HWANGE - Ar - 05 42

Hwange Colliery Company Limited Annual Report 2005
Quality Standards
I
Increased Productivity
he theme for this years annual report focuses on Quality Management Standards,
Increased Productivity and Customer Satisfaction. This strategic orientation, complemented by the rebuilding and replacing of equipment, represents the pillars of the Companys short-term drive
Towards Stakeholder Satisfaction
Customer Satisfaction
through which the Company will take its turnaround efforts to the next level, that of expansion and growth and total stakeholder satisfaction.
Contents
Background
Organisational Vision, Mission and Strategic Objectives 3 Safety, Health and Environment Statement Quality Policy Statement Historical Financial Highlights / Shareholders Diary Notice to Members Salient Features Directorate and Management Team Directorate Profiles Corporate Governance Statement of Wealth Created Chairmans Statement Report of the Directors Managing Directors Review of Operations Annual Financial Statements Five-Year Record Analysis of Shareholders Administration and Advisory Proxy Form for Annual General Meeting 3 4 5 6 7 8 9 12 14 16 20 22 30 53 54 56 57
Coal being loaded into a Caterpillar 91 tonne hauler.
Background
Hwange Colliery Company Limited's origins date back to April 1899 when the Wankie Coal, Railway and Exploration Company was registered, and was reconstructed in 1909 as Wankie Colliery Company Limited. The Company, which over the years grew dramatically, is listed on the Harare, London and Johannesburg Stock Exchanges. The Company changed its name to Hwange Colliery Company Limited in the last quarter of 2004. Today Hwange Colliery Company Limited is a significant player in coal extraction, processing and distribution in southern Africa. The Company's activities encompass world-class mining operations in the western part of the country, at Hwange. The registered office and the marketing and sales function are in the capital city, Harare, and a marketing, sales and liaison office in Bulawayo. These operate from Company owned premises. At Hwange, the Company provides services associated with social and local governance over and above running its own railway and road transport system, internal security and telephone system. The Company employs over 3 000 people of diverse skills and backgrounds. Recognising that the core activities of coal mining and processing inherently impact on safety, environment and the community in which it operates, Hwange Colliery Company Limited has enshrined its commitment to safety, health and environmental care in its organisational mission and environment policy statements. With total assets and revenue of Z$1.95 trillion and Z$989 billion respectively, and comprehensive growth strategies, Hwange Colliery Company Limited thrives to remain the largest and most profitable mining concern in Zimbabwe.
HWANGE HEAD OFFICE

HARARE REGISTERED OFFICE
Company Secretaries
Marketing & Public Relations
Bulawayo Liaison Office
MINING OPERATIONS SERVICES
Opencast Mining
Underground Mining
Coal Processing & Coking Plant
Exploration & Technical Services
Engineering Services
Finance & Information Systems
Human Resources
Medical Services
Estates
Organisational Vision, Mission and Strategic Objectives

VISION
Hwange Colliery Company Limited seeks only one thing, To be a world-class producer and supplier of coal and related products.
MISSION STATEMENT
As a business of coal mining and processing of related products, we are dedicated to exploiting energy and mineral resources in a sustainable manner.
STRATEGIC OBJECTIVES
Increase production volumes to budget levels and address customer quality requirements. Achieve Safety, Health & Environmental excellence. Manage unit costs to improve profitability. Market analysis and development. Identify and exploit new business alliances or opportunities. Retain skills and establish a performance-based culture. Cultivate and sustain business culture.
OUR CORE VALUES

In pursuing the Companys mission, the Company upholds its core values of: integrity, innovativeness, pro-activeness, teamwork, loyalty and equity.
Safety, Health And Environment Statement

RECOGNISING THAT THE CORE ACTIVITIES OF COAL MINING AND PROCESSING INHERENTLY IMPACT ON SAFETY AND ON THE
ENVIRONMENT, THE
COMPANY UNDERTAKES:
to integrate environmental planning and management into existing and future operations and processes in order to protect the environment from undue damage. to educate, train and inform all its employees on environmental responsibilities and to maximise individual awareness and contribution; and to communicate with interested parties in related industries and the community on issues related to the environment. In ALL our activities safety comes first.
to maintain a safe and healthy working environment for its employees and the community within which it operates. to operate in compliance with all applicable current and future environmental laws and regulations, to attain international standards where no local standards exist and to maintain contact with legislating authorities. to continually monitor and assess the environmental impact of its operations, to minimise pollution, reduce waste and aim for maximum recovery in order to conserve the non-renewable resource which forms the basis of the business.
Quality Policy Statement

Hwange Colliery Company Limited explores, mines, processes and markets coal, coke and associated by-products in a sustainable manner. Our quality policy is implemented through a Quality Management System which is based on ISO 9001: 2000. The statement shall be communicated to all employees and reviewed for continuing suitability. The main aims of this policy are to ensure that the Company is and remains: CUSTOMER FOCUSED We recognise that customers have a choice, and will seek other suppliers if we do not satisfy their requirements. We shall solicit customer inputs on how to improve product quality. Customer inputs ultimately define what they expect to buy. We shall strive to ensure that our products not only comply with the customer's contractual specifications, but also exceed their expectations and meet legal requirements. We recognise that coal is a natural product liable to natural variability and we shall take all measures to manage and control this variation within customer specifications. Our marketing department shall liaise closely with production departments to ensure that commitments to customers are synchronised with production capacity. We shall maintain systems that guarantee timely delivery of products to all our customers. CONSISTENT IN REALISING CONTINUAL IMPROVEMENT We shall strive to monitor, benchmark and continually improve our business, products and services, organisation and employee performance. Quality review meetings shall be held quarterly. Causes of product non-conformance shall be identified and addressed and lessons learnt from them used as input into the planning process for subsequent production cycles. Our objective is to ensure quality at all levels.
Financial Highlights (Historical)

Turnover
increased by 164% from $ 374 Billion to 989 Billion
164%
Turnover
increased by 164% to $988.9 Billion
Profit from operations

increased by 242% from 79 Billion to $ 271 Billion
242%
Operating Profit
increased by 242% to $270.9 Billion
Attributable profit
increased by 430% from 50 Billion to $ 430 Billion
Basic earnings per share (cents)

rose by 413% from 29 114 to 149 460
430%
Attributable Profit
increased by 430% to $ 430 Billion
Fixed assets
increased by 275% from 28.4 Billion to $ 106.8 Billion
Shareholders Diary
Announcement of audited results for the year ending 31 December 2005 on Thursday, 30 March 2006;
Circulation of Annual Report, 31 May 2006
Annual General Meeting Friday, 30 June 2006;
Announcement of interim results for the six months ending 30 June 2006 on Thursday, 14 September 2006.
Notice to Members
Notice is hereby given that the eighty-third Annual General Meeting of members of Hwange Colliery Company Limited will be held in the Boardroom, 7th Floor, Coal House, 17 Nelson Mandela Avenue, Harare, at 10.30 a.m. on Friday, 30 June 2006 for the following business: 1. ORDINARY BUSINESS 1.1 1.2 1.3 1.4 1.5 1.6 To receive and consider the accounts and the reports of the directors and of the auditors for the year ended 31 December 2005. To re-elect directors who are retiring in terms of the Articles of Association. To confirm directors fees for the year ended 31 December 2005. To approve the remuneration of the auditors for the year ended 31 December 2005. To elect auditors for the ensuing year. To transact any such business which may be conducted at an Annual General Meeting.
Members may wish to raise any questions regarding the financial affairs of the Company at the forthcoming Annual General Meeting. The Board of Directors will endeavour to provide meaningful and considered responses to such questions. In order to facilitate this, members are requested to lodge any questions in writing, at the registered office of the Company, not less than forty eight (48) hours before the time scheduled for the holding of the Annual General Meeting. However, members will still have the right to ask verbal questions during the meeting, at the appropriate time. A member entitled to attend and vote at the meeting may appoint any person or persons to speak and vote in his/her place. A proxy need not be a member of the Company. Proxy forms must be lodged with the Secretary in Harare not less than 48 hours before the meeting.
By Order of the Board
T K NCUBE Secretary to the Board
30 April 2006
Salient Features
For the year ended 31 December 2005
Inflation Adjusted
2005 2004
Historical Cost
2005 2004
Turnover ($ 000) Profit after tax ($ 000) Basic earnings per share Dividend - Ordinary shares (cents) Dividend cover (times) Net asset value per share (cents) Total assets ($ 000) Shareholders' equity ($ 000) Long-term loans($ 000) Current asset ratio Shareholders' equity to long-term loans Shareholders' equity to interest-bearing liabilities Number of employees
2 534 407 791 124 886 778 70 566 16 531 5 387 102 651 2 939 098 460 77 089 484 1.9:1 38:1 2.61:1 3 150
3 693 981 219 12 862 123 7 503 15 952 5 260 107 907 2 807 570 182 1.6:1 4.58:1 3 298
988 933 644 264 512 104 149 460 1 818 1 952 091 882 323 269 096 77 089 484 1.3:1 4:1 0.29:1 3 150
374 194 693 49 906 593 29 114 316 293 156 564 55 672 677 1.2:1 0.62:1 3 298
Directorate and Management Team

DIRECTORATE
Chairman:
T Savanhu
Appointed 24/02/2006
Directors:
F Chasi Dr G Dzinomwa T Kwashirai Mrs T T Mlobane S I Mutumbwa T Ndlovu J Nqindi Ms R Sibanda
Appointed 01/09/2003 Appointed 01/01/2004 Appointed 01/09/2003 Appointed 01/02/2004 Appointed 03/04/2006 Appointed 24/02/2006 Appointed 01/09/2003 Appointed 24/02/2006
EXECUTIVE MANAGEMENT TEAM
Dr G Dzinomwa G Fari D Jura Dr G B Makoni O J Maponga F Mpofu L Musasa A I Mutiti T K Ncube C Nkomo A Rhuhwaya G Zhou
Managing Director Finance and Information Systems Manager Process & Quality Assurance Manager Medical Services Manager Exploration & Technical Services Manager Human Resources Manager Estates Manager Acting Underground Mine Manager Company Secretary Marketing & Public Relations Manager Engineering Services Manager Opencast Mine Manager
Directorate Profiles
Tendai Savanhu Chairman

Mr Savanhu joined the Board on 24 February 2006 and was elected the Non-Executive Chairman of Hwange Colliery Company Limited. Tendai brings to the colliery a wealth of corporate experience gained over the past 26 years in the private and public sectors. He has distinguished himself in the financial management field with Commercial Supplies (Private) Limited and Willards Foods (Private) Limited. He is currently the Managing Director of Crittal Hope (Private) Limited (Formerly Lonrho Zimbabwe). He is a non-executive director of several companies. Dr Dzinomwa joined Hwange Colliery Company Limited as Managing Director in January 2004. Godfrey has 16 years of technical and managerial experience, having previously worked for Hwange Colliery Company Limited, BHP Minerals Zimbabwe and Zimchem Refiners, where he was managing director. He holds a Bachelor of Science Honours degree in Metallurgical Engineering from the University of Zimbabwe and a PhD in Mineral Processing from the University of Queensland in Australia.
Dr Godfrey Dzinomwa Managing Director
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Directorate Profiles (continued)
Fortune Chasi Non-Executive Director

Mr Chasi was the Group Executive Director (Corporate Affairs) for Premier Finance Group Limited. His speciality is in financial advisory work and corporate legal guidance. He holds a Bachelor of Laws Honours (LLB) degree from the University of Zimbabwe. He also holds a Master of Laws (LLM) degree from Essex University, United Kingdom and a Master of Science degree in International Relations from the University of Zimbabwe and is currently studying for a Doctorate in Law (LLD).
Mrs Thandiwe T Mlobane Non-Executive Director

Mrs Mlobane is a senior economist in the Local Authorities Reorientation Division of the Reserve Bank of Zimbabwe (RBZ). Previously she was the Corporate Finance Executive of Genesis Investment Bank's Advisory Services Division. Thandiwe worked for the City of Bulawayo between 1985 and 2003, where she held various accounting positions. She holds a Bachelor of Accounting Honours degree from the University of Zimbabwe, a diploma in Local Government Accounting (III) from the University of South Africa and a Master of Business Administration degree from the National University of Science and Technology. She is a member of the Institute of Municipal Finance Officers of South Africa.
Ternard Kwashirai Non-Executive Director

Mr Kwashirai is the Managing Director of Infinity Asset Management (Private) Limited, having previously been the executive director (operations) of the company. Mr Kwashirai sits on the Board of Interfresh Limited and is a member of the Chinhoyi University of Technology Council. He holds a Bachelor of Science (Honours) degree in Economics and a Master of Science degree in Economics, both from the University of Zimbabwe.
Shingai I Mutumbwa Non-Executive Director

Mr Mutumbwa joined the Board on 3 April 2006 as a NonExecutive Director. Shingai is a registered legal practitioner and is currently a senior partner with Mutumbwa, Mugabe and Partners, a law firm based in Harare. Shingai holds a Bachelor of Laws Honours (LLB) degree from the University of Zimbabwe. He also holds a post-graduate diploma in International Conflict Studies from Uppsala University, Sweden, a diploma in War and Strategic Studies from the University of Zimbabwe and a certificate in Journalism from the Zimbabwe Institute of Mass Communication (ZIMCO).
11
Directorate Profiles (continued)
Thabani Ndlovu Non-Executive Director

