at the cost to the Company and expensed. The Board's policy is to remunerate Non-Executive Directors at market rates for time, commitment and responsibilities. The Nomination and Remuneration Committee determines payments to the Non-Executive Directors and reviews their remuneration annually, based on market practice, duties and accountability. The maximum aggregate amount of fees, excluding share-based payments that can be paid to Non-Executive Directors is A$1,000,000 ($744,090). To assist directors with independent judgement, it is the Board's policy that if a director considers it necessary to obtain independent professional advice to properly discharge the responsibility of their office as a director then, provided the director first obtains approval from the Chairman for incurring such expense, the Company will pay the reasonable expenses associated with obtaining such advice. Options granted under the arrangement do not carry dividend or voting rights. Options are valued using a binomial option pricing model and the Black-Scholes option pricing model was used to validate the price calculated. During the current financial year the Nomination and Remuneration Committee approved and implemented a performance rights plan. The purpose of the Plan is to assist in the reward, retention and motivation of eligible employee and to align the interest of eligible employee with the shareholders of the Company. Prior to a Performance Right being exercised the performance grants do not carry any dividend or voting rights. The Performance Rights will be granted for no consideration and no exercise price is payable upon exercise of the Performance Rights. All the Performance Rights proposed to be granted are subject to the following vesting conditions. Vesting of the Performance Rights will be subject to a hurdle based on the compound annual growth rate in total shareholder return ("TSR") across the 3 years commencing on the grant date of the Performance Rights ("Performance Period"). TSR is a measure of the increase in the price as determined by the Company. The base price for the TSR calculation will be the volume weighted average price ("VWAP") of shares over the five days prior to the grant date. The end price for the TSR calculation will be the VWAP over the last five days of the Performance Period. Performance-based remuneration The key performance indicators (KPIs') are set annually, which includes consultation with key management personnel to ensure buy-in. The measures are specifically tailored to the area each individual is involved in and has a level of control over. The KPIs target areas the Board believes hold greater potential for group expansion and profit, covering financial and non-financial as well as short and long-term goals. Performance in relation to the KPIs is assessed annually, with bonuses being awarded depending on the number and deemed difficulty of the KPIs achieved. Hedging of Management Remuneration No member of key management entered into an arrangement during or since the end of the financial year to limit the risk relating to any element of that person's remuneration. Relationship between remuneration policy and Company performance The tables below set out summary information about the Group's earnings and movements in shareholder wealth for the five years to June 2016. Year ended Year ended Year ended Year ended Year ended 30 June 30 June 30 June 30 June 30 June 2016 2015 2014 2013 2012 $'000 $'000 $'000 $'000 $'000 Revenue - - 4,060 146,396 243,842 Net loss before tax 23,903 6,711 84,120 155,754 150,551 Net loss after tax 22,472 6,711 84,120 148,137 138,908 Year ended Year ended Year ended Year ended Year ended 30 June 30 June 30 June 30 June 30 June 2016 2015 2014 2013 2012 Share price at start of year A$0.09 A$0.07 A$0.19 A$0.56 A$1.08 Share price at end of year A$0.06 A$0.09 A$0.07 A$0.19 A$0.56 Basic and diluted loss per share ($ cents) 1.24 0.47 8.02 17.00 23.00 Remuneration of directors and key management personnel Details of the nature and amount of each major element of the remuneration of each director and senior management personnel for the year are: Short term employee benefits Post- Termination Share- Total Share- employment