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SAH - SACMH - Reviewed Condensed Provisional Annual Results for the year ended

Release Date: 05/06/2012 10:51:02      Code(s): SAH
SAH - SACMH - Reviewed Condensed Provisional Annual Results for the year ended  
31 December 2011                                                                
SOUTH AFRICAN COAL MINING HOLDINGS LIMITED                                      
(Incorporated in the Republic of South Africa)                                  
Registration number 1994/009012/06                                              
Share code: SAH     ISIN: ZAE000102034                                          
("SACMH" or "the company" or "the group")                                       
FOR THE YEAR ENDED 31 DECEMBER 2011                                             
The reviewed condensed annual results for the year ended 31 December 2011 are   
presented below:                                                                
                                  31 December   31 December                     
                                  2011          2010                            
R`000                              Reviewed      Audited                        
Non-current assets                 525 715       537 204                        
Property, plant and equipment      111 360       111 003                        
Intangible assets                  407 130       421 666                        
Investments                        7 225         4 535                          
Current assets                     58 731        67 717                         
Inventories                        22 349        44 286                         
Trade and other receivables        35 681        17 957                         
Cash and cash equivalents          701           5 474                          
Current assets held for sale       3 242         -                              
Total assets                       587 688       604 921                        
EQUITY AND LIABILITIES                                                          
Capital and reserves               59 384        173 165                        
Issued capital and premium         233 885       233 885                        
Accumulated loss                   (174 501)     (75 966)                       
Shareholder`s loan                 -             15 246                         
Non-current liabilities            380 820       372 420                        
Shareholder`s loan                 213 353       -                              
Interest-bearing liabilities       989           176 562                        
Non-interest-bearing liabilities   34 800        46 600                         
Non-current provisions             34 540        45 772                         
Deferred taxation                  97 138        103 486                        
Current liabilities                141 324       59 336                         
Trade and other payables           39 419        27 067                         
Short-term borrowings              -             7 012                          
Current portion of non-interest-   18 200        11 400                         
bearing liabilities                                                             
Current portion of interest-       50 483        8 738                          
bearing liabilities                                                             
Current portion of provisions      15 998        5 119                          
Bank overdraft                     17 224        -                              
Current liabilities held for sale  6 160         -                              
Total equity and liabilities       587 688       604 921                        
Number of shares in issue (`000)   452 454       452 454                        
Net asset value per share (cents)  13,12         38,22                          
Tangible net asset deficit value   (54,34)       (31,83)                        
per share (cents)                                                               
                                  31 December   31 December                     
                                  2011          2010                            
R`000                              Reviewed      Audited                        
Revenue                            347 338       18 810                         
Cost of sales                      (341 039)     (7 444)                        
Gross profit                       6 299         11 366                         
Other losses                       -             (1 247)                        
Foreign exchange (losses)/gains    (31 481)      3 780                          
Net (impairment charge)/reversal   (4 226)       385                            
of impairment                                                                   
Loss on sale/scrapping of assets   (852)         (11 150)                       
Depreciation                       (28 352)      (10 877)                       
Amortisation of mining rights      (11 846)      (1 340)                        
Rehabilitation provision           (5 809)       (296)                          
Operating expenses                 (17 410)      (24 984)                       
Operating loss before finance      (93 677)      (34 363)                       
costs and taxation                                                              
Finance costs                      (12 882)      (11 683)                       
Finance income                     1 680         -                              
Loss before taxation               (104 879)     (46 046)                       
Taxation                           6 344         36 015                         
Total comprehensive loss           (98 535)      (10 031)                       
attributable to ordinary                                                        
Headline loss (cents)              (20,66)       (0,53)                         
Weighted average number of shares  452 454       452 454                        
in issue (`000)                                                                 
Basic loss per share (cents)       (21,78)       (2,21)                         
Impairments per share (cents)      0,93          (0,09)                         
Loss on sale/scrapping of non-     0,19          2,46                           
current assets per share (cents)                                                
Tax effects thereon (cents)        -             (0,69)                         
Headline loss per share (cents)    (20,66)       (0,53)                         
for the year ended 31 December 2011                                             
                                      Share      Share      holder`s            
                                      capital    premium    loan                
R`000      R`000      R`000               
Balance at 31 December 2009            45 246     188 639    11 607             