Mr Ndlovu joined the Board on 24 February 2006 as a NonExecutive Director. He is the Secretary for Mines and Mining Development, prior to which he was the Principal and Chief Executive Officer of the Zimbabwe School of Mines. Thabani brings to Hwange Colliery Company Limited his extensive technical and management experience, gained locally and internationally in his career spanning over 20 years. He is a non-executive director of Zimchem Refiners (Private) Limited and a member of various boards. Thabani has been widely involved in consultancy in the mining industry in Zimbabwe. Ms Sibanda joined the Board on 24 February 2006 as a NonExecutive Director. She is currently a lecturer in the Faculty of Communication and Information Science at the National University of Science and Technology. She is a distinguished researcher, author and editor of various articles and journals in the field of Information and Communication Technology Management. Rose is a board member of ORAP Community , Foundation for the Western Region of Zimbabwe and SADC Commitee on People with Disabilities. She is a former chairperson of the NetOne Board of Directors, and is also a member of various professional, academic and socio-economic bodies.
Ms Rosemary Sibanda Non-Executive Director
James Nqindi Non-Executive Director

Mr Nqindi is currently the Executive Director of Willougbys Consolidated plc. He is a director of Stanleys Limited, Copro Limited, and is a non-executive director of Zimchem Refiners (Private) Limited. He holds a Bachelor of Science (Honours) degree in Microbiology and Virology from Warwich University, United Kingdom and a diploma in Medical Laboratory Science from South Glamorgan Institute, Cardiff, Wales.
12
Corporate Governance
INTRODUCTION Hwange Colliery Company Limited follows the general guidelines as set out by the King Code of Corporate Practices and Conduct as contained in the King II Report on Corporate Governance, of March 2002. BOARD OF DIRECTORS Details of the Executive and Non-Executive Directors are provided on pages 9 to 11 of the annual report. Hwange Colliery Company Limited has a unitary Board comprised of a Non-Executive Chairman, a Managing Director and eight NonExecutive Directors. The Non-Executive Directors have a wide range of competencies and significant business, commercial and other interests that enable them to bring independent judgement to Board deliberations and decisions. All Directors have access to the advice and services of the Company Secretary. In appropriate circumstances, at the Company's expense, the Directors may seek independent professional advice concerning Hwange Colliery Company Limited's affairs. The Managing Director has a five-year service contract that is renewable, subject to satisfactory performance. Certain functions and responsibilities have been delegated by the Board to the following committees, the terms of reference of which are regularly reviewed: AUDIT COMMITTEE Members: T Kwashirai (Chairman) F Chasi Dr G Dzinomwa T Savanhu Mrs T T Mlobane
The Audit Committee comprises four Non-Executive Directors and the Managing Director. The Audit Committee meets at least four times a year with management and both the external and internal auditors and at least once a year, without management, to review the financial statements and accounting policies, the effectiveness of management information and other systems of internal control, interim financial information, the effectiveness of the internal audit and risk management functions and to discuss the auditors' reports to management and the Board. The auditors are appointed each year, based on recommendations of the Audit Committee after an evaluation based on an agreed criteria. TECHNICAL COMMITTEE Members: T Ndlovu (Chairman) Dr G Dzinomwa T Savanhu J Nqindi Ms R Sibanda
The Technical Committee is comprised of four Non-Executive Directors and the Managing Director. It meets regularly to review production, operational performance and provide guidelines to management and the main Board on the technical aspects of the Company.
13
Corporate Governance (continued)

HUMAN RESOURCES COMMITTEE Members: F Chasi (Chairman) T Kwashirai Dr G Dzinomwa T Savanhu J Nqindi
The Human Resources Committee is comprised of four Non-Executive Directors and the Managing Director. The purpose of the committee is to ensure that the Company's Directors and senior executives are fairly rewarded for their individual contributions to the Company's overall performance. The committee is responsible for developing and administering the general human resources policies of the Company. The recruitment and appointment of executive management is the responsibility of this committee. COMMERCIAL BUSINESS UNITS COMMITTEE Members: Mrs T T Mlobane (Chairperson) T Ndlovu Dr G Dzinomwa T Savanhu Ms R Sibanda
The Commercial Business Units Committee is comprised of four Non-Executive Directors and the Managing Director. The purpose of the committee is to ensure that the Company's estates and medical services functions operates viably and contributes to the net worth of the Company. The committee is responsible for guidance and for developing and administering the general policies and strategies that ensure the objectives of the Commercial Business Units are met. INTERNAL AUDIT The Internal Audit function plays an independent appraisal role, which examines and evaluates the Company's activities. Its objective is to assist the Board and executive management in the effective discharge of their responsibilities. The scope of the Internal Audit function is to review the reliability and integrity of financial and operations information, the systems of internal control, the means of safeguarding assets, the efficient management of the Company's resources, and the effective conduct of Company operations. The head of Internal Audit has unrestricted access to the Chairman of the Audit Committee. RESPONSIBILITY FOR FINANCIAL STATEMENTS The Directors are responsible for the preparation of financial statements that fairly represent the state of affairs of the Company as at the end of the financial year and the profit or loss for that period. The external auditors are responsible for independently reviewing and reporting on these financial statements and expressing their opinion. The financial statements set out in the report have been prepared by management, in accordance with accepted accounting policies consistently applied by the Company, in compliance with International Financial Reporting Standards and the Companies Act (Chapter 24:03). The annual financial statements which appear on pages 32 to 52 were approved by the Board of Directors on 10 March 2006 and are signed on its behalf by:
T SAVANHU Chairman
DR G DZINOMWA Managing Director
14
Statement of Wealth Created

Inflation Adjusted
2005 $000 2004 $000
Historical Cost
2005 $000 2004 $000
Sales Materials and services used New Wealth Created DISTRIBUTION OF WEALTH CREATED To Remunerate Employees - Salaries and wages
2 534 407 791 438 429 132 2 095 978 659
3 693 981 219 1 341 391 320 2 352 589 899
988 933 644 119 120 410 869 813 234
374 194 693 131 319 314 242 875 379
1 206 233 240
1 310 910 832
441 772 584
141 089 436
To Lenders for Interest - Financing costs To Government - Provision for future taxation To Maintain and Expand the Company - Depreciation - Retained earnings Total distribution of wealth created
180 408 984
288 723 041
96 247 296
32 819 007
(26 799 070)
133 162 005
65 947 562
18 534 674
611 248 727 124 886 778 2 095 978 659
606 931 898 12 862 123 2 352 589 899
1 333 688 264 512 104 869 813 234
525 669 49 906 593 242 875 379
Distribution of Wealth Created
Historical cost 2005
Historical cost 2004
percent
change since previous year
percent
Salaries and Wages Financial Costs Government Tax Maintain and Expand the Company
51% 11% 8% 30%
(7)% (3)% 10%
Salaries and Wages Financial Costs Government Tax Maintain and Expand the Company
58% 14% 8% 20%
15
A commitment to consistently deliver customer satisfaction was the principal objective of embarking on ISO 9001: 2000 certification. The programme also sought to build confidence among customers and stakeholders, and ensure goal congruency with the workforce.
Quality Management Standards
16
Chairmans Statement
The year under review has seen the Company reclaiming its top spot amongst the listed companies in Zimbabwe, as it was recently adjudged the Best Turnaround Company in a competition published by local business weekly, .
Following my recent appointment to the Board and subsequent election as the Chairman of the Company, it gives me great pleasure to present the Company performance for the financial year ended 31 December 2005. Business Environment The year was characterised by a challenging business environment. The yearon-year inflation increased significantly from 132% in January 2005 to close the year at 586%. Foreign currency and fuel availability remained critical. There was also a significant movement in the foreign exchange rate. TRADING PERFORMANCE Individual product performance was as detailed below. HPS COAL HPS coal delivered to Zimbabwe Power Company (ZPC)'s Hwange Power Station amounted to 2 023 564 tonnes and was above the previous year's deliveries of 1 996 454 tonnes. HCC COAL HCC Coal sales of 831 614 tonnes were below the performance of 1 022 497 tonnes achieved the previous year. The marginal decrease was attributed to the low production from the new underground mine which was commissioned in the first quarter of 2005. Production from the opencast mine was satisfactory. Coal exports amounted to 39 067 tonnes as compared to 99 514 tonnes for the previous year. Demand for coal from the Zambian and the Democratic Republic of Congo markets continued to be firm for the period under review and there is great potential for growth in these markets. COKE (excluding Breeze) Coke sales of 196 523 tonnes were 10% above the tonnage achieved last year. This product is a high revenue earner for the Company. There was a significant off-take of coke to the export market, especially during the first half of the year. Coke exports for the year amounted to 105 927 tonnes and were 40% above
T Savanhu Chairman
17
Chairmans Statement (continued)

the sales achieved the previous year. COKE OVEN GAS Gas supply to ZPC's Hwange Power Station increased from 19 million Nm3 to 25 million Nm3 due to improved plant availability throughout the year. FINANCIAL RESULTS The Company complied with the International Accounting Standard (IAS) 29 Financial Reporting in Hyperinflationary Economies. The financial statements and corresponding figures for the previous period have therefore been restated to take account of changes in the purchasing power of the Zimbabwean dollar. HISTORICAL COST ACCOUNTING RESULTS Turnover was $ 988.9 billion and was 164% above the previous year's turnover of $ 374.2 billion. This was mainly attributed to the increased coke export volumes and the movement in the exchange rate. The pricing of coal on the domestic market continued under a price monitoring regime. An operating profit of $ 270.9 billion was realised during the year compared with last year's operating profit of $79.3 billion. The Company's attributable profits were $264.5 billion as compared to the previous year's $49.9 billion. Exchange gains were realised on exports following the devaluation of the local currency in the fourth quarter. Fixed assets increased by 275% to $106.8 billion because of the expenditure on the 3-Main Underground Mine which was commissioned during the first half of the year. The Company also invested in a state-of-the-art information and communication technology system, which is still due for completion. Current Liabilities increased by 565% and this was mainly attributed to the revaluation of the foreign loans from Commonwealth Development Corporation and West LB Bank. Borrowings of $114 billion were accessed from the Reserve Bank of Zimbabwe's PLARP facility. The funds were utilised for plant and equipment repairs and construction of coal distribution depots. The Company experienced cash flow problems during the year due to late payments by its major customers, namely Zimbabwe Power Company (ZPC) and Zimbabwe Iron and Steel Company (ZISCO). The Company acknowledges the intervention of the Government, resulting in partial liquidation of the debts owed by these parastatals. INFLATION ADJUSTED ACCOUNTING RESULTS The Company recorded a revenue of $ 2.5 trillion, and realised a net profit after tax of $124.9 billion compared to the profit of $12.9 billion recorded in the previous year. DIVIDEND After taking into account the Company's recapitalisation programme currently in progress, the Board resolved not to consider payment of a dividend for the year ended 31 December 2005. QUALITY, SAFETY, HEALTH AND ENVIRONMENT The Company was successfully certified to the ISO 9001:2000 Quality Management System in December 2005. Safety, health and environmental programmes continued to receive priority attention throughout the Company, as evidenced by a 61% reduction in accidents in 2005 as compared to 2004. The Company had no fatalities during the year. There were no pollution incidents reported during the year. The quality of ground water and surface water in public streams remained good throughout the year. The HIV and AIDS education campaigns continued to raise the level of awareness on good, moral and safe behaviour for both the employees and the Hwange community. The Company won the Auxillia Chimusoro Award for the Best Workplace HIV/AIDS Programme. OUTLOOK The Company is in the process of procuring coal haulage equipment, drills and a coal fines recovery plant. The new 3-Main Underground Mine, which was commissioned during the first quarter of 2005, should be boosted by the current initiatives to expand mining operations when a second continuous miner is brought into production. Demand for coal and coke is expected to remain firm in both the domestic and export markets. The Company is targeting incremental exports from increased production. DIRECTORATE Eng M T A Mutezo resigned as Chairman and from the Board on 28 June 2005. Mr S Gula-Ndebele resigned on 31 December 2005. Messrs T E N Chigudu, J Goromonzi and Eng G S Mlilo resigned on 24 February 2006. On behalf of the Board, I would like to acknowledge the contribution of the above to Hwange Colliery Company Limited and sincerely wish them all the best in their new portfolios and future endeavours.
18
Chairmans Statement (continued)

them all the best in their new portfolios and future endeavours. Messrs T Savanhu, T Ndlovu and Ms R Sibanda joined the Board on 24 February 2006. Mr S I Mutumbwa joined the Board on 3 April 2006. The Board is geared to ensure that the Company achieves its strategic objectives of growth and increasing shareholder value. APPRECIATION I would like to express sincere appreciation to my fellow Directors who have been with the Company throughout the year and worked tirelessly to ensure the Company performed to expectations, notwithstanding the challenges encountered. On behalf of the Board, I would like to thank the management team and all employees for the demonstrated commitment, teamwork and their role in keeping the Company vibrant during the year. The harmonious industrial relations atmosphere has enabled management to focus on key challenges facing the Company, thus laying a strong foundation for the future. The Company also acknowledges the support received from all its key stakeholders, namely Government of Zimbabwe, Reserve Bank of Zimbabwe, customers, suppliers, bankers and members of the public.
T SAVANHU Chairman
25 March 2006
19
Work on a new opencast mining area called Chaba has already commenced. Coal reserves at Chaba are shallower and can be accessed faster at a more favourable cost. This development complemented with repairs to haulage equipment, new equipment and hiring of haulage equipment should result in an increase in coal production.
Increased Productivity
20
Report of the Directors

