Unaudited FY 2013 results

Amsterdam, 13 February 2014

Unaudited FY 2013 results

New World Resources Plc ('NWR' or the 'Company') today announces its unaudited financial results for the full year 2013.

Financial summary

§ Revenues from continuing operations of EUR 850 million, down 28% on falling coal prices.

§ Coking coal average price of EUR 98/t, down 22%; Thermal coal average price of EUR 56/t, down 24%.

§ Cash mining unit costs[1] of EUR 78/t, up 10% on a 21% decline in production, down 14% on a stable production basis. Q4 2013 cash mining unit costs at EUR 68/t.

§ Selling and administrative expenses from continuing operations down 26% to EUR 165 million.

§ EBITDA from continuing operations of EUR (10) million. EUR 40 million EBITDA in Q4 2013 was positively impacted by the release of EUR 28 million provision for employee benefits.

§ Impairment charges of EUR 807 million recognised on continuing operations.

§ Loss from discontinued operations of EUR 56 million, including loss on disposal of EUR 65 million.

§ Basic loss per A share of EUR (3.62).

§ Underlying[2] basic loss from continuing operations per A share of EUR (0.86).

§ Year-end net debt of EUR 625 million, including cash of EUR 184 million.

§ Going concern basis of accounting applied in the expectation that capital restructuring (see below) will be successful; auditor's report likely to refer to the directors' description of the material uncertainty relating to the use of the going concern basis.

Operational summary

§ LTIFR[3] of 7.41, improvement of 3%. Regrettably, 2 miners lost their lives. Drive for fatality-free operations continues.

§ Coal production of 8.8Mt, and coal sales of 9.7Mt.

§ Coal sales mix of 48% coking and 52% thermal coal.

§ CAPEX of EUR 100 million for continuing operations, down 55%.

§ Inventories down 70% to 380kt.

§ Total headcount including contractors down 7%.

Update on liquidity and business optimisation steps

§ Targeted EUR 100 million of cash-enhancing measures delivered in full by YE 2013.

§ Sale of OKK for gross proceeds of EUR 95 million completed[4], EUR 7 million receipt deferred until March 2014.

§ Waivers and amendments in relation to ECA facility agreed.

§ Collective agreement with trade unions for 2014 - 2018 signed.

§ Non-binding Memorandum of Understanding on the closure of the Paskov mine signed with the Czech government.

FY 2014 Prices[5] and targets

§ Coking coal Q1 2014 average price agreed at EUR 91/t, down 7% on previous quarter.

§ Thermal coal FY 2014 average price for 80% of expected production locked in at EUR 54/t, down 4% on FY 2013.

§ Production and sales volume target of 9 - 9.5Mt.

§ Target of 55% - 60% coking coal in sales mix.

§ Maintenance CAPEX below EUR 100 million.

§ Further improvement in LTIFR towards the 2015 target of below 5.

§ Cash mining unit costs decreasing to the EUR 60/t run-rate by year-end, subject to Paskov's closure.

Review of NWR's capital structure

§ The Board initiated a review of NWR's capital structure on 22 January 2014.

§ The Company has commenced discussions with all of its stakeholders with a view to developing and implementing a capital structure that recognizes and respects the interests of all stakeholders.

§ Discussions include the Company's majority shareholder, BXR, who has indicated that it and its shareholders are prepared to invest new equity capital into a revised and satisfactory capital structure.

§ The Company has also commenced discussions to advisers to the Ad hoc committee of note holders, who represent holders of both the senior secured notes due 2018, senior unsecured notes due 2021 and cross-holders.

Update on review of NWR's mineral reserves and resources

§ For the Czech assets, JT Boyd has reported on a preliminary basis a total of 64 million tonnes of JORC compliant saleable (proven and probable) reserves as at 31 December 2013, down 65% from the JORC saleable reserves as at 31 December 2012 of 184 million tonnes.

§ For the Debiensko project in Poland, for which IMC is currently preparing a revised mineral resources and reserves report, it is probable that the previously reported reserves for Debiensko will be downgraded to resources.

Chairman's statement

Market conditions have remained challenging during the fourth quarter of last year, which was marked by a further 15 per cent decline in global coking coal spot prices. This has inevitably impacted the pricing for our coking coal in the first quarter of this year, down another 7 per cent on the previous quarter.

