Raport.

PRAIRIE MINING LTD. (6/2018) Half Year Accounts

Podstawa prawna: Attached as an Annexes to this report is the Company's Half Year Accounts for the six months ended 31 December 2017.
For further information, please contact:
Prairie Mining Limited Tel: +44 207 478 3900
Ben Stoikovich, Chief Executive Officer Email: [email protected]
Sapan Ghai, Head of Corporate Development

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    Interim Financial Report
    for the Half-Year Ended
    31 December 2017
    Śródroczny raport finansowy za drugie półrocze zakończone 31 grudnia 2017
    ABN 23 008 677 852



    Prairie Mining Limited Interim Financial Report for the Half-Year Ended 31 December 2017
    CORPORATE DIRECTORY | ZBIÓR DANYCH KORPORACYJNYCH
    DIRECTORS:
    Mr Ian Middlemas Chairman
    Mr Benjamin Stoikovich Director and CEO
    Ms Carmel Daniele Non-Executive Director
    Mr Thomas Todd Non-Executive Director
    Mr Mark Pearce Non-Executive Director
    Mr Todd Hannigan Alternate Director
    Mr Dylan Browne Company Secretary
    PRINCIPAL OFFICES:
    PD Co sp. z. o.o. (Warsaw):
    Ul. Wspolna, 35 lok. 4
    00-519 Warsaw
    Karbonia S.A. (Czerwionka – Leszczyny):
    Ul. 3 Maja 44,
    44-230 Czerwionka - Leszczyny
    London:
    Unit 3C, 38 Jermyn Street
    London SW1Y 6DN
    United Kingdom
    Tel: +44 207 487 3900
    Australia (Registered Office):
    Level 9, BGC Centre
    28 The Esplanade
    Perth WA 6000
    Tel: +61 8 9322 6322
    Fax: +61 8 9322 6558
    SOLICITORS:
    Poland:
    DLA Piper Wiater sp.k.
    United Kingdom:
    DLA Piper UK LLP
    Australia:
    DLA Piper Australia
    AUDITOR:
    Poland:
    Ernst & Young Audyt Polska sp. z. o.o.
    Australia:
    Ernst & Young – Perth
    BANKERS:
    Poland:
    Bank Zachodni WBK S.A. – Santander Group
    Australia :
    Australia and New Zealand Banking Group Ltd
    SHARE REGISTRIES:
    Poland:
    Komisja Nadzoru Finansowego (KNF)
    Plac Powstańców Warszawy 1, skr. poczt. 419
    00-950 Warszawa
    Tel: +48 22 262 50 00
    United Kingdom:
    Computershare Investor Services PLC
    The Pavilions, Bridgewater Road
    Bristol BS99 6ZZ
    Tel: +44 370 702 0000
    Australia:
    Computershare Investor Services Pty Ltd
    Level 11, 172 St Georges Terrace
    Perth WA 6000
    Tel: +61 8 9323 2000
    STOCK EXCHANGE LISTINGS:
    Poland:
    Warsaw Stock Exchange – GPW Code: PDZ
    United Kingdom:
    London Stock Exchange (Main Board) – LSE Code: PDZ
    Australia:
    Australian Securities Exchange – ASX Code: PDZ
    CONTENTS | ZAWARTOŚĆ Page | Strona
    Directors' Report 1
    Directors' Declaration 9
    Consolidated Statement of Profit or Loss and other Co mprehensive Income 10
    Consolidated Statement of Financial Position 11
    Consolidated Statement of Changes in Equity 12
    Consolidated Statement of Cash Flows 13
    Notes to the Consolidated Financial Statements 14
    Auditor's Independence Declaration 22
    Independent Auditor's Review Report 23



    DIRECTORS’ REPORT
    Prairie Mining Limited Interim Financial Report for the Half-Year Ended 31 December 2017 1
    The Directors of Prairie Mining Limited present their report on the Consolidated Entity consisting of Pra irie Mining Limited
    (“Company” or “Prairie”) and the entities it control led during the half-year ended 31 December 2017 (“C onsolidated Entity”
    or “Group”).
    DIRECTORS
    The names and details of the Company’s Directors in office at any time during the half-year and until the date of this report
    are:
    Directors:
    Mr Ian Middlemas Chairman
    Mr Benjamin Stoikovich Director and CEO
    Ms Carmel Daniele Non-Executive Director
    Mr Thomas Todd Non-Executive Director
    Mr Mark Pearce Non-Executive Director
    Mr Todd Hannigan Alternate Director
    Unless otherwise shown, all Directors were in offic e from the beginning of the half-year until the date of this report.
    OPERATING AND FINANCIAL REVIEW
    Operations
    Highlights during, and subsequent to, the end of th e half-year include:
    Debiensko Mine (Premium Hard Coking Coal)  The newly appointed Prime Minister, Mateusz Morawie cki, officially presented the Ministry of Development’s “Program
    for Silesia” which included a strategy for the re-st art of a major coking coal mine in the Upper Silesia n region, where
    the Debiensko Mine (“Debiensko”) is located, and hi ghlighted the positive social and economic impacts that mine
    development would have on the region.
     Mine site redevelopment planning continued at the Debiensko to advance with completion of initial demolition works,
    pre-qualification of study contractors, and prepara tion for an infill drill program to increase JORC M easured and
    Indicated Resources.
     Prairie continued discussions with regional steel m akers and coke producers for future coking coal sales and offtake.
     Hard coking coal prices continued to trade at pric e levels above US$225/t FOB Australia.
     Market analysts forecast underinvestment in new co king coal mine development has potential to result in sustained
    high coking coal prices.
     European Commission continues to designate coking c oal as a Critical Raw Material in its 2017 review.
    Jan Karski Mine (Semi-Soft Coking Coal)  Prairie’s use of modern exploration techniques cont inues to transform the Jan Karski Mine (“Jan Karski”) with latest
    drilling results re-affirming the capability of the project to produce high value ultra-low ash semi-s oft coking coal.
     Environmental permitting for Jan Karski advanced fol lowing successful submission of the Environmental and Social
    Impact Assessment (“ESIA”) to the Lublin Regional Env ironment Directorate for Environmental Consent.
     Spatial development plan approved at Jan Karski mean ing the rezoning of 56 hectares of agricultural land for industrial
    use is complete allowing for construction of a mine site, shafts and associated surface infrastructure.
     Preparation of the Mining Concession application is underway and anticipated to be lodged in the coming weeks,
    subject to the Company being issued with Environment al Consent.
     China Coal’s technical studies for the constructio n of Jan Karski have significantly advanced and Prair ie is currently
    reviewing study documents provided by China Coal. T he studies will be revised to incorporate the latest coal quality
    results from drilling at Jan Karski as well as any c onditions stipulated in the Environmental Consent a nd the Mining
    Concession to be granted for Jan Karski.




