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TSX - Trans Hex Group Limited - Audited Results For The Year
Ended 31 March 2007 and dividend declaration
Trans Hex Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1963/007579/06)
Share Code: TSX
ISIN: ZAE000018552
("Trans Hex" or "the Company" or "the Group")
Audited Results For The Year Ended 31 March 2007 and
dividend declaration
- Significant turnaround in profit at R42 million
- Cash generated increased 74% to R90 million
- Improved performance from SA land operations
- Ranked Number 1 in Resources Sector of FM Top Empowerment
Companies 2007 Survey
Audited consolidated income
statement
% 2007 2006
change R`000 R`000
Sales revenue (5) 1 035 1 087 897
811
Cost of goods sold (3) 792 420 820 342
Gross income (9) 243 391 267 555
Royalties: Namaqualand (34 168) (33 034)
Diamond Fund Trust
Selling and (84 468) (75 536)
administration costs
Mining income (22) 124 755 158 985
Other financial income 17 123 4 149
(Note 1)
Finance costs (8 701) (8 730)
Exploration costs (18) (52 267) (63 651)
Impairment of assets 24 286 (218 792)
Share of results of (10) (6)
associated companies
Profit/(loss) before 105 186 (128 045)
income tax
Income tax 63 463 (9 117)
Profit/(loss) for the year 41 723 (118 928)
Earnings per share (cents)
Basic 39,4 (112,7)
Diluted 39,3 (112,7)
Dividend per share (cents)
Interim 5,0 20,0
Final 15,0 10,0
20,0 30,0
Total number of shares in
issue (`000) 89 955 89 847
Weighted average issued
shares (`000) 89 880 89 470
Abridged audited consolidated balance sheet
2007 2006
R`000 R`000
Assets
Property, plant and equipment 679 571 659 027
Goodwill 37 096 37 096
Financial assets 209 707 200 637
Deferred income tax assets 5 408 10 166
Current assets 479 619 368 718
Inventory 115 223 119 488
Trade and other receivables 82 384 65 431
Current income tax 1 867 -
Cash and cash equivalents 280 145 183 799
Non-current assets classified 97 599 82 854
as held for sale
1 509 000 1 358 498
Equity and liabilities
Total shareholders` interests 1 009 435 961 373
Long-term liabilities 18 157 18 649
Deferred taxation 159 561 120 960
Provisions 41 230 39 093
Current liabilities 275 929 213 735
Short-term borrowings 52 481 16 406
Bank overdraft 30 875 24 414
Other 192 573 172 915
Liabilities directly 4 688 4 688
associated with non-current
assets classified as held for
sale
1 509 000 1 358 498
Net asset value per share 1 122 1 070
(cents)
Abridged audited consolidated statement of changes in equity
2007 2006
R`000 R`000
Balance at 1 April 961 373 1 113 713
Net profit/(loss) attributable to 41 723 (118 928)
ordinary shareholders
Dividends paid (13 492) (35 822)
Translation differences on foreign 19 259 1 179
subsidiaries
Fair value adjustment on available- 561 (6 157)
for-sale financial assets
Share-based payments (1 062) 1 090
Issue of share capital 1 073 6 298
Balance at end of year 1 009 961 373
435
Abridged audited consolidated cash flow statement
2007 2006
R`000 R`000
Cash available from operating 198 696 232 338
activities
Movements in working capital 32 909 54 436
Taxation paid (66 030) (83 975)
Dividend paid (13 492) (35 822)
Cash retained from operations 152 083 166 977
Cash employed (62 198) (115 466)
Fixed assets - Replacement (27 257) (24 880)
- Additional (68 729) (69 671)
Loan to Angolan joint ventures - (10 195)
Investment in Tirisano mine - 665
Long-term liabilities 35 583 (14 432)
Investments, loans and issue of (1 795) 3 047
capital
Net increase in cash and cash 89 885 51 511
equivalents
Notes
1. Net financial 2007 2006
expenditure R`000 R`000
Net financial
income/(expenses) consist
mainly of the following
principal categories:
Interest received 14 569 4 744
Net foreign exchange profit 4 193 162
Rehabilitation provision - (1 639) (757)
unwinding of discount
17 123 4 149
2. Reconciliation of
headline earnings
Profit/(loss) for the year 41 723 (118 928)
(Profit)/loss on sale of (2 172) 765
assets
Impairment of assets (24 286) 218 792
Taxation impact 7 672 (69 065)
Headline earnings 22 937 31 564
Headline earnings per share 21,7 29,9
(cents)
3. Capital commitments 229 833 44 421
(includingamounts
authorised, but not yet
contracted)
These commitments of the Group will be financed from its own
resources or borrowed funds.
