Wrap Text
TSX - Trans Hex Group Limited - Unaudited Interim Results For The Six Months
Ended 30 September 2007 And Cash Dividend Declaration
TRANS HEX GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1963/007573/06)
Share Code: TSX
ISIN ZAE000018552
("Trans Hex")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007 AND CASH
DIVIDEND DECLARATION
ABRIDGED CONSOLIDATED INCOME STATEMENT
Six months ended Year ended
30/09/07 30/09/06 31/03/07
Unaudited Reviewed Audited
R`000 R`000 R`000
Sales revenue (Note 1) 418 102 479 103 1 035 811
Cost of goods sold (374 397) (388 731) (792 420)
Gross income 43 705 90 372 243 391
Royalties: Namaqualand Diamond (13 147) (16 064) (34 168)
Fund Trust
Selling and administration costs (40 341) (37 109) (84 468)
Mining income (9 783) 37 199 124 755
Other financial income (Note 2) 10 254 11 346 17 123
Finance costs (3 275) (3 964) (8 701)
Exploration costs (20 103) (23 211) (52 267)
Reversal of impairment of assets 19 513 - 24 286
(Note 7)
Share of results of associated (6) (9) (10)
companies
(Loss)/profit before income tax (3 400) 21 361 105 186
Income tax (7 693) (18 585) (63 463)
(Loss)/profit for the period (11 093) 2 776 41 723
Earnings per share (cents)
- Basic (10,5) 2,6 39,4
- Diluted (10,5) 2,6 39,3
- Headline (29,9) 7,5 21,7
Dividend per share (cents) 5,0 5,0 20,0
Total number of shares in issue 89 955 89 872 89 955
(`000)
Weighted average issued shares 105 955 105 872 105 880
(`000)
Average US$ exchange rate 7,12 6,79 7,03
ABRIDGED CONSOLIDATED BALANCE SHEET
Six months ended Year ended
30/09/07 30/09/06 31/03/07
Unaudited Reviewed Audited
R`000 R`000 R`000
Assets
Property, plant and equipment 690 791 682 922 679 571
Goodwill 37 096 37 096 37 096
Financial assets 190 033 248 025 209 707
Deferred income tax assets 2 704 7 787 5 408
Current assets 388 933 374 076 479 619
Inventory 108 081 117 486 115 223
Trade and other receivables 81 601 117 881 82 384
Current income tax 19 010 - 1 867
Cash and cash equivalents 180 241 138 709 280 145
Non-current assets classified as held for 114 315 72 845 97 599
sale
1 423 872 1 422 751 1 509 000
Equity and liabilities
Total shareholders` interest 982 135 961 559 1 009 435
Long-term borrowings 24 193 9 324 18 157
Deferred taxation 151 055 159 613 159 561
Provisions 41 541 39 301 41 230
Current liabilities 220 260 248 266 275 929
Short-term borrowings 40 993 17 528 52 481
Bank overdraft 4 764 46 359 30 875
Other 174 503 184 379 192 573
Liabilities directly associated with non- 4 688 4 688 4 688
current assets classified as held for
sale
1 423 872 1 422 751 1 509 000
Net asset value per share (cents) 1 092 1 070 1 122
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended Year ended
30/09/07 30/09/06 31/03/07
Unaudited Reviewed Audited
R`000 R`000 R`000
Balance at 1 April 1 009 435 961 373 961 373
Net (loss)/profit for the period (11 093) 2 776 41 723
Dividends paid (13 493) (8 998) (13 492)
Translation differences on foreign (1 937) 25 582 19 259
subsidiaries
Fair value adjustment on available-for- (801) (1 147) 561
sale financial assets
Share-based payments 24 317 (1 062)
Cash flow hedges - (18 504) -
Issue of share capital - 160 1 073
Balance at end of period 982 135 961 559 1 009 435
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
Six months ended Year ended
30/09/07 30/09/06 31/03/07
Unaudited Reviewed Audited
R`000 R`000 R`000
Cash available from operating activities 38 775 80 674 198 696
Movements in working capital 15 991 (10 033) 32 909
Taxation paid (43 203) (68 655) (66 030)
Dividend paid (13 493) (8 998) (13 492)
Cash utilised by operations (1 930) (7 012) 152 083
Cash employed (71 863) (60 023) (62 198)
Fixed assets
- Replacement (54 099) (9 383) (27 257)
- Additional (15 724) (36 626) (68 729)
Borrowings (5 452) (8 203) 35 583
Investments, loans and issue of capital 3 412 (5 811) (1 795)
Net cash flow for the period (73 793) (67 035) 89 885
NOTES
Six months ended Year ended
30/09/07 30/09/06 31/03/07
Unaudited Reviewed Audited
R`000 R`000 R`000
1. Sales revenue
Bloeddrif mined a high-quality geological - 107 820 119 727
feature during the first six months of
the 2006/07 financial year. Following
completion of the mining of this feature
the plant was decommissioned and upgraded
to increase throughput and lower
production costs to enable the remaining
lower-grade deposits to be economically
mined.