Increase in equity loans               -          -          3 639              
Total comprehensive loss attributable  -          -          -                  
to ordinary shareholders                                                        
Balance at 31 December 2010 - Audited  45 246     188 639    15 246             
Equity loans transferred to non-       -          -          (15 246)           
current liabilities                                                             
Total comprehensive loss attributable  -          -          -                  
to ordinary shareholders                                                        
Balance at 31 December 2011 -          45 246     188 639    -                  
                                      loss         Total                        
                                      R`000        R`000                        
Balance at 31 December 2009            (65 935)     179 557                     
Increase in equity loans               -            3 639                       
Total comprehensive loss attributable  (10 031)     (10 031)                    
to ordinary shareholders                                                        
Balance at 31 December 2010 - Audited  (75 966)     173 165                     
Equity loans transferred to non-       -            (15 246)                    
current liabilities                                                             
Total comprehensive loss attributable  (98 535)     (98 535)                    
to ordinary shareholders                                                        
Balance at 31 December 2011 -          (174 501)    59 384                      
31 December    31 December          
                                            2011           2010                 
R`000                                        Reviewed       Audited             
Cash flows generated from/(utilised in)      6 573          (50 165)            
Net finance charges paid                     (11 201)       (11 683)            
Taxation refunded                            -              2 083               
Net cash utilised operating activities       (4 628)        (59 765)            
Cash flows from investing activities                                            
Purchase of property, plant and equipment    (36 286)       (13 942)            
Increase in investments                      -              (4 535)             
Net cash used in investing activities        (36 286)       (18 476)            
Cash from financing activities                                                  
Borrowings repaid                            (7 304)        -                   
Net liabilities raised                       26 221         76 734              
Net cash from financing activities           18 917         76 734              
Net decrease in cash and cash equivalents    (21 997)       (1 508)             
Cash and cash equivalents at beginning of    5 474          6 982               
Cash and cash equivalents at end of year     (16 523)       5 474               
The condensed financial statements have been prepared in accordance with        
International Financial Reporting Standards (IAS 34: Interim Financial          
Reporting, and AC 500 standards as issued by the Accounting Practice Board),    
the Companies Act of South Africa and the Listings Requirements of the JSE      
Limited. The accounting policies used to prepare the financial statements have  
been consistently applied to all periods presented.                             
These financial results have been reviewed by the company`s auditors, Deloitte  
& Touche. They have disclaimed their review opinion on a material uncertainty   
on the valuation of mineral rights and the company`s ability to continue as a   
going concern. Their disclaimed review report is available at the registered    
office of the company.                                                          
The financial statements have been prepared on the going concern basis taking   
into account the fact that the group is dependent on JSW Energy Limited (a      
company listed on the Indian stock exchange and operating through its           
subsidiary JSW Natural Resources South Africa (Proprietary) Limited) ("JSW")    
which will continue to support SACMH. JSW have indicated their firm intention   
to continue financial support in writing, subject to the following:             
- JSW obtains board approval for the additional funding at the time;            
- JSW fulfils all regulatory requirements as prescribed by Indian legislation;  
- JSW remains the majority shareholder.                                         
JSW have demonstrated their on-going support during the current financial year. 
1. Performance for the 12 months to 31 December 2011                            
Mining operations and operational performance                                   
The mining operations included both open cast and underground operations and    
resumed in the latter part of 2010 as per the decision of the board and         
shareholders. The mining experience in the first quarter was poor and a         
decision was made to implement a comprehensive resource evaluation programme    
(as mentioned in note 4 below).                                                 
The geological information available from the most recent Competent Person`s    
Report ("CPR") at the time from 2008, proved lacking or inaccurate in allowing  
effective and detailed mine planning to be implemented, given the nature of     
conditions. Additional infill drilling was undertaken (as part of the resource  
evaluation programme mentioned in note 4) in the open cast pit operation, to    
assist in managing mining operations more effectively. The benefits of this     
came to bear in the last five months of the financial year as more effective    
mining controls were able to be implemented. Production volumes reached a peak  
of 99 000 tons Run of Mine ("ROM") (2010: 32 000 tons) in November 2011, with   
an average of 77 000 tons for the second half of 2011. During the year under    
review, 811 000 tons (2010: 89 000 tons) of ROM was produced. The ROM has been  
processed to a RB1 specification (save for the inherent sulphur levels which    
was between 1,0% and 1,2% on average), with an expected average processing      
yield of 52%.                                                                   
Despite improved mining controls, resulting in an improved production and cost  
consistency, geological losses remained high and negatively impacted on the     
cost per ton, in particular in respect of open cast operations.                 
A total of 425 000 tons (2010: Nil) of product was sold on the export market    
during the year, representing R337 million (2010: Nil) of turnover at an        
average selling price of US$109,63 per ton (2010: Nil), with a total of 362 000 
tons (2010: 37 000 tons) having been produced from operations.                  
