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SAL - Sallies Limited - Condensed audited consolidated results for the year
ended 30 June 2011
SALLIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1903/001879/06)
JSE share code: SAL ISIN: ZAE000022588
("Sallies" or "the Company" or "the Group")
CONDENSED AUDITED CONSOLIDATED RESULTS
FOR THE YEAR ENDED 30 JUNE 2011
HIGHLIGHTS
- Loss per share reduced by 33% to 6,6 cents per share (F2010: 9,8 cents per
share)
- Witkop back in production and 32 027 wet metric tons ("wmt") of acid grade
fluorspar produced for the year
- 15 076 dry metric tons ("dmt") exported at average prices in excess of
US$357 per dmt
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year Year
ended ended
30 June 30 June
2011 2010
R`000 Audited Audited
Revenue - mining 56 071 60 815
Net foreign exchange losses (775) (1 091)
Cost of sales (52 222) (59 929)
Profit/(loss) from mining activities 3 074 (205)
Less: Depreciation (15 769) (19 451)
Operating loss from mining (12 695) (19 656)
Loss on disposal of plant, property and - (611)
equipment
Administrative expenses (29 095) (18 174)
Investment income 2 017 320
Finance costs on borrowings (1 467) (6 432)
Interest on convertible debentures (7 216) (7 224)
Restricted investments fair value adjustment 716 247
Loss before Honeywell, share-based payments (47 740) (51 530)
and Buffalo impairment
Honeywell award interest provision - (464)
Notional interest on convertible debentures (3 797) (3 204)
Share based payments - (920)
Loss before Buffalo impairment (51 537) (56 118)
Buffalo impairment - (6 464)
Net loss before taxation (51 537) (62 582)
Taxation 5 269 -
Net loss after taxation (46 268) (62 582)
Total comprehensive loss for the period (46 268) (62 582)
Issued shares (000) 724 556 642 220
Weighted average shares issued (000) 704 479 642 220
Weighted average shares issued for diluted 704 479 642 220
earnings per share (000)
RECONCILIATION OF EARNINGS
Net loss attributable to ordinary share- (46 268) (62 582)
holders for basic earnings per share
(Gain) on disposal of plant and equipment 43 611
Fair value of investment properties 1 627 -
adjustment
Impact of the impairment of Buffalo fixed - 6 464
assets
Net loss attributable to ordinary share- (44 598) (55 507)
holders for headline earnings per share
LOSS PER SHARE (cents)
Loss per share (cents) (6,6) (9,8)
Diluted loss per share (cents) (6,6) (9,8)
Headline loss per share (cents) (6,3) (8,7)
Diluted headline loss per share (cents) (6,3) (8,7)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Portion of
convertible
debentures
deemed
Share Share to be
R`000 capital premium equity
Balance at 30 June 2009 642 284 145 17 102
Total other comprehensive loss - - -
Transactions with owners:
Share-based payments - - -
Total transactions with owners - - -
Balance at 30 June 2010 642 284 145 17 102
Total other comprehensive loss - - -
Transactions with owners:
Share-based payments - - -
Shares issued 83 11 003 -
Total transactions with owners 83 11 003 -
Balance at 30 June 2011 725 295 148 17 102
Share
based
pay- Accumu-
ment lated
R`000 reserve loss Total
Balance at 30 June 2009 19 981 (222 582) 99 288
Total other comprehensive loss - (62 582) (62 582)
Transactions with owners:
Share-based payments (1 035) - (1 035)
Total transactions with owners (1 035) - (1 035)
Balance at 30 June 2010 18 946 (285 164) 35 671
Total other comprehensive loss - (46 268) (46 268)
Transactions with owners:
Share-based payments 122 - 122
Shares issued - - 11 086
Total transactions with owners 122 - 11 208
Balance at 30 June 2011 19 068 (331 432) 611
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 June 30 June
2011 2010
R`000 Audited Audited
ASSETS
Non-current assets 96 019 102 561
Investment properties 1 349 3 143
Restricted investment 4 095 2 779
Property, plant and equipment 80 400 86 464
Goodwill 10 175 10 175
Current assets 75 511 72 609
Inventories 51 428 31 576
Accounts receivable - trade 12 237 12 160
Accounts receivable - other 1 638 1 383
Taxation pre-paid - 2 789
Cash and cash equivalents 10 208 24 701
Total assets 171 530 175 170
EQUITY AND LIABILITIES
Capital and reserves 611 35 671
Share capital and premium 295 873 284 787
Portion of convertible debentures deemed to 17 102 17 102