Other operations 418 102 389 283 916 084
418 102 479 103 1 035 811
2. Other financial income
Other financial income consists of the
following principal categories:
Interest received 11 286 4 208 14 569
Net foreign exchange (loss)/profit (1 032) 7 138 4 193
Rehabilitation provision - unwinding of - - (1 639)
discount
10 254 11 346 17 123
3. Reconciliation of headline earnings
(Loss)/profit for the period (11 093) 2 776 41 723
(Loss)/profit on sale of assets (1 069) 5 156 (1 542)
- Before taxation (1 132) 5 557 (2 172)
- Taxation 63 (401) 630
Reversal of asset impairment (19 513) - (17 244)
- Before taxation (19 513) - (24 286)
- Taxation - - 7 042
Headline earnings (31 675) 7 932 22 937
4. Capital commitments
(including amounts authorised, but not 171 248 235 745 229 833
yet contracted)
These commitments, through to 2009, will
be financed from its own resources or
borrowed funds.
Six months ended Year ended
30/09/07 30/09/06 31/03/07
Unaudited Reviewed Audited
R`000 R`000 R`000
5. Segment information
Carats sold
South Africa (Land and Shallow Water) 55 793 63 950 133 239
Namibia (Marine Vessels) 21 867 24 245 44 382
Angola* 27 562 27 952 49 767
Sales
South Africa (Land and Shallow Water) 343 881 404 243 893 874
Namibia (Marine Vessels) 23 544 21 800 50 949
Angola* 50 677 53 060 90 988
Mining income/(loss) before depreciation
South Africa (Land and Shallow Water) 71 780 111 536 301 739
- Bloeddrif (4 101) 76 836 64 830
- Other operations 75 881 34 700 236 909
Namibia (Marine Vessels) (7 066) (10 751) (12 986)
Angola* (10 702) (7 659) (32 059)
Mining income/(loss)
South Africa (Land and Shallow Water) 33 349 70 766 217 016
Namibia (Marine Vessels) (10 963) (11 140) (20 949)
Angola* (32 169) (22 427) (71 312)
* Trans Hex attributable share
6. The accounting policies are consistent with the annual report and the
corresponding prior year period in accordance with International Financial
Reporting Standards. 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.
7. Reversal of asset impairment
During the 2006 financial year, in light of the lower than anticipated
exploration results, the group reviewed the value of its investments in the
Tirisano Mine near Ventersdorp and the Middle Orange operations. The review
indicated impairment to the value of these investments as well as the Middle
Orange operations and in accordance with the provisions of IAS36, the value of
these investments was reduced.
Due to the sale of the Tirisano Mine (September 2007) and Middle Orange River
operations (March 2007), the value of these operations has been reassessed,
resulting in a reversal of the impairment as follows:
Six months ended Year ended
30/09/07 30/09/06 31/03/07
Unaudited Reviewed Audited
R`000 R`000 R`000
Details of reversal of net assets are as
follows:
Mining plant and equipment 4 462 - 11 970
Mining rights 12 064 - 12 316
Net current assets 2 987 - -
Net asset impairment reversal before 19 513 - 24 286
taxation
Deferred taxation - - (7 042)
Net asset impairment reversal 19 513 - 17 244
COMMENTS
In this commentary, results are compared with the first six months of the
2006/07 financial year (in brackets).
INTRODUCTION
Sales revenue declined primarily as a result of the temporary loss of production
from the Bloeddrif plant and a resultant decline in the overall average price
per carat being achieved for the Lower Orange River operations. As previously
reported, the Bloeddrif plant was decommissioned to enable plant modifications
to increase throughput capacity and reduce unit costs. Bloeddrif mined a high
quality geological feature during the first six months of the 2006/07 financial
year. Following completion of mining of this feature, the plant was upgraded to
enable the remaining lower-grade deposits to be mined economically. Production
is scheduled to recommence during November 2007. South African land operations
production for the full year is expected to be in line with prior year levels.
