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TSX - Trans Hex Group - Audited Results For The Year Ended 31 March 2008 And
Cash Dividend Declaration
Trans Hex Group Limited
JSE share code: TSX & NSX share code: THX
ISIN: ZAE000018552
Registration number: 1963/007579/06
Incorporated in the Republic of South Africa
("Trans Hex" or "the group")
AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2008 AND CASH DIVIDEND
DECLARATION
Audited consolidated income statement
2008 2007
Notes R`000 R`000
Continuing operations
Sales revenue 880 900 984 862
Cost of goods sold 702 934 728 864
Gross profit 177 966 255 998
Royalties: Namaqualand Diamond Fund (31 386) (34 168)
Trust
Selling and administration costs (76 899) (76 126)
Mining income 69 681 145 704
Exploration costs (39 345) (52 267)
Other gains/(losses) - net 1 5 660 2 554
Finance income 23 014 14 569
Finance costs (5 963) (8 701)
Reversal of impairment of assets 2 19 513 24 286
Impairment of available-for-sale
investment 3 (26 360) -
Share of results of associated (7) (10)
companies
Profit before income tax 46 193 126 135
Income tax 47 683 74 353
(Loss)/profit for the year from
continuing operations (1 490) 51 782
Discontinued operations
Loss for the year from discontinued
operations 4 (16 972) (10 059)
(Loss)/profit for the year (18 462) 41 723
(Loss)/earnings per share for
continuing operations
- Basic (1,4) 48,9
- Diluted (1,4) 48,8
Loss per share for discontinued
operations
- Basic (16,1) (9,5)
- Diluted (16,1) (9,5)
Dividend per share (cents)
- Interim 5,0 5,0
- Final 5,0 15,0
10,0 20,0
Total number of shares in issue 106 051 89 95
(`000)
Weighted average issued shares 105 643 89 880
(`000)
Headline earnings per share (cents)
2008 2007
- Continuing operations 8,6 31,2
- Discontinued operations (16,1) (9,5)
Abridged audited consolidated balance sheet
2008 2007
R`000 R`000
Assets
Property, plant and equipment 656 262 679 571
Goodwill 37 096 37 096
Financial assets 270 176 209 707
Deferred income tax assets - 5 408
Current assets 428 160 479 619
Inventory 112 720 115 223
Trade and other receivables 57 051 82 384
Financial assets 11 588 -
Current income tax 24 401 1 867
Cash and cash equivalents 222 400 280 145
Non-current assets classified as held for
sale 153 595 97 599
1 545 289 1 509 000
Equity and liabilities
Total shareholders` interest 994 472 1 009 435
Long-term borrowings 22 489 18 157
Deferred taxation 203 819 159 561
Provisions 54 844 45 211
Current liabilities 261 427 271 948
Short-term borrowings 30 088 52 481
Bank overdraft 28 248 30 875
Other 203 091 188 592
Liabilities directly associated with non- 8 238 4 688
current assets classified as held for
sale
1 545 289 1 509 000
Net asset value per share (cents) 941 1 122
Abridged audited consolidated statement of changes in equity
2008 2007
R`000 R`000
Balance at 1 April 1 009 435 961 373
Net (loss)/profit attributable to (18 462) 41 723
ordinary shareholders
Dividends paid (17 996) (13 492)
Translation differences on foreign (3 699) 19 259
subsidiaries
Fair value adjustment on available-for- 26 360 561
sale financial assets
Share-based payments 48 (1 062)
Treasury shares held by group (1 816) -
Issue of share capital 602 1 073
Balance at end of year 994 472 1 009 435
Abridged audited consolidated cash flow statement
2008 2007
R`000 R`000
Cash available from operating activities 151 619 198 696
Movements in working capital 45 485 32 909
Taxation paid (51 043) (66 030)
Dividend paid (17 996) (13 492)
Cash retained from operations 128 065 152 083
Cash employed (183 183) (62 198)
Fixed assets:
Replacement (137 283) (27 257)
Additional (29 180) (68 729)
Borrowings (18 061) 35 583
Investments, loans and issue of capital 1 341 (1 795)
Net (decrease)/increase in cash and cash (55 118) 89 885
equivalents
Notes
2008 2007
R`000 R`000
1. Other gains/(losses) - net
Other gains/(losses) consist mainly of
the following principal categories:
Net foreign exchange profit 8 871 4 193
Loss on other financial assets at fair
value through profit and loss (912) -
Rehabilitation provision - unwinding of (2 299) (1 639)
discount
5 660 2 554
2. Reversal of impairment of assets
During 2006 the group reviewed the
carrying value of its investment in the
Tirisano Mine near Ventersdorp. The
review indicated impairment to the value
of this investment and the value of this
investment was reduced during the 2006
financial year.