    DIRECTORS REPORT
    (Continued)
    2
    OPERATING AND FINANCIAL REVIEW (Continued)
    Corporate  In July 2017, Prairie and CD Capital completed an a dditional investment of US$2.0 million ($2.6 million) in the form of
    a non-redeemable, non-interest-bearing convertible loan note (“Loan Note 2”).
     Cash on hand of $15.1 million and CD Capital’s rig ht to invest a further $68 million as a cornerstone investor, plus with
    the Strategic Co-operation Agreement between Prairie and China Coal for financing and construction of Jan Karski,
    Prairie is well positioned to progress with its plan ned development activities at Debiensko and Jan Kars ki.
    Debiensko Mine
    Debiensko is a hard coking coal project located in the Upper Silesian Coal Basin in the south west of t he Republic of
    Poland. It is approximately 40 km from the city of K atowice 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 an d was operated by various Polish mining companies un til 2000 when
    mining operations were terminated due to a major go vernment led restructuring of the coal sector caused by a downturn
    in global coal prices. In early 2006 New World Reso urces Plc (“NWR”) acquired Debiensko and commenced p lanning for
    Debiensko to comply with Polish mining standards, wi th the aim of accessing and mining hard coking coal seams. In 2008,
    the Minister of Environment of Poland (“MoE”) granted a 50-year mine license for Debiensko.
    Premium Quality Hard Coking Coal
    Preliminary analysis indicates that a range of premi um hard coking coals that will be in high demand fr om European
    steelmakers can be produced from Debiensko. This an alysis is based on historical data, neighbouring operational coking
    coal mines and the results of a suite of modern cok ing tests performed on selected seams from a fully cored borehole
    drilled by the previous owners in 2015/16. Two prem ium hard coking coal specifications have been delineated from select
    seams at Debiensko, namely Medium volatile matter h ard coking coal (“Mid-vol HCC”) and Low volatile matter hard coking
    coal (“Low-vol HCC”). Future study phases will dete rmine the precise Debiensko premium hard coking coa l quality
    specification on a year by year basis depending on the final adopted mine plan, mining schedule and ex tent of coal
    blending.
    Both Debiensko’s Mid-vol and Low-vol HCC lie within the range of premium hard coking coals produced gl obally.
    Indications are that the Mid-vol HCC at Debiensko i s present between 850 m to 1,000 m from surface and the Low-vol
    HCC is present 1,000 m to 1,300 m below surface i.e . at depths similar to adjacent operating mines owned by JSW - the
    largest coking coal producer in Europe
    Re-start of a Coking Coal mine included in “Program for Silesia” and new political appointments in Poland
    Prairie notes that during the half-year, the Polish G overnment appointed a new Prime Minister, Mr Mateusz Morawiecki,
    who immediately prior to his current role, was Depu ty Prime Minister and Minister of Finance in Poland. Prairie also notes
    that in January 2018, a new Minister of Environment , Mr Henryk Kowalczyk, was appointed as part of a ca binet reshuffle
    under the new Prime Minister. In Poland, responsibili ty for exploration and Mining Concessions is the responsibility of the
    MoE.
    Following his appointment, Prime Minister Mateusz Mo rawiecki, presented the Polish Ministry of Development’s “Program
    for Silesia ” (“Program”) – a strategic document which anticipat ed the re-construction of a coking coal mine in the region of
    Upper Silesia, where Debiensko is located. The Progra m details the creation of 1,500 direct jobs in the region and indicates
    the social and economic benefits of re-construction of a coking coal mine, to potentially be funded by foreign and Polish
    capital.
    Preparation for the Next Phase of Project Studies
    Following completion of a 28 shallow geo-technical drill program during the period, Prairie continued to analyse the drill
    hole data which will be used for engineering design of foundations of structures associated with the shafts, coal handling
    and preparation plant (“CHPP”) and other surface faci lities. These holes are essential in order to assess the soil conditions,
    properly design structural foundations and thus pro vide more accurate pricing in the tenders as required for a feasibility
    study.
    Pre-qualification of contractors for the major compo nents of the next phase of Debiensko studies also c ontinued throughout
    the period including contractors for the:



    DIRECTORS REPORT
    (Continued)
    Prairie Mining Limited Interim Financial Report for the Half-Year Ended 31 December 2017 3
    OPERATING AND FINANCIAL REVIEW (Continued)
    Debiensko Mine (Continued)
    Preparation for the Next Phase of Project Studies (Cont inued)
     In-fill drilling program (to update measured and i ndicated resources);
     CHPP;
     Shafts and bulk coal winder;
     Desalination plant; and
     Surface facilities.
    Demolition works continued throughout the period sp ecifically targeting old structures including walkways and old
    administrative buildings. To date, Prairie has compl eted demolition works on a number of old surface st ructures of the
    former Debiensko mine including the bathhouse, swit chgear building and locomotive garage.
    Jan Karski Mine
    Latest Drill Results Affirm Jan Karski as a Semi-Sof t Coking Coal Project
    Prairie’s use of modern exploration techniques conti nues to transform Jan Karski with latest drill results re-affriming the
    capability of the the project to produce high value ultra-low ash semi-soft coking coal, known as Type 34 coal in Poland.
    The coking coal quality results are superior to the drill results announced in May 2017, and further c onfirm that Jan Karski
    is a globally significant semi-soft coking coal (“SSC C”) / Type 34 coking coal deposit with the potential to produce a high
    value ultra-low ash SSCC with an exceptional CSR and a high 75% coking coal product split.
    Submission of ESIA & Initiation of Public Consultation
    An application for issuing the environmental decisi on together with the ESIA was submitted to the Region al 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 20 17. The Environmental Consent process has now officially been
    initiated by RDOS.
    Prairie is now waiting for approval of the ESIA in the form of an Environmental Consent decision, which is the last
    component to meet all formal requirements to apply for the Mining Concession for construction for Jan Karski.
    As part of the environmental permitting process, Pra irie initiated public consultations in three municipalities, including
    Wierzbica, Siedliszcze and Cyców. Presentations on Ja n Karski’s development plans were given by Mr Miroslaw Taras
    (Prairie’s Group Executive), Witold Wołoszyn (Prairie’ s Environmental and Planning Manager) and specialis ts from the
    international environmental consulting group, Multi consult Polska who prepared the ESIA. Key advantages f or the local
    community related to employment opportunities and s ocial 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 s ervices and communications within the region; and
     building a mine that creates new employment for ge nerations 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 i n Poland including China Coal No.5 Construction Company Ltd
    (“China Coal”) and the Chinese Government’s officia lly authorised coal mine design institute Jinan Mine Design Institute,
    during which locally provided content for construct ion of Jan Karski was finalised alongside domestic Po lish specialists,
    subcontractors and partners who will provide releva nt Polish content.




    DIRECTORS REPORT
    (Continued)
    4
    OPERATING AND FINANCIAL REVIEW (Continued)
    Jan Karski Mine (Continued)
    China Coal Progress and Financing Discussions (Continued)
    China Coal’s non-JORC technical studies for the con struction and funding of the Jan Karski Mine have significantly
    advanced and Prairie is currently reviewing study do cuments (“Studies”) received from China Coal subsequ ent to the half-
    year end. In accordance with the Strategic Co-operat ion Agreement between Prairie and China Coal, the Stu dies will form
    the basis for provision of debt financing out of Ch ina for the construction and development of Jan Kars ki. The Studies are
    being undertaken in accordance with Chinese officia l mine design and banking standards for coal mine p rojects, and to
    comply with domestic Polish engineering standards an d 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 discussio ns with Chinese banks to provide debt facilities to fund construction
    of the Project and enter into a complete Engineering, Procurement, and Construction (“EPC”) contract under which China
    Coal would construct the Jan Karski Mine.
    Results of Operations
    The net loss of the Consolidated Entity for the half -year ended 31 December 2017 was $5,297,797 (31 Dec ember 2016:
    $5,337,988). Significant items contributing to the c urrent half-year loss and the substantial differences from the previous
    half-year include to the following:
    (i) Exploration and evaluation expenses of $4,047,6 21 (31 December 2016: $2,565,889), which is attributable to the
    Group’s accounting policy of expensing exploration and evaluation expenditure incurred by the Group su bsequent
    to the acquisition of rights to explore and up to t he commencement of a bankable feasibility study for each separate
    area of interest. As a direct result of exploration and evaluation activities conducted during the hal f-year, the Group
    achieved key milestones including (i) completed dri lling 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 ap proval of
    spatial development plans which will form the basis of a Mining Concession application; (iii) substantial
    advancement of China Coal’s technical studies for c onstruction of the Jan Karski Mine; and (iv) mine site
    redevelopment planning continued at Debiensko inclu ding advancement of demolition works pre-qualification of
    study contractors and preparation for an infill dri ll program to increase JORC Measured and Indicated Resources;
    (ii) Business development expenses of $512,267 (31 D ecember 2016: $484,478) which includes expenses relating to
    the Group’s investor relations activities during th e six months to 31 December 2017 including brokerag e fees, public
    relations, digital marketing, travel costs, attenda nces at conferences and business development consul tant costs;
    (iii) Other expenses of nil (31 December 2016: $500 ,236) which relates to legal, accounting and other consultant costs
    in relation to the extensive due diligence and lega l process conducted by the Company to effectively e xecute the
    acquisition of Karbonia in 2016;
    (iv) Non-cash share-based payment expenses of $200, 422 (31 December 2016: $167,060) due to incentive securities
    issued to key management personnel and other key em ployees and consultants of the Group as part of the long-
    term incentive plan to reward key management person nel and other key employees and consultants for the long-
    term performance of the Group. The expense results from the Group’s accounting policy of expensing the fair value
    (determined using an appropriate pricing model) of incentive securities granted on a straight-line basis over the
    vesting period of the options and rights. At 31 Dec ember 2017 1.2 million unvested performance rights were
    forfeited;
    (v) Non-cash fair value loss of $212,687 (31 Decemb er 2016: $1,847,018) which is attributable to the non-cash fair
    value movements on the conversion right of the firs t CD Capital convertible loan note (“Loan Note 1”) accounted as
    a financial liability at fair value through profit and loss. This financial liability increases in siz e as the share price of
    the Company increases. With the share price increas ing by some 8% during the half-year, the size of the loss
    attributable to the financial liability has increas ed. When Loan Note 1 converts into shares and the C D Options are
    issued, the financial liability will be reclassifie d from a liability to equity and will require no ca sh settlement by the
    Company; and
    (vi) Revenue of $441,023 (31 December 2016: $403,179) c onsisting of interest revenue of $189,164 (31 December
    2016: $208,330) and the receipt of $251,859 (31 Dec ember 2016: $194,849) of gas and property lease income
    derived at Debiensko.