The Directors of Hwange Colliery Company Limited have the pleasure to present their report together with the audited financial statements of the Company for the year ended 31 December 2005. CAPITAL The authorised share capital of the Company remained at 180 000 000 ordinary shares of $1 each and the issued and fully paid share capital stood at 177 795 000 ordinary shares of $1 each, respectively. The Directors have control over unissued ordinary shares amounting to 2 205 000 which are set aside for the share option scheme. The Company's authorised share capital needs to be revised. Shareholders will be requested to pass a special resolution at the Annual General Meeting to increase the share capital to 500 000 000, and that Directors have control over 50 000 000 shares which are set aside for the share option scheme. LOANS As at 31 December 2005, there were no long-term loans. However, loans payable within one year amounted to $1 011 784 784 000. These relate to the offshore gas pipeline loans from the Commonwealth Development Corporation and West LB (formerly West Merchant Bank) whose outstanding capital balance was at GBP 6 503 582. These loans were not subject to forward exchange rate risk cover. Due to the devaluation of the local currency in October 2005, the value of these loans is shown in the Company's financial statements as having increased by 1 200% from the previous year's balance of $77 849 803 000. No loan repayments were made during the year in respect of offshore loans, because of the foreign currency shortages. In this regard, attention is drawn to the deferred foreign currency differences shown in the balance sheet and described in note13 to the financial statements. The Company accessed concessionary working capital funding from the Reserve Bank of Zimbabwe's Parastatals Reorientation Programme, amounting to $114 821 387 000. The funds were used to repair and service the production equipment and this assisted in building capacity.
Income and Appropriations

Inflation Adjusted
2005 $000 2004 $000
Historical Cost
2005 $000 2004 $000
(Loss)/profit before finance costs Net finance charges Impairment reversal Profit before taxation Taxation
(136 150 362) 105 791 192 128 446 878 98 087 708 26 799 070
102 439 797 (57 989 155) 101 573 486 146 024 128 (133 162 005)
270 943 297 59 516 369 330 459 666 (65 947 562)
79 250 454 (10 809 187) 68 441 267 (18 534 674)
Profit after taxation
124 886 778
12 862 123
264 512 104
49 906 593
Retained (loss)/profit brought forward
(2 742 578 926)
(2 755 441 048)
52 885 050
2 978 457
Retained (loss)/profit carried forward
(2 617 692 148)
(2 742 578 925)
317 397 154
52 885 050
21
Report of the Directors (continued)

FIXED ASSETS Expenditure on fixed assets for the year amounted to $79 682 004 000 and was mainly on the 3 Main Underground Mine development and the Information Technology project. This was financed through internal resources. DIRECTORATE Eng M T A Mutezo, who was the Chairman, resigned from the Board on 28 June 2005. Mr S Gula-Ndebele resigned on 31 December 2005. Messrs T E N Chigudu, J Goromonzi and Eng G S Mlilo resigned from the Board on 24 February 2006. Messrs T Ndlovu, T Savanhu, and Ms R Sibanda were appointed as Directors of the Company with effect from 24 February 2006. Mr S I Mutumbwa was appointed to the Board on 3 April 2006. Mr Savanhu was, in terms of Article 120 of the Company's Articles of Association, subsequently elected by the Directors to be the Chairman of Hwange Colliery Company Limited. In terms of the Articles of Association, Messrs S I Mutumbwa, T Ndlovu, T Savanhu, and Ms R Sibanda retire at the Annual General Meeting. All the above retiring Directors, being eligible, offer themselves for re-election. AUDITORS The auditors of the Company, Messrs CAMELSA Chartered Accountants (Zimbabwe), hold office until the conclusion of the Annual General Meeting, at which shareholders would be requested to approve their appointment for the ensuing year and to also approve their remuneration for the past year. STOCK EXCHANGES The following additional information is provided, in compliance with the requirements of the stock exchanges:i. All the Company's sales and profit were made and realised in Africa south of the equator;
ii. There were no contracts with the Company in which any Director had an interest either during or as at the end of the financial year; iii. The borrowings as at 31 December 2005 are summarised as follows: Authorised borrowings: Three times shareholders' equity Actual borrowings $ 59 trillion $ 12 trillion
By order of the Board
T K NCUBE Secretary Harare
20 March 2006
22
Managing Directors Review Of Operations

I have pleasure in submitting my report on operations of the Company for the year ended 31 December 2005. STRATEGIC DIRECTION At the beginning of 2005, the Board, management and workers' representatives formulated a strategic plan whose key goals were to: Improve production volumes and quality to satisfy market demand Achieve Safety, Health and Environment excellence Cultivate and sustain a business culture Develop and retain skills Manage unit costs to improve profitability Identify and exploit new business opportunities Build a positive corporate image
These strategic objectives formed the milestones of the Company's turnaround programme and provided a sense of direction to our efforts. The Board, management and staff, have shown tremendous sense of commitment to the implementation of our turnaround strategy. It was also gratifying to note that many stakeholders, including the Government of Zimbabwe through the Reserve Bank, and industry, have shown credible overtures of support for our programmes.
Dr G Dzinomwa Managing Director

A number of projects were implemented during the year which represented significant milestones in our operations. These are detailed under their respective departments. The Company attained certification for the ISO 9001:2000 Quality Management System. PERFORMANCE OVERVIEW The year 2005 presented great challenges which impacted negatively on the Company's operations. These included limitations to the organisation's performance and included, inter alia: the perennial constraints on foreign currency to source spares, equipment and inputs; logistical constraints, availability of wagons to transport the coal products to the market and nonperforming debtors, which affected cash flows. However, these challenges were tackled with a satisfactory measure of success. Total raw coal mined amounted to 3 478 735 and was 7% below the previous year's 3 746 524 tonnes. The unaccounted balance and discard rate decreased from 14 % in 2004 to 13 % in 2005. The resultant throughput of 3 137 764 tonnes was 6% below last year's 3 330 233 tonnes. HPS coal sales for the year were 2 023 564 tonnes, representing an increase of 1.41 % from last year's. Total coal sales for the year amounted to 2 855 206 tonnes. This tonnage was 5% below coal sales for the year 2004. Coke sales at 229 486 tonnes were above the 178 711 tonnes sold in 2004.
Our desire to evolve, taking our customers and all stakeholders with us, has seen us continually reassessing ourselves, our management systems and delivery channels to deliver value and convenience to the customer.
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Managing Directors Review Of Operations (continued)