Throughout 2013 and into 2014 NWR's management has delivered on the initiatives that we launched last spring and has consistently executed our cost containment programme. As a result, our cash mining unit costs amounted to EUR 68/t in Q4 2013, administrative expenses decreased significantly year-on-year and EUR 100 million of cash-enhancing measures were realised (see table below).

Further important achievements in Q4 2013 included a) the successful completion of the divestment of our coke subsidiary OKK to the METALIMEX group for a gross EUR 95 million, b) agreement of additional waivers for the ECA loan, and c) the securing of a new five-year collective agreement with OKD's trade unions. These steps have strengthened our short-term liquidity, which nevertheless remains under pressure as a result of the current coal pricing environment.

Following the conclusion of the memorandum of understanding with the Czech Government as regards the Paskov mine, we are jointly with the Czech government exploring the possibility of keeping the high-cost Paskov mine open beyond the end of 2014. Any such scenario would have to be beneficial for all concerned and also compliant with EU rules regarding state aid. Discussions will continue through March and we will inform the market of the outcome as appropriate.

Our 2014 operational targets remain broadly unchanged: coal production of between 9 and 9.5 million tonnes, 55 - 60 per cent of coking coal in the sales mix, cash mining unit costs run-rate of EUR 60 per tonne achieved by the end of the year, lower overheads, less than EUR 100 million of maintenance CAPEX, and continuing improvements in the safety performance. Dale Ekmark, the newly appointed managing director of OKD and his team are working hard to achieve these targets.

Throughout what has been an extremely difficult year for everyone at NWR I am pleased to report that our safety performance in 2013 remained strong, with our key metric LTIFR improving by three per cent. Despite the on-going positive safety trend, it is with deepest regret that we report a loss of two of our miners at work during the year - an unacceptable result and we remain committed to achieving our ultimate target of fatality-free operations. Whilst the divestment of OKK has had an influence on our absolute LTIFR, our mines remain among the safest deep underground mines in Europe and the safety of our people remains our number one priority.

On 22 January 2014, we announced that a review of our mineral resources and reserves was underway. Independent third parties are conducting this review. John T. Boyd Company ('JT Boyd') is reviewing the Company's Czech assets and IMC-Montan Consulting GmbH ('IMC') is reviewing the Debiensko project in Poland.

For the Czech assets, having regard to the revised Life of Mine Plan, JT Boyd has reported on a preliminary basis a total of 64 million tonnes of JORC compliant saleable (proven and probable) reserves as at 31 December 2013. The 2013 JORC reserve figure for the Czech assets represents a 65 per cent decrease from the JORC saleable reserves as at 31 December 2012 of 184 million tonnes. This decrease principally relates to a downward adjustment of the Company's long-term coal prices of EUR 108 per tonne and EUR 57 per tonne respectively for coking and thermal coal.

In the context of the review, the Company has updated its Life of Mine Plan. The revised Life of Mine Plan excludes the Paskov mine after 2014, and part of the Karvina expansion project. In the revised Life of Mine Plan, the annual production of the Company declines progressively over the coming ten years: from the 2014 target of 9 - 9.5 million tonnes to around 4 million tonnes in 2021. At current long-term coal price assumptions, production beyond 2023 is not expected to exceed 2 million tonnes per annum.

For the Debiensko project, for which IMC is currently preparing a revised mineral resources and reserves report, it is probable that the previously reported reserves for Debiensko will be reclassified to resources principally due to a combination of an increase in the reporting requirements introduced in the 2012 JORC Code (which became effective 1 December 2013) and the downward adjustment of the Company's long-term coal price outlook. The Company is undertaking the additional geological investigations necessary to complete the ongoing feasibility study being undertaken by IMC.

The prolonged and unprecedented global pressure on both coking and thermal coal prices, the expiry of our RCF credit line and the likely downward revision of our coal resource and reserve balance (as a direct result of the deterioration in the long-term coal price outlook), triggered the Board's decision to initiate a review of NWR's capital structure on 22 January 2014.

The Company has commenced discussions with all of its stakeholders with a view to developing and implementing a capital structure that recognizes and respects the interests of all stakeholders. This includes the Company's majority shareholder, BXR, who has indicated that it and its shareholders are prepared to invest new equity capital into a revised and satisfactory capital structure. The Company has also commenced discussions to advisers to the Ad hoc Committee of note holders, who represent holders of both the EUR 500 million senior secured notes due 2018 and the EUR 275 million senior unsecured notes due 2021 (and those holders that hold both notes).

