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CONSOLIDATED UNAUDITED INTERIMS
GREAT BASIN GOLD LIMITED
(Incorporated in Canada and registered as an External Company in South Africa)
(Registration No. 2006/021304/10)
Share Code: GBG ISIN Number: CA3901241057
("Great Basin" or "the Company")
CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 2012
(Unaudited)
(Expressed in thousands of Canadian Dollars, unless otherwise stated)
CONSOLIDATED STATEMENT OF LOSS Three months ended Six months ended
June 30 June 30
2012 2011 2012 2011
Note
$ '000 $ '000 $ '000 $ '000
Revenue 32,371 56,738 65,744 83,081
Cost of operations
Production cost (30,165) (29,272) (57,236) (42,968)
Depletion charge (1,137) (1,856) (2,197) (2,990)
Depreciation charge (4,043) (5,984) (7,430) (7,198)
Expenses
Exploration expenses (2,605) (3,443) (4,719) (6,344)
Pre-development expenses (5,009) (3,686) (9,751) (7,425)
Corporate and administrative cost (1,466) (2,170) (3,046) (4,452)
Environmental impact study (362) (488) (882) (925)
Foreign exchange (loss) gain - net (3,332) 714 (423) 3,177
Salaries and compensation
Salaries and wages (2,136) (2,171) (4,575) (4,510)
Share based payments expense 10(c) (1,757) (1,574) (2,776) (3,015)
(Loss) profit from operating activities (19,641) 6,808 (27,291) 6,431
Interest expense (7,272) (6,126) (14,363) (11,197)
Interest income 426 404 848 793
Net interest expense (6,846) (5,722) (13,515) (10,404)
(Loss) profit from operating activities after net interest (26,487) 1,086 (40,806) (3,973)
Impairment of loan due from related party 6 (1,377) – (4,000) –
Profit (loss) on derivative instruments - net 8,108 (1,373) 7,610 (16,205)
Loss before income taxes (19,756) (287) (37,196) (20,178)
Income tax expense (2,234) (764) (2,564) (1,214)
Net loss for the period (21,990) (1,051) (39,760) (21,392)
Basic and diluted loss per share (0.04) (0.00) (0.08) (0.05)
Weighted average number of common shares outstanding (thousands) 551,997 454,559 514,231 443,155
The accompanying notes are an integral part of these consolidated financial statements
Consolidated Statements of Comprehensive Loss
Three months e nded Six months e nded
June 30 June 30
2012 2011 2012 2011
$ '000 $ '000 $ '000 $ '000
Net loss for the period (21,990) (1,051) (39,760) (21,392)
Other comprehensive loss
Cumulative translation adjustment (25,300) (3,307) (6,346) (29,956)
Other comprehensive loss for the pe riod (25,300) (3,307) (6,346) (29,956)
Comprehensive loss for the period (47,290) (4,358) (46,106) (51,348)
The accompanying notes are an integral part of these consolidated financial statements
Consolidated Statements of Financial Position
June 30 December 31
Note 2012 2011
$ '000 $ '000
Assets
Current assets
Cash and cash equivalents 16,655 25,749
Trade and other receivables 7,075 14,060
Inventories 5 31,032 19,694
Other current assets 981 2,404
55,743 61,907
Non-current assets
Inventories 5 7,603 7,998
Loan due from related party 6 2,143 3,784
Property, plant and equipment 7 765,276 720,213
Other assets 6,135 5,327
Deferred income tax assets 51,136 51,081
Total assets 888,036 850,310
Liabilities
Current liabilities
Trade and other payables 77,548 56,038
Current portion of long term debt 8 24,221 20,371
Current portion of other liabilities 9 3,240 3,050
105,009 79,459
Non-current liabilities
Long term debt 8 268,929 262,075
Other liabilities 9 23,451 31,197
Site reclamation obligations 6,023 6,011
Total liabilities 403,412 378,742
Equity
Share capital 10(b) 883,165 833,643
Warrants 10(b) 4,324 -
Contributed surplus 88,653 83,337
Accumulated other comprehensive loss (80,110) (73,764)
Deficit (411,408) (371,648)
Total equity 484,624 471,568
Total liabilities and equity 888,036 850,310
The accompanying notes are an integral part of these consolidated financial statements