MINING OPERATIONS
OPENCAST Mining operations were mainly conducted in the Dragline South Pit and the 3B Strategic pit. Raw coal mined by opencast operations during the year totalled 3 313 288 tonnes, comprising 2 062 008 tonnes of HPS and 1 251 280 tonnes of HCC coal. A total of 17 698 tonnes of coal fines discards were reclaimed from the Processing Plant dumps. The coal fines were blended together with HPS raw coal product and delivered to Hwange Power Station. The coal fines assisted with keeping the HPS coal ash content levels to well within the monthly contractual quality specification ranges. The average HCC coal quality, at 12.2% ash content, was within the specified upper limit of 14.0%. The volatiles content of this coal at 25.0% was equal to the specified minimum limit of 25.0%. HPS coal quality at 23.9% ash content was within the contractual requirement of an annual average limit of 25.0%.The calorific value at 25.22 MJ/kg was marginally higher than the contractual annual average limit of 24.75 MJ/kg.
The decision to embark on the ISO 9001: 2000 project was a strategic one that sought to build customer confidence, enhance competitiveness, as well as to maintain and improve overall organisational performance and capabilities.
Both coal and overburden production operations were severely affected as a result of financial constraints leading to reduced operating capacity, in comparison to the normal opencast design capacity of 4.8 million tonnes per annum. Financial constraints were mainly attributable to diminishing cash flows, as a result of low sales, below-cost pricing of the HPS coal product as well as the foreign currency shortages. These financial constraints have persisted with a severe impact on the coal and overburden mining operations, as a result of the deterioration of the pit equipment, due to the increasing shortages of spare parts. Work on the installation of the Mineral Sizer in replacement of the ESC Coal Breaker was completed in June 2005. Benefits of the Mineral Sizer are being realised through improved
HCC coal off-take was much lower than the actual coal demand levels from the Processing Plant due to the low mining rates. Priority was given to HPS coal mining in order to avert a Hwange Power Station shutdown as well as to facilitate exposure of sufficient HCC coal reserves for mining. A total of 1 250 224 tonnes of HCC coal was delivered to the Processing Plant, which was 5.09% below the delivery of 1 317 325 tonnes achieved in the previous year.
The Coal Plant continued to be the bottleneck on the production line. Serious challenges were encountered in the following areas; gearbox and fluid coupling problems, non-availability of VT cards, worn out conveyor belts constantly snapping, and secondary crushers drive system problems. These challenges were aggravated by cash flow problems arising from non-payment by Zimbabwe Iron and Steel Company Limited (ZISCO) and Zimbabwe Power Company (ZPC).
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availability on the ESC mining system. The Dragline stripped 6 358 152 bank cubic metres (bcms) of overburden during the year, as compared to 5 773 364 bcms excavated in the previous year. No section of the Dragline pit was throw-blasted due to low availabilities of main bench drills and bulldozers. The average Dragline stripping ratio was 2.57:1 bcms/tonne in the standard buffer-blasted cuts. There is need for the Dragline bench to be optimised at 26 metres so as to lower the stripping ratio, thereby increasing the Dragline's productivity. Supplementary stripping operations and main bench drilling are currently being boosted through acquisition of new equipment. At the end of the year, there were 17 100 tonnes of exposed HCC coal available for extraction in the Dragline Pit, whilst exposed HPS coal amounted to 44 071 tonnes, including a total of 2 719 tonnes remaining as temporary stockpiles. Last year, inpit exposed coal reserves amounted to 50 650 and 32 024 tonnes of HCC and HPS coal, respectively. One Dragline major service was carried out during the year. Dragline machine availability was low at 71.0%, mainly due to a combination of electrical and mechanical delays. Electrical problems encountered included failures on M.G. sets, hoist generators and drag motors. Mechanical breakdowns included repairs on various couplings, pedestal bearings, propel motors, deflector sheaves, swing rack bolts, hoist and drag brake linings. A total of 2 043 662 bcms of supplementary stripping overburden was mined as compared to 1 459 175 bcms mined in the previous year. Supplementary stripping equipment breakdowns and non-availability of spares, as well as operational stoppages due to redeployment of the equipment to coal production were the major factors. Supplementary stripping equipment was also utilised to expose coal at the 3B Strategic Pit. Earthmoving contractors were engaged to augment the low availabilities on supplementary stripping equipment. A total of 1 225 494 bcms were moved by the three contractors, and is included in the total supplementary stripping overburden quoted above. The overall overburden stripping ratio was 2.82:1 bcms/tonne compared to the projected 3.25:1 ratio, mainly due to the reduced supplementary stripping overburden volumes moved. The overall stripping ratio was higher than the 2.70:1 achieved in the previous year. Rehabilitation of the waste dump sites continued as an integral part of the opencast operations. The scope of work to reclaim mined-out areas has increased considerably. During the year 4.26 hectares were rehabilitated as compared to 14.0 hectares rehabilitated in the previous year. This was due to the suspension of the supplementary stripping operations during the first half of the year, as well as low availabilities of dozers and other support equipment utilised in rehabilitation operations. The rehabilitated Opencast Mine area now stands at 364 hectares, of which 294.81 hectares (81.0%) are under vegetation cover.
In line with the Companys thrust to enhance and expand productivity, a new opencast mine called CHABA has been established. CHABA has shallower reserves that can be accessed faster and at a more favourable cost.
Supplementary Stripping Rope Shovels availability at 41.5% was higher than 39.4% achieved in the previous year. Shovel No. 3 remained on breakdown due to a failure on the left hand propel gearbox.
The Opencast Mining Department recorded a total of eight accidents comprising three (3) reportable and five (5) lost-shift accidents during the year, compared to one fatal, ten (10) lost-shift accidents recorded during the previous year.
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MINING OPERATIONS
UNDERGROUND Underground mining operations commenced at 3-Main in February 2005 using the Company's own financial resources. The mine produced 197 009 tonnes during the year. Difficult mining conditions, which included steep gradients and severe faulting, were experienced during the early stages of mining. The situation was aggravated by massive water ingress emanating from the footwall into the underground mine workings in November 2005. The underground water pumping programme was boosted and the situation was subsequently brought under control. Coal quality was satisfactory at 13.8% ash, 24.40% volatiles, 0.021% phosphorus and 1.48% sulphur. Low phosphorus coal campaigns were successfully carried out. The 3-Main project works achieved significant milestones. The high wall at the entry was supported as planned. The water pipeline from No.5 tanks to 3-Main was installed and commissioned. The surface stockpiling conveyors were installed and commissioned. The main fan was relocated from M-Block and commissioned. The workshop was relocated from No.3 Colliery and is now in use. The in-pit sump and trench were excavated to cater for floods. Work on construction of portals at the adits is ongoing. The major outstanding work is the installation of the conveyor belt linking 3-Main to opencast conveyors, as well as acquiring equipment for a second section. This is being affected by project funding, which is still being mobilised. Safety, health and environmental issues continued to receive top priority with regular meetings being held at all levels. The mine
recorded four lost shift accidents as compared to eight total accidents for the previous year. Self-contained rescue packs remained in good repair and were adequate to cover all mine personnel. The use of standard personal protective equipment was adhered to by all. Mine rescue teams and breaking apparatus were effectively maintained. The mine acquired new BGA units which will eventually replace the obsolete BG174 breathing apparatus. The new Continuous Miner was delivered and performed satisfactorily despite premature failures of a few items. The items were replaced on warranty. The continuous miner from M-Block was sent to South Africa for a rebuild. Machine service and maintenance, as well as regular planned independent flameproof audits, were adequately carried out. The main fan performed satisfactorily and adequately ventilated the mine. Noise pollution was effectively managed. Dust suppression at source was carried out during the year and air-borne dust analyses done indicated dust levels below the stipulated maximum requirements. Costs were generally well managed and within budget, despite the high inflationary environment under which the mine operated. The major five cost drivers were identified and were strictly monitored. Human resource development programmes (staff and technical training) were carried out. Training of operators and engineering medium-skill personnel continued during the year to have an adequate skill base for the second Continuous Miner section.
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PROCESS AND QUALITY ASSURANCE
PROCESS AND QUALITY ASSURANCE The total HCC coal sales for the year amounted to 831 641 tonnes and were 18.7 % lower than the 1 022 497 tonnes sold in the previous year. Coal supply from the mines totalled 1 445 379 tonnes, comprising 1 253 427 tonnes from opencast and 191 952 tonnes from the 3-Main Underground Mine. The Processing Plant availability was satisfactory throughout the year.
get their coal supplies from the depots, which are closer than the mine. The depots are expected to be commissioned during the third quarter of 2006. Washed peas remained the dominant grade on demand with a total of 362 130 tonnes sold, making 43.5% of total coal sales. Coking coal dispatches to ZISCO averaged 16 910 tonnes per month, which was 17.3% lower than the average of 20 439 tonnes per month in 2004. The decrease was due to low supplies and reduced liner off-take. Coke production and sales were satisfactory, with no major problems experienced with battery machines.
In an effort to boost sales and service the customer efficiently, the colliery embarked on establishing two major coal depots: one in Harare, and the other in Bulawayo.
Crude tar production was 9 092 848 kg, which was 10.9% lower than the 10 200 420kg produced in 2004. Tar production was consistent with the reduced battery throughput so as to increase foundry coke production and also due to coking coal stocks.
Wagon supply from the National Railways of Zimbabwe (NRZ) decreased marginally to an average of 47 per day, compared to 48 per day in 2004. Customers continued to use lorries as well. An average of 33 lorries were loaded per day, compared to 48 lorries per day in 2004. In an effort to boost sales and service the customer efficiently, the colliery embarked on establishing two major coal depots: one in Harare, and the other in Bulawayo. When completed, these depots will warehouse coal from the mine. Customers will
A total of 24 862 870 normal cubic metres (Nm3) of coke oven gas were sold to ZPC at an average calorific value of 17.35 mJ/Nm3. These sales were 27.9% higher than the 19 445 670 sold in 2004. Plans are underway for a coke oven battery inspection and repair campaign by external consultants during the current year.
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SUPPORT SERVICES
ENGINEERING SERVICES The shortage of foreign currency, to source spares and to replace equipment and machinery, posed a major challenge to the Engineering Department's ability to provide adequate support to the core processes. Maximum efforts were made to minimise interruptions to operations. The electrical distribution network functioned well during the year, with minor transient faults resulting in circuit breakers re-closing. The ZESA supply system experienced four short-lived outages during the year. Three of these were due to lightning and thunderstorm-related damages. Scheduled maintenance was carried out on all sub-stations, switchgear and power lines. All the No.3 exchanges were re-established and functioned well thereafter. Water supplies to both operations and domestic areas remained satisfactory throughout the year, save the momentary interruptions in the Prospect Hill and surrounding areas following the collapse of Tank No.7. The maintenance schedules on pumps, water lines and the associated equipment were complied with. The proper servicing of pumps was, however, occasionally affected by shortages of spares such as pump packings, balance discs and sleeves. Provision of adequate transport for employees continued to be a major challenge to the Company. Vehicle breakdowns, due mainly to old age and unavailability of parts remained high. The Company plans to acquire some buses during the current year. EXPLORATION AND TECHNICAL SERVICES All legal requirements relating to the preparation, updating and submissions of survey plans to the Government Mines Inspectorate were complied with. Exploration and other related activities during the year focused on refining geological and quality models in the areas to be mined within the next five years at 3-Main and the current
Dragline Pit. The department also carried out preparatory work for commencement of mining at the Chaba Strategic Pit. Rock mechanics investigations were intensified to increase safety in underground mining operations as well as to optimise mining recovery of the coking coal reserve. Memoranda of understanding were drafted with three companies for joint exploration activities involving coal-bed methane gas and coal in new areas. SAFETY, HEALTH AND ENVIRONMENT The Company's 2005 Safety, Health and Environment programmes focused on the consolidation of initiatives created over the last two years. Safety, Health and Environment awareness campaigns were conducted to cover all levels of employees and contractors. The Company-wide human injury accident frequency and severity rates in 2005 dropped by 61% from 59 in 2004 to 23. The 23 accidents comprised four reportable, 15 lost shift, and 4 non-lost shift accidents. The effluent water discharged into the surface water streams in 2005 was in the safe category, according to Zimbabwe National Water Authority (ZINWA) regulations. No incidents of water pollution were reported. Noise levels, illumination status and respirable dust monitoring were carried out as per Mining (Safety and Management) Regulations in all critical areas of our operations. ESTATES The Commercial Services Department successfully introduced some initiatives in line with the commercialisation strategy. Most of the commercialised services reported favourable trading and had positive balance sheets. The department opened
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a supermarket during the year to augment the existing sources of revenue. The department commenced applying cash collected from rents and rates towards repairing and construction of housing units. HUMAN RESOURCES As at 31 December 2005, the number of employees in service was 3128, compared to 3089 in service at the end of the year 2004 - an increase of 39 employees. A significant focus for the year has been the promotion and maintenance of sound industrial relations and the adoption of a culture of self responsibility for development, which makes us unique amongst mining companies. The industrial relations atmosphere within the organisation remained cordial throughout the year. All NEC salary increments were effected. The review of the internal Collective Bargaining Agreement for 2006 commenced towards the end of the year and was concluded in February 2006. The Training and Development function continued to train and develop employee skills in various trades and areas of specialisation. Members of the executive management and most of the Level 2 managers and some supervisory staff went through performance management workshops. The Company continued to run the graduate learnership programme as part of its contribution to the development of a sound skills base. A total of 21 graduates from several disciplines pursued their learnership training during the year. A total 62 945 man days were spent on training. CAPITAL EXPENDITURE Capital Expenditure for the year 2005 amounted to $48 126 599 984, compared to last years figure of $20 864 771 777. The harsh environment has continued to affect capital projects negatively. The inflation regime which started at 133.6% at the beginning of the financial year only slowed down in February and March 2005 to 127,2% and 123.7% respectively. However, in April the inflation started rising up to 129.1% and eventually reached its peak at 585.8% in December 2005. Lack of foreign currency also affected the capital programme during the period under review. The development of 3-Main Underground Mine continued in the year 2005 with the final payment for the Continuous Miner being done. The machine was commissioned in January 2005. The three shuttle cars were also partly paid for, but delivery is still outstanding. The surface electric reticulation was The Primary and Secondary Mineral Sizer at the opencast was commissioned at a total cost of $3 098 250 000. A reconditioned 988F front-end loader was purchased for opencast mining during the year under review at a cost of $2 466 000 000. The IT Project implementation covered the purchase of computer hardware and laying of a fibre-optic network. Installation and commissioning of LAN, MAN, WAN Networks and also the installation and commissioning of the ERP system for Hwange Colliery Company remains outstanding. The project cost amounted to $24 284 752 000 in the year 2005. One executive vehicle and four section-head vehicles were purchased during the year 2005 at a cost of $3 487 527 984. CONCLUSION The Company continued to operate within a difficult economic environment characterised by high inflation and shortage of foreign currency. Sterling efforts were made to ensure the Company's survival. Production and sales figures were marginally lower than those of the previous year but the trend is expected to be reversed in the coming year. The passage of the underground mining operations out of the bad ground areas into competent ground and the expected delivery and subsequent commissioning of the second Continuous Miner should result in significantly increased, if not double, production rates at the 3-Main Underground Mine. Furthermore, the commissioning of mining operations in the shallow part of Chaba scheduled for the first half of 2006 will see more coal deliveries to ZESA and to the general purpose low-ash coal users. Some coal haulage equipment and a coal fries recovery plant are expected during 2006, and these should give hope for a brighter future for the Company. I would like to thank fellow Directors, management and employees at all levels for their hard work and loyalty. completed. The No. 5 to 3-Main Mine water pipeline was completed and water is now available at the mine. The adit conveyor and underground conveyor were also installed at 3 Main Underground Mine during the period. All the above activities consumed $13 476 816 000.
DR G DZINOMWA Managing Director Harare
30 April 2006.
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As we strive for customer satisfaction, the construction of depots is at an advanced stage and these will be used as regional warehouses for coal and coke products. The aim is to decentralise operations and deliver convenience to the customer.
Customer Satisfaction
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Annual Financial Statements Contents

Certificate from the Company Secretary Report of the Independent Auditors Income Statement Balance Sheet Statement of Changes in Equity Cash Flow Statement 30 31 32 33 34 35 Notes to the Financial Statements Five-Year Record Analysis of Shareholders Administration and Advisory Proxy Form for Annual General Meeting Notes 36 53 54 56 57
Certificate by the Company Secretary

In my capacity as Company Secretary, I confirm that, in terms of the Companies Act (Chapter 24:03), the Company has lodged with the Registrar of Companies, all such returns as are required of a public quoted company in terms of this Act and that all such returns are true, correct and up to date. By Order of the Board
T K NCUBE Secretary to the Board 30 April 2006
T K Ncube Company Secretary
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Camelsa Business Park 135 Enterprise Road, Highlands, P Box CY 2619, Causeway, Harare, Zimbabwe .O. Tel: (+263-4) 442511-5 Fax: (+263-4)496985 Email: info@camelsa.co.zw Website: www.camelsa.co.zw REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF HWANGE COLLIERY COMPANY LIMITED. We have audited the accompanying hyper-inflation adjusted annual financial statements of Hwange Colliery Company Limited set out on pages 32 to 52, which comprise the balance sheet as at 31 December 2005, and the income statement, statement of changes in equity and cash flow statement for the year then ended and a summary of significant accounting policies and other explanatory notes. Directors responsibility for the Financial Statements Directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Amounts shown under the heading "Historical Cost" are provided for supplementary information purposes only and accordingly our audit opinion only refers to inflation adjusted amounts. Audit Opinion In our opinion, the hyper-inflation adjusted financial statements fairly present, in all material respects, the financial position of the Company as at 31 December 2005 and the results of its operations and cash flows and changes in equity for the year ended in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act (Chapter 24:03) in Zimbabwe.
CAMELSA Chartered Accountants (Zimbabwe) HARARE 20 March 2006
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Income Statement
Inflation Adjusted
Notes 2005 $000 2004 $000
Historical Cost
2005 $000 2004 $000
Revenue Cost of sales Gross profit Discontinuing operations Other operating income Distribution costs Administrative expenses Loss on net monetary position (Loss)/profit from operations Net finance income Impairment reversal Profit before taxation Taxation Profit after taxation
2 534 407 791 (1 856 664 716) 677 743 075 313 976 550 (14 869 537) (1 071 752 227) (41 248 223)
3 693 981 219 (2 270 551 850) 1 423 429 369 (7 238 028) 3 219 900 (43 484 370) (1 245 532 743) (27 954 331) 102 439 797 (57 989 155) 101 573 486 146 024 128 (133 162 005) 12 862 123 Cents 7 503 7 443 (32 307) (32 048)
988 933 644 (487 433 603) 501 500 041 216 988 869 (5 831 191) (441 714 422) 270 943 297 59 516 369 330 459 666 (65 947 562) 264 512 104 Cents 149 460 148 779 149 858 149 175
374 194 693 (159 018 950) 215 175 743 (453 434) 87 109 (4 766 797) (130 792 167) 79 250 454 (10 809 187) 68 441 267 (18 534 674) 49 906 593 Cents 29 114 28 880 29 328 29 093
2 3
4 5 6
(136 150 362) 105 791 192 128 446 878 98 087 708
26 799 070 124 886 778 Cents
Attributable earnings per share Headline earnings/(loss) per share
- basic - diluted - basic - diluted
8 8 8 8
70 566 70 244 18 535 18 450
33
Balance Sheet
As at 31 December 2005
Inflation Adjusted
Notes 2005 $000 2004 $000
Historical Cost
2005 $000 2004 $000
ASSETS Non-Current Assets Property, plant and equipment Investments Loans receivable in more than one year
9 10 11
2 571 317 704 12 601 807 2 583 919 511
2 835 116 700 12 601 807 428 230 2 848 146 737
106 816 943 15 760 106 832 703
28 468 627 15 760 62 439 28 546 826
Current Assets Pre-stripped overburden Inventory Recoverable deferred foreign currency differences Receivables and prepayments Short-term loans receivable Bank and cash balances
12 13 14 11 15
933 492 337 353 657 326 999 563 300 468 696 907 22 844 47 750 426 2 803 183 140
796 912 495 295 445 097 424 580 464 749 214 414 135 255 145 673 445 2 411 961 170 5 260 107 907
172 375 778 156 849 924 999 563 300 468 696 907 22 844 47 750 426 1 845 259 179 1 952 091 882
39 091 324 33 111 356 61 906 725 109 240 446 19 721 21 240 166 264 609 738 293 156 564
Total assets EQUITY AND LIABILITIES Capital and reserves Share capital Capital reserves Retained (loss)/profit
5 387 102 651
16 17
3 687 854 696 1 868 935 909 (2 617 692 145) 2 939 098 460
3 687 848 936 1 862 300 169 (2 742 578 923) 2 807 570 182
177 795 5 694 147 317 397 154 323 269 096
175 998 2 611 629 52 885 050 55 672 677
Non-current liabilities PLARP Deferred taxation
19 7
77 089 484 891 062 996 968 152 480
927 071 901 927 071 901
77 089 484 71 881 591 148 971 075
15 060 732 15 060 732
Current liabilities Overdrafts Bills and acceptance credits Loans repayable within one year Productive Sector Funding PLARP Payables Provision for discontinuing operation costs Provision for taxation
15 15 18 18 19 20 2
28 310 777 1 011 784 784 37 731 903 391 007 478 1 264 978 9 751 791 1 479 851 711
532 506 17 906 940 533 924 689 78 851 549 860 313 122 9 369 274 24 567 744 1 525 465 824 5 260 107 907
28 310 777 1 011 784 784 37 731 903 391 007 478 1 264 978 9 751 791 1 479 851 711 1 952 091 882
77 643 2 610 952 77 849 803 11 497 085 125 439 427 1 366 103 3 582 142 222 423 155 293 156 564
Total equity and liabilities
5 387 102 651
T Savanhu Chairman 16 March 2005 Harare
Dr G Dzinomwa Managing Director
T K Ncube Secretary
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Statement of Changes in Equity