Once we have completed this process along with our ongoing operational efficiency improvements at OKD, we believe NWR's business will emerge from this very difficult period as a competitive player on the European hard coal market. We remain committed to our longer-term strategy to become Europe's leading miner and marketer of coking coal by 2017.

Gareth Penny, Executive Chairman of NWR

Summary tables[6]

Selected consolidated financial and operational data (continuing operations)

Coal segment

FY 2013 earnings call and webcast:

NWR's management will host an analyst and investor conference call on 13 February 2014 at 10:00 GMT (11:00 CET). The presentation will be made available via a live audio webcast on www.newworldresources.eu and then archived on the Company's website.

For those who would like to join the live call, dial in details are as follows:

UK and the rest of Europe +44 (0)20 3427 1905

USA +1 646 254 3367

The Netherlands +31 (0)20 716 8256

Czech Republic 800 701 229

Poland 00 800 121 4330

Access code 7795120

Contacts:

Investor Relations Media Relations

Tel: +31 20 570 2244 Tel: +420 225 282 451

Email: [email protected] Email: [email protected]

Website: www.newworldresources.eu

Notes to editors:

New World Resources Plc is a Central European hard coal producer. NWR produces quality coking and thermal coal for the steel and energy sectors in Central Europe through its subsidiary OKD, the largest hard coal mining company in the Czech Republic. NWR currently has several development projects in Poland and the Czech Republic, which form part of NWR's regional growth strategy.

In 2013 the Company announced a strategic outlook to reposition NWR into Europe's leading miner and marketer of coking coal by 2017.

NWR is listed in London, Prague and Warsaw. It is a constituent of FTSE Small Cap index.

New World Resources Plc

Consolidated statement of comprehensive income

The notes on pages 14 to 30 are an integral part of this condensed consolidated financial information.

New World Resources Plc

Consolidated statement of financial position

The notes on pages 14 to 30 are an integral part of this condensed consolidated financial information.

New World Resources Plc

Consolidated statement of cash flows

The notes on pages 14 to 30 are an integral part of this condensed consolidated financial information.

New World Resources Plc

Consolidated statement of changes in equity

The notes on pages 14 to 30 are an integral part of this condensed consolidated financial information.

1. Corporate Information

New World Resources Plc ('NWR' or the 'Company') is a public limited liability company with its registered office at One Silk Street, London EC2Y 8HQ, United Kingdom.

These consolidated financial statements comprise the Company and its subsidiaries (together the 'Group'). The Group is primarily involved in coal mining and coke production (classified as discontinued operations and disposed during the year). The objective of the Company is to act as a holding company and to provide management services for the Group.

2. Financial Results Overview

On 6 December 2013, the Group completed the sale of its entire Coke segment, represented by OKK Koksovny, a.s. ('OKK') and its results are presented as a discontinued operation for all periods presented.

Continuing Operations

Revenues. The Group's revenues decreased by 28% (26% on a constant currency basis), from EUR 1,179 million in 2012 to EUR 850 million in the year 2013. This is mainly attributable to lower realised prices for coking coal as well as thermal coal and lower sales volumes of coking coal following lower production.

Cost of sales. Cost of sales decreased from EUR 913 million to EUR 844 million or by 8% (5% on a constant currency basis) in 2013 compared to the year 2012. This is mainly attributable to:

§ lower production and less development work, resulting in lower consumption of mining material and spare parts as well as in lower provision for mining damages;

§ reduced number of contractors shifts, resulting in lower service expenses; and

§ reduction in headcount, resulting in lower personnel expenses.

Lower operating expenses were partly offset by a EUR 112 million year on year inventory impact driven by the Group selling higher volumes of low quality thermal coal from its inventories in 2013 compared to the year 2012, when the Group was producing on stock.

Selling expenses. Selling expenses decreased from EUR 118 million to EUR 86 million or by 27% (25% on a constant currency basis) in the year 2013, attributable to lower sales volumes and a change in the geographic composition of sales resulting in a decrease in transport costs.

Administrative expenses. Administrative expenses decreased from EUR 104 million to EUR 79 million or by 24% (22% on a constant currency basis) in 2013 principally as a result of lower personnel expenses by 29%.

EBITDA. 2013 saw a negative EBITDA from continuing operations of EUR 10 million, a decrease of EUR 220 million from EUR 210 million achieved in 2012, attributable mainly to the decrease in revenues that outweighed the decrease in operating expenses.