4. Segment information
Primary segments
South
Africa Angola Namibia Liberia Total
R`000 R`000 R`000 R`000 R`000
2007
Revenue 893 874 90 988 50 949 - 1 035 811
Operating 301 739 (32 059) (12 986) - 256 694
income/(loss)
Depreciation 84 723 39 253 7 963 - 131 939
Mining 217 016 (71 312) (20 949) - 124 755
income/(loss)
Net financial 12 492 (4 070) - - 8 422
income/(expen
se)
Exploration (4 330) (35 082) - (12 855) (52 267)
costs
Impairment of 24 286 - - - 24 286
assets
Share of (10) - - - (10)
associates`
results
Profit/(loss) 249 454 (110 (20 949) (12 855) 105 186
before 464)
taxation
Assets 955 740 359 061 84 379 12 221 1 411 401
Non-current
assets 96 675 924 - - 97 599
classified as
held for sale
Liabilities 382 576 114 980 2 009 - 499 565
Capital 87 624 41 522 211 9 856 139 213
expenditure
2006
Revenue 958 428 87 592 41 877 - 1 087 897
Operating 324 488 (11 785) (20 776) - 291 927
income/(loss)
Depreciation 100 545 26 167 6 230 - 132 942
Mining 223 943 (37 952) (27 006) - 158 985
income/(loss)
Net financial (3 068) (1 513) - - (4 581)
expense
Exploration (16 694) (44 358) - (2 599) (63 651)
costs
Impairment of (73 501) (145 - - (218 792)
assets 291)
Share of (6) - - - (6)
associates`
results
Profit/(loss) 130 674 (229 (27 006) (2 599) (128 045)
before 114)
taxation
Assets 835 638 363 401 76 605 - 1 275 644
Non-current
assets 67 661 15 193 - - 82 854
classified as
held for sale
Liabilities 355 236 41 889 - - 397 125
Capital 87 042 34 484 269 - 121 795
expenditure
5. The accounting policies are consistent with those applied in
the previous year in accordance with International Financial
Reporting Standards, except for the changes described in Note 6
below.
6. Change in accounting policies
IAS 19 - Employee Benefits
During the year the group changed the accounting treatment of
actuarial gains and losses arising from experience adjustments
and changes in actuarial assumptions. In previous years, these
changes were charged to income in the year during which they
occurred. Under the new treatment changes in excess of the
greater of 10% of the value of plan assets or 10% of the
deferred benefit obligations are charged or credited to income
over the employees` expected average remaining working lives.
Effect on 2006
Decrease in provision for post-retirement
medical aid expense 2 558
Increase in tax expense (742)
Increase in net profit 1 816
Effect on years prior to 2006
Decrease in net profit (170)
Increase in retained earnings
at 31 March 2006 1 646
7. Impairment of assets
In the prior year, in light of the lower than anticipated
exploration results, the group reviewed the value of its
investments in the Cacola and Caquilo alluvial and kimberlite
exploration projects in Angola and the Tirisano Mine near
Ventersdorp. The review indicated impairment to the value of
these investments as well as the Middle Orange operations and in
accordance with the provisions of IAS 36, the value of these
investments was reduced accordingly.
In this financial year, subsequent to the sale of the Middle
Orange River operations, the value of this operation has been
reassessed, resulting in a reversal of the impairment as
follows:
2007 2006
R`000 R`000
Details of net assets impaired
are as follows:
Mining plant and equipment (11 970) 22 418
Mining rights (12 316) 190 205
Net current assets - 6 169
Impairment of assets before tax (24 286) 218 792
Deferred tax 7 042 (68 843)
Net assets impaired/(impairment
reversal) (17 244) 149 949
8. Report of independent auditor. The results have been audited
by PricewaterhouseCoopers Inc. (Stellenbosch). A copy of their
unqualified report is available for inspection at the Company`s
registered office.
Financial summary
The profit for the year increased to R41,7 million compared to a
loss of R118,9 million for the prior year, with earnings per share
at 39,4 cents (loss per share 112,7 cents). Headline earnings per
share at 21,7 cents is 27% lower than the prior year.
Total rough diamond sales for the financial year amounted to
US$148,8 million, a reduction of 12% over those of the 2006
financial year. Rand revenue at R1 035,8 million was 5% lower than
the prior year. The impact of lower sales volumes was partially
offset by the weaker rand and marginally higher selling prices.
Cost of sales decreased by 3% to R792,4 million, mainly due to less
carats sold. Other cost of sales increased by 4% from the previous
year. Costs at the group`s flagship Baken operation remain a key
focus area. Continued improvements in operational effectiveness
contributed to a 5% reduction in cost per cubic metre.