Due to the subsequent sale of the
Tirisano Mine (September 2007) the value
of the operation was reassessed,
resulting in an impairment reversal in
the current period of R19,5 million.
During the comparative period, the
Middle Orange River operations disposal
was concluded (March 2007), resulting in
an impairment reversal of R17,2 million.
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
3. Impairment of available-for-sale (26 360) -
investment
In light of a significant and prolonged
decline in the fair value of the shares
held in Diamond Fields International
Ltd, the cumulative loss previously
uthorized in equity, has been
reclassified to the income statement.
4. Loss for the year from discontinued (16 792) (10 059)
operations
The group has resolved on 7 March 2008
to discontinue the deep water marine
operations as a result of continued
losses sustained. These operations
consist of two mining vessels and
various options regarding the disposal
of these vessels are being actively
pursued.
2008 2007
R`000 R`000
5. Reconciliation of headline earnings
Continuing operations
(Loss)/profit for the year (1 490) 51 782
Loss/(profit) on sale of assets 3 141 (2 172)
Reversal of impairment of assets (19 513) (24 286)
Impairment of available-for-sale 26 360 -
investments
Taxation impact 596 7 672
Headline earnings 9 094 32 996
Headline earnings per share (cents) 8,6 31,2
Discontinued operations
Loss for the year (16 972) (10 059)
Taxation impact - -
Headline earnings (16 972) (10 059)
Headline earnings per share (cents) (16,1) (9,5)
6. Capital commitments 161 937 229 833
(including amounts uthorized, but not
yet contracted)
These commitments of the group will be financed from its own
resources or borrowed funds.
7. Segment information
Primary segments
Discon-
Continuing tinued
South Africa
R`000 Angola Liberia Total Namibia
R`000 R`000 R`000 R`000
2008
Revenue 791 891 89 009 - 880 900 48 255
Operating
income/(loss) 226 220 (37 425) - 188 795 (20 308)
Depreciation (82 282) (36 832) - (119 114) (7 197)
Mining
income/(loss) 143 938 (74 257) - 69 681 (27 505)
Net financial
income/(expens 31 917 (9 206) - 22 711 -
e)
Exploration
costs (4 691) (25 900) (8 754) (39 345) (2 472)
Reversal of
impairment of
assets 19 513 - - 19 513 -
Share of
associates`
results (7) - - (7) -
Profit/(loss)
before 190 670 (109 363) (8 754) 72 553 (29 977)
taxation
Impairment of
available-for-
sale
investment - - - (26 360) -
(other)
190 670 (109 363) (8 754) 46 193 (29 977)
Assets 1 014 779 358 057 5 234 1 378 070 13 624
Non-current
assets
classified as
held for sale 96 675 542 6 558 103 775 49 820
Liabilities 401 619 147 440 - 549 059 1 758
Capital
expenditure 177 607 5 454 - 183 061 -
2007
Revenue 893 874 90 988 - 984 862 50 949
Operating
income/(loss) 301 739 (32 059) - 269 680 (12 986)
Depreciation (84 723) (39 253) - (123 976) (7 963)
Mining
income/(loss) 217 016 (71 312) - 145 704 (20 949)
Net financial
income/(expense) 12 492 (4 070) - 8 422 -
Exploration
costs (4 330) (35 082) (12 855) (52 267) -
Reversal of
impairment of
assets 24 286 - - 24 286 -
Share of
associates`
results (10) - - (10) -
Profit/(loss)
before taxation 249 454 (110 464) (12 855) 126 135 (20 949)
Assets 955 740 359 061 12 221 1 327 022 84 379
Non-current
assets
classified as
held for sale 96 675 924 - 97 599 -
Liabilities 382 576 114 980 - 497 556 2 009
Capital
expenditure 87 624 41 522 9 856 139 002 211
8. The accounting policies are consistent with those applied in the previous
year in accordance with International Financial Reporting Standards,
including IAS 34.
9. 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.
Salient features
Second-half headline earnings of R41 million compared to first-half headline
loss of R32 million
Extended life of mine achieved at Bloeddrif and Baken
Costs driven down - achieved 2,4% reduction in cost per cubic metre at South
African land operations
Production at Luarica increased by 16%
Operational responsibility achieved at Fucauma
Bulk sampling at Luana proves 10,4 million carat resource
Operations conducted by deepwater mining vessels discontinued
Financial summary
Continuing operations
Total rough diamond sales for the financial year amounted to US$122,2
million, a reduction of 14% over those of the 2007 financial year. Rand
revenue at R880,9 million was 11% lower than the prior year.