Inflation Adjusted
Balance at 1 January 2004 Profit for the year Issue of share capital under share option scheme Balance at 31 December 2004 Balance at 1 January 2005 Profit for the year Issue of share capital under share option scheme Balance at 31 December 2005
3 687 810 358 -
1 849 403 719 -
(2 755 441 046) 12 862 123
2 781 773 031 12 862 123
38 578 3 687 848 936 3 687 848 936 -
12 896 450 1 862 300 169 1 862 300 169 -
(2 742 578 923) (2 742 578 923) 124 886 778
12 935 028 2 807 570 182 2 807 570 182 124 886 778
5 760 3 687 854 696
6 635 740 1 868 935 909
(2 617 692 145)
6 641 500 2 939 098 460
Historical Cost
Balance at 1 January 2004 Profit for the year Issue of share capital under share option scheme Balance at 31 December 2004 Balance at 1 January 2005 Profit for the year Issue of share capital under share option scheme Balance at 31 December 2005
170 681 -
735 857 -
2 978 457 49 906 593
3 884 995 49 906 593
5 317 175 998 175 998 -
1 875 772 2 611 629 2 611 629 -
52 885 050 52 885 050 264 512 104
1 881 089 55 672 677 55 672 677 264 512 104
1 797 177 795
3 082 518 5 694 147
317 397 154
3 084 315 323 269 096
35
Cash Flow Statement

Inflation Adjusted
Notes 2005 $000 2004 $000
Historical Cost
2005 $000 2004 $000
CASH FLOWS FROM OPERATING ACTIVITIES (Loss)/profit from operations Non-cash items - Depreciation - Deferred foreign currency differences written off - Profit on disposal of property, plant and equipment - Deferred expenditure M-Block - Monetary adjustment - Write-off of deferred expenditure: M - Block Operating cash flow before changes in working capital Increase in inventory Increase in deferred foreign currency differences Decrease/(increase) in receivables (Decrease)/increase in payables Cash flow utilised from operations (136 150 362) 611 248 727 (8 104 297) (1 106 581 662) (639 587 594) (194 792 071) (574 982 836) 280 517 507 (469 305 644) (1 598 150 638) 102 439 797 606 931 898 17 831 011 (61 795) ( 13 877 221) (225 869 123) 7 238 028 494 632 595 (570 286 136) (424 580 464) (446 475 641) 624 744 823 270 943 297 1 333 688 (101 125) 272 175 860 (257 023 022) (937 656 575) (359 456 461) 265 568 051 79 250 454 525 669 1 117 043 (85 531) (90 199) 453 434 81 170 870 (64 017 541) (61 906 725) (90 275 045) 110 681 994 (24 346 447)
(321 964 823) (1 016 392 147)
Interest paid Interest received Income tax paid Net Cash flows utilised from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment Disposal of property, plant and equipment Net cash flows from investing activities Net cash flows before financing activities CASH FLOWS FROM FINANCING ACTIVITIES Shares issued Increase in loans Loans repaid Decrease/(increase) in loans receivable
(180 408 984) 286 200 176 (12 240 315) (1 504 599 761)
(288 723 041) 230 733 886 (24 184 305) (404 138 283)
(96 247 296) 155 763 665 (2 957 054) (959 832 832)
(32 819 007) 22 009 820 (1 453 341) (36 608 975)
(219 002 853) (219 002 853) (1 723 602 614)
(237 053 937) 1 253 274 (235 800 663)
(79 682 004) (79 682 004)
(24 936 818) 105 000 (24 831 818) (61 440 793)
(639 938 946) (1 039 514 836)
6 641 500 1 653 487 288 (44 861 165) 540 641 1 615 808 264
12 935 029 956 083 748 (258 029 735) (39 161) 710 949 881 71 010 935
3 084 315 1 048 756 368 (11 497 085) 59 316 1 040 402 914 888 078
1 881 089 102 786 961 (28 148 529) (49 312) 76 470 209 15 029 416
Increase in cash and cash equivalents Represented by: Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year
(107 794 350)
15
127 233 999 19 439 649 (107 794 350)
56 223 064 127 233 999 71 010 935
18 551 571 19 439 649 888 078
3 522 155 18 551 571 15 029 416
36
Notes to the Financial Statements

1 ACCOUNTING POLICIES The principal accounting policies adopted by the Company applied on a basis consistent with the previous year are as follows: 1.1 ACCOUNTING POLICIES The financial statements are presented in Zimbabwean dollars and are prepared in accordance with and comply with International Financial Reporting Standards. They are based on the historical cost and are restated to take account of the effects of inflation in accordance with the International Accounting Standard (IAS) 29: Financial Reporting in Hyperinflationary Economies. The existence of certain hyperinflationary conditions, as identified by IAS 29, was formally identified by the Public Accountants and Auditors Board in November 1999. The application of IAS 29 was made effective for the financial periods beginning on or after 1 January 2000. International Accounting Standard 29 (IAS 29), "Financial Reporting in Hyperinflationary Economies" requires that the financial statements prepared in the currency of the hyperinflationary economy be stated in terms of the measuring unit current at the balance sheet date, and that corresponding figures for the previous period be restated in the same terms. One characteristic that necessitates the application of IAS 29 is a cumulative three-year inflation rate approaching or exceeding 100%. The inflation-adjusted results were calculated by means of conversion factors derived from the Zimbabwe Consumer Price Index (CPI) given below: Dates 31 December 2005 31 December 2004 31 December 2003 Indices 48205.6 7028.7 3019.9 Conversion Factors 1.0000 6.8584 15.9626
at amounts current at the balance sheet date and components of shareholders' equity are restated by applying the relevant monthly conversion factors. Additions to equipment in the year of acquisition are restated using the relevant conversion factors. Comparative financial statements are restated using general inflation indices in terms of the measuring unit, current at the latest balance sheet date. All items in the income statement are restated by applying the relevant monthly, or year-end conversion factors. 1.2 REVENUE RECOGNITION Revenue is recognised upon delivery of products and customer acceptance net of Value Added Tax and discounts. Other revenue earned by the Company is recognised on the following basis: Interest income - as it accrues taking into account the effective yield on the asset unless collectibility is in doubt. Dividend income - when the shareholder's right to receive payment is established. 1.3 PROPERTY, PLANT AND EQUIPMENT All property, plant and equipment is initially recorded at cost. Land and buildings are subsequently shown at fair value, based on valuations by external independent valuers, less subsequent depreciation for property. All other property, plant and equipment is stated at historical cost or valuation, less accumulated depreciation. Increases in the carrying amount arising on revaluation are credited to capital reserves in shareholders' equity. Decreases that offset previous increases of the same asset are charged against the capital reserve: all other decreases are charged to the income statement. Depreciation Land, capital work in progress and pre-stripped overburden are not depreciated. All other property, plant and equipment are depreciated on a straight-line basis or amortised at rates estimated to write off the cost or valuation of such assets over their expected useful lives.
The main procedures applied for the above-mentioned restatement are as follows: Financial statements prepared in the currency of a hyperinflationary economy are stated in terms of the measuring unit current at the balance sheet date, and corresponding figures for the previous period are restated in the same terms. Monetary assets and liabilities that are carried at the balance sheet date are not restated because they are already expressed in terms of the monetary unit current at the balance sheet date. Non-monetary assets and liabilities that are not carried
37
Notes to the Financial Statements (continued)

The expected useful lives are as follows:
trade date accounting method. - Financial instruments are initially measured at cost, which includes transaction costs. Subsequent to initial recognition these instruments are measured as set out below: 1.5.1 Investments Marketable securities are carried at market value, which is calculated by reference to quoted selling prices at the date of business on the balance sheet date. Other investments are shown at fair value. Fair value adjustments are recognised in the income statement. Changes in fair value of investments designated as available for sale are recognised directly in equity. 1.5.2 Trade receivables Trade receivables are carried at anticipated realisable value. An estimate is made for doubtful receivables based on a review of all outstanding amounts at the year end. Bad debts are written off during the year in which they are identified. 1.5.3 Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held on call with banks, and investments in money market instruments, net of bank overdrafts. In the balance sheet, bank overdrafts are included in borrowings and current liabilities. 1.6 FOREIGN CURRENCIES Foreign currency transactions in the Company are accounted for at the exchange rates prevailing at the date of the transaction: gains and losses resulting from the settlement of such transaction and from the translation of monetary assets and liabilities denominated in foreign currencies, are recognised in the income statement. 1.7 OPENCAST PRE-STRIPPED OVERBURDEN Pre-stripped overburden represents the cost of overburden removed to expose coal and is capitalised during the course of development. The portion relating to reserves expected to be mined in the next 12 months is transferred to current assets and is charged to production as the coal is mined.
Impairment Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. Gains and losses on disposal of property, plant and equipment are determined by reference to their carrying amount and are taken into account in determining operating profit. On disposal of revalued assets, amounts in capital reserves relating to that asset are transferred to retained earnings. Interest costs on borrowings to finance the construction of property, plant and equipment are capitalised, during the period of time that is required to complete and prepare the property for its intended use, as part of the cost of the asset. 1.4 INVESTMENT PROPERTIES Investment properties are treated as long-term investments and carried at fair value determined by external independent valuers. Investment properties are not subject to depreciation. Increases in their carrying amount are credited to the income statement. Decreases that offset previous increases of the same asset are charged to the income statement. On disposal of an investment property, the difference between the net disposal proceeds and the carrying amount is charged or credited to the income statement; any amounts on capital reserves relating to that investment property are transferred to retained earnings. 1.5 FINANCIAL INSTRUMENTS - Financial instruments are initially recognised using the
38

1.8 INVENTORIES Stores stocks Stores are valued at the lower of weighted average cost and net realisable value. Provision is made for obsolete items. Production stocks Stocks of coal, coke and coke by-products are stated at the lower of cost, determined on an average cost of production basis, and net realisable value. 1.11 DEFERRED TAXATION Deferred income tax is provided, using the liability method, for all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. Currently enacted tax rates are used to determine deferred income tax. The principal temporary differences arise from depreciation on property, plant and equipment, revaluations of certain non-current assets and tax losses carried forward. Deferred tax assets relating to the carry forward of unused tax losses are recognised to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be utilised. 1.12 LEASES Leases of property, plant and equipment, where the Company assumes substantially all the benefits and risks of ownership, are classified as finance leases. Finance leases are capitalised at the estimated present value of the underlying lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance charge is charged to the income statement over the lease period. The property, plant and equipment acquired under finance leasing contracts is depreciated over the useful life of the asset. Leases of assets, under which all the risks and rewards
of ownership are effectively retained by the lessor, are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place. 1.13 EMPLOYEE BENEFITS Pension and retirement scheme The Company is a member of the Mining Industry Pension Fund, which is independently administered as a defined contribution scheme. All full-time permanent employees are members and the scheme provides for contributions by both employer and employee. The Company's contributions to the defined contribution pension plans are charged to the income statement in the year to which they relate. The Company and all employees must contribute to the National Social Security Authority statutory pension and benefits scheme, which is a defined contribution scheme. Equity compensation benefits The share option scheme allows directors and employees to acquire shares of the Company. The option exercise price equals the market price of the underlying shares at the date of the grant and consequently no compensation cost or obligation is recognised. When the options are exercised equity is increased by the amount of the proceeds received. 1.14 PROVISIONS Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligations and a reliable estimate of the amount of the obligations can be made. Employee entitlements to annual leave and long-service leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave and long-service leave as a result of services rendered by employees up to balance sheet date.
39