The group utilised all rail entitlement to Richards Bay Coal Terminal ("RBCT")  
for the year. The group`s rail allocation to RBCT in terms of the Quattro       
allocation scheme administrated by the Department of Minerals and Resources was 
reduced to 157 000 tons (2010: 207 000 tons). An additional 30 000 tons of      
allocation was declared in terms of the Phase V agreement with RBCT at a cost   
of R2,7 million resulting in the total entitlement in terms of the group`s      
Phase V increasing to 100 000 tons p.a. (2010: 70 000 tons). The total rail     
allocation available to the group decreased to 257 000 tons (2010: 277 000      
Foreign exchange gains/(losses)                                                 
The group continued to be financially supported by JSW during the year, inter   
alia, through a loan of US$22,9 million (2010: US$19,0 million) from a          
subsidiary of JSW. Changes in the Rand/Dollar exchange rate resulted in an      
unrealised loss of R30,8 million (2010: gain of R3,8 million) on this loan      
outstanding at the year-end.                                                    
Exchange (losses)/gains on turnover totalled R0,7 million (2010: Nil) for the   
Amortisation of mining right                                                    
Amortisation of the mining rights increased to R11,8 million (2010: R1,3        
million) during the year as a result of the increase in mining activity and the 
potential reduction of mineable resource; the amortisation charge rate is       
consistent with prior years.                                                    
Due to the losses incurred during the year no income tax liability was          
incurred. A reduction in the deferred tax liability of R6 million (2010: R36    
million) was recorded as a result of the reduction in the carrying value of the 
mining right and changes, and changes to the rehabilitation liability.          
2. Asset management                                                             
Capital expenditure                                                             
Capital expenditure of R36,3 million (2010: R13,9 million) was incurred during  
the year. The upgrade to the wash plant was fully commissioned to improve       
capacity and efficiencies at a cost of R12,0 million during the year and        
development of the Vlakfontein open cast reserve was completed together with    
the recommencement of mining operations on the Mooifontein underground section  
at a cost of R14,3 million.                                                     
Assets held for sale                                                            
An agreement to dispose of land and buildings with a carrying value of R3,2     
million held by Ilanga Coal Mines (Pty) Limited was concluded during the year.  
The rehabilitation liability of R6,1 million included in liabilities on assets  
held for sale, will be assumed by the purchaser. The transfer of the property   
is expected to take place by 30 June 2012.                                      
Rehabilitation costs                                                            
Rehabilitation costs have been provided for and include full mine closure and   
the rehabilitation of previous operations. Increases in the estimate cost of    
rehabilitation have resulted in an increase in the estimated rehabilitation     
3. Going concern                                                                
The group`s going concern has been underwritten by the support of JSW. JSW has  
confirmed in writing its intention to continue their financial support of       
SACMH. This is also evidenced by the further funding made available during the  
In terms of the loan agreements with JSW the group has undertaken not to accept 
repayment of its loan accounts until such stage as SACMH`s assets fairly valued 
exceed its liabilities. These loans were previously included with other         
interest-bearing liabilities.                                                   
In terms of the group`s Life of Mine ("LOM") plan, operations are expected to   
produce positive cash flows after servicing of all debt and capital             
requirements, by 2015. The group`s major shareholder has committed to support   
funding requirements necessary during this period subject to certain conditions 
set out above.                                                                  
Repayment of the amounts due in terms of the Phase V investment at RBCT are due 
in full by 31 December 2012; In this respect, the amount of R48,2 million       
(2010: R6,0 million) has been included in current interest-bearing liabilities. 
4. Updated Statement of Reserves and Resources                                  
With reference to prior communications on this issue, where the company stated  
that it had embarked on a comprehensive resource evaluation and exploration     
drilling programme, which commenced in April 2011, the company can now state    
that the drilling programme with all related results and analysis was completed 
in February 2012. Approximately 280 additional core holes were drilled with     
over 70% wireline logged. All three target seams were analysed by an accredited 
laboratory in Middelburg.                                                       
The updated geological information as evaluated by SRK in their Independent     
Engineer`s Report ("IER") reflects a significant reduction in the Resource and  
Reserve estimates in comparison to a prior CPR prepared by SRK Consulting in    
2008, where Gross Tons In Situ ("GTIS") were stated as GTIS of 41 Mt and ROM    
tons of 25,7 Mt. A copy of the IER is available on the company`s website.       
The board together with JSW are undertaking a full evaluation of the IER        
together with every aspect of the resource before confirming any potential      
changes, to identify opportunities to further maximise the economical           
extraction through detailed engineering and feasibility studies which will      
- An evaluation of the appropriate mining methodology and technology, to        
economically exploit the C Upper and C Lower Seams in the Voorslag mine; this   
accounts for a meaningful portion of the future mineable reserves and higher    
quality coal.                                                                   
- Refinement of underground pillar design and investigation of partial pillar   
- Improvement of open cast mining efficiencies which could increase the         
opencast footprint in the Voorslag mining area.                                 
