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TRANS HEX GROUP LTD - INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2004
TRANS HEX GROUP LTD
("Trans Hex" or "the Group")
JSE share code: TSX ISIN: ZAE000018552
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2004
- HEPS down 35% to 86,3 cps, up 23% in constant currency terms
- Attributable income down 29% to R80,6 million (2003: R112,9 million)
- Dividend per share maintained at 20 cps (2003: 20 cps)
- CONTOPS agreed with NUM
- Appointment of Managing Directors for Trans Hex Group and Trans Hex
Angola
Llewellyn Delport, Trans Hex Group managing director, commented:
"We are optimistic that with CONTOPS we"ll be able to maintain our South African
margins and optimally exploit our Baken reserves. The continuing consolidation
of our Angolan operations provides a good base for further expansion."
Enquiries:
Trans Hex Group 021 937 2000
Llewellyn Delport (Managing director) 082 457 0316
George Zacharias (Group secretary) 082 418 3000
College Hill 011 447 3030
Johannes van Niekerk 082 921 9110
Nicholas Williams 083 607 0761
ABRIDGED CONSOLIDATED INCOME STATEMENT
Year
Six months ended ended
30/09/04 30/09/03 31/03/04
% Reviewed Reviewed Audited
Change R"000 R"000 R"000
Sales revenue (6,7) 532 770 570 895 1 079 734
Cost of sales 25,3 394 507 314 806 677 586
Depreciation of mining assets 65 686 58 472 112 284
Royalties: Namaqualand Diamond
Fund Trust 13 335 17 022 30 866
Other costs 315 486 239 312 534 436
Mining income (46,0) 138 263 256 089 402 148
Net financial income/
(expenditure) (Note 1) 6 204 (49 642) (50 729)
Exploration costs (13 552) (26 816) (49 719)
Share of results of associated
companies (2) (3) (5)
Profit before taxation (27,1) 130 913 179 628 301 695
Taxation 50 355 66 752 110 407
Attributable income (28,6) 80 558 112 876 191 288
Earnings per share (cents)
- Basic (30,8) 91,0 131,5 220,5
- Diluted (29,6) 79,5 113,0 193,4
- Headline (34,9) 86,3 132,5 222,0
Dividend per share (cents) 20,0 20,0 73,0
Total number of shares in issue
("000) 88 744 86 536 88 425
Weighted average issued shares
("000) 88 530 85 833 86 750
Average US$ exchange rate 6,48 7,55 7,15
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year
Six months ended ended
30/09/04 30/09/03 31/03/04
Reviewed Reviewed Audited
R"000 R"000 R"000
Balance at 1 April 1 077 673 961 770 961 770
Net profit attributable to ordinary
shareholders 80 558 112 876 191 288
Dividends paid (46 887) (41 164) (58 710)
Translation differences on foreign
subsidiaries 3 756 (27 367) (41 745)
Fair value adjustment on available-for-
sale financial assets (450) 6 859 4 314
Issue of share capital 2 434 5 830 20 756
Balance at end of period 1 117 084 1 018 804 1 077 673
ABRIDGED CONSOLIDATED BALANCE SHEET
Year
Six months ended ended
30/09/04 30/09/03 31/03/04
Reviewed Reviewed Audited
R"000 R"000 R"000
Assets
Property, plant and equipment 787 728 787 371 765 825
Goodwill 37 096 3 478 37 096
Investments and loans 302 968 122 429 164 420
Deferred taxation 16 750 20 331 18 655
Current assets 336 203 497 753 521 064
Inventory 128 414 122 309 107 628
Accounts receivable 40 844 86 544 55 797
Cash resources and equivalents 166 945 288 900 357 639
1 480 745 1 431 362 1 507 060
Equity and liabilities
Total shareholders" interest 1 117 084 1 018 804 1 077 673
Long-term liabilities 42 271 55 835 49 487
Deferred taxation 143 859 150 274 146 859
Deferred liabilities 33 847 36 171 32 283
Current liabilities 143 684 170 278 200 758
Short-term borrowings 13 564 11 933 12 696
Other 130 120 158 345 188 062
1 480 745 1 431 362 1 507 060
Net asset value per share (cents) 1 259 1 177 1 219
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
Year