    DIRECTORS REPORT
    (Continued)
    Prairie Mining Limited Interim Financial Report for the Half-Year Ended 31 December 2017 5
    OPERATING AND FINANCIAL REVIEW (Continued)
    Financial Position
    At 31 December 2017, the Group had cash reserves of $15,146,766 (30 June 2017: $16,826,854) and with CD Capital’s
    right to invest a further $68 million in the Compan y as a strategic partner, this places the Group in a strong financial position
    to continue with its planned development activities at Debiensko and Jan Karski.
    At 31 December 2017, the Company had net assets of $10,634,740 (30 June 2017: $13,095,130) a decrease of
    approximately 19% compared with 30 June 2017. This is largely attributable to the decrease in cash, the increase in other
    financial liabilities coupled with the loss for the six months to 31 December 2017.
    Business Strategies and Prospects for Future Financ ial Years
    Prairie’s strategy is to create long-term shareholder value by creating synergies and developing both D ebiensko and Jan
    Karski in Poland.
    To date, the Group has not commenced production of any minerals. To achieve its objective, the Group currently has the
    following business strategies and prospects:  Commence a focused in-fill drill program to increa se JORC measured and indicated resources to support future
    feasibility studies for Debiensko;
     Deliver a re-engineered mine plan to produce a fea sibility study to international standards with a focus on near term
    production at Debiensko;
     Continue to advance discussions with regional stee l makers and coke producers for future coking coal sales and
    offtake at Debiensko;
     Formally lodge a Mining Concession application for Jan Karski in the coming weeks, subject to the Company being
    issued with Environmental Consent;
     Furthering discussions with a select group of Chin ese financing institutions as China Coal nears completion of its
    Studies; and
     Based on the results of the Studies, enter into a c omplete EPC contract under which China Coal will cons truct the
    Jan Karski Mine.
    All of these activities are inherently risky and th e Board is unable to provide certainty of the expect ed results of these
    activities, or that any or all of these likely acti vities will be achieved. The material business risk s faced by the Group that
    could have an effect on the Group’s future prospect s, and how the Group manages these risks, include t he following:
     The Company’s activities will require further capit al in future years – As at 31 December 2017, the Company has
    cash in excess of $15 million which places it in an excellent position to conduct its current planned exploration and
    development activities at Debiensko and Jan Karski. However, the ability of the Company to finance capital
    investment in future years for the construction and future operation of the Company’s projects is depe ndent, among
    other things, on the Company’s ability to raise add itional future funding either through equity or debt financing. Any
    failure to obtain sufficient financing in the futur e may result in delaying or indefinite postponement of any future
    construction of the projects or even a loss of prop erty 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 inv estment agreement, CD Capital has a first right to invest a further
    $55 million in any future fund raise conducted by t he Company, plus CD Capital will have the ability t o inject a
    further $13 million through the exercise of $0.60 o ptions (“CD Options”) to be held in the Company. Th ere is however
    no guarantee that CD Capital would take up this rig ht in the future (or exercise the CD Options). There is also a risk
    that the Company’s obligation to offer CD Capital a first right of refusal on any future fund raising could prejudice
    the Company’s ability to raise funds from investors other than CD Capital. However, the Company consid ers that it
    would not be necessary to undertake such developmen t actions until it has secured financing to do so and the
    timing for commencement of such actions would accor dingly 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 abili ty to significantly
    reduce its ongoing expenditure.
    The Company has also signed a Strategic Co-operatio n Agreement with China Coal for the financing and
    construction of Jan Karski. Subsequent to the end o f the half-year, China Coal and Prairie continue to advance
    towards completion the Studies, which will provide t he basis for an EPC contract and finalising a term sh eet with
    Chinese financing institutions for a construction f unding package for Jan Karski.



    DIRECTORS REPORT
    (Continued)
    6
    OPERATING AND FINANCIAL REVIEW (Continued)
    Business Strategies and Prospects for Future Financial Years (Continued)
    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 wit h strategic
    partners, large institutional fund managers, off-ta ke partners and traders and project finance lenders .
    There is however no guarantee that the then prevai ling market conditions will allow for a future fundraising or that
    new investors will be prepared to subscribe for ord inary shares or at the price at which they are willing to do so in
    the future. Failure to obtain sufficient future fin ancing may result in delaying or indefinite postpon ement of appraisal
    and any development of the Company’s projects in th e 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 othe r types of financing
    will be available, if needed, or that, if available , the terms of such future financing will be favour able to the Company.
    If the Company obtains debt financing in the futur e, it will be exposed to the risk of leverage and its activities could
    become subject to restrictive loan and lease covena nts and undertakings. If the Company obtains future equity
    financing other than on a pro rata basis to existin g Shareholders, the future percentage ownership of t he existing
    Shareholders may be reduced, Shareholders may then ex perience subsequent dilution and/or such securities may
    have preferred rights, options and pre-emption righ ts senior to the Ordinary Shares. There can be no as surance
    that the Company would be successful in overcoming these risks in the future or any other problems encountered
    in connection with such financings.
     Risk of maintaining project concessions - The Company’s mining exploration and development activities at
    Debiensko and Jan Karski are dependent upon the alt eration of, or as the case may be, the maintenance of
    appropriate licences, concessions, leases, claims, permits and regulatory consents which may be withdr awn or
    made subject to limitations. The maintaining of con cessions, obtaining renewals, or attaining concessions
    alterations, often depends on the Company being suc cessful in obtaining required statutory approvals for its
    proposed activities and that the licences, concessi ons, leases, claims, permits or consents it holds will be renewed
    and altered as and when required. In this regard th e Company has made an application to the Polish MoE, in
    December 2016, to amend the Debiensko Mining Conces sion (which is valid until 2058) to alter the commencement
    of production from 1 January 2018 to 2025. Not comm encing production by January 2018 does not immediately
    infringe on the validity and expiry date of the cur rent Mining Concession, however, the concession aut hority has the
    right to request the concession holder to reasonabl y remove any infringements related to non-conforman ce with the
    conditions of a Mining Concession and determine a r easonable date for removal of the infringements (under Polish
    law, the concession authority is required to provid e a reasonable timeframe to remedy any non-complian ce taking
    into account the nature of the non-conformance). Fa ilure to remedy the infringements within any reasonable time
    frame prescribed by the concession authority may le ad to commencement of proceedings to limit or withd raw a
    concession. A decision from the MoE on the Company’s amendment application is currently pending following a
    change of the Polish Prime Minister in December 2017 and the appointment of a new Minister of Environment in
    January 2018. Under Poland’s Geological and Mining L aw, the MoE is required to view any application to modify a
    concession in the same manner as any initial applic ation for a concession, in that the award of the concession is
    not in detriment to public interest (building a min e is considered to be in the best interest of the p ublic), does not
    particularly breach any environmental laws (Karbonia was awarded with Environmental Consent prior to bei ng
    granted a Mining Concession) and is not in breach o f the spatial development plan (Karbonia was granted with
    spatial approval prior to the award of the Debiensk o Mining Concession).
    On 1 July 2015, the Company announced that it had s ecured the Exclusive Right to apply for a Mining Concession
    for Jan Karski. As a result of its geological docume ntation for the Jan Karski deposit being approved, Pr airie is
    currently the only entity that can lodge a Mining C oncession application over Jan Karski within a three (3) year
    period up and until 2 April 2018. The approved geol ogical documentation covers an area comprising of a ll four of
    the original Exploration Concessions granted to Prair ie (K-4-5, K-6-7, K-8 and K-9) and includes the full extent of
    the targeted resources within the mine plan for Jan Karski. In this regard, no beneficial title interest was surrendered
    by the Company when the K-6-7 Exploration Concession expired in 2017. Under Polish mining law, and owing to
    the Exclusive Right the Company has secured, Prairie is currently the only entity that may apply for and be granted
    a Mining Concession with respect to the K-6-7 area (the Exclusive Right also applies to the K-4-5, K-8 and K-9
    areas of Jan Karski). There is no requirement for th e Company to hold an Exploration Concession in order exercise
    the Exclusive Right and apply for a Mining Concessio n. In addition, Prairie has the right to apply for and be granted,
    within 3 months of making an application, a mining usufruct agreement for an additional 12 month perio d 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 wi th the decision from the Polish MoE still pending. In the event
    that a mining usufruct agreement is not made availa ble to the Company on acceptable terms or the Compa ny does
    not enter in to a mining usufruct agreement for any other reason, other parties may be able to apply for a Mining
    Concession for all or part of the Jan Karski license area.