Approved by the Board of Directors
Lourens van Vuuren Ronald W. Thiessen
Interim Chief Executive Officer Director
Consolidated Statements of Changes in Equity
For the six months ended June 30, 2012 and 2011
Accumulated
other
Contributed comprehensive
Share capital Warrants surplus loss Deficit Total
$'000 $'000 $'000 $'000 $'000 $'000
Balance - January 1, 2012 833,643 - 83,337 (73,764) (371,648) 471,568
Comprehensive loss for the period - - - (6,346) (39,760) (46,106)
Net loss for the period - - - - (39,760) (39,760)
Other comprehensive loss - - - (6,346) - (6,346)
Employee share options
Value of services recognized (note 10(c)) - - 5,316 - - 5,316
Proceeds on issuance of units in public offering (net 49,522 4,324 - - - 53,846
of transaction costs) (note 10(b))
Balance - June 30, 2012 883,165 4,324 88,653 (80,110) (411,408) 484,624
Balance - January 1, 2011 709,449 6,108 77,676 26,395 (353,911) 465,717
Comprehensive loss for the period - - - (29,956) (21,392) (51,348)
Net loss for the period - - - - (21,392) (21,392)
Other comprehensive loss - - - (29,956) - (29,956)
Employee share options
Value of services recognized (note 10(c)) - - 4,965 - - 4,965
Proceeds on issuing shares 4,206 - (1,574) - - 2,632
Warrants
Proceeds on issuing shares 22,426 (3,793) - - - 18,633
Proceeds on issuance of shares in public offering 81,190 - - - - 81,190
(net of transaction costs)
Other 163 - - - - 163
Balance - June 30, 2011 817,434 2,315 81,067 (3,561) (375,303) 521,952
The accompanying notes are an integral part of these consolidated financial statements
5
Consolidated Statements of Cash Flows
Three months ended Six months ended
June 30 June 30
2012 2011 2012 2011
$ '000 $ '000 $ '000 $ '000
Operating activities
Loss for the period (21,990) (1,051) (39,760) (21,392)
Items not involving cash
Production non-cash charges 1,022 797 1,848 967
Depletion 1,137 1,856 2,197 2,990
Depreciation 4,190 6,160 7,730 7,554
Exploration non-cash charges 10 32 30 91
Pre-development non-cash charges 250 (13) 519 375
Unrealized foreign exchange loss (gain) 3,296 (446) 193 (3,258)
Share based payments expense 1,757 1,574 2,776 3,015
Impairment of loan due from related party 1,377 – 4,000 –
(Profit) loss on derivative instruments - net (8,108) 1,419 (7,610) 16,221
Share donation – 163 – 163
Adjusted for
Interest expense 7,272 6,126 14,363 11,197
Interest income (426) (404) (848) (793)
Changes in non-cash operating working capital
Trade and other receivables (2,674) (2,362) 6,837 (578)
Other current assets 1,238 398 1,409 581
Inventories (4,620) 830 (11,122) (7,710)
Trade and other payables 19,836 8,676 21,570 4,850
Net cash generated from operating activities 3,567 23,755 4,132 14,273
Investing activities
Advance to related party (1,096) (1,468) (1,727) (1,468)
Purchase of property, plant and equipment (32,635) (56,657) (61,452) (93,191)
Interest income 103 152 210 322
Reclamation deposits (628) (99) (770) (460)
Net cash utilized by investing activities (34,256) (58,072) (63,739) (94,797)
Financing activities
Common shares and warrants issued for cash, net of issue costs 6,888 14,338 53,845 102,455
Proceeds on issuance of debt 10,029 – 19,986 68,810
Repayment of debt (6,010) (2,069) (14,746) (55,755)
Interest expense (7,363) (7,912) (9,347) (9,040)
Net cash generated from financing activities 3,544 4,357 49,738 106,470
(Decrease) increase in cash and cash equivalents (27,145) (29,960) (9,869) 25,946
Cash and cash equivalents, beginning of period 43,548 68,018 25,749 12,855
Foreign exchange movement on cash and cash equivalents 252 713 775 (30)
Cash and cash equivalents, end of period 16,655 38,771 16,655 38,771
Refer note 11 of the notes to the consolidated financial statements for supplementary information to the cash flow statement.