benefits based based benefits payments % of Total Salary Bonus Non- Super- Options/ and fees monetary annuation Shares 2016 benefits $ $ $ $ $ $ $ % Non-Executive Directors B Pryor 56,608 - - - - 17,478 74,086 24 P Cordin 47,070 - - 4,472 - 17,478 69,020 25 K Mosehla 46,240 - - - - 17,478 63,718 27 R Torlage 46,240 - - - - - 46,240 - A Mifflin 47,070 - - 4,472 - 17,478 69,020 25 T Mosololi 46,240 - - - - 17,478 63,718 27 Executive Directors D Brown 405,424 31,782 - - - 78,876 516,082 15 D Schutte 251,964 - - - - 25,053 277,017 9 946,856 31,782 - 8,944 - 191,319 1,178,901 C Bronn 227,227 17,335 - - - 17,437 261,999 7 1,174,083 49,117 - 8,944 - 208,756 1,440,900 No director or key management appointed during the period received a payment as part of his consideration for agreeing to hold the position. In September 2015, performance bonuses were paid out in relation to certain performance targets met for the 2015 financial year. Short term employee benefits Post- Termination Share- Total Share- employment benefits based based benefits payments % of Total Salary Bonus Non- Super- Options/ and fees monetary annuation Shares 2015 benefits $ $ $ $ $ $ $ % Non-Executive Directors B Pryor 62,940 - - - - - 62,940 - P Cordin 37,226 - - 4,785 - - 42,011 - K Mosehla 50,688 - - - - - 50,688 - R Torlage 50,688 - - - - - 50,688 - A Mifflin(1) 19,582 - - 2,690 - - 22,272 - T Mosololi(1) 26,791 - - - - - 26,791 - D Murray(2) 17,738 - - 2,077 - - 19,815 - Executive Directors D Brown 481,250 - - - - 131,485 612,735 32 D Schutte(3) 8,497 - - - - - 8,497 - M Meeser(4) 249,139 - - - - - 249,139 - 1,004,539 - - 9,552 - 131,485 1,145,576 18 C Bronn 262,500 21,875 - - - - 284,375 - 1,267,039 21,875 - 9,552 - 131,485 1,429,951 15 1. Mr Mifflin and Mr Mosololi were appointed as Independent Non-Executive Directors on 12 December 2014. 2. Mr Murray resigned as Senior Independent Non-Executive Director on 12 December 2014. 3. Mr Schutte was appointed as Chief Financial Officer and Executive Director on 22 June 2015. 4. Mr Meeser resigned as Chief Financial Officer and Executive Director on 30 April 2015. Share-based payments granted as compensation for the current financial year During the financial year, the following share-based payment arrangements were in existence: Exercise Grant date Vesting Option series Number Grant date Expiry date price value date Class C unlisted options 2,500,000 09/11/2010 09/11/2015 A$1.20 A$0.59 (1) ESOP unlisted options 1,441,061 04/02/2011 30/09/2015 A$1.40 A$0.91 (2) ESOP unlisted options 2,670,000 16/09/2011 14/02/2017 ZAR7.60 ZAR3.46 (3) Class L unlisted options 3,500,000 28/11/2012 30/11/2015 GBP0.25 GBP0.032 (4) ESOP unlisted options 3,932,928 22/11/2013 30/06/2017 ZAR1.75 ZAR0.52 (5) ESOP unlisted options 1,375,000 22/11/2013 30/11/2015 ZAR2.00 ZAR0.56 (6) ESOP unlisted options 3,525,000 28/11/2014 01/02/2019 ZAR1.20 ZAR0.15 (7) ESOP unlisted options 3,525,000 28/11/2014 01/02/2019 ZAR1.32 ZAR0.14 (7) ESOP unlisted options 3,525,000 28/11/2014 01/02/2019 ZAR1.45 ZAR0.12 (7) ESOP unlisted options 5,000,000 27/11/2015 27/11/2018 GBP0.055 AUD0.024 (8) 30,993,989 1. Mr Murray was issued a total of 2,500,000 options with an expiry date five years from the issue date, 1,000,000 vested 12 months after the date of issue, 750,000 vested 24 months after the date of issue and the remaining 750,000 vested 36 months from the date of issue. These options expired during the current financial year. 2. These options were issued to employees and vest in three equal tranches on 30 September 2011, 30 September 2012 and the remaining third on 30 September 2013. These options expired during the current financial year. 3. These options were issued to employees and one third vested on 1 July 2012, one third on 1 July 2013 and the remaining third on 1 July 2014. 4. These options all vested on 28 November 2012 and all option expired during the current financial year. 5. These options were issued to employees and two thirds vested immediately on granting and one third vesting on 1 July 2014. 6. Mr Meeser (resigned 30 April 2015) was issued a total of 4,125,000 options vesting in three equal tranches on 1 June 2014, 1 June 2015 and 1 June 2016. 