Six months ended ended
30/09/04 30/09/03 31/03/04
Reviewed Reviewed Audited
R"000 R"000 R"000
Cash available from operating activities 195 043 239 950 426 312
Movements in working capital (9 434) (70 182) (30 250)
Taxation paid (107 471) (105 525) (109 653)
Dividend paid (46 887) (41 164) (58 710)
Cash retained from operating activities 31 251 23 079 227 699
Cash employed (221 945) (73 012) (208 893)
Fixed assets - Replacement (20 205) (5 816) (6 339)
- Additional (66 633) (15 676) (70 889)
Long-term liabilities (6 348) (6 348) (11 169)
Acquisition of profit-sharing rights - - (35 256)
Investments, loans and issue of capital (128 759) (45 172) (85 240)
Net cash flow for the period (190 694) (49 933) 18 806
NOTES
Year
Six months ended ended
30/09/04 30/09/03 31/03/04
Reviewed Reviewed Audited
R"000 R"000 R"000
1. Net financial income/(expenditure)
Net financial income/(expenditure)
consists mainly of the following
principal categories:
Interest received 5 845 5 408 7 129
Interest paid (3 922) (9 457) (19 460)
Net foreign exchange profit/(loss) 5 247 (44 372) (41 063)
Rehabilitation provision - unwinding of (966) (1 221) 2 665
discount
6 204 (49 642) (50 729)
2. Reconciliation of headline earnings
Attributable income 80 558 112 876 191 288
(Profit)/loss on sale of assets (617) 476 (872
Negative goodwill (3 534) 348 2 135
Headline earnings 76 407 113 700 192 551
3. Capital commitments
(including amounts authorised, but not
yet contracted) 97 722 40 778 120 826
These commitments will be funded out of
own resources or borrowed funds.
4. Segment information
Revenue - Land 463 070 511 341 966 920
Revenue - Marine 69 700 59 554 112 814
Mining income - Land 140 501 245 874 393 684
Mining income - Marine (2 238) 10 215 8 464
5. The accounting policies are consistent with the annual report and the
corresponding prior year period in accordance with International
Financial Reporting Standards, except for the adoption of IFRS3
Business Combinations. In terms of this standard, existing goodwill is
no longer amortised and negative goodwill is reflected in the income
statement when it arises. The adoption of IFRS3 had no impact on
opening balances and the impact on current year earnings is not
material. These abridged financial statements comply with IAS34. Income
does not accrue evenly throughout the year and the income for the six
months, therefore, does not necessarily represent half of a full
financial year"s income.
Review by independent auditors. PricewaterhouseCoopers Inc. has
reviewed the interim results. A copy of their unqualified review report
is available for inspection at the company"s registered office.
Comments
In this commentary, results are compared with the first six months of the
2003/04 financial year (in brackets).
Financial summary
Diamond sales were 2% lower in rand terms at R532,8 million (R542,2 million) and
18% higher in dollar terms at US$82,5 million (US$69,8 million). The rand
strengthened by 14,2%. Had the rand remained at last year"s average level,
headline earnings for the six months would have been 163 cents per share.
Attributable income decreased 28,6% to R80,6 million (R112,9 million), resulting
in a 34,9% decrease in headline earnings per share to 86,3 cents (132,5 cents).
Mining income decreased by 46,0% to R138,3 million (R256,1 million). Cost of
sales increased 25,3% to R394,5 million (R314,8 million). The Group"s activities
in Angola increased with Luarica moving from ramp-up to production phase and
Fucauma commencing pilot production in March 2004. In addition, the Trans Hex
Angola office was strengthened with the appointment of a full-time Managing
Director. These activities resulted in a 57% increase in Angolan costs.