The accompanying notes are an integral part of these consolidated financial statements
Notes to the Consolidated Financial Statements
1. General information
Great Basin Gold Ltd. is incorporated under the laws of the Province of British Columbia and its
registered address is 1108-1030 West Georgia Street, Vancouver BC, Canada. Great Basin Gold
Ltd., including its subsidiaries (“Great Basin” or “the Company”), is a mineral exploration and
development company with two operating assets, both in the production build-up phase, the
Hollister Project on the Carlin Trend in Nevada, USA and the Burnstone Project in the
Witwatersrand Goldfields in South Africa. Over and above the exploration being conducted at the
above mentioned properties, greenfields exploration is being undertaken in Tanzania and
Mozambique.
Operating results for the three and six month periods ended June 30, 2012 are not necessarily
indicative of the results that may be expected for the full fiscal year ending December 31, 2012.
In the opinion of management, these unaudited interim consolidated financial statements reflect
all adjustments that are necessary for a fair presentation of the results for the interim periods
presented.
2. Basis of preparation
The interim consolidated financial statements for the three and six months ended June 30, 2012
have been prepared in accordance with IAS34, Interim financial reporting. The condensed interim
financial information should be read in conjunction with the annual financial statements for the
year ended December 31, 2011, which have been prepared in accordance with International
Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards
Board (“IASB”). The working capital deficit at June 30, 2012, indicates an uncertainty which
may cast substantial doubt about the company's ability to continue as a going concern. See note
13 which details the strategic alternatives being considered by management together with
managements’ basis for continuing to adopt the going concern assumption as a basis for preparing
the interim consolidated financial statements.
3. Accounting policies
These unaudited interim consolidated financial statements follow the same accounting policies
and methods of application as the Company’s most recent annual financial statements.
Accordingly, they should be read in conjunction with the Company’s most recent annual financial
statements. The policies applied in these condensed consolidated financial statements are based
on IFRS issued and outstanding as of August 13, 2012, the date the Board of Directors approved
the financial statements.
Accounting standards and amendments issued but not yet adopted
Refer to note 2 of the Company’s most recent annual financial statements for a comprehensive
listing of revised standards and amendments which are effective for annual periods beginning on
or after January 1, 2013 with earlier application permitted. The Company has not yet assessed the
impact of these standards and amendments or determined whether it will early adopt them.
4. Estimates
The preparation of interim financial statements requires management to make judgements,
estimates and assumptions that affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual results may differ from these
estimates.
In preparing these condensed consolidated interim financial statements, the significant
judgements made by management in applying the Company’s accounting policies and key
sources of estimation uncertainty were the same as those that applied to the consolidated financial
statements for the year ended December 31, 2011. In addition, see note 13 which details the
strategic alternatives being considered by management together with managements' basis for
continuing to adopt the going concern assumption as a basis for preparing the interim
consolidated financial statements.
5. Inventories
June 30 December 31
2012 2011
$ ‘000 $ ‘000
Stores and materials 4,255 4,699
Unprocessed ore 2,688 2,437
Precious metals in process 31,692 20,556
38,635 27,692
Non-current 7,603 7,998
Current 31,032 19,694
38,635 27,692
Cost of operations recognized in the statement of income consists of direct and indirect mining
costs, overhead costs, royalties, depreciation of mining equipment and depletion of mineral
properties. The Company recognized cost of inventories of $35 million (2011: $38 million) and
$67 million (2011: $54 million) as cost of operations expenses during the three and six months
ended June 30, 2012 respectively.
Inventories including unprocessed ore and precious metals in process of $4.5 million are carried
at net realizable value (2011: $nil).
Non-current inventories comprise of gold in lock-up in metallurgical plants which are expected to
be realized upon plant clean-up or dismantling.