Impairment loss on property, plant and equipment. The current market environment, low prices of both coking coal and thermal coal and updated long term mine plan resulted in the Company undertaking an impairment review of its cash generating units and subsequently recognised an impairment charge of EUR 807 million on the Group's non-current assets to reflect its recoverable value. The impairment review was carried out per 30 June 2013 and 31 December 2013.

Underlying loss. The reported loss from continuing operations for the period is EUR 914 million. Excluding the impact of impairment charges, the underlying loss for the period from continuing operations would have been EUR 230 million.

Discontinued operations

The loss of discontinued operations for the period of EUR 56 million consists of profit from operating activities of EUR 9 million and loss on disposal of discontinued operations of EUR 65 million.

3. Basis of Presentation

The condensed consolidated financial statements (the 'financial statements') presented in this document are prepared:

§ for the year ended 31 December 2013, with the year ended 31 December 2012 as the comparative period; and

§ based on the recognition and measurement criteria of International Financial Reporting Standards as adopted by European Union ('adopted IFRS') and on the going concern basis that the Directors consider appropriate (see below).

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2013 and 2012. The financial information for 2012 is derived (and restated) from the statutory accounts for 2012, which have been delivered to the registrar of companies. The auditor has reported on the 2012 accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. However, we draw attention to the auditors' review report for the six month period ended 30 June 2013, which while unqualified, did include reference to an emphasis of matter in relation to the ability of the Group to continue as a going concern. The statutory accounts for 2013 will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement, and will be delivered to the registrar of companies in due course. The potential effects on the auditors' report is described under 'Going concern basis of accounting' below.

The financial information does not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements as at and for the year ended 31 December 2012, which are contained within the 2012 Annual Report and Accounts of the Company, available on the Group's website at www.newworldresources.eu.

Going concern basis of accounting

The Group manages its liquidity through cash (EUR 184 million (31 December 2012: EUR 267 million)) and receivable financing. In addition on 16 December 2013, the Group agreed revised terms for its amortising Export Credit Agency loan ('ECA Facility') (EUR 48 million at 31 December 2013), which included the suspension of the financial covenants thereunder until Q4 2014. Further information and requirements are described in section 10Borrowings, Liquidity and Capital Resources.

At the present market prices for coal, the Group is currently cash flow negative and the current low coal price environment has placed significant pressure on the Group's liquidity position and also on its solvency resulting in the Group having net liabilities of EUR 280 million at 31 December 2013. As a reaction to the continuing difficult trading conditions and price pressures in 2013, the Group implemented various measures to safeguard the Group's liquidity for the foreseeable future.

Irrespective of the above and absent the potential restructuring referred to below, the Directors anticipate that the Group will not be able to meet the revised requirements of the ECA Facility financial covenants when they are next tested after the end of Q4 2014 and will enter into further negotiation with its financiers with a view to either agreeing a further deferral of covenant testing under the ECA Facility or to negotiating replacement facilities. There can be no guarantee that it will be possible to either agree a further suspension of ECA Facility financial covenant testing or to agree replacement facilities. In that event the ECA Facility could be declared due and payable by the ECA Facility lenders.

On 17 September 2013, the Group announced the closure of the Paskov mine with the phasing and terms of the closure to be determined after discussions with the Czech Government and other stakeholders. On 6 January 2014, the Group and the Czech Government entered into a Memorandum of Understanding in a joint effort to minimise the negative social, regional and economic impact of the mine closure (see note 14Subsequent events and other information), and in particular to explore the option of OKD extending the operation of the mine until 31 December 2016 at its own risk and account after which ownership of the mine will be transferred to the Czech State for a symbolic CZK 1 for closure. This would be subject to certain conditions, such as approval of the European Commission and support of the mine's key stakeholders. In the event that agreement is reached significant costs associated with the closure that would otherwise be incurred in 2015 would be avoided though the Group would incur the net costs of operating the Paskov mine in 2015 and 2016. There can be no guarantee that the Czech Government will agree to the purchase of the Paskov mine, or that the purchase would be approved by the European Commission, and in that situation the Group would be liable for the associated closure costs.

In addition the Group is heavily geared with long term borrowings totalling EUR 825 million. Following revisions of the long term pricing outlook for both thermal and coking coal and the associated write down of assets (see in note 7part Impairment loss), on 22 January 2014, the Directors initiated a review of the Group's capital structure with a view to addressing the solvency and the mid-term liquidity of the Group. The review will be focused on the Group's balance sheet and will consider all available options. The Company has commenced discussions with all its stakeholders with a view to developing and implementing a capital structure that recognises and respects the interest of all stakeholders. There can be no guarantee that it will be possible to successfully complete such a capital structure or that such implementation occurs within a timeframe that will secure the liquidity and solvency of the Group.