2 DISCONTINUING OPERATION M-Block Mine was scheduled to close in June 2004 pursuant to a plan for discontinuance announced on 24 June 2003. The mine was, however, closed in October 2004. All practicable assets were transferred to the new 3 Main Underground Mine which was commissioned in 2005.
Inflation Adjusted
2005 $000 2004 $000
Historical Cost
2005 $000 2004 $000
Discontinuing operation costs recognised in financial statements
7 238 028
453 434
Results attributable to M-Block Revenue Expenses
752 900 611 (460 646 382)
70 569 817 (44 730 409)
Pre-tax profit Taxation Profit after tax
292 254 229 (75 255 466) 216 998 763
25 839 408 (6 653 648) 19 185 760
Discontinuing operation Discontinuing operation costs related to the anticipated closure of M-Block mine in 2004. Liability for discontinuing operation costs Balance brought forward 1 January 2005 Increase in provision Monetary adjustment Balance carried forward 31 December 2005 Total liability Short-term portion transferred to current liabilities Long-term liability 9 369 274 (252 813) (7 851 483) 1 264 978 1 264 978 (1 264 978) 23 246 495 (618 620) (13 258 601) 9 369 274 9 369 274 (9 369 274) 1 366 103 (101 125) 1 264 978 1 264 978 (1 264 978) 1 456 302 (90 199) 1 366 103 1 366 103 (1 366 103) -
Deferred expenditure Balance brought forward 1 January 2005 Charge to income statement Balance carried forward 31 December 2005 7 238 028 (7 238 028) 453 434 (453 434) -
The deferred expenditure was amortised over the remaining useful life of M-Block, starting in January 2003 ending in October 2004.
40

Inflation Adjusted
2005 $000 2004 $000
Historical Cost
2005 $000 2004 $000
3 OTHER OPERATING INCOME Exchange gains Profit on disposal of property, plant and equipment Proceeds from sale of scrap Gas plant profit Profit on Colliery Motors 276 979 815 3 287 970 31 971 312 1 737 453 313 976 550 4 PROFIT/(LOSS) FROM OPERATIONS Profit/(loss) from operations is stated after charging: Recoveries and write-downs of deferred foreign currency differences Audit fees Contributions to the Mining Industry Pension Fund and National Social Security Authority: current service costs Depreciation of property, plant and equipment Directors' emoluments - fees in respect of services as directors - managerial services Doubtful debts provision and after crediting: Dividends received Doubtful debts provision Sale of scrap Profit on disposal of property, plant and equipment Provisions: Net foreign currency gains 4.1 STAFF COSTS Wages and salaries Contribution to Mining Industry Pension Fund Contribution to National Social Security Authority 1 173 636 140 27 454 592 5 142 508 1 247 222 151 56 190 322 7 498 359 430 513 295 9 779 392 1 479 897 133 822 258 6 368 129 899 049 405 448 151 705 326 3 287 970 276 979 815 128 663 61 794 (13 264 575) 396 529 72 222 531 704 608 201 085 993 11 427 85 531 (442 710) (13 264 575) 61 795 4 265 503 12 157 177 3 219 900 201 085 993 704 608 14 434 255 764 013 216 988 869 (442 710) 85 531 115 396 328 892 87 109
2 774 087 32 597 100 611 248 727 2 036 264 3 524 233 156 180 863
34 297 358 3 518 350 63 688 680 606 931 898 1 395 985 3 604 244 400 734 359
2 500 000 11 259 288 1 333 688 917 000 1 468 412 31 094 759
4 028 404 460 000 7 267 178 525 669 166 175 409 321 55 842 108
The average number of employees during the year was 3 150 (2004: 3 298) 5 NET FINANCE INCOME/(COSTS) Interest payable Interest receivable ( 180 408 984) 286 200 176 105 791 192 6 IMPAIRMENT REVERSAL Property, plant and equipment 128 446 878 101 573 486 ( 288 723 041) 230 733 886 ( 57 989 155) (96 247 296) 155 763 665 59 516 369 (32 819 007) 22 009 820 ( 10 809 187)
This impairment has arisen in respect of the change in the Zimbabwe Dollar estimated market value due to the depreciation of the local currency. This reverses impairment losses recognised on the same assets in previous accounting periods. As a result of the reversal the deferred tax credit in the income statement has decreased by $ 33 075 071 000.
41

Inflation Adjusted
2005 $000 2004 $000
Historical Cost
2005 $000 2004 $000
7 TAXATION 7.1 CREDIT/(CHARGE) FOR THE YEAR: Income taxation Deferred taxation (9 209 834) 36 008 904 26 799 070 7.2 TAXATION RECONCILIATION: Accounting profit Notional tax thereon at a rate of 25.75% Tax effect of: Permanent differences 98 087 708 25 257 585 1 541 485 26 799 070 146 024 128 (37 601 212) (95 560 793) (133 162 005) 330 459 666 85 093 364 (151 040 926) (65 947 562) 68 441 267 (17 623 626) (911 048) (18 534 674) (23 825 666) (109 336 339) (133 162 005) (9 209 834) (56 737 728) (65 947 562) (3 473 942) (15 060 732) (18 534 674)
The applicable tax rate for the future which has been used for the calculation of deferred taxation is 25.75% 7.3 DEFERRED TAXATION CHARGE (Charged)/credited to income statement 7.4 DEFERRED TAXATION LIABILITY Arising on temporary differences from the following sources: Property, plant and equipment Sundry temporary differences 902 488 587 ( 11 425 591) 891 062 996 923 104 457 3 967 444 927 071 901 71 895 985 (14 394) 71 881 591 15 756 060 (695 328) 15 060 732 36 008 904 (109 336 339) (56 737 728) (15 060 732)
42

Inflation Adjusted
2005 $000 2004 $000
Historical Cost
2005 $000 2004 $000
8 EARNINGS PER SHARE 8.1 BASIC Net profit attributable to shareholders Weighted average number of ordinary shares in issue Basic earnings per share 124 886 778 176 979 70 566 12 862 123 171 419 7 503 264 512 104 176 979 149 460 49 906 593 171 419 29 114
Basic earnings per share is calculated by dividing the net profit attributable to shareholders by the weighted average number of ordinary shares in issue during the year, excluding the average number of ordinary shares purchased by the Company and held as treasury shares. 8.2 DILUTED For diluted earnings per share the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The Company has one category of dilutive potential ordinary shares being share options granted to employees. In diluted earnings per share the share options calculation is done to determine the number of shares that could have been acquired (determined as the average annual share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share options. This calculation serves to determine the unpurchased shares to be added to the ordinary shares outstanding for the purpose of computing the dilution; for the share option calculation no adjustment is made to net profit. For the current year, shares under option scheme had an effect on the adjusted weighted average number of shares in issue as the average option price was lower than the average market price. Net profit used to determine diluted earnings per share Weighted average number of ordinary shares in issue Adjustments for share options Weighted average number of ordinary shares for diluted earnings per share Diluted earnings per share 8.3 HEADLINE EARNINGS PER SHARE Headline earnings per share is calculated by dividing the headline earnings shown below by the number of shares in issue during the year: Profit after taxation Non-recurring items: Discontinuing operation Profit on disposals of property, plant and equipment Sale of scrap Impairment reversal (net of tax) 124 886 778 3 287 970 (95 371 807) (92 083 837) Headline earnings/(loss) 8.3.1 Basic 8.3.2 Diluted 32 802 941 18 535 18 450 12 862 123 7 238 028 (61 794) (75 418 313) (68 242 079) (55 379 956) (32 307) (32 048) 264 512 104 704 608 704 608 265 216 712 149 858 149 175 49 906 593 453 434 (85 531) 367 903 50 274 496 29 328 29 093 124 886 778 176 979 810 177 789 70 244 12 862 123 171 419 1 385 172 804 7 443 264 512 104 176 979 810 177 789 148 779 49 906 593 171 419 1 385 172 804 28 880
43

Freehold Land & Buildings $000 Permanent Works $000 Plant Machinery & Movables $000 Motor Vehicles $000 Capital Work in Progress $000 Coal Mining & Other Rights $000 Pre-Stripped Overburden $000 Total
$000
9 PROPERTY PLANT , AND EQUIPMENT 9.1 INFLATION ADJUSTED

Cost or valuation At 31 December 2004 Cost Additions Pre-stripped overburden Transfer to current assets Impairment reversal Transfers At 31 December 2005 Accumulated depreciation At 31 December 2004 Current year charge At 31 December 2005 Net book value At 31 December 2005
2 229 241 516 2 229 241 516
285 750 002 8 671 789 914 128 446 878 49 112 794 266 485 159 334 862 796 9 066 721 951
421 300 992 224 629 015 - 219 002 853 20 969 974 (336 567 927) 442 270 966 107 063 941
14 803 029 14 803 029
160 012 043 (160 012 043) -
11 847 514 468 219 002 853 160 012 043 (160 012 043) 128 446 878 12 194 964 199
995 015 468 74 108 935 1 069 124 403
125 158 093 7 493 035 331 10 665 459 521 060 228 135 823 552 8 014 095 559
390 155 992 5 044 738 395 200 730
9 032 884 369 367 9 402 251
9 012 397 768 611 248 727 9 623 646 495
1 160 117 113
199 039 244 1 052 626 392
47 070 236
107 063 941
5 400 778
2 571 317 704
9.2 INFLATION ADJUSTED Cost or valuation At 31 December 2003 Cost 2 226 657 067 Additions Pre-stripped overburden Disposals Transfer to current assets Impairment reversal Transfers 2 584 449 At 31 December 2004 Accumulated depreciation At 31 December 2003 Current year charge Disposals At 31 December 2004 Net book value At 31 December 2004 918 431 263 76 584 205 995 015 468 114 289 650 6 978 435 473 387 223 404 10 868 443 514 599 858 4 879 220 - (1 946 632) 125 158 093 7 493 035 331 390 155 992 9 032 712 172 9 032 884 8 407 412 502 606 931 898 (1 946 632) 9 012 397 768 2 229 241 516
285 750 002 8 547 679 413 409 019 897 28 115 750 14 803 029 94 195 136 11 606 220 294 - 237 053 937 237 053 937 - 359 703 354 359 703 354 - (3 138 113) (3 138 113) - (453 898 490) (453 898 490) - 101 573 486 101 573 486 22 537 015 15 419 208 (40 540 672) 285 750 002 8 671 789 914 421 300 992 224 629 015 14 803 029 - 11 847 514 468
1 234 226 048
160 591 909 1 178 754 583 31 145 000 224 629 015
5 770 145
2 835 116 700
44

Freehold Land & Buildings $000 Permanent Works $000 Plant Machinery & Movables $000 Motor Vehicles $000 Capital Work in Progress $000 Coal Mining & Other Rights $000 Pre-Stripped Overburden $000 Total
$000
9.3 HISTORICAL COST Cost or valuation At 31 December 2004 Valuation Cost Additions Pre-stripped overburden Disposals Transfer to current assets Impairment reversal Transfers At 31 December 2005 Valuation Cost
264 578 260 853 525 431 264 578 260 853 525 431
23 310 48 476 9 350 496 9 422 282 23 310 9 398 972 9 422 282
615 165 3 849 742 31 661 348 36 126 255 615 165 35 511 090 36 126 255
1 519 554 3 487 528 5 007 082 5 007 082 5 007 082
24 269 400 35 182 632 59 452 032 59 452 032 59 452 032
1 988 1 988 1 988 1 988
158 708 731 (158 708 731) -
903 053 29 950 013 79 682 004 158 708 731 (158 708 731) 110 535 070 903 053 109 632 017 110 535 070
Accumulated depreciation At 31 December 2004 Current year charge Disposals 153 933 18 970 22 734 41 098 1 966 881 932 738 239 653 340 857 1 238 25 2 384 439 1 333 688 -
At 31 December 2005 Net Book Value At 31 December 2005 9.4 HISTORICAL COST Cost or valuation At 31 December 2003 Valuation Cost Additions Pre-stripped overburden Disposals Transfer to current assets Transfers At 31 December 2004 Valuation Cost
172 903 352 528
63 832 9 358 450
2 899 619 33 226 636
580 510 4 426 572
59 452 032
1 263 725
3 718 127 106 816 943
264 578 76 834 184 019 525 431 264 578 260 853 525 431
23 310 48 476 71 786 23 310 48 476 71 786
615 165 2 723 161 1 126 581 4 464 907 615 165 3 849 742 4 464 907
515 203 (28 973) 1 033 324 1 519 554 1 519 554 1 519 554
1 676 506 24 936 818 (2 343 924) 24 269 400 24 269 400 24 269 400
1 988 1 988 1 988 1 988
842 788 36 958 453 (37 801 241) -
903 053 5 884 956 24 936 818 36 958 453 (28 973) (37 801 241) 30 853 066 903 053 29 950 013 30 853 066
Accumulated depreciation At 31 December 2003 Current year charge Disposals At 31 December 2004 Net book value At 31 December 2004 140 763 13 170 153 933 371 498 20 451 2 283 22 734 49 052 1 566 481 400 400 1 966 881 2 498 026 139 366 109 791 (9 504) 239 653 1 279 901 24 269 400 1 213 25 1 238 750 1 868 274 525 669 (9 504) 2 384 439 28 468 627
45