    DIRECTORS REPORT
    (Continued)
    Prairie Mining Limited Interim Financial Report for the Half-Year Ended 31 December 2017 7
    OPERATING AND FINANCIAL REVIEW (Continued)
    Business Strategies and Prospects for Future Financ ial Years (Continued)
    If, however, in a scenario where the MoE does not grant the Company with a mining usufruct in the required
    timeframe, legal advice sought by Company outlines that the Group will be in a position to file a civil law claim
    against the Polish authorities which could overturn the authority’s decision not to grant Prairie a mining usufruct. In
    any event, The Company intends to submit a Mining C oncession application over the mine plan area at Jan Karski
    (which includes K-6-7), which is subject to the app roval of the MoE, within the coming weeks subject to the Company
    being issued with Environmental Consent. There is no assurance that the Company will be issued Environme ntal
    Consent, however the Company believes that the Envir onmental Consent application, as submitted in October 2017
    and supplemented in November 2017, was complete and complied with formal requirements of the relevant Polish
    environmental regulations.
    There is also no assurance that such applications ( or renewals or alterations) of the concessions will be granted or
    that such applications, renewals, alterations, righ ts and title interests will not be revoked or significantly altered. If
    such applications, renewals or alterations of conce ssions applied for are not granted or are in fact revoked in the
    future, there is a risk that this may have a materi al adverse effect on the financial performance and operations at
    Jan Karski, Debiensko, the Company and on the value of the Company’s securities.
     Risk of further challenges by Bogdanka – Since April 2015, Lubelski Wegiel Bogdanka (“Bogdanka”) has made a
    number of applications and appeals to the Polish MoE seeking a Mining Concession application over the Company’s
    K-6-7 Exploration Concession and priority right (onl y one Exploration Concession which comprises of the Jan Karski
    Mine). All applications and appeals previously made by Bogdanka have been outright rejected. However, Bo gdanka
    has made a further appeal to the Supreme Administrat ive 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 howev er
    cancel the MoE’s previous rejection decision. If the Supreme Administrative Court does cancel the MoE dec ision,
    the MoE will be required to re-assess Bogdanka’s Mini ng Concession application.
    These proceedings do not relate
    to the Prairie’s valid and existing priority right t o apply for a Mining Concession over the K-6-7 area . As discussed
    above Bogdanka has in the past raised several appeal s 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 govern ment departments in the course of the Jan Karski Min e
    development timeline.
     Operations conducted in an emerging market – The Company’s operations are located in Poland and w ill be
    exposed to related risks and uncertainties associat ed with this jurisdiction. Changes in mining or investment policies,
    laws or regulations (or the application thereof) or shifts in political attitude in Poland, in particular to mining, use of
    coal, and foreign ownership of coal projects may ad versely affect the operation or profitability of the Company. The
    Company continues to consult with the various level s 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 abi lity to attract
    funding for its operations. The Company also compet es with many other companies in Poland, including co mpanies
    with established mining operations. Some of these c ompanies have greater financial resources and political
    influence than the Company and, as a result, may be in a better position to compete with or impede the Company’s
    current or future activities.
     The Company may be adversely affected by fluctuatio ns in coal prices and/or foreign exchange – The price of coal
    fluctuates widely and is affected by numerous facto rs beyond the control of the Company. Coal prices a re currently
    high compared to previous levels but there is no gu arantee that prices will remain at this level in the future. Future
    production, if any, from the Company’s mineral prop erties and its profitability will be dependent upon the price of
    coal being adequate to make these properties econom ic. 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 a ny hedging
    or derivative transactions to manage commodity pric e or foreign exchange risk. As the Company’s operat ions
    change, this policy will be reviewed periodically g oing forward.
    SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD (i) On 9 February 2018, the Company issued an annou ncement, following recent press articles, regarding possible co-
    operation between the Company and JSW to progress t he development and exploitation of the Company’s Polish
    coal projects. Prairie confirms that a meeting was h eld with JSW where preliminary discussions regardin g co-
    operation took place. Discussions are at a very ear ly stage and there can be no certainty as to whethe r any co-
    operation will be agreed in the future; and
    (ii) On 21 February 2018, the Company released dril l results at Jan Karski which re-affirmed the capability of the project
    to produce high value ultra-low ash semi-soft cokin g coal.
    Other than the above, there were no significant eve nts occurring after balance date requiring disclosure.




    DIRECTORS REPORT
    (Continued)
    8
    AUDITOR'S INDEPENDENCE DECLARATION
    Section 307C of the Corporations Act 2001 requires our auditors, Ernst and Young, to provide the Directors of Prairie
    Mining Limited with an Independence Declaration in relation to the review of the half-year financial report. This
    Independence Declaration is on page 22 and forms pa rt of this Directors' Report.
    Signed in accordance with a resolution of the Direct ors.
    BEN STOIKOVICH
    Director
    9 March 2018
    Forward Looking Statements
    This report may include forward-looking statements. These forward-looking statements are based on Prair ie’s expectations
    and beliefs concerning future events. Forward looki ng statements are necessarily subject to risks, uncertainties and other
    factors, many of which are outside the control of Pr airie, which could cause actual results to differ materially from such
    statements. Prairie makes no undertaking to subseque ntly update or revise the forward-looking statements made in this
    release, to reflect the circumstances or events aft er the date of that release.