The capital structure review is at very early stage and we anticipate issuing our audited Annual Report in late March 2014. In the event that the status of these matters have changed by then we will update the above disclosures and the auditors' report will take account of these amendments. On the assumption that the position does not change substantially, the auditors' report is expected to include an Emphasis of Matter paragraph drawing attention to the material uncertainty regarding the Group's and Company's ability to continue as a going concern.

Should the Group fail to achieve a satisfactory capital structure for liquidity and solvency purposes, it would pose a significant risk of the Group ceasing to operate as a going concern. On current base case forecasts the Group anticipates a net cash outflow of approximately EUR 30 million per quarter and that its current cash balance will be exhausted in Q1-Q2 2015. However, an inability to renew receivable financing, further price deterioration, default on existing facilities or other factors such as lower than forecasted production could bring this point forward.

4. Significant Accounting Policies

The financial statements have been prepared under the historical cost convention, except for certain financial instruments, which are stated at fair value.

The financial statements have been prepared on the basis of accounting policies and methods of compilation consistent with those applied in the consolidated financial statements as at and for the year ended 31 December 2012, with the exception described below.

Discontinued operations

On 6 December 2013, the Group completed the sale of its entire Coke segment, represented by OKK and as such, the Coke segment is classified as discontinued operations in the financial statements. It was not previously classified as discontinued operations and the comparative period (consolidated statement of comprehensive income) has been restated to show the discontinued operations separately from continuing operations.

Change in classification and presentation

With effect from 1 January 2013, the Group has changed the basis on which it presents expenses in the income statement. While previously classified by their nature, expenses are now classified by their function (also known as a 'Cost of Sales' format). This change has been made to align better with current best reporting practice in the mining industry.

The reclassifications have no impact on the consolidated operating income or net profit. The main categories are as follows:

Cost of sales - comprise all operating costs incurred in production including depreciation and amortisation, or compensation of, and provisions for mining damages.

Selling expenses - comprise all operating costs involved in selling or distribution of products and include mainly transport costs incurred to deliver the Group's products to customers.

Administrative expenses- comprise all other operating costs associated with general operation of the Group, which cannot be allocated to either cost of sales or selling expenses, and include mainly personnel costs, and advisory costs.

New standards and interpretations

The Group adopted the following amendments to standards and new interpretations, which are effective for its accounting period starting 1 January 2013:

§ Amendment to IAS 1 Financial Statement Presentation - Presentation of Items of Other Comprehensive Income (effective 1 July 2012)

§ Amendment to IAS 19 Employee Benefits (effective 1 January 2013)

§ Amendment to IFRS 7 Financial Instrument: Disclosures - Offsetting Financial Assets and Financial Liabilities (effective 1 January 2013)

§ IFRS 13 Fair Value Measurement (effective 1 January 2013)

§ IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine (effective 1 January 2013)

The amendments to IAS 1 and IFRS 13 impact the Group's financial position and performance as follows:

§ Fair value measurement

IFRS 13 establishes a single framework for measuring fair value and making disclosures about fair value measurements, when such measurements are required or permitted by other IFRSs. In particular, it unifies the definition of fair value as the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants as the measurement date. It also replaces and expands the disclosure requirements about fair value measurements in other IFRSs, including IFRS 7 Financial Instruments: Disclosures. 

In accordance with the transitional provisions of IFRS 13, the Group has applied the new fair value measurement guidance prospectively. Notwithstanding the above, the change has no significant impact on the measurement of the Group's assets and liabilities.

§ Presentation of items of other comprehensive income

As a result of the amendments to IAS 1, the Group has modified the presentation of items of other comprehensive income in its condensed consolidated statement of profit or loss and other comprehensive income, to present separately items that would be reclassified to profit or loss in the future from those that would never be. Comparative information has been re-presented accordingly.

The adoption of the amendment to IAS 1 has no impact on the recognised assets, liabilities and comprehensive income of the Group.

Estimates

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing these consolidated financial statements, the significant judgements made by the management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements of the Company as at and for the year ended 31 December 2012. 

5. Non-IFRS Measures

The Company defines:

§ EBITDA as net profit before non-controlling interests, income tax, net financial costs, depreciation and amortisation, impairment of property, plant and equipment ('PPE') and gains/losses from the sale of PPE.