Inflation Adjusted
2005 $000 2004 $000
Historical Cost
2005 $000 2004 $000
9.5 INVESTMENT PROPERTY Income and Expenditure amounts included in 2004 Income Statement Income Expenditure 9.6 COST At 31 December 2004 Accumulated depreciation At 31 December 2004 Charge for the year At 31 December 2005 Net book value At 31 December 2005 9.7 REVALUED ASSETS Historical cost convention Land, buildings, permanent works, plant, machinery and movables were revalued by independent professional valuers on 31 August 1991 at depreciated replacement value according to age, obsolescence and condition. The net book value of revalued assets included above that would have been included in the accounts had the assets been carried at cost less depreciation is as follows: 74 754 147 31 289 439 3 878 326 35 167 765 74 754 145 27 411 111 3 878 326 31 289 437 24 219 9 762 1 210 10 972 24 219 8 552 1 210 9 762 1 170 139 324 488 2 539 568 347 062 457 980 127 001 264 282 36 117
39 586 382
43 464 708
13 247
14 457
Historical Cost
Cost Accumulated Depreciation Net book Value 2005 $000 Net book Value 2004 $000
Land and buildings Permanent works Plant and machinery and movables
34 994 23 584 201 962 260 540
28 189 15 776 165 816 209 781
6 805 7 808 36 146 50 759
7 636 8 391 38 530 54 557
Inflation Adjusted
2005 $000 2004 $000
Historical Cost
2005 $000 2004 $000
9.8 FULLY DEPRECIATED ASSETS The gross value of fully depreciated assets still in use is 5 512 416 121 3 588 990 027 1 135 164 728 994
46

Inflation Adjusted
2005 $000 2004 $000
Historical Cost
2005 $000 2004 $000
10 INVESTMENTS - Unquoted Percentage Holding The investments are shown at cost less amounts written off. Clay Products Limited Coal and Allied Industries Limited (dormant) Zimchem Refiners (Private) Limited 49% 100% 44% 4 330 295 47 727 8 223 785 12 601 807 11 LOANS RECEIVABLE DUE IN MORE THAN ONE YEAR Medium term loan - related party - Loan to Clay Products Limited Housing and vehicle loans to officers of the Company - Balance at 31 December 2004 - less repaid during the year - balance at 31 December 2005 Staff debtors Total loans Short-term loans receivable portion transferred to current assets Loans receivable in more than one year Housing loans are secured, bear interest at 7% per annum and are repayable over periods ranging between two and twenty eight years. Motor vehicle loans bear interest at 16% per annum and are repayable over periods ranging between three and five years. 12 INVENTORY Stores stocks Production stocks - Coal - Coke - Coke by - products 329 155 775 2 057 310 22 444 241 353 657 326 249 163 010 4 661 452 41 618 777 1 858 295 445 097 139 105 511 1 489 936 16 254 477 156 849 924 26 963 326 619 219 5 528 564 247 33 111 356 22 844 22 844 22 844 156 672 158 158 158 406 813 563 485 135 255 428 230 22 844 22 844 22 844 22 844 10 10 10 59 316 82 160 19 721 62 439 4 330 295 47 727 8 223 785 12 601 807 555 152 15 053 15 760 555 152 15 053 15 760 12 601 807 12 601 807 15 760 15 760
47

Inflation Adjusted
2005 $000 2004 $000
Historical Cost
2005 $000 2004 $000
13 DEFERRED FOREIGN CURRENCY DIFFERENCES Balance at 31 December 2004 Exchange losses for the year Balance at 31 December 2005 61 906 725 937 656 575 999 563 300 424 580 464 424 580 464 61 906 725 937 656 575 999 563 300 61 906 725 61 906 725
In terms of an agreement between the Company and the Zimbabwe Power Company (ZPC) as regards the supply and purchase of coke ovenrich gas, the exchange losses that arise on the uncovered portion of the coke oven gas pipeline loans will be recovered in full from ZPC by means of a price mechanism. These losses will be recognised in the income statement over the terms of the related loans. 14 RECEIVABLES AND PREPAYMENTS Trade receivables Deposits and prepayments 454 386 645 14 310 262 468 696 907 Concentration of credit risk Included in trade receivables are amounts totalling $ 449 999 084 000 owing to the Company by major parastatals (2005 Historical cost $ 105 786 613 000; 2004 Inflation adjusted $ 725 526 364 000). 15 CASH AND CASH EQUIVALENTS Bank and cash balances Bills and acceptances credits Overdrafts 47 750 426 (28 310 777) 19 439 649 16 SHARE CAPITAL Authorised 180 000 000 ordinary shares of $1 each Issued and fully paid 108 123 347 Ordinary shares of $1 each at 31 December 2004 1 797 000 Issued during the year under the share option scheme 110 237 432 Ordinary shares of $1 each at 31 December 2005 67 557 568 A Ordinary shares of $1 each at 31 December 2005 180 000 180 000 180 000 180 000 145 673 445 (17 906 940) (532 506) 127 233 999 47 750 426 (28 310 777) 19 439 649 21 240 166 (2 610 952) (77 643) 18 551 571 746 675 704 2 538 710 749 214 414 454 386 645 14 310 262 468 696 907 108 870 285 370 161 109 240 446
108 440 1 797 110 237 67 558 177 795
103 123 5 317 108 440 67 558 175 998 3 687 672 938 3 687 848 936
108 440 1 797 110 237 67 558 177 795 177 795
103 123 5 317 108 440 67 558 175 998 175 998
Adjustment to share capital
3 687 676 901 3 687 854 696
48

16.1 In terms of an ordinary resolution of members passed on 26 October 1993, the unissued shares are held at the disposal of the Directors who may, at any time, issue them on such terms and conditions as they see fit, subject to the limitations of the Companies Act (Chapter 24:03) and the relevant Stock Exchange Regulations. A ordinary shares rank pari passu with ordinary shares in all respects except that they are not quoted on any stock exchange. 16.2 In terms of the Hwange Colliery Company Share Option Scheme, the Directors may grant options up to a maximum of 2 205 000 ordinary shares. The options granted are exercisable within a period of 2 months from the date of grant and the issue price is the closing share price at the Zimbabwe Stock Exchange (ZSE) on the day preceding the Annual General Meeting.
2005 Shares
2004 Shares
16.3 THE NUMBER OF SHARES AVAILABLE FOR THE GRANTING OPTIONS Balance at 31 December 2004 New scheme 5 965 160 8 036 000 14 001 160 Options granted Options lapsed (8 036 000) 7 648 675 (387 325) Balance of shares available for further granting of options 16.4 THE NUMBER OF SHARES UNDER OPTION GRANTED BY THE DIRECTORS Balance at 31 December 2004 Options granted Options lapsed Options exercised Cancelled shares Options granted but not yet exercised 16.5 ANALYSIS OF OPTIONS GRANTED BUT NOT YET EXERCISED The original share option scheme, which had a tenure of 10 years, expired on the 30th of June 2005. As a result of this 1 285 105 share options granted under this share option scheme but not yet exercised lapsed on the 30th of June 2005 1 385 105 8 036 000 (7 648 675) (1 797 430) 25 000 2 060 105 7 701 000 (3 059 000) (5 317 000) 1 385 105 13 613 835 2 906 160 7 701 000 10 607 160 (7 701 000) 3 059 000 (4 642 000) 5 965 160
49

2005 Shares
2004 Shares
16.6 DIRECTORS' INTERESTS At 31 December 2005 the Directors held the following beneficial and non-beneficial ordinary shares. No changes to the shareholdings have taken place since the end of the financial year. Dr G Dzinomwa Eng G S Mlilo Mr J Nqindi Mr T Kwashirai Mr T E N Chigudu Mr J Goromonzi 50 000 50 000 3 935 002 133 000 50 000 50 000 4 268 002 16.7 BORROWING POWERS The total borrowing powers of the Company may not exceed an amount equal to three times the aggregate of the nominal amount of the issued and paid-up capital and the capital, and revenue reserves of the Company per Articles of Association paragraph 60, registered with the Registrar of Companies on 21 April 1992. 25 000 25 000 3 029 248 25 000 25 000 25 000 3 154 248
Inflation Adjusted
2005 $000 2004 $000
Historical Cost
2005 $000 2004 $000
17 NON-DISTRIBUTABLE CAPITAL RESERVES 17.1 SURPLUS ON REVALUATION OF PROPERTY, PLANT AND EQUIPMENT Balance at 31 December 2005 17.2 TRANSFER IN TERMS OF THE COAL PRICE AGREEMENT Representing 25% of the profit after taxation: Balance at 31 December 2004 Balance at 31 December 2005 The coal price agreement expired in 1995 and was not renewed. Consequently, no further transfers have been made to this account. 17.3 SHARE PREMIUM ARISING ON ISSUE OF ORDINARY SHARES Under the share option scheme Balance at 31 December 2004 Share premium arising on issues during the year Balance at 31 December 2005 Total capital reserves at 31 December 2005 14 072 487 6 635 740 20 708 227 1 868 935 909 1 176 037 12 896 450 14 072 487 1 862 300 169 1 880 214 3 082 518 4 962 732 5 694 147 4 442 1 875 772 1 880 214 2 611 629 1 848 227 682 1 848 227 682 1 848 227 682 1 848 227 682 451 673 451 673 451 673 451 673 279 742 279 742
50

Inflation Adjusted
2005 $000 2004 $000
Historical Cost
2005 $000 2004 $000
18 LOANS PAYABLE WITHIN ONE YEAR 18.1 EXTERNAL LOANS A) West LB ZWD GBP Secured by Government undertaking (Note 8.1c). The loan was repayable in half-yearly instalments of GBP 714 286 each ending on 1 February 2004. Interest is charged at 7.55% per annum on both the unpaid interest and capital. The Company has been negotiating with the lender to reschedule the loans. Discussions are still ongoing but the Company hopes to pay off the loans over the course of 2006 and 2007. B) Commonwealth Development Corporation (CDC) ZWD GBP Secured by Government undertaking (Note 8.1c). The loan was repayable in half yearly instalments of GBP 750 000 each ending on 25 May 2004. Interest is charged at the rate of 9.3% per annum on both the unpaid interest and capital. The Company has been negotiating with the lender to reschedule the loans. Discussions are still ongoing but the Company hopes to pay off the loans over the course of 2006 and 2007. Whilst the Government of Zimbabwe has undertaken to ensure that the funds are available to repay the West LB and CDC loans, no repayments were made during 2005 due to the shortage of foreign currency in the country and cash flow constraints. The GBP amounts are rounded off to the nearest pound and are not expressed in thousands. 18.2 TOTAL LOANS 1 011 784 784 533 924 689 1 011 784 784 77 849 803 465 010 922 2 932 243 348 284 2 932 465 010 922 2 932 35 481 813 2 932 546 773 862 3 571 290 576 405 3 571 546 773 862 3 571 42 367 990 3 571
From which the following amounts are transferred to shortterm borrowings as they are repayable within one year. - West LB - Commonwealth Development Corporation (CDC) 546 773 862 465 010 922 1 011 784 784 18.3 In terms of the investment agreement with the CDC the Company has undertaken not to declare or pay any dividend: A) If the long-term debt/equity ratio exceeds 60 : 40 B) If the current ratio falls below 1.2 : 1 1.3:1 1.2:1 290 576 405 243 348 284 533 924 689 546 773 862 465 010 922 1 011 784 784 42 367 990 35 481 813 77 849 803
51

Inflation Adjusted
2005 $000 2004 $000
Historical Cost
2005 $000 2004 $000
18.4 INTEREST RATE RISK The Company's exposure to interest rate risk is spread as follows: On foreign loans On local facilities 19 PLARP/PRODUCTIVE SECTOR FUNDING Non-current PLARP - RBZ Current Time Bank of Zimbabwe Limited Barbican Holdings Limited Production Sector Funding PLARP - RBZ 77 089 484 37 731 903 37 731 903 This is the Parastatals and Local Authority Re-orientation Programme Funding secured from the Reserve Bank of Zimbabwe at an interest rate of 50% per annum. 20 PAYABLES Trade Interest accrued on losses Leave pay provisions Other creditors and accruals 142 867 319 6 000 000 62 924 939 179 215 220 391 007 478 629 772 260 48 566 674 8 108 350 173 865 838 860 313 122 142 867 319 6 000 000 62 924 939 179 215 220 391 007 478 91 825 022 7 081 347 1 182 252 25 350 806 125 439 427 68 583 949 10 267 600 78 851 549 78 851 549 77 089 484 37 731 903 37 731 903 10 000 000 1 497 085 11 497 085 11 497 085
7.55% - 9.3% 50.0% - 400.0%
Inflation Adjusted
2005 Sales $000 2005 Debtors $000
Historical Cost
2005 Sales $000 2005 Debtors $000
21 RELATED PARTIES Transactions and balances with related parties included in the financial statements for the year are as follows: Clay Products Limited Zimchem Refiners (Private) Limited 4 624 893 3 099 116 1 682 859 7 239 894 -
2005 Purchases $000
2005 Creditors $000
2005 Purchases $000
2005 Creditors $000
Clay Products Limited Transactions with related parties are on an arms-length basis.
1 670 847
913 177
52