Mining income decreased by 22% to R124,8 million (2006: R159,0
million), with the loss on Angolan mining increasing from R38,0
million to R71,3 million, due to lower levels of production
resulting from operational inefficiencies. The mining loss from the
marine vessels reduced from R27,0 million to R20,9 million.
Technical improvements on the Mv Namakwa and deployment of the
vessels in more prospective concession areas in the second half
contributed to a marked improvement in operational performance.
A partial impairment reversal of R17,2 million relating to the
disposal of the Middle Orange River assets to Rockwell as announced
in March has been accounted for.
Cash flows remained strong with cash retained from operating
activities after dividend paid maintained at R152,1 million.
OPERATIONS
SOUTH AFRICA
Carat production from land operations totalled 116 200 carats, lower
than the 130 700 carats produced during the previous year, mainly
due to the extraordinary rain which adversely affected production at
the Lower Orange River operations during the first half of the
financial year.
Baken produced 32 400 carats in the first half and a much improved
50 800 carats in the second half totalling 83 200 carats (2006: 98
850 carats) with an average stone size of 1,16 carats per stone
(2006: 1,19 carats per stone). The average grade realised declined
to 1,95 carats/100 m3 (2006: 2,37 carats/100 m3). Despite the loss
of production due to rain in the first half, ongoing operational
improvements resulted in a 7% increase in total volumes moved, with
a similar reduction in unit costs.
The Surpac model for the Baken orebody was updated with new drill
and bulk sample information, and Whittle mine optimisation software
was run on the new model, which has confirmed that the current
reserve estimate and mine plan for Baken is optimal and sustainable
for the remainder of the currently estimated eight-year life of
mine.
The Richtersveld operations, comprising the Bloeddrif, Reuning
Central, Suidhek, Nxodap plants and the Gariep joint venture,
achieved 27 850 carats (2006: 16 400 carats). The improved carat
production follows the commissioning during September 2006 of the
semi-mobile Nxodap mining and processing system. The Bloeddrif plant
has been decommissioned pending plant modifications to increase
throughput capacity which will decrease unit costs.
As announced on 5 March 2007, the Middle Orange River operations
consisting primarily of the Saxendrift and Niewejaarskraal
operations have been sold to Rockwell Resources RSA (Proprietary)
Limited for a purchase consideration of R100,4 million. The sale
will be implemented once the requisite consent by the Minister of
Minerals and Energy to the cession and transfer of the underlying
mining and prospecting rights has been obtained.
Shallow water operations
Combined production from the two marine shallow water operations
declined from 14 800 carats to 13 750 carats due to adverse weather
conditions which resulted in fewer operating days for the contract
divers.
ANGOLA
Production at Luarica, in which Trans Hex has a 35% interest, was 76
000 carats (2006: 93 000 carats). Almost two weeks of production was
lost in the first half of the year due to labour unrest. Additional
exploration has led to improvements in the economic evaluation of
mining blocks and is expected to improve the reserve potential and
mining operational difficulties at the operation.
The Fucauma project, in which Trans Hex has a 32% interest, achieved
73 000 carats (2006: 83 000 carats). Additional production capacity
was acquired and installed at the end of the financial year which
will provide improved production potential for the operation.
Production at both operations has been affected by poor earth-moving
equipment availabilities and operational difficulties which are
currently being addressed together with the joint venture partners.
Above-average rainfall also negatively affected production at both
operations during the second half of the financial year.
Namibia
The Mv Ivan Prinsep and the Mv Namakwa were utilised for mining and
prospecting in the Namdeb Mid-Shelve Concession Areas of Namibia, in
accordance with a joint venture agreement with Namibian empowerment
group, EPIA Minerals (Pty) Limited. Total production from the two
vessels was 37 150 carats (2006: 33 700 carats). The Mv Ivan Prinsep
was chartered by De Beers Marine Namibia for 55 days during the
reporting period. Losses incurred by the Namibian operations
declined in the second half as a result of ongoing technical
improvements to the Mv Namakwa. The improved revenue levels
experienced during the second half of the year are expected to
continue in the current financial year.
Exploration
South Africa
The regional kimberlite exploration programme utilising airborne
gradiometer technology has proved effective in identifying known
kimberlites and other mineral deposits and in defining new
prospective targets in previously problematic kimberlite exploration
terrains. Various kimberlitic and alluvial prospects are currently
being evaluated. Forty two new order prospecting rights have been
issued to date and the evaluation of these prospects is continuing.
Angola
At Luana overburden stripping of exploration trenches is well
advanced and treatment of samples is expected to commence during the
second half of calendar 2007. Bulk sampling, to prove a minimum of
one million carats, will target an area of the concession where
dredging has indicated an average grade of 18 carats per 100 cubic
metres.