§ Underlying profit as net profit before material one off charges (for example impairment of PPE).

While the amounts included in EBITDA/underlying profit are derived from the Group's financial information, it is not a financial measure determined in accordance with adopted IFRS and should not be considered as an alternative to net income or operating income as a sole indication of the Group's performance or as an alternative to cash flows as a measure of the Group's liquidity. The Company currently uses EBITDA/underlying profit in its business operations to, among others, evaluate the performance of its operations, develop budgets and measure its performance against those budgets.

The financial information shows the results from its Coke segment as discontinued operations. To present comparable figures with previously published financial information, the Company presents Total EBITDA, which is defined as the total of EBITDA from continuing operations and EBITDA from discontinued operations. Discontinued operations are presented in note 12 of this document.

The Company defines net debt as total debt less cash and cash equivalents. Total debt includes issued bonds, long-term and short-term interest‑bearing loans and borrowings, less related expenses. Interest‑bearing loans, bond issues, and borrowings are measured at amortised cost.

6. Exchange Rates

Throughout this document, the financial results and performance in both the current and comparative periods are expressed in Euros. The financial information could differ considerably if the financial information was presented in CZK. The Company may where deemed relevant, present variances using constant foreign exchange rates (constant currency basis), marked 'ex-FX', excluding the estimated effect of currency translation differences. These are non-IFRS financial measures.

7. Financial Performance of Continuing Operations

The Coke segment is classified as discontinued operations and is presented separately from continuing operations in note 12 Discontinued Operations. The comparative period of the year 2012 has been restated accordingly.

Revenues

The Group's largest source of revenue is the sale of coking coal, which accounted for 53% of total revenues in the year 2013, whilst the sale of thermal coal accounts for 33% of total revenues in this period.

*For the purpose of this analysis, where the Group sells products on an EXW or similar basis, the notional transport element is shown separately in order to separate the impact of changing transport revenues from changes in the underlying achieved price for the products sold.

Total revenues decreased by 28% mainly as a result of lower realised prices and lower sales volumes of coking coal (see table below), in line with lower prices and demand for steel making materials globally, as well as in our region. In addition, revenues decreased due to lower realised prices for thermal coal. Lower sales volumes also resulted in a decrease of transport revenues, with a similar decrease in transport costs, for no material impact on profitability.

All of the Group's coking coal sales are priced quarterly and the majority of thermal coal sales are priced on a calendar year basis.

Total production of coal in the year 2013 decreased by 21% compared to 2012. Coal volumes sold were lower by 5% as a result of lower coking coal sales, partially offset by increased sales of middlings and lower grades of thermal coal from inventories in 2013.

Coal inventories decreased by 907kt in 2013 compared to an increase by 978kt in the year 2012.

* Inventory consists of coal available for immediate sale and coal that has to be converted from raw coal. Opening and closing inventory balances do not always reconcile due to various factors such as production losses.

Cost of Sales

Excluding the EUR 112 million year on year impact in change in inventories driven by the Group selling higher volumes of low quality thermal coal in 2013 compared to the year 2012 when the Group was producing on stock, cost of sales decreased by EUR 180 million, namely as a result of:

§ a decrease in production and development works, influencing consumption of mining material and spare parts, as well as the provision for mining damages;

§ a 15% decrease in the number of shifts and a 6% decrease in unit costs per shift ex-FX resulting in decrease of contractors' cost (contractors headcount decreased by 15%);and

§ a 5% decrease in the number of employees and change in employee benefit assumptions (see below) resulting in lower personnel expenses.

Selling Expenses

Lower sales volumes together with a change in the geographic composition of sales resulted in a reduction in transport costs by 28%, with a similar decrease in transport revenues, with no material impact on profitability.

Administrative Expenses

Decrease in administrative expenses by 22% on a constant currency basis is principally attributable to lower personnel costs (10% salary cut, lower headcount and lower share-based payments costs).

Total Personnel Expenses and Headcount

Total personnel expenses have reduced principally through lower headcount (see below) and the completion of negotiation with the trade unions and the execution of a new Collective Bargaining Agreement with employees, which reduced the overall employee benefit liability of the Group.

EBITDA

The Group's EBITDA from continuing operations decreased by EUR 220 million compared to 2012 mainly as a result of lower commodity prices and sales volumes that outweigh the decrease in operating expenses.