Inflation Adjusted
2005 $000 2004 $000
Historical Cost
2005 $000 2004 $000
22 GEOGRAPHICAL SALES The Company operates in Zimbabwe. Income is generated from the following geographical areas: Sales within Zimbabwe Sales elsewhere in sub-Saharan Africa Total sales 1 824 872 068 709 933 452 2 534 805 520 2 943 857 703 740 229 192 3 684 086 895 712 147 418 276 786 226 988 933 644 303 182 120 71 012 573 374 194 693
Inflation Adjusted
2005 $000 2004 $000
Historical Cost
2005 $000 2004 $000
23 CAPITAL EXPENDITURE APPROVED Authorised and contracted - plant and machinery Authorised but not yet contracted - plant and machinery 142 663 994 1 894 142 214 2 036 806 208 384 774 051 1 174 277 635 1 559 051 686 142 663 994 1 894 142 214 2 036 806 208 56 102 639 171 217 560 227 320 199
Total capital expenditure will be financed from both external borrowings and internal resources.
53
Five-Year Record
Historical Cost
2005 $000 2004 $000 2003 $000 2002 $000 2001 $000
Share Performance Shares in issue ($ 000) Net asset value per share (cents) Earnings per share (cents) Return on shareholders' funds Share price at 31 December (cents) Number of shareholders Results Turnover ($ 000) Profit after tax ($ 000) Sales Coal tonnes Coke tonnes Tar - tonnes Benzole products - litres Coke oven gas - normal cubic metres Financial ratios Issued share capital ($ 000) Total reserves ($ 000) Shareholders' equity ($ 000) Deferred taxation ($ 000) Long-term liabilities ($ 000) Total funds employed ($ 000) Current assets to current liabilities Acid test (current assets excluding stock to current liabilities) Long and medium-term liabilities as a percentage of shareholders' equity (%) Number of employees 24 3 128 3 089 3 500 5 3 257 7 3 372 1.17:1 0.87:1 0.73:1 0.77:1 0.66:1 177 795 323 091 301 323 269 096 71 881 591 77 089 484 323 269 096 1.3:1 175 998 55 496 679 55 672 677 15 060 732 70 733 409 1.19.1 170 681 3 714 314 3 884 995 3 884 995 0.94:1 169 823 1 832 503 2 002 326 554 369 100 000 2 656 695 1.19:1 169 553 1 508 342 1 677 895 519 329 120 989 2 318 213 1.13:1 2 866 180 196 523 24 356 880 3 018 951 178 711 19 029 290 2 548 998 228 389 15 624 000 3 448 600 224 111 16 640 142 101 24 260 240 3 751 418 245 822 18 338 1 614 307 27 075 060 988 933 644 264 512 104 374 194 693 49 906 593 54 310 740 1 878 971 8 434 407 323 500 4 777 885 284 631 177 795 286 832 149 460 82 8000 175 998 40 190 29 114 134 2000 170 681 2 276 1 104 48 900 2467 169 823 1 179 191 16 800 2465 169 533 989 168 17 600 2622
54
Analysis of Shareholders
Top Five
1 2 3 4 5 Total
Shareholder Name
Country
Shares
GOVERNMENT OF ZIMBABWE EDWARDS NOMINEES (PRIVATE) LIMITED MESSINA INVESTMENTS LIMITED LONDON REGISTER NATIONAL SOCIAL SECURITY AUTHORITY
ZIM ZIM UK UK ZIM
67 555 968 27 494 966 22 400 000 12 516 576 10 037 744 140 005 254 37 789 746 177 795 000
38.00 % 15.46 % 12.60 % 7.04 % 5.65 % 78.75 % 21.25 % 100 %
Other shareholders
Portfolio Size of Shares

1 - 5 000 5 001 - 10 000 10 001 - 25 000 25 001 - 50 000 50 001 - 100 000 100 001 - 200 000 200 001 - 500 000 500 001-1 000 000 >1 000 000 Totals
Total Number of Shares

4 172 931 2 503 983 2 571 605 2 099 645 1 919 885 3 070 445 4 008 052 6 225 514 151 222 940 177 795 000
% of Issued Share Capital

2.36% 1.40% 1.45% 1.18% 1.08% 1.73% 2.25% 3.50% 85.05% 100%
Number of Shareholders
2 261 320 152 53 25 20 14 9 14 2 868
% of Shareholders
78.84% 11.16% 5.30% 1.85% 0.87% 0.70% 0.49% 0.31% 0.49% 100%
55
Analysis of Shareholders (continued)

Shareholding By
Total Number of Shares
% of Issued Share Capital
Number of Shareholders
% of Shareholders
OTHER ORGANISATIONS NOMINEES LOCAL FOREIGN COMPANIES NON-RESIDENTS LOCAL INDIVIDUAL RESIDENTS PENSION FUNDS EMPLOYEE SHARE TRUST LOCAL COMPANIES INVESTMENTS & TRUSTS NEW NON-RESIDENT NOMINEES FOREIGN FUND MANAGERS BANKS DECEASED ESTATES INSURANCE COMPANIES TOTALS
69 620 426 30 487 110 23 799 840 18 948 154 12 099 875 11 023 318 4 704 930 2 999 342 1 634 771 1 209 866 664 956 365 855 109 732 78 125 48 700 177 795 000
39.15% 17.15% 13.38% 10.66% 6.81% 6.20% 2.65% 1.69% 0.92% 0.68% 0.37% 0.21% 0.06% 0.04% 0.03% 100%
54 50 5 113 1 375 21 1 116 25 59 18 11 3 3 9 4 2 866
1.88% 1.74% 0.18% 3.94% 47.98 0.73% 38.94 0.87% 2.06% 0.63% 0.38% 0.11% 0.11% 0.31% 0.14% 100%
56
Administration and Advisory

Secretary Thembelani Kole Ncube Attorneys 1. Gula-Ndebele and Partners Legal Practitioners. 2nd Floor Intermarket Centre, Registered Office 17 Nelson Mandela Avenue, 7th Floor, Coal House, P Box 2870 Harare, .O. Zimbabwe 2. Mawere and Sibanda Legal Practitioners. Auditors Camelsa Chartered Accountants (Zimbabwe). Camelsa Business Park. 135 Enterprise Road, Highlands, P Box CY 2619 Harare, .O. Zimbabwe 3. Chihambakwe Mutizwa and Partners Legal Practitioners. Share Transfer Secretaries Corpserve (Private) Limited. 4th Floor Intermarket Centre, Cnr Kwame Nkrumah Avenue / First Street, Harare. Zimbabwe Bankers Computershare Registrars Limited. 11 Diagonal Street. Johannesburg 2001. South Africa 1. Barclays Bank of Zimbabwe Limited. 2. Commercial Bank of Zimbabwe Limited. 3. Merchant Bank of Central Africa Limited. 4. NMB Bank Limited. 5. Standard Chartered Bank Zimbabwe Limited. CAPITA IRG Plc Bourne House. 34 Beckenham Road, Beckenham, Kent BR3 4TU, United Kingdom Reporting and presentation currency : Zimbabwean Dollars 6. Zimbabwe Banking Corporation. 8th Floor, Regal Star House. 25 George Silundika Avenue, P Box 4316 Harare, Zimbabwe .O. 10th Floor, Southampton House, First Street / Kwame Nkrumah Avenue P Box CY1376 Causeway, .O. Harare, Zimbabwe 59 Kwame Nkrumah Avenue, P Box CY1009 Causeway, .O. Harare, Zimbabwe
Financial Statements reporting period : Year ended 31 December 2005
57
Proxy Form for Annual General Meeting

For use at the Eighty-Third Annual General Meeting of the Company to be held on Friday 30 June 2006 at 10:30 a.m. at 17 Nelson Mandela Avenue, Harare.
The Secretary Hwange Colliery Company Limited Registered Office 17 Nelson Mandela Avenue HARARE Zimbabwe
or by post to: The Secretary Hwange Colliery Company Limited P O Box 2870 HARARE Zimbabwe
I/We.......................................................................................................................................................................... of............................................................................................................................................................................... being the registered holder/s of.........................................................................................................ordinary shares in Hwange Colliery Company Limited do hereby appoint:1. .........................................................................................................................................................or failing him 2. .........................................................................................................................................................or failing him, the Chairman of the Annual General Meeting, as my/our proxy to vote on my/our behalf at the Eighty-Third Annual General Meeting of the Company which will be held at 17 Nelson Mandela Avenue, Harare on Friday, 30 June 2006 at 10:30 a.m. and at any adjournment thereof and to vote for me/us on my/our behalf or to abstain from voting as indicated below:
1. Adoption of 2005 annual financial statements 2. Re-election of Directors: S I Mutumbwa T Ndlovu T Savanhu R Sibanda (Ms) 3. Directors' Fees 4. Remuneration of Auditors 5. Appointment of Auditors
Signature of Shareholder................................................................
Date...............................................
NOTES
1. A Shareholder entitled to attend and vote may insert the name/s of one or more proxy/ies or the names of two alternative proxies of the shareholder's choice in the space provided with or without deleting the Chairman of the Annual General Meeting. Any such proxy, who need not be a shareholder of the Company, is entitled to attend, speak and vote in his stead. Should this space be left blank, the proxy will be exercised by the Chairman of the meeting.
2.
The person whose name appears first on the proxy form and is present at the meeting will be entitled to act as proxy to the exclusion of those whose names follow.
3.
A proxy is entitled to one vote by a show of hands and by a poll one vote in respect of each share held. A shareholder's instructions to the proxy must be indicated in the appropriate space.
4.
If a shareholder does not indicate on this instrument that his proxy is to vote in favour of or against any resolution or abstain from voting or gives contradictory instructions or should any further resolutions or any amendment/s which may be properly put before the Annual General Meeting be proposed, the proxy shall be entitled to vote as he/she thinks fit.
5.
Any alteration or correction made to this form must be initialled by the signatory/ies.
6.
The completion and lodging of this form will not preclude a shareholder from attending the Annual General Meeting and speaking and voting in person thereat to the exclusion of any proxy/ies appointed in terms hereof, should such shareholder wish to do so.
7.
Forms of proxy must be lodged with or posted to the Secretary, Hwange Colliery Company Limited, to be received not later than 48 hours before the time fixed for the meeting.
8.
The Chairman of the meeting may accept or reject any proxy form which is completed and/or received other than in accordance with these instructions.
CHANGE OF ADDRESS
If the address on the envelope of this letter is incorrect or has changed, please fill in the correct details below and return to the Secretary.
NAME
..........................................................................................................................................................................
ADDRESS:
.........................................................................................................................................................................
..........................................................................................................................................................................
..........................................................................................................................................................................
Notes
Notes

HWANGE - Ar - 05 42

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Hwange Colliery Company Limited Annual Report 2005

Towards Stakeholder Satisfaction

Coal being loaded into a Caterpillar 91 tonne hauler.

Hwange Colliery Company Limited Annual Report 2005

HWANGE HEAD OFFICE

Marketing & Public Relations

Bulawayo Liaison Office

MINING OPERATIONS SERVICES

Coal Processing & Coking Plant

Exploration & Technical Services

Finance & Information Systems

Towards Stakeholder Satisfaction

Organisational Vision, Mission and Strategic Objectives

OUR CORE VALUES

Safety, Health And Environment Statement

Hwange Colliery Company Limited Annual Report 2005

Quality Policy Statement

Towards Stakeholder Satisfaction

Financial Highlights (Historical)

Profit from operations

Basic earnings per share (cents)

Circulation of Annual Report, 31 May 2006

Annual General Meeting Friday, 30 June 2006;

Hwange Colliery Company Limited Annual Report 2005

By Order of the Board

T K NCUBE Secretary to the Board

Towards Stakeholder Satisfaction

Hwange Colliery Company Limited Annual Report 2005

Directorate and Management Team

F Chasi Dr G Dzinomwa T Kwashirai Mrs T T Mlobane S I Mutumbwa T Ndlovu J Nqindi Ms R Sibanda

EXECUTIVE MANAGEMENT TEAM

Towards Stakeholder Satisfaction

Tendai Savanhu Chairman

Dr Godfrey Dzinomwa Managing Director

Hwange Colliery Company Limited Annual Report 2005

Directorate Profiles (continued)

Fortune Chasi Non-Executive Director

Mrs Thandiwe T Mlobane Non-Executive Director

Ternard Kwashirai Non-Executive Director

Shingai I Mutumbwa Non-Executive Director

Towards Stakeholder Satisfaction

Directorate Profiles (continued)

Thabani Ndlovu Non-Executive Director

Ms Rosemary Sibanda Non-Executive Director

James Nqindi Non-Executive Director

Hwange Colliery Company Limited Annual Report 2005

Towards Stakeholder Satisfaction

Corporate Governance (continued)

DR G DZINOMWA Managing Director

Hwange Colliery Company Limited Annual Report 2005

Statement of Wealth Created

2 534 407 791 438 429 132 2 095 978 659

3 693 981 219 1 341 391 320 2 352 589 899

988 933 644 119 120 410 869 813 234

374 194 693 131 319 314 242 875 379

1 206 233 240

1 310 910 832

441 772 584

141 089 436

180 408 984

288 723 041

(26 799 070)