2,750,000 of these options had not vested and were cancelled on Mr Meeser's resignation. The remainder of his share options expired during the current financial year. 7. A total of 10,575,000 options were granted to Mr Brown on his appointment as Chief Executive Officer and vest in three equal tranches on 1 February 2015, 1 February 2016 and 1 February 2017. 8. A total of 5,000,000 options were granted to non-executive directors Mr Cordin, Mr Mosehla, Mr Pryor, Mr Mifflin and Mr Mosololi vesting immediately on grant date. The following grants of share-based payment compensation to key management personnel relate to the current financial year: During the financial year % of compensation % of % of for the year Number Number grant grant consisting of Name Option series granted vested vested forfeited options D Brown ESOP unlisted options 10,575,000 3,525,000 33 n/a 7 D Brown Performance Grant 9,714,021 - - n/a 8 D Schutte Performance Grant 5,449,944 - - n/a 9 C Bronn Performance Grant 3,793,298 - - n/a 7 During the year, none of the key management personnel exercised options that were granted to them as part of their compensation. Key terms of employment contracts The Company entered into formal contractual employment agreements with the Chief Executive Officer and the Chief Financial Officer only and not with any other member of the Board. The employment conditions of the Chief Executive Officer and Chief Financial Officer are: Current 1. Mr Brown's appointment as Chief Executive Officer commenced on 1 February 2014 with an annual remuneration of ZAR5.5 million and a three month notice period and received 10,575,000 options in accordance with the Company's employee share option plan. The options are exercisable in three equal tranches over three years at ZAR1.20, ZAR1.32 and ZAR1.40 vesting on 1 February 2015, 1 February 2016 and 1 February 2017 respectively. 2. Mr Schutte serves as Financial Director with an annual remuneration of ZAR3.6 million and a three month notice period. On appointment as Chief Financial Officer and Executive Director Mr Schutte received 6,600,000 options in accordance with the Company's employee share option plan. The options vest in three equal tranches over a three- year period and are subject to shareholder approval. The first tranche of 2,200,000 options are exercisable on 21 June 2016 at ZAR1.20 each, a further 2,200,000 options are exercisable on 21 June 2017 at ZAR1.32 per option and the remaining 2,200,000 options are exercisable on 21 June 2018 at an exercise price of ZAR1.45 each. These share options are still subject to shareholder approval. The employment conditions of the following specified executives have been formalised in employment contracts: 1. Mr Bronn is employed by CoAL in the capacity of Chief Operations Officer, at an annual remuneration of ZAR3.0 million. This permanent employment contract may be terminated by written notice of two months. Key management personnel equity holdings Option holdings The movement during the reporting period in the number of options over ordinary shares exercisable at A$1.20 on or before 9 November 2015 held directly, indirectly or beneficially by each director and key management personnel including their personally-related entities, is as follows: Held at Granted as Exercised Expired/Other Held at 1 July 2015 remuneration changes 30 June 2016 Non-Executive Directors B Pryor - - - - - D Murray(1) 2,500,000 - - (2,500,000) - P Cordin - - - - - K Mosehla - - - - - R Torlage - - - - - A Mifflin - - - - - T Mosololi - - - - - Executive Directors D Brown - - - - - D Schutte - - - - - Key management - - - - - (1)Resigned 12 December 2014 The movement during the reporting period in the number of options over ordinary shares exercisable at ZAR1.75 on or before 30 June 2017 held directly, indirectly or beneficially by each director and key management personnel including their personally-related entities, is as follows: Held at Granted as Exercised Expired/Other Held at 1 July 2015 remuneration changes 30 June 2016 Non-Executive Directors B Pryor - - - - - P Cordin - - - - - K Mosehla - - - - - R Torlage - - - - - A Mifflin - - - - - T Mosololi - - - - - Executive Directors D Brown - - - - - D Schutte - - - - - Key management C