6. Related party balances and transactions
Related party transactions are recorded at the exchange amount which is the amount of
consideration paid or received.
6. Related party balances and transactions (continued)
Loan due from related party
June 30 December 31
2012 2011
$’000 $’000
Balance, beginning of the period 3,784 13,372
Cash advances 1,727 4,506
Interest earned 638 1,000
Impairment provision (4,000) (13,680)
Foreign exchange (6) (1,414)
Balance, end of the period 2,143 3,784
In 2007 the Company completed a series of transactions in order to achieve compliance with
South Africa’s post-apartheid legislation designed to facilitate participation by historical
disadvantages South Africans (“HDSAs”) in the mining industry. This legislation is reflected in
the South African Mining Charter and required the Company to achieve a target of 26%
ownership by HDSA in the Company’s South African projects by 2014. In order to comply with
these requirements, Tranter Burnstone (Pty) Ltd (“Tranter”), an HDSA company, acquired
19,938,650 Great Basin treasury common shares for $38 million (ZAR260 million) which,
because it involved indirect economic participation in both the Hollister and Burnstone projects,
was deemed equivalent to a 26% interest in Burnstone. Tranter borrowed ZAR200 million ($27
million) from Investec Bank Ltd (“Investec”), a South African bank, to partly fund the purchase
of the shares and the Company gave a loan guarantee in favour of Tranter limited of ZAR140
($19 million) million. A loan of $16.9 million (ZAR 136 million) was advanced to Tranter under
the guarantee agreement to enable Tranter to meet its payment obligation to Investec.
As a result of this loan the remaining guarantee available, as at June 30, 2012, is $0.5 million
(ZAR4 million) (2011: $2.2 million (ZAR17 million)) (refer note 9).
Any advances to Tranter are due to be repaid in installments from 2014 to 2017, with interest
accruing at the South African prime interest rate plus 2%. Security for any advances made
includes a second charge against any shares of the Company held by Tranter (second to Investec).
The fair value of the security, based on the prolonged decline in the Company’s share price, was
deemed inadequate and the Company raised a fair value impairment provision of $1.4 million
(ZAR11.2 million) and $4 million (ZAR31.5 million) during the three and six months ended June
30, 2012 respectively. These are in addition to the $13.7 million (ZAR100 million) impairment
provision raised against the loan to provide for its exposure to potential future repayment losses
in quarter 4 of 2011.
7. Property, plant and equipment
Assets
Mineral Mine Mine under Other
properties infrastructure equipment construction assets Total
$’000 $’000 $’000 $’000 $’000 $’000
Period ended June 30, 2012
At January 1, 2012 164,854 460,320 40,131 47,141 7,767 720,213
Additions - 30,131 299 34,298 195 64,923
Transfers - 3,190 2,204 (5,496) 102 -
Depletion and
depreciation (2,601) (3,529) (6,091) - (777) (12,998)
Foreign exchange
differences (696) (5,014) (294) (798) (60) (6,862)
At June 30, 2012 161,557 485,098 36,249 75,145 7,227 765,276
At June 30, 2012
Cost 184,757 499,142 66,435 75,145 12,174 837,653
Accumulated depreciation (23,200) (14,044) (30,186) - (4,947) (72,377)
Net book value 161,557 485,098 36,249 75,145 7,227 765,276
Year ended December 31, 2011
At January 1, 2011 182,992 23,064 44,399 435,255 9,664 695,374
Additions 85 389 11,443 138,151 898 150,966
Transfers - 482,985 - (482,985) - -
Depletion and
depreciation (5,354) (9,103) (9,634) - (1,508) (25,599)
Foreign exchange
differences (12,869) (37,015) (6,077) (43,280) (1,287) (100,528)
At December 31, 2011 164,854 460,320 40,131 47,141 7,767 720,213
At December 31, 2011
Cost 185,404 470,913 64,460 47,141 11,959 779,877
Accumulated depreciation (20,550) (10,593) (24,329) - (4,192) (59,664)
Net book value 164,854 460,320 40,131 47,141 7,767 720,213
Depletion of $2.3 million relating to stockpiled tons and ounces in process was capitalized to the
value of the unprocessed ore and precious metals in process at June 30, 2012 (2011: $2.4 million)
(refer note 5).