    DIRECTORS’ DECLARATION
    Prairie Mining Limited Interim Financial Report for the Half-Year Ended 31 December 2017 9
    In accordance with a resolution of the Directors of Prairie Mining Limited, I state that:
    In the reasonable opinion of the Directors and to t he best of their knowledge:
    (a) the attached financial statements and notes the reto for the period ended 31 December 2017 are in accordance with
    the Corporations Act 2001, including:
    (i) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations
    Regulations 2001; and
    (ii) giving a true and fair view of the financial p osition of the Group as at 31 December 2017 and of its
    performance for the half-year ended on that date; a nd
    (b) The Directors Report, which includes the Operat ing and Financial Review, includes a fair review of the information
    required by:
    (i) DTR4.2.7R of the Disclosure and Transparency Ru les in the United Kingdom, being an indication of important
    events during the first six months of the current f inancial year and their impact on the half-year fin ancial
    statements, and a description of the principal risk s and uncertainties for the remaining six months of the year;
    and
    (ii) DTR4.2.8R of the Disclosure and Transparency R ules in the United Kingdom, being related party transactions
    that have taken place in the first six months of th e current financial year and that have materially a ffected the
    financial position or performance of the Group duri ng that period, and any changes in the related part y
    transactions described in the last annual report th at could have such a material effect; and
    (c) there are reasonable grounds to believe that th e Company will be able to pay its debts as and when they become
    due and payable.
    On behalf of the Board
    BEN STOIKOVICH
    Director
    9 March 2018




    CONSOLIDATED STATEMENT OF PROFIT OR LOSS
    AND OTHER COMPREHENSIVE INCOME
    FOR THE HALF-YEAR ENDED 31 DECEMBER 2017
    10
    Note
    Half-Year Ended
    31 December
    2017
    $
    Half-Year Ended
    31 December
    2016
    $
    Revenue 4(a) 441,023 403,179
    Other income 4(b) - 325,000
    Exploration and evaluation expenses (4,047,621) (2,565,889)
    Employment expenses (66,680) (68,774)
    Administration and corporate expenses (487,870) (238,129)
    Occupancy expenses (211,273) (194,583)
    Share-based payment expenses (200,422) (167,060)
    Business development expenses (512,267) (484,478)
    Other expenses - (500,236)
    Fair value movements 5 (212,687) (1,847,018)
    Loss before income tax (5,297,797) (5,337,988)
    Income tax expense - -
    Net loss for the period (5,297,797) (5,337,988)
    Net loss attributable to members of Prairie Mining L imited (5,297,797) (5,337,988)
    Other comprehensive income
    Items that may be reclassified subsequently to prof it or
    loss:
    Exchange differences on translation of foreign oper ations
    42,842 (150,679)
    Total other comprehensive income/(loss) for the per iod 42,842 (150,679)
    Total comprehensive loss for the period (5,254,955) (5,488,667)
    Total comprehensive loss attributable to members of
    Prairie Mining Limited (5,254,955) (5,488,667)
    Basic and diluted loss per share (cents per share) (3.16) (3.52)
    The above Consolidated Statement of Profit or Loss an d other Comprehensive Income should
    be read in conjunction with the accompanying notes.




    CONSOLIDATED STATEMENT OF
    FINANCIAL POSITION
    AS AT 31 DECEMBER 2017
    Prairie Mining Limited Interim Financial Report for the Half-Year Ended 31 December 2017 11
    Note
    31 December
    2017
    $
    30 June
    2017
    $
    ASSETS
    Current Assets
    Cash and cash equivalents 15,146,766
    16,826,854
    Trade and other receivables 6 991,479
    1,094,997
    Total Current Assets 16,138,245
    17,921,851
    Non-Current Assets
    Property, plant and equipment 7 2,444,548 2,779,526
    Exploration and evaluation assets 8 2,699,523
    2,603,172
    Total Non-Current Assets 5,144,071
    5,382,698
    TOTAL ASSETS 21,282,316
    23,304,549
    LIABILITIES
    Current Liabilities
    Trade and other payables
    9
    2,011,403 2,109,127
    Provisions
    11(a)
    616,795 580,129
    Other financial liabilities
    10(a)
    1,841,338 1,783,283
    Non-cash other financial liabilities
    10(b)
    4,813,433 4,600,746
    Total Current Liabilities
    9,282,969 9,073,285
    Non-Current Liabilities
    Provisions
    11(b)
    1,364,607 1,136,134
    Total Non-Current Liabilities
    1,364,607 1,136,134
    TOTAL LIABILITIES
    10,647,576 10,209,419
    NET ASSETS
    10,634,740 13,095,130
    EQUITY
    Contributed equity
    12
    61,071,856 58,477,713
    Reserves
    13
    2,501,603 2,258,339
    Accumulated losses
    (52,938,719) (47,640,922)
    TOTAL EQUITY
    10,634,740 13,095,130
    The above Consolidated Statement of Financial Positio n should be read in conjunction with the accompanying notes.




    CONSOLIDATED STATEMENT OF
    CHANGES IN EQUITY
    FOR THE HALF-YEAR ENDED 31 DECEMBER 2017
    12
    The above Consolidated Statement of Changes in Equity
    should be read in conjunction with the accompanying notes.
    Contributed Equity Share-based Payments Reserve
    Foreign Currency Translation Reserve
    Accumulated Losses Total Equity
    $ $ $ $ $ Balance at 1 July 2017 58,477,713 1,529,894 728,445 (47,640,922) 13,095,130
    Net loss for the period - - - (5,297,797) (5,297,797)
    Other comprehensive income for the half-year Exchange differences on translation of foreign operations
    - - 42,842 - 42,842
    Total comprehensive income/(loss) for the period - - 42,842 (5,297,797) (5,254,955) Transactions with owners recorded directly in equity
    Issue of convertible notes (Loan Note 2) (Note 12) 2,627,430 - - - 2,627,430
    Convertible note issue costs (27,418) - - - (27,418)
    Share issue costs (5,869) - - - (5,869)
    Forfeiture of performance rights - (1,134,010) - - (1,134,010) Recognition of share-based payments - 1,334,432 - - 1,334,432
    Balance at 31 December 2017 61,071,856 1,730,316 771,287 (52,938,719) 10,634,740
    Balance at 1 July 2016 51,298,932 3,010,300 33,193 (36,526,665) 17,815,760
    Net loss for the period - - - (5,337,988) (5,337,988)
    Other comprehensive income for the half-year Exchange differences on translation of foreign operations
    - - (150,679) - (150,679)
    Total comprehensive income/(loss) for the period - - (150,679) (5,337,988) (5,488,667) Transactions with owners recorded directly in equity
    Issue of ordinary shares 50,000 - - - 50,000
    Share issue costs (1,918) - - - (1,918)
    Forfeiture of performance rights - (396,001) - - (396,001)
    Recognition of share-based payments - 513,061 - - 5 13,061
    Balance at 31 December 2016 51,347,014 3,127,360 (117,486) (41,864,653) 12,492 ,235



    CONSOLIDATED STATEMENT OF CASH FLOWS
    FOR THE HALF-YEAR ENDED 31 DECEMBER 2017
    Prairie Mining Limited Interim Financial Report for the Half-Year Ended 31 December 2017 13
    Note
    Half-Year Ended
    31 December 2017
    $
    Half-Year Ended
    31 December 2016
    $
    Cash flows from operating activities
    Payments to suppliers and employees (5,078,182) (4,890,288)
    Proceeds from property and gas sales 248,859 94,849
    Interest revenue from third parties 202,758 231,437
    Net cash outflow from operating activities (4,626, 565) (4,564,002)
    Cash flows from investing activities
    Purchase of plant and equipment (60,008) -
    Proceeds from sale of property 495,008 -
    Purchase of controlled entity 14 - (742,367)
    Proceeds from sale of base metals project - 325,000
    Net cash inflow/(outflow) from investing activities 435,000 (417,367)
    Cash flows from financing activities
    Proceeds from issue of convertible note 2,627,430 -
    Payments for issue of convertible note (54,611) -
    Payments for share issue costs (61,342) -
    Net cash inflow from financing activities 2,511,47 7 -
    Net decrease in cash and cash equivalents (1,680,088) (4,981,369)
    Net foreign exchange differences - (4,980)
    Cash and cash equivalents at the beginning of the p eriod 16,826,854 18,063,119
    Cash and cash equivalents at the end of the period 15,146,766 13,076,770
    The above Consolidated Statement of Cash Flows
    should be read in conjunction with the accompanying notes.