be equity
Share based payment reserve 19 068 18 946
Accumulated loss (331 432) (285 164)
Non-current liabilities 148 454 109 053
Long-term loan 34 747 1 287
Provision for environmental rehabilitation 48 676 46 532
Portion of convertible debentures deemed to 65 031 61 234
be debt
Current liabilities 22 465 30 446
Trade and other payables 21 178 27 806
Current portion of long-term liabilities 1 287 2 640
Total equity and liabilities 171 530 175 170
Current asset/current liability ratio 3,4 2,5
Net asset value per share (cents) 0,1 5,7
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Year Year
ended ended
30 June 30 June
2011 2010
R`000 Audited Audited
Net cash (outflows) from operating activities (36 513) (2 770)
Net cash (outflows)/inflows from investing (10 088) 470
activities
Net cash inflows/(outflows) from financing 32 108 (4 030)
activities
Net (decrease) in cash and cash equivalents (14 493) (6 330)
Cash and cash equivalents at beginning of 24 701 31 031
year
Cash and cash equivalents at end of year 10 208 24 701
ABBREVIATED SEGMENTAL ANALYSIS
Witkop Buffalo
R`000 NW Province Limpopo Other Group
Year ended 30 June 2010
External revenue 57 665 3 150 - 60 815
Inter segmental revenue - - 73 707 73 707
Segmental profit/(loss) (105 419) (10 575) 53 412 (62 582)
Total assets 169 147 3 326 2 697 175 170
Total liabilities (33 668) (20 025) (85 806) (139 499)
Year ended 30 June 2011
External revenue 51 736 4 135 - 56 071
Inter segmental revenue - - 16 558 16 558
Segmental loss (41 043) (3 281) (1 944) (46 268)
Total assets 169 334 717 1 479 171 530
Total liabilities (303 678) (121 312) 254 076 (170 919)
COMMENTARY FOR THE YEAR ENDED 30 JUNE 2011
INTRODUCTION
As advised to shareholders previously the Company`s two subsidiaries ceased
operation in the prior financial years and were placed on care and maintenance.
In March this year the Witkop Fluorspar mine recommenced operations and had
produced and exported high quality acid grade Fluorspar by year end.
The Company announced on SENS on 28 December 2010 that its controlling
shareholders had entered into a conditional transaction to dispose of their
investment in the Company to Maghreb Minerals Plc subsequently renamed Fluormin
Plc ("Fluormin") and that shareholders should exercise caution in dealing in
their Sallies shares pending receipt of the mandatory offer by Fluormin to
Sallies` minority ordinary shareholders and debenture holders.
MARKETING
During F2011, Sallies entered into a marketing agreement with FluorOne Trading
Limited, B.V.I. ("FluorOne"), under which FluorOne exclusively represents
Sallies for sales of Fluorspar outside South Africa. Orders have been received
for all of calendar year 2011`s production with sales into Europe, North
America, India, Japan and China.
OPERATIONS
No fatal accidents occurred at either operation during the review period.
Witkop
During the year all the mining equipment and mining vehicles were maintained and
placed in a state of readiness for when the mine would be recommissioned. The
primary crusher was rebuilt and modified to handle greater volume and to
increase throughput. Redundant piping and electrical cabling was stripped from
the production plant and disposed of. The management of the slimes dams has been
out sourced which contract includes their rehabilitation and the planting of
grass to control the dust.
In March the mine was recommissioned and had produced 32 027 wmt of acid grade
by year end. 11 089 wmt of acid grade were transported to Durban by rail and
exported at average prices in excess of US$387 per dmt.
Buffalo
The Buffalo processing facility remained on care and maintenance for the whole
year. Test work continued during the year to reduce the phosphorous levels in
the tailings dams together with the test work on extracting fluorspar from the
fines in the aggregate dumps. However there are no plans to recommence
operations in the near future.
FINANCE
At 30 June 2011 near cash was R10 million (F2010: R25 million). Mining Revenue
reduced from R60,8 million in 2010 to R56,0 million in 2011. Operating loss from
mining for F2011 is R12,7 million compared to R19,7 million in 2010. The loss
before taxation is R51,5 million (F2010: R62,6 million).