As EBITDA is a non-IFRS measure, the following table provides a reconciliation of EBITDA from continuing operations and net loss after tax.

Impairment Loss

Due to reduced price expectations for the Group's products, the Group undertook a re-assessment of the mine plan for future operations, which accordingly led to a re-assessment of therecoverable amount (per 30 June and 31 December 2013) of its continuing cash generating units ('CGU's). As a result, an impairment loss of EUR 807 million (2012: nil) has been recognised. The impairment loss related entirely to the coal segment. This includes EUR 142 million in respect of the Paskov mine and EUR 9 million in relation to the Debiensko project with the balance relating to the coal business generally.

The recoverable amount of the CGUs was based on value in use. Value in use was determined by discounting the future cash flows expected to be generated from the continuing use of the CGUs. Value in use as at 31 December 2013 was based on the following key assumptions;

§ cash flows were forecast based on past experience, actual operating results, approved budget and long term business plan. Cash flows for the years to the end of the life of mines for the Coal segment were extrapolated using declining growth rate (reflecting decreasing production towards the end of the life of the mines);

§ revenue was forecast based on agreed prices for the first quarter of 2014. The anticipated annual revenue movement included in the cash flow projects ranged from (9%) to 8 % for the years 2014 to 2018 and are based on the average of a range of publically available data (market consensus);

§ a post-tax discount rate of 11.73% (2012: 10.6%) was applied in determining the recoverable amount of the group of CGUs. The discount rate was estimated based on an industry average weighted-average cost of capital adjusted for the specific risks of each CGU; and

§ cash mining unit costs anticipated of EUR 65 per tonne in 2014, decreasing to EUR 60 per tonne in 2015 and thereafter.

The impairment charges are particularly sensitive to the discount rate applied, the forecast sales prices of the Group'sproductsand the operating expenses. Holding all other parameters constant a 1.50% increase in the discount rate would give rise to an additional impairment loss of EUR 38 million; a 2.50% increase in the discount rate would give rise to an additional impairment loss of EUR 61 million; a 5% reduction in sales prices would give rise to an additional impairment loss of EUR 144 million and a EUR 5 per tonne increase on operating expenses would give rise to an additional impairment loss of EUR 164 million.

Financial Income and Expense

The increase in net financial expense of EUR 41 million in 2013 compared to the year 2012 is mainly attributable to the loss on revaluation and settlement of derivatives for which hedge accounting is not applied compared to the gain realised in the comparative period (EUR 15 million), to the realised and unrealised FX losses (EUR 18 million) and to the loss recorded due to the repayment of the Senior Notes due 2015 (EUR 8 million), consisting of the write off of unamortised transaction costs (EUR 4 million) and the cost of early redemption (EUR 4 million).

Loss from Continuing Operations before Tax

The loss before tax in 2013 was EUR 1,061 million, down EUR 1,064 million compared to a profit of EUR 3 million in the year 2012.

Income Tax

The Group recorded a net income tax benefit of EUR 146 million in 2013, compared to a net income tax expense of EUR 10 million in 2012, as a result of the recognition of a deferred tax asset arising from tax losses incurred and recognition of impairment loss.

Loss from Continuing Operations

The Group recognised a loss from continuing operations of EUR 914 million in 2013, which represents a decrease of EUR 907 million compared to the loss of EUR 7 million in 2012 and was materially influenced by the impairment loss on coal assets in the amount of EUR 685 million (after tax).

8. (Loss) / Earnings per Share

The calculation of earnings per share was based on profit attributable to the shareholders of the Company and a weighted average number of shares outstanding during the year ended 31 December:

9. Cash Flow

Cash Flow from Operating Activities

The Group's primary source of cash is its operating activities. Cash generated from operating activities, after working capital changes and before interest and tax payments in 2013 was positive EUR 18 million, which was EUR 199 millionlower than in 2012. This follows lower EBITDA during the reporting period offset by positive effect of inventories sale of EUR 20 million and working capital optimisation of EUR 22 million.

Cash Flow from Investing Activities

Capital expenditures amounted to EUR 109 million in 2013 (of which EUR 9 million relates to discontinued operations), a decrease of EUR 122 millionwhen compared to the year 2012. The capital expenditures consist principally of expenditure in the Coal segment, including the development of new mining areas. The Group considers this level of expenditure (and even lower) to be representative of an ongoing level of expenditure to sustain the level of operations in the updated mine plans.