    NOTES TO THE CONSOLIDATED
    FINANCIAL STATEMENTS
    FOR THE HALF-YEAR ENDED 31 DECEMBER 2017
    14
    1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    (a) Statement of Compliance
    The interim consolidated financial statements of th e Group for the half-year ended 31 December 2017 we re authorised for
    issue in accordance with the resolution of the Dire ctors on 7 March 2018.
    This general purpose condensed financial report for the interim half-year reporting period ended 31 December 2017 has
    been prepared in accordance with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act
    2001 .
    This interim financial report does not include all the notes of the type normally included in an annua l financial report.
    Accordingly, this report is to be read in conjuncti on with the annual report of Prairie Mining Limited for the year ended 30
    June 2017 and any public announcements made by the Group and its controlled entities during the interim reporting period
    in accordance with the continuous disclosure requir ements of the Corporations Act 2001 .
    2. BASIS OF PREPARATION AND CHANGES TO THE GROUP’S ACCOUNTING POLICIES
    (a) Basis of Preparation of Half-Year Financial Repo rt
    The financial statements have been prepared on the basis of historical cost, except for the derivative financial instruments
    that are measured at fair value. Cost is based on t he fair values of the consideration given in exchange for assets. All
    amounts are presented in Australian dollars.
    (b) New Standards, interpretations and amendments th ereof, adopted by the Group
    The accounting policies and methods of computation adopted in the preparation of the consolidated half-year financial
    report are consistent with those adopted and disclo sed in the company's annual financial report for the year ended 30 June
    2017, other than as detailed below.
    In the current period, the Group has adopted all of the new and revised Standards and Interpretations i ssued by the
    Australian Accounting Standards Board (the “AASB”) tha t are relevant to its operations and effective for annual reporting
    periods beginning on or after 1 July 2017.
    New and revised Standards and amendments thereof and Interpretations effective for the current half-year that are relevant
    to the Group include:  AASB 2016-2 Amendments to Australian Accounting Stand ards – Disclosure Initiative: Amendments to AASB 107;
    Statement of Cash Flows and
     AASB 2017-2 Amendments to Australian Accounting Stand ards – Further Annual Improvements to Australian
    Accounting Standards 2012–2014 Cycle including AASB 5 Non-current Assets Held for Sale and Discontinued
    Operations and AASB 12 Disclosure of Interests in Other Entities .
    The adoption of these new and revised standards has not resulted in any significant changes to the Group's accounting
    policies or to the amounts reported for the current or prior periods. The Group has not early adopted any other standard,
    interpretation or amendment that has been issued bu t is not yet effective.
    3. SEGMENT INFORMATION
    AASB 8 requires operating segments to be identified o n the basis of internal reports about components of the Consolidated
    Entity that are regularly reviewed by the chief oper ating decision maker in order to allocate resources to the segment and
    to assess its performance.
    The Consolidated Entity operates in one segment, bei ng mineral exploration. This is the basis on which internal reports
    are provided to the Chief Executive Officer for asse ssing performance and determining the allocation of resources within
    the Consolidated
    Entity.



    NOTES TO THE CONSOLIDATED
    FINANCIAL STATEMENTS
    FOR THE HALF-YEAR ENDED 31 DECEMBER 2017 (Continued )
    Prairie Mining Limited Interim Financial Report for the Half-Year Ended 31 December 2017 15
    Half-Year ended
    31 December
    2017
    $
    Half-Year Ended
    31 December
    2016
    $
    4. REVENUE AND OTHER INCOME
    (a) Revenue
    Interest Income 189,164 208,330
    Gas and property lease income 251,859 194,849
    441,023 403,179
    (b) Other Income
    Sale of base metals project - 325,000
    - 325,000
    Note
    Half-Year ended
    31 December
    2017
    $
    Half-Year Ended
    31 December
    2016
    $
    5. FAIR VALUE MOVEMENTS
    Fair value loss on financial liabilities at fair value through profit and loss 1 12(a) (212,687) (1,847,018)
    Notes: 1 The fair value movements are a result of the fair value measurements of the conversion rights (the issue of Ordinary Shares and subsequent issue
    of CD Options on conversion of Loan Note 1) of Loan Note 1 that needs to be considered and accounted for separately. This financial liability
    increases in size as the share price of the Company increases. W ith the share price increasing by approximately 8% during the half-year, the size
    of the loss attributable to the financial liability has also increased. W hen Loan Note 1 converts into shares and the CD Options are issued, the liability
    will be reclassified from a liability to equity and will require no cash settlement by the Company. Pl ease refer to Notes 10 and 12(a) for further
    disclosure.
    31 December
    2017
    $
    30 June
    2017
    $
    6. TRADE AND OTHER RECEIVABLES
    Trade Receivables 238,271 266,389
    Accrued interest 61,582 75,229
    Deposits/prepayments 370,851 585,485
    GST and other receivables 320,775 167,894
    991,479 1,094,997




    NOTES TO THE CONSOLIDATED
    FINANCIAL STATEMENTS
    FOR THE HALF-YEAR ENDED 31 DECEMBER 2017 (Continued)
    16
    Note
    31 December
    2017
    $
    30 June
    2017
    $
    7. PROPERTY, PLANT AND EQUIPMENT
    (a) Property, Plant and Equipment
    Gross carrying amount at cost 2,635,598 2,970,271
    Accumulated depreciation (191,050) (190,745)
    Carrying amount at end of the period
    2,444,548 2,779,526
    (b) Reconciliation
    Carrying amount at beginning of the period, net of accumulated
    depreciation
    2,779,526 98,140
    Acquired on acquisition of controlled entity 14 - 2,527,356
    Additions 60,008 184,896
    Disposals (448,101) -
    Depreciation charge (53,187) (65,899)
    Exchange differences on translation of foreign oper ations 106,302 35,033
    Carrying amount at end of the period
    2,444,548 2,779,526
    Note
    31 December
    2017
    $
    30 June
    2017
    $
    8. EXPLORATION AND EVALUATION ASSETS
    (a) Areas of Interest
    Jan Karski Mine 530,000 530,000
    Debiensko Mine 2,169,522 2,073,172
    Carrying amount at end of the period 1
    2,699,522 2,603,172
    (b) Reconciliation
    Carrying amount at beginning of the period 2,603,172 530,000
    Acquired on acquisition of controlled entity 14 - 2,047,034
    Exchange differences on translation of foreign oper ations 96,350 26,138
    Carrying amount at end of the period 1
    2,699,522 2,603,172
    Notes: 1 The ultimate recoupment of costs carried for explo ration and evaluation expenditure is dependent on the successful development and commercial
    exploitation or sale of the respective areas.
    31 December
    2017
    $
    30 June
    2017
    $
    9. TRADE AND OTHER PAYABLES
    Trade and other payables 2,011,403 2,109,127
    2,011,403 2,109,127