- Evaluation of various sources of ROM material for blending purposes and other 
product derivatives, to mitigate higher inherent sulphur levels.                
Due to the uncertainty of the value of a potential reduction in mineable        
reserves, the board has decided not to effect any impairment charge at this     
stage until the results of the above investigations are completed. It is        
expected that these will be completed before the end of this year.              
The impact of the potential reduction in the reserves could lead to an          
impairment of the mining asset of up to a value of R173,2 million.              
5. Financing activities                                                         
During the year a further R27,1 million (2010: R19,1 million) was advanced by   
JSW to finance the upgrades to the wash plant and to supplement working capital 
requirements. The shareholder continues to provide on-going financial support   
to the group.                                                                   
The loan from Mainsail Investments of R15,246 million was acquired by JSW       
during the year as part of the Put option exercised by Royal Bafokeng Holdings  
on 31 October 2011. JSW has elected not to convert the loan to equity.          
Post-balance sheet events                                                       
JSW has made further funds available to replace Standard Bank`s short-term      
Environmental approval for the mining of the Voorslag area has been applied for 
from the Department of Minerals and Resources. As indicated in the announcement 
made on 18 April 2011 via SENS, the delays in the approval process, have        
resulted in a reduction in production levels, as the Vlakfontein opencast       
operations were completed during the month of March 2012. The company is        
embarking on cost reduction exercises to mitigate this situation.               
Capital expenditure commitments                                                 
No material commitments have been approved.                                     
Contingencies and commitments                                                   
There has been no change in the previously disclosed contingent assets and      
The prevalent scenarios and current level of operations compels the group and   
its directors to pursue a comprehensive strategic solution for the business.    
This could encompass a couple of key scenarios. Potential significant reduction 
in the mineable reserves and the impact on the future LOM, at this stage being  
fundamentally the underground B seam with its systemic relatively poor yield    
and high sulphur, compels the company and its directors to pursue a strategic   
solution for the business. This could encompass a couple of key scenarios. The  
company`s logistics assets and export capacity have significant value and a     
number of strategic options are being investigated which would leverage and     
unlock this value.                                                              
The impending BEE transaction comprises a set of potential investors and        
counterparties that could well provide a comprehensive strategic solution. The  
process in this regard will commence shortly after the release of these         
provisional results.                                                            
Independent engineers report                                                    
As indicated in note 4, an IER has been prepared by SRK. The potential          
significant change in mineable reserves from the 2008 position is of concern to 
the board and the company`s majority shareholder. Notwithstanding the           
reconciliation of the differences being presented in the IER, the company       
and/or its major shareholder may pursue a further investigation into this if    
they deem it necessary.                                                         
Changes to directorate                                                          
Mr WN Gardyne, non-executive director of the company who represented New Africa 
Mining Fund which had accepted the JSW offer to shareholders to acquire their   
shares, resigned as a director on 10 January 2011.                              
Mr GM Scrutton resigned as a non-executive director on 1 February 2011.         
Dr V Lickfold, an independent non-executive director, was due for re-election   
by rotation as a director at the annual general meeting held on 18 August 2011. 
Due to increased responsibilities and commitments she advised that she would    
not be available for re-election at the latter meeting.                         
Mr LM Ndala resigned as a director on 31 August 2011 due to increased           
commitments at Royal Bafokeng Holdings.                                         
Mr TV Mokgatlha resigned as chairman and as a director of the board on 2        
November 2011, following the acquisition by JSW Energy Natural Resources South  
Africa Limited of the entire shareholding of the Royal Bafokeng Group.          
Mr PP Menon, a representative of JSW Energy Limited - the majority shareholder  
in the company - was appointed as non-executive director on 16 November 2011.   
Mr QMSM Mokoetle was appointed as an independent non-executive director and     
chairman of the board on6 February 2012.                                        
For and on behalf of the board                                                  
QMSM Mokoetle                     AJL Rayment                                   
Chairman                          Chief Executive Officer                       
05 June 2012                                                                    
QMSM Mokoetle (Non-executive Chairman)                                          
AJL Rayment (CEO)                                                               
DGA Miller (CFO)                                                                
VP Garg* (Non-executive)                                                        
PP Menon* (Non-executive)                                                       
Registered office:                                                              
3rd Floor, 198 Oxford Road, Illovo, Sandton                                     
Transfer secretary:                                                             
Computershare Investor Services (Pty) Limited                                   
Exchange Sponsors (2008) (Pty) Limited                                          
Deloitte & Touche                                                               
Investor Relations:                                                             
Renay Tandy, Ngage Tel 011 867 7763                                             
Date: 05/06/2012 10:51:01 Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                             .                  
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information disseminated through SENS.                                          

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