Cash flow from investing activities was positively influenced by disposal of discontinued operations of EUR 90 million (reflecting costs incurred and cash disposed of), of which EUR 7 million was paid on escrow account (restricted cash) and will be released from the escrow account three months after the date of sale, subject to the satisfaction of any claims by the purchaser under the OKK Share Purchase Agreement.

Cash Flow from Financing Activities

Cash flow from financing activities was influenced by issuance of new EUR 275 million Senior Notes due 2021 (the '2021 Notes') that were used to repay in full the outstanding amount of EUR 258 million under the Senior Notes due 2015 (the '2015 Notes'). Additional transaction costs of EUR 9 million were incurred in connection with the refinancing. Cash flow from financing activities also consisted of repayment of the ECA loan of EUR 28 million (amount of EUR 14 million was repaid in the comparative period of 2012). The comparative period of 2012 was influenced by repayment of the Revolving Credit Facility in the amount of EUR 100 million and a dividend payment of EUR 34 million to A shareholders.

10. Borrowings, Liquidity and Capital Resources

The liquidity requirements of the Group arise primarily from the need to fund operating losses, working capital requirements, the need to fund capital expenditures and, on a selective basis, possible future acquisitions. The principal uses of cash are anticipated to fund planned operating expenditures, capital expenditures, scheduled debt service on the Senior Notes and other borrowings, and other distributions. The Group continuously reviews its cash flow and operations in order to safeguard the business as a going concern.

Senior Notes Issuance

On 23 January 2013, New World Resources N.V. ('NWR NV') issued its EUR 275 million Senior Notes due 2021 with a 7.875% coupon. The net proceeds were used to repay in full the outstanding amounts of the 7.375% Senior Notes due 2015, which were repaid on 22 February 2013 in the total amount of EUR 267 million, including accrued interest and call premium.

Financial covenants

The Group agreed with its lenders to suspend and re-set certain financial covenants under the RCF and ECA Facility agreements as follows:

§ for the RCF (agreed on 4 April and further on 9 October 2013), covenant testing was suspended for the remainder of the facility term and the facility expired on 7 February 2014;

§ for ECA Facility (agreed on 28 March and further on 17 December 2013), covenant testing is suspended for the period from 1 January 2013 until 30 September 2014;

§ in addition to the above suspension and re-set, the conditions that NWR NV needs to comply with under the current ECA Facility waiver include: amendments to the scheduled debt service requiring certain prepayments; a minimum cash balance requirement of EUR 80 million; limitations on dividend payments; financial reporting obligations; and limitations on incurring additional senior debt. The Facility expires on 31 December 2017.

Indebtedness and liquidity

As at 31 December 2013, the Group held cash and cash equivalents of EUR 184 million and had indebtedness of EUR 809 million, of which EUR 14 million is contractually repayable in the next 12 months. This results in a net debt position for the Group of EUR 625 million, 13% higher when compared to EUR 551 million as at 31 December 2012.

As a reaction to the continuation of difficult trading conditions and price pressures in 2013, various measures were put in place to safeguard the Group's liquidity for the foreseeable future. For more information about liquidity and going concern basis of accounting please refer to note 3 Basis of Presentation.

11. Segments and Divisions

NWR's business is organised into three segments, Coal, Coke (discontinued operations), and Real Estate Division ('RED') segment, for which financial and other performance measures are separately available and regularly evaluated by the Chief Operating Decision Maker ('CODM'). The CODM is the Company's Board of Directors. These operational segments were identified based on the nature, performance and financial effects of key business activities of the Group.

The Group is further organised into two divisions: the Mining Division ('MD') and the Real Estate Division. The Company had A Shares and B Shares outstanding for the presented periods. The A Shares and B Shares are tracking stocks, which are designed to reflect the financial performance and economic value of the MD and RED, respectively. Due to the public listing of the Company's A shares, the Group provides divisional reporting showing separately the performance of the MD and RED. The main rights, obligations and relations between the RED and MD are described in the Divisional Policy Statement, available at the Company's website www.newworldresources.eu.

The divisional reporting, as such, is essential for the evaluation of the equity attributable for the listed part of the Group. As the operating segments form part of the divisions, and in order to provide understandable and transparent information, the Company decided to combine the segment and divisional disclosure into one table, with the Coal and Coke (discontinued operations) segments within the Mining division and the RED segment within Real Estate division. The Company's headquarters is included in the Other information under the Mining division. The accounting principles of this segmental and divisional disclosure are further described in NWR's 2012 Annual Report and Accounts.