Excluding the Group"s Angolan operations, cost of sales increased by 22%,
primarily as a result of major component replacements in the earthmoving
equipment fleet. Shallow-water marine contractor fees increased by R14 million
but was offset by higher carat production.
Cash retained from operating activities increased by 35,4% to R31,3 million
(R23,1 million). Total diamond production amounted to 120 700 carats (107 400
carats).
Operations
Land
South Africa
Production from Land Operations was 19% lower at 60 400 carats. Continuous
operations (CONTOPS - a 7-day a week, 24-hour per day operations system) was
anticipated for implementation at the Lower Orange River projects from the
beginning of the financial year but will only now be implemented on 15 November
2004 at the Baken and Bloeddrif operations. This will assist in reaching planned
production levels for the last four months of the financial year.
At Baken, the average grade was above expectations but production volumes were
lower than anticipated due to CONTOPS not having been implemented. The Koeskop
mining area produced exceptional grades at 13,0 carats/100 m3. A second scour
feature at Bloeddrif is producing encouraging results with grades in excess of
4,0 carats/100 m3.
At Reuning the processing of the Nxodap terrace through the Suidhek Plant
continues although the grade achieved has declined and is now lower than
originally expected. The Jakkalsberg Plant was mothballed at the end of October
2004 due to the depletion of the stockpiled material, uneconomic grades of the
in situ gravel and a sustained strong rand.
The Lower Orange River region continues to produce large high-quality stones and
has, during the period under review, produced 13 stones larger than 30 carats,
including a 52-carat stone from Baken and a 44- and 43-carat stone from Reuning.
At Saxendrift production has been maintained at 9 600 carats despite the
decommissioning of the Terrace B Plant in January 2004. A very satisfactory
average stone size of 2,60 carats/stone is being sustained. The strong rand has
however affected the long-term viability of the operation. Mining operations and
configurations are currently being reviewed which may result in a scaling down
of the operation.
The Niewejaarskraal production plant has been commissioned and is continually
exceeding design throughput capacity. Whilst the grade achieved has declined
over the last six months average stone size improved to an excellent 2,83
carats/stone.
The Middle Orange River operations produced 8 stones larger than 50 carats,
including a 120-carat stone from Brakfontein and a 137-carat stone from
Niewejaarskraal.
Exploration
In terms of the agreement concluded between Etruscan Diamonds and the Trans
Hex/Mvelaphanda Resources joint venture company, Mvelaphanda Exploration, Trans
Hex became operators of Etruscan"s Tirisano mine on 1 June 2004. The effective
utilisation of the plant has improved from 42% to 77%. A shutdown period is
however scheduled for November for the phase 1 upgrade of the plant. Production
since June 2004 has been 2 430 carats which are sold via the Trans Hex tender
system. Sales to date have achieved an average price of $588/carat. The Company
expects to meet the relevant "earn-in" criteria prior to August 2005, which will
result in Mvelaphanda Exploration acquiring a 50% stake in the Tirisano
operation. Tirisano commenced CONTOPS during October 2004.
Trans Hex has acquired its joint venture partner"s share in the Viegulands Put
and Remhoogte properties (Niewejaarskraal area) and now holds 100% of the
properties. Bulk sampling of the extensive untested Remhoogte rooikoppie gravels
is expected to commence towards the end of the financial year.
Angola
Production at Luarica has averaged 8 000 carats per month since June, with an
average grade of 15 carats/100 m3 being achieved. Trans Hex, together with its
project partners, is currently reviewing additional capital expenditure
proposals which, if accepted, will increase medium-term production levels. The
project"s cost per carat averaged US$242.
Pilot production at Fucauma commenced in March 2004, and 9 500 carats have been
produced to date. The project"s Dense Medium Separation plant has arrived in
Angola and full production is expected at the end of the first quarter of 2005.
A total of 57 700 carats from the Angolan operations were sold during the period
under review. Luarica sales remain in the $300 per carat range, with Fucauma
averaging $200 per carat.