A loss of R1,5 million was made compared to a profit of R51,8 million for
the prior year, with a loss per share of 1,4 cents compared to a profit per
share of 48,9 cents in the prior year. Headline earnings per share was 8,6
cents (2007: 31,2 cents), with second-half headline earnings of R41 million
compared to the first-half loss of R32 million. The decline in earnings was
primarily due to the temporary decommissioning of the Bloeddrif plant, which
has now been successfully recommissioned, as well as lower grades at Baken
during the last quarter, which have subsequently recovered to anticipated
levels.
Cost of sales decreased by 3,6% to R703 million, whilst cubic metres of
gravel treated remained constant. Operating costs remain a key focus area as
well as improvements in operational effectiveness, which have resulted in a
2,4% reduction in cost per cubic metre at the South African land operations
despite severe inflationary pressures.
An impairment of R26,4 million resulting from a decrease in value of the
investment in Diamond Fields International Limited, gained as part of the
group`s Benguela acquisition in 2000, has impacted profits. The share price
(which at acquisition was CAD1,66 per share) was trading on 31 March 2008 at
CAD0,085 per share. This decline is considered to be of a permanent nature
and therefore the cumulative loss has been reclassified from equity to the
income statement.
Cash flow from operations remains positive at R128 million (2007: R152
million). Despite self-funded capital expenditure of R181 million primarily
for the earthmoving equipment replacement cycle at the South African land
operations, year-end cash balances were strong at R194 million (2007: R249
million).
Discontinued operations
The operations conducted by the two deepwater mining vessels have been
discontinued at financial year-end. The after-tax loss for the year was
R17,0 million (2007: R10,1 million).
Operations
South Africa
Carat production in the second half was 7% higher (55 444 carats) than the
first half (51 861 carats) totalling 107 305 carats (2007:129 950 carats).
The year-on-year decrease in total carats was mainly due to the
decommissioning of the Bloeddrif plant and the lower than anticipated grades
at Baken, both of which have now been addressed.
Baken produced 71 856 carats (2007: 83 224 carats) with an average stone
size of 1,03 carats per stone (2007: 1,16 carats per stone). The average
grade realised was 1,63 carats/100 m3 (2007: 1,95 carats/100 m3). The
primary cause of the decline in grade was due to the calcrete layers
experienced in the overburden during the last quarter, which negatively
impacted access to planned high-grade gravels. This was a temporary
occurrence and, as previously reported, Baken`s average reserve grade (1,7
carats/100 m3) is expected to stabilise over the remaining life of mine. The
achievement of lower unit cost and higher diamond prices, as well as further
exploration work, resulted in the life of mine remaining at eight years.
The Bloeddrif plant was successfully recommissioned during November 2007
with full production achieved towards financial year-end. The gravel treated
has been significantly increased from pre-shutdown levels of 28 000 m3 to 40
000 m3 per month. Operating costs have been driven down from a high of
R129/m3 (R51/tonne) to R70/m3 (R28/tonne) and further reductions are
expected to bring costs to a sustainable R60/m3 (R24/tonne) level. This, in
combination with a higher diamond price, has resulted in a large percentage
of previously uneconomical resource being reclassified as probable reserves.
With the current installed capacity the life of mine is in excess of 20
years which allows for a large-volume, low-cost mining operation.
The balance of the Richtersveld operations achieved 23 159 carats (2007: 16
376 carats) at an average stone size of 1,60 carats per stone.
Shallow-water operations
Combined production from the two marine shallow-water operations was 11 366
carats (2007: 13 731 carats). A research and development project utilising a
combination of various mining technologies has been completed which will
enable access to previously unmined areas in the surf zones.
Angola
Production at Luarica, in which Trans Hex has a 35% interest, increased by
16% to 88 500 carats (2007: 76 000 carats) with the average grade of
12,6/100 m3 remaining stable year on year. The lack of availability of
machinery continues to be addressed and an increase in carat production was
achieved with the operating loss decreasing by 40%. The exploration
activities conducted by Luarica Association has resulted in the addition of
510 000 carats to the inferred resource and significant upside exists to
expand and upgrade this resource in the future.
The Fucauma project, in which Trans Hex has a 32% interest, achieved 41 800
carats (2007: 73 000 carats) with the average grade of 12,4/100 m3 remaining
stable year on year. As announced on 7 May 2008, the members of the Fucauma
Association have granted to Trans Hex the operational responsibility of the
Fucauma project for a period of four years.
A comprehensive recovery plan for the project is now being implemented which
will enable Trans Hex to deploy and utilise its considerable expertise in
alluvial diamond mining operations at Fucauma.