Bronn 174,696 - - - 174,696 The movement during the reporting period in the number of options over ordinary shares exercisable at ZAR2.00 on or before 1 June 2018 held directly, indirectly or beneficially by each director and key management personnel including their personally-related entities, is as follows: Held at Granted as Exercised Expired/Other Held at 1 July 2015 remuneration changes 30 June 2016 Non-Executive Directors B Pryor - - - - - P Cordin - - - - - K Mosehla - - - - - R Torlage - - - - - A Mifflin - - - - - T Mosololi - - - - - Executive Directors D Brown - - - - - D Schutte - - - - - M Meeser(1) 1,375,000 - - (1,375,000) - Key management - - - - - (1)Resigned 30 April 2015 The movement during the reporting period in the number of options over ordinary shares exercisable in three equal tranches at ZAR1.20 on or before 1 February 2015, ZAR1.32 on or before 1 February 2016 and ZAR1.45 on or before 1 February 2017 held directly, indirectly or beneficially by each director and key management personnel including their personally-related entities, is as follows: Held at Granted as Exercised Expired/Other Held at 1 July 2015 remuneration changes 30 June 2016 Non-Executive Directors B Pryor - - - - - P Cordin - - - - - K Mosehla - - - - - R Torlage - - - - - A Mifflin - - - - - T Mosololi - - - - - Executive Directors D Brown 10,575,000 - - - 10,575,000 D Schutte - - - - - Key management - - - - - Key management personnel equity holdings The movement during the reporting period in the number of options over ordinary shares at GBP 0.055, vesting immediately held directly, indirectly or beneficially by each director and key management personnel including their personally-related entities, is as follows: Held at Granted as Exercised Expired/Other Held at 1 July 2015 remuneration changes 30 June 2016 Non-Executive Directors B Pryor 1,000,000 - - 1,000,000 P Cordin - 1,000,000 - - 1,000,000 K Mosehla - 1,000,000 - - 1,000,000 R Torlage - - - - - A Mifflin - 1,000,000 - - 1,000,000 T Mosololi - 1,000,000 - - 1,000,000 Executive Directors D Brown - - - - - D Schutte - - - - - Key management - - - - - Key management personnel equity holdings The movement during the reporting period in the number of performance grants over ordinary shares exercisable in three years' time subject to performance criteria, held directly, indirectly or beneficially by each director and key management personnel including their personally-related entities, is as follows: Held at Granted as Exercised Expired/Other Held at 1 July 2015 remuneration changes 30 June 2016 Non-Executive Directors B Pryor - - - - - P Cordin - - - - - K Mosehla - - - - - R Torlage - - - - - A Mifflin - - - - - T Mosololi - - - - - Executive Directors D Brown - 9,714,021 - - 9,714,021 D Schutte - 5,449,944 - - 5,449,944 Key management - 3,793,298 - - 3,793,298 Equity holdings and transactions of Directors and key management personnel The movement during the reporting period in the number of ordinary shares held, directly, indirectly or beneficially by each key management personnel including their personally-related entities, is as follows: Held at Granted as Exercised Expired/Other Held at 1 July 2015 remuneration changes 30 June 2016 Non-Executive Directors B Pryor 150,000 - - - 150,000 P Cordin 1,371,059 - - - 1,371,059 K Mosehla - - - - - R Torlage - - - - - A Mifflin - - - - - T Mosololi(1) 10,000 - - - 10,000 Executive Directors D Brown 825,000 - - - 825,000 D Schutte - - - - - Key management - - - - - (1)Purchased prior to being appointed as a Non-Executive Director. This directors' report is signed in accordance with a resolution of directors made pursuant to s298(2) of the Corporations Act 2001. On behalf of the Directors Bernard Robert Pryor David Hugh Brown Chairman Chief Executive Officer 30 September 2016 30 September 2016 Deloitte Touche Tohmatsu ABN 74 490 121 060 Brookfield Place, Tower 2 123 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia Tel: +61 8 9365 7000 Fax: +61 8 9365 7001 http://www.deloitte.com.au The Board of Directors Coal of Africa Limited Suite 8, 7 The Esplanade Mount Pleasant WA 6153 30 September 2016 Dear Board Members Au

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