Notwithstanding the overall loss for the Angolan division, the Luarica operation
achieved a much improved performance with mining income after depreciation at
R1,4 million (R5,3 million loss). The performance of the Namibian marine
operation improved with a reduced operating loss being sustained during the six-
month period.
FINANCIAL SUMMARY
The loss for the period amounted to R11 million compared to a profit of R3
million for the comparative period. The group`s loss per share was 10,5 cents
(earnings per share 2,6 cents) whilst headline loss per share amounted to
29,9 cents (earnings per share 7,5 cents).
Diamond sales decreased by 13% to R418 million (R479 million) and were 17% lower
in dollar terms at US$59,1 million (US$71,6 million), mainly due to the short-
term decommissioning of the Bloeddrif plant.
Cost of sales decreased by 4% to R374 million (R389 million) and mining income
reflected a loss of R9,8 million (R37,2 million profit).
A partial impairment reversal of R19,5 million relating to the disposal of the
Tirisano Mine to Etruscan Diamonds (Pty) Ltd has been accounted for following
the sale of Mvelaphanda Exploration`s 50% interest in Tirisano.
Cash available from operating activities remains positive. The group embarked on
a R200 million, three-year earth-moving equipment replacement cycle at the Lower
Orange River operations to be funded out of internal cash resources and
borrowings. Due to long lead times on delivery of this equipment, the bulk of
this funding will take place during the 2008 and 2009 financial years.
OPERATIONS
LAND
South Africa
Production from the South African operations was 9% lower at
46 700 carats (51 200 carats), mainly as a result of the loss of production at
the Bloeddrif plant (10 500 carats), which was temporarily de-commissioned
during November 2006, pending upgrading to increase production throughput and to
lower production cost. This plant is scheduled to resume production during
November 2007.
Baken production delivered a strong increase of 21% to 39 300 carats (32 400
carats) mainly as initiatives to lessen production interruptions during the
rainy season were successful and improvements in operational efficiencies
continued.
As previously announced, 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 completed upon receipt of the consent of the
Minister of Minerals and Energy to the cession and transfer of the underlying
mining and prospecting rights.
Production from the two shallow water operations, Port Nolloth and De Punt,
declined from 6 700 carats last year to 5 200 carats for the reporting period.
Mvelaphanda Exploration, the joint venture between Trans Hex and Mvelaphanda
Resources Limited, has sold its 50% interest in the Tirisano Mine near
Ventersdorp to Etruscan Diamonds (Proprietary) Limited, which holds the
remaining 50% interest in Tirisano. The sale consideration for the 50% interest
in the Tirisano Mine, was R50 million, of which R25 million was in cash and the
balance in Etruscan Resources Inc shares. Etruscan Resources Inc is a Toronto
Stock Exchange listed junior mining company with diamond interests in South
Africa and gold interests in West Africa.
Angola
Production at Luarica increased by 15% to 51 700 carats (attributable 18 095
carats) compared to 45 100 carats (attributable 15 785 carats) for the period
under review, with an average grade of approximately 12 carats/100 m3 (13
carats/100 m3). Initiatives to enhance efficiencies paid off with the project
reporting a positive operating profit and cash flows for the period, which
enabled repayment of the investment loan amount to recommence. Sales remained in
the US$315 per carat range.
At Fucauma, production increased by 9% to 31 600 carats (attributable 10 112
carats) compared to 28 900 carats (attributable 9 248 carats). Its performance
was hampered by continuing operational equipment maintenance and procurement
delays, which management is in the process of resolving. Fucauma sales averaged
US$180 per carat.
Approximately 81 900 carats (80 000 carats) from the Angolan operations were
sold during the period under review, with 27 562 carats attributable to Trans
Hex (27 952 carats).
Namibia
The mining vessels, Mv Ivan Prinsep and Mv Namakwa were utilised during the
entire reporting period, for mining and prospecting work in Namibia. The vessels
conducted resource development for 34 working days which has resulted in the
establishment of a sufficient resource to enable the development of a feasible
mining plan for the 2008 calendar year. The Mv Namakwa underwent statutory
maintenance in Cape Town for the entire month of September 2007.
Production, and subsequently revenue, increased by 8% compared to the same
reporting period last year, with a combined total of 18 300 carats.
EXPLORATION
South Africa
The regional kimberlite exploration programme utilising airborne gradiometer
technology and conventional methods that commenced in the second quarter of
2005, is progressing. A total of 52 Prospecting Rights had been granted by the
Department of Minerals and Energy by September 2007, and 18 more were submitted
during the third quarter of 2007. A number of anomalies remain to be tested.