The Swiss Arbitral Tribunal awarded Honeywell US$1 243 824 plus interest at 5%
per annum from 19 January 2006. This award was settled during the current year
through the issue by the company of 82 335 700 ordinary shares at an issue price
of 13,5 cents per share. This was a specific issue of shares for cash in terms
of the general authority granted by Sallies` shareholders.
The dispute with the South African Revenue Service ("SARS") over Value Added Tax
of R3,2 million was resolved and payment received. Witkop was involved in a
dispute with SARS over the refund of R6,7 million in income tax. This matter was
heard in the Tax Court and judgement was given in Witkop`s favour and the refund
plus accrued interest was received. The portion of the refund previously not
accounted for as a receivable, due to the contingent nature thereof, is shown as
a tax credit in the condensed consolidated statement of comprehensive income.
In order to finance the recommissioning of Witkop, the Company entered into a
Working Capital Funding agreement with Fluormin (via its local subsidiary) for
the Rand equivalent of US$8 million of which the Rand equivalent of US$5 million
had been drawn down at year end and appears in the statement of financial
position as the long-term loan. The facility is unsecured, denominated in Rand,
pays interest at 10% per annum and is repayable by December 2012 or earlier at
Sallies` discretion.
As at year end, Witkop had arranged a guarantee for its rehabilitation
obligations in favour of the Department of Mineral Resources ("DMR") in an
amount of R2,2 million. This guarantee expired on 31 July 2011 and is being
replaced on a phased basis to an estimated amount of R25 million by 30 June
2012. A covering first bond will be registered over the Witkop properties as
security. The monthly contribution to the restricted investment policies will be
increased accordingly.
No dividends have been declared for the current financial year.
There have been no material changes in reserves.
HUMAN RESOURCES
The labour necessary to recommission the Witkop mine was recruited in terms of a
recall agreement with the two trade unions recognised by the mine. Preference in
this process was given to previously employed workers who were medically fit to
perform the task for which they were being hired. At 30 June 2011 there were 208
persons employed at Witkop. The recalling of the workers has given Witkop an
opportunity to build a healthy workforce where the racial and gender complexion
begins to reflect the demographics of the country as required by law and
Witkop`s mining rights.
AGREEMENTS WITH AFRICAN RENAISSANCE HOLDINGS LIMITED ("ARH")
ARH is Sallies` BEE partner. It is majority owned and managed by historically
disadvantaged South Africans as defined in the Mineral and Petroleum Resources
Development Act, 2002 (Act 28 of 2002).
Sallies, Witkop and Buffalo entered into a collection of interrelated agreements
in terms of which ARH will become a 26% beneficial shareholder in each of Witkop
and Buffalo. ARH will subscribe for shares in Witkop at an aggregate
consideration of R83 million. Sallies has subscribed for preference shares in
Witkop which will pay a dividend equal to the after tax interest cost of its
loan to Witkop. When the loan including accrued interest has been fully repaid
and Witkop is generating profits, dividends will be declared on the ordinary
shares. ARH have undertaken to distribute 31% of funds received by it to the
communities from which Witkop draws its employees. ARH will acquire its 26%
shareholding in Buffalo at par for cash, with no need for financial assistance.
The preference share owned by Sallies will pay a dividend equal to the after tax
interest cost of its loan to Buffalo and, similar to the Witkop agreements, ARH
will receive dividends from the profits generated by Buffalo, 31% of which will
be distributed to the communities from which the employees are drawn.
SIGNIFICANT POST YEAR-END EVENTS
On Friday, 9 September 2011, Firebird Global Master Fund Limited and its
affiliate, Firebird Global Master Fund Limited II (collectively: "Firebird"),
which held about 67% of Sallies ordinary shares and about 58% of Sallies
convertible debentures, announced that they had sold their holdings to Fluormin
Plc.
As a result of Fluormin`s holding of Sallies ordinary shares and Sallies
convertible debentures surpassing 35% in each case, Fluormin is required, in
terms of Section 123 of the Companies Act, No. 71 of 2008 (the "Act"), to extend
a mandatory offer to the remaining Sallies Security Holders (the "Offer").
Fluormin has decided to implement the Offer in terms of Section 114 of the Act.
The Offer is to be effected, subject to certain conditions, by way of a scheme
of arrangement under the provisions of Section 114 of the Act in respect of
Sallies` ordinary shareholders (the "Share Scheme") and Sallies` convertible
debenture holders whereby Sallies shareholders may receive 0,0277 Fluormin
ordinary shares for every one Sallies share held, or a cash consideration of 14
cents per Sallies share. Sallies convertible debenture holders may receive
0,0646 Fluormin ordinary shares for every one Sallies debenture held, or a cash
consideration of 50 cents per debenture.
