Supplemental cash flow information - Note 13
The accompanying notes are an integral part of these financial statements
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the periods ended March 31, 2013 and 2012
(all tabular amounts in thousands of Canadian dollars except per share figures and unless otherwise noted)
1 Corporate information and going concern
EastCoal Inc. (the "Company") was incorporated on December 15, 1986 under the laws of the Province of British Columbia, CANADA. Its principal business activity is the acquisition and development of mineral properties and its registered address is 20th floor, 250 Howe Street, Vancouver, British Columbia, CANADA, V6C 3R8 and its head office is located at Suite 130, 889 Harbourside Drive, North Vancouver, British Columbia, CANADA, V7P 3S1.
The Company is focused on the Verticalnaya Mine located in the Donbass Region of Ukraine. The Verticalnaya Mine is an advanced anthracite coal project in the construction phase. Recovery of the carrying value of the Verticalnaya assets depends on the attainment of profitable production on time and within budget, its profitable disposition or the introduction of a joint venture partner. The Company also owns the Menzhinsky Mine and wash plant, but due to operational failure and ongoing technical challenges the Board of Directors resolved on May 22, 2013 to place Inter-Invest LLC ("Inter-Invest"), the wholly owned subsidiary that owns the Menzhinsky operations, into administration and/or liquidation.
The Company has experienced recurring operating losses and has accumulated a deficit of $40,838,550 at March 31, 2013. For the period ended March 31, 2013 the Company incurred a loss of $18,054,609 and used cash in operating activities totaling $4,430,592. The Company had cash and cash equivalents and short-term investments of $1,228,367 and a working capital deficit of $7,782,265 at March 31, 2013. Working capital is defined as current assets less current liabilities and provides a measure of the Company's ability to settle liabilities that are due within one year with assets that are also expected to be converted into cash within one year. The Company is presently in the final stages of completing an equity fundraising, principally with institutional investors and expects, very shortly, to be able make a further announcement in this regard. The Board is confident that the completion of that fundraising, combined with the closure of the Menzhinsky operations, is expected to provide the Company with sufficient working capital for a 12 month period.
The Company's continued operations are dependent upon the Verticalnaya mine being brought into production on budget and on time. The Company does not have any financing facilities in place and would be dependent on its ability to raise additional funding in the event of significant delays or cost overruns at Verticalnaya. Although the directors believe that the Company should be able to secure the current equity fundraising as well as future additional fundraising as required, there are no assurances that the Company will be successful in achieving these goals. These consolidated financial statements do not include adjustments to the amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue as a going concern. These adjustments may be material.
2 Basis of presentation
These interim condensed consolidated financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting ("IAS 34") and follow the same accounting policies and methods of application as contained in the annual financial statements for the year ended December 31, 2012 with the exception of those outlined below. Accordingly, they should be read in conjunction with the Company's most recent annual financial statements. These interim condensed consolidated financial statements were approved by the Board of Directors on May 27, 2013.
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