Further evaluation of various other kimberlitic and alluvial prospects in the
Northern Cape and North West Province is in progress following positive first-
phase kimberlite indicator sampling and mineral chemical results. Alluvial
deposits held by Trans Hex in the Lower Orange region are being re-evaluated and
remodelled on a continuous basis to ensure maximum returns.
Angola
Exploration drilling and small-scale sampling on a 100 km2 portion of the 750
km2 Luana concession has resulted in the definition of a 1 million carat
Inferred Resource at a grade of 18 carats/100 m3. Bulk sampling of this inferred
resource, which started in July 2007, has yielded 1 300 carats at an average
grade of 45 carats/100 m3 and a stone size of 0.44 carats/stone from the 2 803
m3 treated to date. A further 27 trenches are planned during the next four
months to evaluate resources on the western bank of the Luana River, whereafter
evaluation of the eastern bank, which has similar potential, will be undertaken.
Bulk sampling of the western bank is scheduled for completion in February 2008,
after which a feasibility study will be undertaken, followed by investments to
place the project into full production.
Liberia
The Kpo kimberlite project is a joint venture with London AIM listed Stellar
Diamonds formed following the recent restructuring of Mano River Resources.
Trans Hex earned a 50% stake in the project by funding exploration to a maximum
of US$2,1 million during the first six months of the year. The partners are
currently co-funding exploration. The 20tph kimberlite bulk sample plant, which
was commissioned in May 2007 commenced full treatment during June 2007. Bulk
sampling of the six known kimberlites on the concession is continuing.
THE ROUGH DIAMOND MARKET
Rough diamond prices remained strong throughout the period in line with scarce
supply of larger stones in most cutting centres. Consequently, demand for Trans
Hex`s production remained buoyant throughout the period and we anticipate this
scenario to continue going forward.
During the period under review, Trans Hex sold its highest value stone on record
in dollar terms, generating US$2,96 million for a 78 carat D colour stone.
DIAMOND-RELATED LEGISLATION
In terms of the recent amendments to the Diamond Act, all producers are required
to sell 10% of their South African production to the State Diamond Trader (SDT).
Negotiations are currently under way with the SDT to finalise a producer
agreement and sales to the SDT expected to commence during 2008.
In addition, the Diamond Export Levy Act, which is due for enactment in the near
future, provides for producers to be granted an exemption on the payment of a 5%
export duty, provided that 15% by value of Trans Hex`s South African production
is sold to South African licence holders for local beneficiation.
Consultations with key stakeholders continue and developments are being closely
monitored in respect of the Mineral and Petroleum Resources Royalty Bill.
PROSPECTS
Trans Hex anticipates the Lower Orange River production for the full year to be
in line with prior year levels. The Bloeddrif plant, which has been modified to
increase throughput capacity, with the added potential to decrease unit costs,
will be recommissioned during November 2007.
The turnaround strategy to place the Angolan operations in a profit-making
position is starting to deliver positive results, with Luarica showing an
operating profit, which trend is expected to continue.
The anticipated demand and pricing for the larger sizes of rough diamonds for
which Trans Hex is renowned, should mitigate the negative impact that a strong
rand may have.
DIRECTOR APPOINTMENT
The Board is pleased to announce the appointment of Mr Mervyn Carstens as
Executive Director: SA Land Operations, with immediate effect.
Mr Carstens joined Trans Hex in 1996 as Human Resources Manager. He was
appointed Assistant General Manager: Baken mine in 2000, and General Manager of
the Middle Orange River Operations in 2002. He currently holds the position of
Group Executive: SA Land Operations, a position which he has held since
September 2005.
DIVIDEND DECLARATION
The directors have resolved to declare dividend number 54 of 5,0 cents per share
for the interim period ended 30 September 2007.
Last day to trade (cum dividend) Friday, 7 December 2007
First date of trading (ex dividend) Monday, 10 December 2007
Record date Friday, 14 December 2007
Payment date Tuesday, 18 December 2007
Share certificates may not be dematerialised or rematerialised between Monday 10
December 2007 and Friday 14 December 2007, both days inclusive.
By order of the board
P L Zim L Delport
Chairman Managing director
Parow
14 November 2007
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
PL Zim (Chairman), BR van Rooyen (Deputy chairman), L Delport (Managing
director), MJ Carstens, DM Falck, E de la H Hertzog, DM Hoogenhout, MS Loubser,
AR Martin, PC Pienaar
GJ Zacharias (Company secretary)
www.transhex.co.za
Date: 14/11/2007 08:12:45 Supplied by www.sharenet.co.za
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