Should the Share Scheme be successfully implemented, Sallies will become a
wholly-owned subsidiary of Fluormin and the listing of its shares and
convertible debentures on the JSE Limited will be terminated. Should the
transaction in terms of Section 114 of the Act fail, Fluormin will still be
liable to make an unconditional mandatory offer in terms of Section 123 of the
Act.
On 23 June 2011, Sallies entered into a loan agreement with TSC Investments
Limited ("TSC") whereby Sallies borrowed US$2 800 000, which, under certain
circumstances, one of which was the announcement of a mandatory offer by
Fluormin to acquire the remaining shares in Sallies that it does not own, was
convertible into ordinary shares in Sallies. The mandatory offer was announced
on 9 September 2011 whereupon the loan was converted to 183 059 337 ordinary
shares in Sallies at 11 cents per share in accordance with the terms of the
agreement, which had been approved by shareholders on 6 September 2011.
On 6 September 2011 Sallies shareholders approved, by special resolution, the
authority of the directors to authorise the company to provide direct or
indirect financial assistance to related or inter-related companies as required
in terms of Section 45 of the Companies Act.
BASIS OF PREPARATION
These audited results are a summary of the consolidated financial statements and
are prepared in accordance with the recognition and measurement criteria of
International Financial Reporting Standards (IFRS), the presentation and
disclosure requirements of IAS 34 - Interim Financial Reporting, the AC 500
Standards as issued by the Accounting Practices Board or its successor, the
Listings Requirements of the JSE Limited and the requirements of the South
African Companies Act on a basis consistent with the prior financial year, being
30 June 2010.
GOING CONCERN
The processing facility at Buffalo was placed on care and maintenance in October
2008 and remains as such. Witkop suspended operations in June 2009 but following
recommissioning in March 2011 has produced 32 027 wmt of acid grade fluorspar of
which 11 089 wmt have been exported. Witkop`s forward order book is robust with
all production sold until the third quarter of F2012.
10% interest on the 144 million unsecured unsubordinated convertible debentures
of R0,50 each in issue becomes payable at the end of June and December at R3,6
million per payment and, if not converted earlier, the debentures are repayable
in an amount of approximately R72 million on 31 December 2012. The cash flow to
30 June 2012 indicates that the Company will have funds to pay these interest
costs.
The Directors are of the opinion that the Sallies group is a going concern for
the foreseeable future as it has adequate resources to meet all its commitments
until at least 30 June 2012. The annual financial statements have been prepared
on the basis of accounting policies applicable to a going concern.
PROSPECTS
Cash generated from profitable trading during the remainder of F2012 will be
applied to repaying the long-term loan.
It is considered that Fluormin`s mandatory offer is likely to succeed in which
case the delisting of Sallies could occur before 30 June 2012.
AUDIT OPINION
The financial results have been audited by the Group`s external auditors, BDO
South Africa Incorporated. A copy of their unqualified audit report is available
for inspection at the Company`s registered office.
By order of the board
N Davidoff
Non-executive Chairman
30 September 2011
Directors
N Davidoff (Chairman), PR Cooke (Financial director and acting CEO), J Kogl, SP
Morris, S Swana, AN Kamau.
The above directors held office throughout the financial year and are in office
at the date of this report.
RB Phiri was appointed a non-executive director as of 20 September 2011 and is
in office at the date of this report.
Registered office:
Block C, Riverwalk Office Park
41 Matroosberg Road, Ashlea Gardens
Pretoria
Auditors:
BDO South Africa Incorporated
Block C
Riverwalk Office Park
41 Matroosberg Road, Ashlea Gardens
Pretoria 0081
(PO Box 95436, Waterkloof, 0145)
Transfer secretaries:
Computershare Investor Services (Proprietary) Limited
(Registration number 2004/003647/07)
70 Marshall Street, Johannesburg, 2001,
(PO Box 61051, Marshalltown, 2107)
Sponsor:
Bridge Capital Advisors (Proprietary) Limited
2nd Floor, 27 Fricker Road, Illovo Boulevard Illovo, 2196
Date: 30/09/2011 07:05:20 Supplied by www.sharenet.co.za
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