Exploration
South Africa
The regional kimberlite exploration programme utilising airborne gradiometer
technology is continuing. In total, 114 anomalies have been evaluated by
means of a combination of target sampling, ground geophysics and drilling.
Several small kimberlite pipes and fissures have been identified and their
evaluation is ongoing. Fifty nine new order prospecting rights have been
issued to date and the evaluation of these prospects is continuing.
Angola
Results of further samples indicated exceptional potential at our Luana
concession and development of a mine is now a high priority. Bulk sampling
is progressing well, with 27 of the 30 planned trenches on the west bank of
the Luana River completed. Results of the central trenches were better than
expected with average grades in excess of 25 carats/100 m3 being achieved.
Pilot production will be undertaken on the west bank after completion of the
three remaining trenches. A pre-feasibility study is currently under way. An
updated resource statement based on these results indicates a total of 2,3
million carats in Indicated Resources and 8,1 million carats in Inferred
Resources for this project. A reserve of 1,9 million carats at a grade of
30,7 carats/100 m3 has been established at Luana.
Liberia
Bulk sampling of five of the six known kimberlites on the Kpo joint venture
with Stellar Diamonds Liberia, has been completed. Initial financial
analysis indicates that the pipes are not currently economically mineable.
Exploration for new kimberlites is continuing.
The rough diamond market
Total sales for the period were US$128,8 million, with US$109,7 million
being attributed to the group`s South African operations. The period has
been characterised by a strong demand for large good quality rough diamonds
and increasing price levels for these stones were experienced through out
the financial year. Three gem quality stones in excess of 50 carats in
weight and thirty six stones in excess of 20 carats in weight were sold
during the year. Included in these was Trans Hex`s highest dollar-value
stone on record which achieved US$2,96 million for a 78 carat 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 are expected to commence during
the second half of calendar 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.
Outlook
The significant progress which has been made towards implementing
operational efficiencies at the group`s production facilities, as well as a
marked improvement in operating costs at the South African land operations,
is expected to continue.
The Bloeddrif mine will be operated under current low-cost structure in
order to lay the foundation for a high-volume, low-cost mine.
A significant milestone in the recovery of the Angolan operations by
achieving operational responsibility of Fucauma has been attained and the
process of implementing an extensive recovery plan which is expected to
drive improved production and reduce costs, is under way.
Production levels at Luarica are anticipated to improve further.
The feasibility study of the high-potential Luana resource has commenced.
Various options for the disposal of the mining vessels are being actively
pursued.
Demand and pricing for larger sizes of rough diamonds have been strong
during the last quarter and the outlook for rough diamond prices in the long
term appears positive.
Change in directorship
As previously reported, Mr Mervyn Carstens was appointed executive director
SA land operations in August 2007. Mrs Magda Loubser resigned as financial
director during February 2008. The board wishes to thank Mrs Loubser for the
considerable contribution she has made to the group during her 21 years of
service. Mr Graham Muller was appointed financial director in February 2008.
As part of the group`s director rotation policy, one third of non-executive
directors are due for re-election at the forthcoming annual general meeting.
Mr Niel Hoogenhout has indicated he will not be available for re-election.
The board wishes to thank him for his 27 years of dedicated service to the
group, and for his valuable contribution as chief executive officer, and
thereafter as non-executive director.
The board is pleased to announce the appointment of Mr Theunis de Bruyn as a
non-executive director with effect from 28 May 2008. Mr de Bruyn is a
chartered accountant. He has previously held senior research and corporate
finance positions with ABN AMRO Securities and has been a founding
shareholder in several private equity investment and asset management
companies.
Dividend declaration
The directors of Trans Hex have resolved to declare a final dividend number
55 of 5,0 cents per share.
Last day of trade (cum dividend) Friday 27 June 2008
First date of trading (ex dividend) Monday 30 June 2008
Record date Friday 4 July 2008
Payment date Monday 7 July 2008
Share certificates may not be dematerialised or rematerialised between
Monday, 30 June 2008, and Friday, 4 July 2008, 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 2008 and the annual general
meeting is scheduled for 1 August 2008.
By order of the board
PL Zim L Delport
Chairman Chief executive officer
Parow
28 May 2008
Registered office
405 Voortrekker Road, Parow 7500, PO Box 723, Parow 7499
Transfer secretaries
South Africa: Computershare Investor Services (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
(chief executive officer), MJ Carstens, T de Bruyn, DM Falck,
E de la H Hertzog, DM Hoogenhout, AR Martin, AG Muller, PC Pienaar
GJ Zacharias (company secretary)
www.transhex.co.za
Date: 28/05/2008 08:00:08 Supplied by www.sharenet.co.za
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