    NOTES TO THE CONSOLIDATED
    FINANCIAL STATEMENTS
    FOR THE HALF-YEAR ENDED 31 DECEMBER 2017 (Continued )
    Prairie Mining Limited Interim Financial Report for the Half-Year Ended 31 December 2017 17
    Note
    31 December
    2017
    $
    30 June
    2017
    $
    10. OTHER FINANCIAL LIABILITIES
    Financial liabilities at fair value through profit or loss:
    (a) Cash settlement required
    Contingent consideration carried at amortised cost 14 1,841,338 1,783,283
    (b) Non-cash settlement required
    Derivative liability - conversion right attached to Loan Note 1 at fair
    value through profit and loss 1 12(a) 4,813,433 4,600,746
    Notes: 1 In September 2015, Prairie completed an Investment Agreement with CD Capital by way of a private placement by PDZ Holdings (a wholly-owned
    subsidiary of Prairie which indirectly holds the Ja n Karski Mine) of non-interest bearing convertible loan notes with an aggregate principal amount of
    $15 million to CD Capital, exchangeable for ordinar y shares in Prairie at $0.335 per share (Loan Note 1). The $83 million transaction was approved
    by shareholders and is structured as follows:
     Issue of the convertible note upfront;
     On conversion of the Loan Note 1, agreement to gra nt CD Capital unlisted options in Prairie with an exercise price of A$0.60 per option (“CD
    Options”) for a further investment in Prairie of $1 3 million once exercised; and
     a priority right for CD Capital to invest a furthe r A$55 million in any future funding conducted by P rairie.
    Due to the conversion terms of the Loan Note 1 and the agreement to issue the CD Options, the Company is required under the accounting standards
    to account for this conversion factor as a financia l derivative liability though profit and loss, despite the Company only having to issue unlisted optio ns
    (the CD Options) and there being no obligation to e xtinguish Loan Note 1 using the Company’s cash and cash equivalents.
    31 December
    2017
    $
    30 June
    2017
    $
    11. PROVISIONS
    (a) Current Provisions:
    Provisions for the protection against mining damage at Debiensko 1 199,374 245,587
    Annual leave provision 198,011 124,876
    Other 2 219,410 209,666
    616,795 580,129
    (b) Non-Current Provisions:
    Provisions for the protection against mining damage at Debiensko 1 1,364,607 1,136,134
    1,364,607 1,136,134
    Notes: 1 With Debiensko being an operating mine previously, Karbonia is required to pay out mining land damages to any surrounding land owner who makes
    a legitimate claim under Polish law.
    2 In April 2012, Karbonia signed a power connection contract with the local power grid operator. The purpose of the contract was to connect Karbonia’s
    future mining facilities at Debiensko to the power operator’s power lines. The operator has incurred e xpenses amounting to PLN597,614 ($219,410)
    of which Karbonia would owe to the operator in the event that the contract is terminated (which both parties are entitled to do), or if power is not
    purchased from Tauron prior to 30 November 2019.




    NOTES TO THE CONSOLIDATED
    FINANCIAL STATEMENTS
    FOR THE HALF-YEAR ENDED 31 DECEMBER 2017 (Continued)
    18
    Note
    31 December
    2017
    $
    30 June
    2017
    $
    12. CONTRIBUTED EQUITY
    (a) Issued and Unissued Capital
    167,498,969 (30 June 2017: 167,498,969) fully paid ordinary
    shares 12(b) 45,370,939 45,376,808
    Loan Note 1 exchangeable into fully paid ordinary s hares at
    $0.335 per share 1 15,000,000 15,000,000
    Conversion right attached to Loan Note 1 2 (968,236) (968,236)
    Loan Note 2 exchangeable into fully paid ordinary s hares at $0.46
    per share 3
    2,627,430 -
    Costs incurred to issue the loan notes
    (958,277) (930,859)
    Total Contributed Equity
    61,071,856 58,477,713
    Notes: 1 In September 2015, Prairie completed an Investment Agreement with CD Capital by way of a private placement by PDZ Holdings (a wholly-owned
    subsidiary of Prairie which indirectly holds the Ja n Karski Mine) of non-interest bearing convertible loan notes with an aggregate principal amount of
    $15 million to CD Capital, exchangeable for ordinar y shares in Prairie at $0.335 per share (Loan Note 1). The $83 million transaction was approved
    by shareholders and is structured as follows:
     Issue of the convertible note upfront;
     On conversion of the Loan Note 1, grant CD Capital unlisted options in Prairie with an exercise price of A$0.60 per option (CD Options) for a
    further investment in Prairie of $13 million once e xercised; and
     a priority right for CD Capital to invest a furthe r A$55 million in any future funding conducted by Prairie.
    2 Under AASB 132, the conversion rights (the issue of Ordinary Shares and subsequent issue of CD Options on conversion of Loan Note 1) of the
    Convertible Note needs to be considered and account ed for separately. This embedded derivative is required to be carried at fair value through
    profit and loss and the fair value movements of the conversion rights are to be recognised in profit and loss for the period. The fair value of the
    derivative liability at 30 June 2017 and 31 Decembe r 2017 was assessed to be $4,600,746 and $4,813,433 , respectively. The non-cash fair value
    loss arising from the movement in the derivative wa s $212,687. Please refer to Note 5 and 10(b) for further disclosure.
    3 On 2 July 2017, Prairie and CD Capital completed an additional investment of US$2.0 million (A$2.6 million) in the form of the non-redeemable,
    non-interest-bearing convertible Loan Note 2. The L oan Note 2 is convertible into ordinary shares of Prairie at an issue price of A$0.46 per share.
    Other key terms of the Loan Note 2 include the foll owing:
     Loan Note 2 is non-interest bearing;
     Loan Note 2 is only repayable in an event of breac h of the terms of the Loan Note 2 agreements;
     Loan Note 2 cannot be converted until after 1 Apri l 2018 by either party;
     Prairie has the right, whilst no Event of Default exists, to convert all or part of the outstanding principal amount of Loan Note 2 into shares at
    the conversion price of $0.46 per share: o in the event of an unconditional takeover of the C ompany (acquisition of a relevant interest in at least 50% of Prairie shares pursuant
    to a takeover bid or by an Australian court approvi ng a merger by way of a scheme of arrangement); or
    o at any time after 1 April 2018 provided that the 3 0 day VW AP of Prairie’s shares exceeds the conversion price of $0.46 per share.
     Loan Note 2 does not provide CD Capital with any r ight to participate in any new issues of securities.
     CD Capital has the right to convert all or part of the outstanding principal amount of the Notes into shares at the conversion price of $0.46
    per share provided that: o Loan Note 1 has been converted into Prairie shares ; and
    o The CD Options have been exercised into Prairie sh ares.
     If the Company reorganises its capital structure, such as by subdividing or consolidating the number of its shares, conducts a pro-rata offer
    to existing shareholders or distributes assets or s ecurities to Shareholders, then the conversion pric e of $0.46 of Loan Note 2 will be adjusted
    so that the number of Prairie shares received by CD Capital on conversion of Loan Note 2 is the same as if Loan Note 2 were converted prior
    to relevant event.
     The occurrence of an Event of Default entitles CD Capital to declare the principal amount of the Loan Note 2 immediately due and payable
    and exercise any other rights or remedies (includin g bringing proceedings) against the Company.
     Each of the following events is an "Event of Defau lt" in relation to the Loan Note 2:
    o If any representation or warranty made by Prairie is false or misleading which is reasonably likely to be a Material Adverse Effect, and
    if such breach is capable of remedy, it is not reme died within 45 days;
    o If the Company breaches a covenant or condition of the Notes or associated agreements which is a Material Adverse Effect, and if
    such breach is capable of remedy, it is not remedie d within 45 days;
    o An Insolvency Event occurs (i.e. winding up) in re lation to the Group;
    o If the Group ceases to carry on a business; or
    o If the Group does not maintain the listing and tra ding of its shares on at least one of the ASX, LSE or W SE.
     CD Capital may assign, transfer or encumber in who le or in part (in amounts of at least A$1 million) its rights under Loan Note 2 to any third
    party by giving written notice to Prairie provided the third party has provided a deed of assumption. Assignment of Loan Note 2 will not result
    in the assignment of the rights and obligations und er the subscription agreement or investment agreeme nt from Loan Note 1.
     A Material Adverse Effect means a material adverse effect on:
    o the Company or PDZ Holding's ability to perform an y of their obligations under Loan Note 2, the and all other Transaction Document;
    o the validity or enforceability of a Transaction Do cument; or
    o the assets, business, condition (financial or othe rwise), prospects or operations of the Group.
     An Insolvency Event in relation to the Group means :
    o An order being made, or the Group passing a resolu tion, for its winding up.