Mineral properties of $116.2 million consisting of the Hollister, Esmeralda and Burnstone
properties and fixed assets of $603 million have been pledged as security for the term loans (refer
note 8(a) and 8(b)).
Mining equipment includes leased assets with net book values as set out below. These assets are
pledged as security for the related finance leases (refer note 8).
June 30 December 31
2012 2011
$’000 $’000
Cost 1,121 5,451
Accumulated depreciation (224) (981)
Net book value 897 4,470
8. Long term debt
Non-current portion of long term debt
June 30 December 31
2012 2011
$ ‘000 $ ‘000
Convertible debentures 101,563 97,669
Finance lease liabilities 46 71
Term loan I (note 8(a)) 135,901 125,879
Term loan II (note 8(b)) 31,419 38,456
268,929 262,075
Current portion of long term debt
June 30 December 31
2012 2011
$ ‘000 $ ‘000
Convertible debentures 843 843
Finance lease liabilities 519 2,902
Term loan I (note 8(a)) 10,872 280
Term loan II (note 8(b)) 11,987 16,346
24,221 20,371
The continuity of long term debt is as follows:
June 30 December 31
2012 2011
$ ‘000 $ ‘000
Balance, beginning of the period 282,446 209,578
New debt 19,986 135,321
New leases - 1,989
Transaction cost (260) (6,525)
Repayment of debt and interest (23,570) (94,010)
Settlement loss on senior secured notes - 8,817
Amortized transaction cost 881 1,231
Interest expense 13,220 25,476
Foreign exchange 447 569
Balance, end of the period 293,150 282,446
(a) Term loan I
In December 2011, the Company successfully negotiated the restructuring of Term loan I, thereby
increasing the facility to $152.6 million (US$150 million) and extending repayment to 2016.
$132 million (US$130 million) of the restructured facility was drawn down on December 15,
2011, with the remaining $20 million (US$20 million) drawn down during the six months ended
June 30, 2012.
Term loan I has a maximum term of 5 years from the December 15, 2011 draw down and capital
will be repaid in 16 quarterly consecutive installments, commencing on March 15, 2013. The
interest rate for Term loan I is linked to the US$ London interbank offered rate (“US$ LIBOR”)
at a premium of 4% above US$ LIBOR and is fixed on a quarterly basis. The floating rate on
June 30, 2012 is 4.46785% (USD LIBOR of 0.46785% plus 4% premium).
The Burnstone Property, its assets and certain subsidiary guarantees serve as security for the
facility (refer note 7).
Term loan I contains certain financial covenants, customary to facilities of this nature, and
includes borrower tangible net worth, debt to equity ratio, debt service cover ratio, a loan life
cover ratio and available liquidity. As at June 30, 2012, the Company assessed and complied with
all covenants.
Refer to note 9(a) for details of the hedge structure entered into under the Term loan I agreement.
(b) Term loan II
Term loan II is being repaid in 14 remaining quarterly consecutive installments. The interest rate
for Term loan II is linked to the US$ LIBOR at a premium of 3.75% above US$ LIBOR and is
fixed on a quarterly basis. The floating rate on June 30, 2012 is 4.21785% (USD LIBOR of
0.46785% plus 3.75% premium).
The Hollister project and a surety signed by the Company serve as security for the loan (refer
note 7).
Term loan II contains certain financial covenants customary to facilities of this nature and
includes borrower tangible net worth, debt to equity ratio, debt service cover ratio and a loan life
cover ratio. As at June 30, 2012, the Company assessed and complied with all covenants.
Refer to note 9(b) for details of the hedge structure entered into under the Term loan II
agreement.