Liberia
Six kimberlite pipes have, to date, been discovered at the Kpo
project in joint venture with Mano River Resources. Five of the six
kimberlite pipes are diamondiferous with excellent mineral
chemistry. A 5 tonne per hour DMS bulk sample plant has arrived on
site and bulk sampling to establish a macro diamond grade is
scheduled to be completed in the second half of calendar 2007.
The rough diamond market
Although liquidity and inventory difficulties in the diamond
industry persisted in calendar 2006, demand for larger sizes of
rough diamonds improved in the last quarter of the financial year.
Demand and pricing for larger sizes, for which the Trans Hex
production is synonymous, have been particularly strong as shortages
of such goods in the market exist and the outlook in the long term
for rough diamond suppliers appears positive.
One 208 carat stone, a 115 carat stone and fifty stones larger than
20 carats were sold during the reporting period. The Lower Orange
region contributed 75% of the larger than 20 carat stones. Three of
these stones sold in excess of US$1 million each. A 15 carat Baken
stone was sold for US$43 000 per carat.
Conversion of mining rights
Trans Hex was recently ranked first in the Resources Sector of the
Financial Mail Top Empowerment Companies 2007 survey and fourteenth
overall out of the top 200 companies.
The company continues to convert its various mining rights to new
order rights, with 12 mining rights having been converted to new
order rights to date.
Diamond-related legislation
National Treasury has released a further draft of the Diamond Export
Levy Bill which proposed a 5% export duty on exports of rough
diamonds. The Bill provides for an exemption of the 5% export duty
on the bulk of a producer`s rough diamond export, provided that a
percentage, as specified in the Act, of the producer`s production is
sold to local beneficiators.
Consultations with key stakeholders continue and developments are
being closely monitored in respect of the Diamond Export Levy Bill
and the Royalty Bill.
Prospects
The positive improvement in operating costs as well as the increased
carat production at the South African land operations is expected to
continue. The improved performance from the Namibian operations is
anticipated to be sustained. Production from the Angolan operations
is expected to have improved by end calendar 2007, following the
implementation of measures to counter the difficult operating
conditions.
Demand and pricing for larger sizes of rough diamonds, for which the
Trans Hex production is synonymous, have been particularly strong
during 2007 and the outlook for rough diamond prices in the long
term appears positive.
Change in directorship
As announced previously, following the successful conclusion of the
Mvelaphanda Resources Limited (Mvela) and Afripalm Resources
(Afripalm) transaction, the Mvela representation on the Trans Hex
Board has changed as follows:
Mr Tokyo Sexwale has resigned as a non-executive director and
chairman.
Mr Lazarus Zim has been appointed as a non-executive director and
chairman of Trans Hex.
Mr Mark Willcox has resigned as a non-executive director and Mr Pine
Pienaar has been appointed as a non-executive director of Trans Hex.
The above resignations and appointments were all effective from 9
May 2007.
The Board welcomes Messrs Zim and Pienaar as directors and wishes to
thank Mr Sexwale for his dedicated leadership during his five-year
tenure as chairman of the company.
Dividend declaration
The directors of Trans Hex have resolved to declare a final dividend
number 53 of 15 cents per share.
Last day of trade (cum dividend) Friday 29 June 2007
First date of trading (ex dividend) Monday 2 July 2007
Record date Friday 6 July 2007
Payment date Monday 9 July 2007
Share certificates may not be dematerialised or rematerialised
between Monday, 2 July 2007, and Friday, 6 July 2007, both days
inclusive. On the payment date, where so mandated, dividends due to
holders of certificated securities will either be transferred
electronically to such shareholders` bank accounts or,
alternatively, cheques will be posted to their registered addresses.
Shareholders` diary
The annual report will be mailed before 30 June 2007 and the annual
general meeting is scheduled for 3 August 2007.
By order of the Board
PL Zim L Delport
Chairman Managing Director
Parow
29 May 2007
Registered office
405 Voortrekker Road, Parow 7500, PO Box 723, Parow 7499
JSE share code: TSX
NSX share code: THX
Transfer secretaries
South Africa: Computershare Investor Services 2004 (Pty) Limited
PO Box 61051, Marshalltown 2107
Namibia: Transfer Secretaries (Pty) Ltd
PO Box 2401, Windhoek
Directorate
PL Zim (Chairman), BR van Rooyen (Deputy Chairman), L Delport
(Managing Director), DM Falck, E de la H Hertzog, DM Hoogenhout, MS
Loubser, AR Martin, PC Pienaar
GJ Zacharias (Company Secretary)
www.transhex.co.za
Date: 29/05/2007 08:00:01 Supplied by www.sharenet.co.za
Produced by the JSE SENS Department.
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