    NOTES TO THE CONSOLIDATED
    FINANCIAL STATEMENTS
    FOR THE HALF-YEAR ENDED 31 DECEMBER 2017 (Continued )
    Prairie Mining Limited Interim Financial Report for the Half-Year Ended 31 December 2017 19
    12. CONTRIBUTED EQUITY (Continued)
    (b) Movements in fully paid ordinary shares during
    the past six months
    Date Details
    Number of
    Shares $
    1 Jul 17 Opening Balance 167,498,969
    45,376,808
    Jul 17 to Dec 17 Share issue costs -
    (5,869)
    31 Dec 17 Closing Balance
    167,498,969 45,370,939
    Note
    31 December
    2017
    $
    30 June
    2017
    $
    13. RESERVES
    Share-based payments reserve 13(a) 1,730,316 1,529,894
    Foreign currency translation reserve 771,287 728,445
    2,501,603 2,258,339
    (a) Movements in share-based payments reserve during the past six months
    Date Details
    Number of
    Incentive
    Options
    Number of
    Performance
    Rights
    $
    1 Jul 17 Opening Balance
    2,700,000 6,800,000 1,529,894
    21 Aug 17 Grant of Performance Rights
    - 5,775,000 -
    15 Sep 17 Grant of Incentive Options 500,000 - -
    31 Dec 17 Forfeiture of Performance Rights - (3,150 ,000) (1,134,010)
    Jul 17 to Dec 17 Share-based payments expense
    - - 1,334,432
    31 Dec 17 Closing Balance 3,200,000 9,425,000 1,730 ,316
    The Incentive Options outstanding at the end of the half-year have the following exercise prices and expiry dates:
     1,400,000 Incentive Options exercisable at $0.45 e ach on or before 30 June 2018.
     200,000 Incentive Options exercisable at $0.50 eac h on or before 31 March 2020;
     900,000 Incentive Options exercisable at $0.60 eac h on or before 31 March 2020; and
     700,000 Incentive Options exercisable at $0.80 eac h on or before 31 March 2020.
    The Performance Rights outstanding at the end of the financial year have the following expiry dates:
     2,575,000 Performance Rights expiring 31 December 2018;
     2,450,000 Performance Rights expiring 31 December 2019; and
     4,400,000 Performance Rights expiring on 31 Decemb er 2020.
    The Company also as a number of other unlisted secu rities on issue which includes the following:
     A convertible note with a principal amount of $15, 000,000, exchangeable into 44,776,120 ordinary shares at a
    conversion price of $0.335 per share with no expiry date (Loan Note 1);
     An agreement to issue 22,388,060 Options exercisab le at $0.60 each expiring 3 years after conversion of Loan
    Note 1 (CD Options); and
     A convertible loan note with a principal amount of $2,627,430, convertible into 5,711,805 ordinary shares at a
    conversion price of $0.46 per share with no expiry date (Loan Note 2).



    NOTES TO THE CONSOLIDATED
    FINANCIAL STATEMENTS
    FOR THE HALF-YEAR ENDED 31 DECEMBER 2017 (Continued)
    20
    14. ACQUISITION OF CONTROLLED ENTITY
    On 10 October 2016, the Company completed the acquisition of Karbonia S.A. which holds Debiensko. The transaction
    was deemed not to be a Business Combination in accor dance with AASB 3 Business Combinations and was been
    accounted for as an asset acquisition.
    The total cost of the acquisition was $2,524,047 an d comprised as follows:
    Relative Value
    on acquisition
    $
    Exploration and evaluation assets 2,047,034
    Cash and cash equivalents 27,232
    Trade and other receivables 2,387,537
    Property, plant & equipment 2,527,356
    Trade and other payables (2,355,738)
    Provisions (2,109,374)
    Net Assets Acquired 2,524,047
    Cost of Acquisition:
    Cash consideration 742,367
    Contingent consideration 1 1,781,680
    2,524,047
    Notes: 1 The Company acquired 100% of the shares of Karbonia for upfront cash consideration of €500,000 ($742,367) and by agreeing to pay a contingent
    cash consideration component of €1,500,000 upon cer tain project specific milestones being achieved, including approval of an amendment of the
    Debiensko Mining Concession to extend the start dat e of commencement of mining operations beyond 2018 (with a decision still pending), and
    therefore facilitating Prairie’s forward work progr am aimed at defining a “bankable” project at Debien sko according to international standards. As at
    the acquisition date, the fair value of the conting ent consideration was estimated to be €1,200,000 ($ 1,781,680) based on the probability of meeting
    the project milestones and being granted approval t o amend the Debiensko Mining Concession. As at the reporting date, and due to fluctuations in
    the foreign exchange rates between the Euro and Aus tralian Dollar, the carrying value of the contingent consideration was estimated to be
    $1,841,338 and is disclosed as an other financial l iability in Note 10(a). The loss arising from the remeasurement in the carrying value of the
    contingent consideration was $18,926 for half-year. Exchange differences on translation of foreign operations for the half-year amounted to $39,129.
    15. CONTINGENT ASSETS AND LIABILITIES
    There have been no changes to contingent assets or liabilities since the date of the last annual report.
    16. FINANCIAL INSTRUMENTS
    The Group’s financial assets and liabilities, which comprise of cash and cash equivalents, trade and o ther receivables,
    trade and other payables and other financial liabil ities, may be impacted by foreign exchange movement s. At 31 December
    2017 and 30 June 2017, the carrying value of the Gr oup’s financial assets and liabilities approximate their fair value. Please
    refer to notes 5, 10, 14 and below for further disc losure.
    An option pricing model was used to fair value the conversion rights attached to the Convertible Note. This fair value
    measurement is determined at Level 2 of the fair va lue hierarchy. For the purposes of valuing the conversion right, the fair
    value has been determined to be the price that woul d be received to transfer a liability in an orderly transaction between
    market participants at the measurement date. The as sumptions used to determine the fair value of the conversion rights
    attached to Loan Note 1 is as follows:




    NOTES TO THE CONSOLIDATED
    FINANCIAL STATEMENTS
    FOR THE HALF-YEAR ENDED 31 DECEMBER 2017 (Continued )
    Prairie Mining Limited Interim Financial Report for the Half-Year Ended 31 December 2017 21
    16. FINANCIAL INSTRUMENTS (Continued)
    31 December 2017 Assumptions
    Exercise price
    $0.600
    Valuation date share price $0.540
    Dividend yield 1 -
    Volatility 2 90%
    Risk-free interest rate 2.13%
    Number of CD Options 22,388,060
    Issue date 21 Sep 2015
    Estimated Expiry date 20 Sep 2020
    Expected life of CD Option 3 2.73 years
    Discount Applied 3 25%
    Fair value $0.215
    Notes: 1 The dividend yield reflects the assumption that the current dividend payout will remain unchanged. 2 The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may not necessarily be the actual
    outcome
    3 Based on management’s best estimates.
    17. DIVIDENDS PAID OR PROVIDED FOR
    No dividend has been paid or provided for during th e half-year (31 December 2016: nil).
    18. SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD
    (i) On 9 February 2018, the Company issued an annou ncement, following recent press articles, regarding possible co-
    operation between the Company and JSW to progress t he development and exploitation of the Company’s Polish
    coal projects. Prairie confirms that a meeting was h eld with JSW where preliminary discussions regardin g co-
    operation took place. Discussions are at a very ear ly stage and there can be no certainty as to whethe r any co-
    operation will be agreed in the future; and
    (ii) On 21 February 2018, the Company released dril l results at Jan Karski which re-affirmed the capability of the project
    to produce high value ultra-low ash semi-soft cokin g coal.
    Other than the above, there were no significant eve nts occurring after balance date requiring disclosure.



    AUDITOR’S INDEPENDENCE DECLARATION
    22
    (i) aaaa




    AUDITOR’S REVIEW REPORT
    Prairie Mining Limited Interim Financial Report for the Half-Year Ended 31 December 2017 23




    AUDITOR’S REVIEW REPORT
    (Continued)
    24



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WSZYSTKIE KOMUNIKATY SPÓŁKI
Informacje o spółce
Nazwa:Prairie Mining Ltd.
ISIN:AU000000PDZ2
NIP:
EKD:
Adres: Level 9, BGC Centre, 28 The Esplanade WA6000 Perth, Australia
Telefon:+61893226322
www:www.pdz.com.au
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