Kimberlite exploration at the Gango project identified a large coincident
gravity and kimberlite indicator mineral anomaly. Core drilling confirmed a
kimberlite body of approximately 100 hectares in extent, named the Lorelei pipe.
Preliminary mineral chemistry of the Lorelei pipe indicates a low diamond-
bearing potential. Exploration drilling of other anomalies in the concession
area is continuing.
Dredge sampling of the Luana River in the Luana concession yielded an average
grade of 31 carats/100 m3 and an average stone size of 0,28 carats/stone. The
bulk sample phase is due to commence in the first quarter of 2005.
Marine
Diamond production amounted to 41 600 carats (13 800 carats) with shallow water
contractor operations contributing 45% of the total production, namely 18 800
carats, which is a 36% improvement on production for the corresponding prior
period.
The two air-lift mining vessels, mv Ivan Prinsep and mv Namakwa, conducted mid-
water contract mining in Namibia, with the proceeds from the sale of 22 800
carats accruing to Trans Hex.
The Group has concluded an agreement with a Namibian empowerment company, Epia
Minerals (Pty) Limited, to jointly pursue various opportunities in Namibia.
The rough diamond market
The demand for rough, together with US dollar pricing levels, during the period
under review has remained positive. Sales during the six-month period amounted
to US$82,5 million. This reflects an 18% increase over the same period last
year.
During the period, Trans Hex sold two stones larger than 100 carats in weight,
one of which realised a price in excess of US$1 million.
Prices for rough have eased since September 2004, particularly in respect of the
under-two carat stones, which constitute less than 25% of Trans Hex"s
production. Sales of polished, however, appear to have been good throughout the
year and there is continued optimism for diamond jewellery sales during the
holiday season. The Group remains confident that the demand for the Trans Hex
production will remain strong for at least the remainder of the financial year.
Health and safety
Although the disabling injury frequency rate declined by 34%, the Group regrets
to announce that during October two employees died in a road accident at the
Reuning operation. A comprehensive health and safety intervention programme has
been launched to enhance awareness and ownership of health and safety issues by
all employees.
Prospects
The implementation of CONTOPS during November will result in increased
production levels at Baken and Bloeddrif. In Angola, the Luarica project is
expected to reach anticipated production levels by the end of the financial
year. The Group remains optimistic that current dollar diamond prices will be
maintained although a sustained rand dollar exchange rate at present levels will
negatively impact on earnings for the full financial year.
Dividend declaration
The directors of Trans Hex have resolved to declare dividend number 48 of 20
cents per share for the interim period ended 30 September 2004.
Last day to trade (cum dividend) Friday, 3 December 2004
First date of trading (ex dividend) Monday, 6 December 2004
Record date Friday, 10 December 2004
Payment date Monday, 13 December 2004
Share certificates may not be dematerialised or rematerialised between Monday 6
December 2004 and Friday 10 December 2004, both days inclusive.
Change in directorship
Mr Llewellyn Delport was appointed Managing Director of the Company on 1 July
2004.
By order of the board
TMG Sexwale L Delport
Chairman Managing director
Parow
8 November 2004
Registered office
405 Voortrekker Road, Parow 7500, PO Box 723, Parow 7499
JSE share code: TSX NSX share code: THX
ISIN: ZAE000018552
Registration number: 1963/007579/06
Transfer secretaries
South Africa: Computershare Investor Services 2004 (Pty) Ltd
PO Box 61051, Marshalltown 2107
Namibia: Transfer Secretaries (Pty) Ltd
PO Box 2401, Windhoek
Directorate
TMG Sexwale (Chairman), BR van Rooyen (Deputy chairman), L Delport (Managing
director), WE Buhrmann, E de la H Hertzog, DM Hoogenhout, AM Krige, MS Loubser,
AR Martin, MJ Willcox
GJ Zacharias (Company secretary)
www.transhex.co.za
Date: 09/11/2004 07:00:29 AM Supplied by www.sharenet.co.za
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