9. Other liabilities
Non-current portion of other liabilities
June 30 December 31
2012 2011
$ ‘000 $ ‘000
Zero cost collar program I (note 9(a)) 13,793 17,834
Zero cost collar program II (note 9(b)) 9,658 13,363
23,451 31,197
Current portion of other liabilities
June 30 December 31
2012 2011
$ ‘000 $ ‘000
Financial guarantee 2,143 2,165
Zero cost collar program I (note 9(a)) 512 666
Zero cost collar program II (note 9(b)) 585 219
3,240 3,050
The continuity of other liabilities is as follows:
June 30 December 31
2012 2011
$ ‘000 $ ‘000
Balance, beginning of the period 34,247 12,697
ZCC fair value upon inception - 43,212
ZCC fair value upon novation - (18,295)
ZCC marked-to-market adjustments (7,556) (3,814)
Foreign exchange - 447
Balance, end of the period 26,691 34,247
(a) Zero cost collar program I
In connection with Term loan I (refer note 8(a)), the Company executed a zero cost collar hedge
program for a total 165,474 gold ounces over a period of five years that commenced in January
2012.
The pricing and delivery dates of the put and call options are presented in note 9(d) below.
The marked-to-market movements until June 30, 2012 were calculated using an option pricing
model with inputs based on the following assumptions:
June 30 December 31
2012 2011
Gold price (per ounce) US$1,599 US$1,564
Risk free interest rate 0.31% - 0.96% 0.33% - 1.285%
Expected life 1 - 54 months 1 – 60 months
Gold price volatility 18.08% - 27.50% 20.35% - 32%
Gold delivery positions as at June 30, 2012:
June 30 December 31
2012 2011
Expired unexercised at no cost 7,776 ounces Nil ounces
Delivered Nil ounces Nil ounces
Remaining positions 157,698 ounces 165,474 ounces
(b) Zero cost collar program II
In connection with Term loan II (refer note 8(b)), the Company executed a zero cost collar hedge
program for a total 117,500 gold ounces over a period of four years that commenced in January
2012.
The pricing and delivery dates of the put and call options are presented in note 9(d) below.
The marked-to-market movements until June 30, 2012 were calculated using an option pricing
model with inputs based on the following assumptions:
June 30 December 31
2012 2011
Gold price (per ounce) US$1,599 US$1,564
Risk free interest rate 0.31% - 0.79% 0.33% - 1.06%
Expected life 1 - 42 months 1 - 48 months
Gold price volatility 18.08% - 26.51% 20.35% - 30.76%
Gold delivery positions as at June 30, 2012:
June 30 December 31
2012 2011
Expired unexercised at no cost 5,250 ounces Nil ounces
Delivered Nil ounces Nil ounces
Remaining positions 112,250 ounces 117,500 ounces
(c) Classification
The fair values of the derivative instruments as of June 30, 2012 are as follows:
Asset Liability Net
derivatives derivatives derivatives
Estimated Estimated Estimated
Derivatives not designated as hedging Statement of financial fair value fair value fair value
instruments position classification $’000 $’000 $’000
Commodity contracts (gold) – ZCC 1 Other liabilities 10,446 (24,239) (13,793)
Commodity contracts (gold) – ZCC 2 Other liabilities 2,707 (12,365) (9,658)
13,153 (36,604) (23,451)
Commodity contracts (gold) – ZCC 1 Current other liabilities 5 (517) (512)
Commodity contracts (gold) – ZCC 2 Current other liabilities 28 (613) (585)
33 (1,130) (1,097)
(d) Gold delivery positions
The Company’s gold delivery positions as at June 30, 2012 are as follows:
Put options
2012 2013 2014 2015 2016 Total
Strike price AU oz AU oz AU oz AU oz AU oz AU oz
ZCC – 1 $900 13,536 - - - - 13,536
ZCC – 1 $950 - 28,506 - - - 28,506
ZCC – 1 $1,200 - - 34,008 39,768 41,880 115,656
ZCC – 2 $1,050 5,250 36,000 36,000 35,000 - 112,250
18,786 64,506 70,008 74,768 41,880 269,948
Call options
Strike 2012 2013 2014 2015 2016 Total
price AU oz AU oz AU oz AU oz AU oz AU oz
ZCC – 1 $1,890 6,768 14,253 17,004 19,884 20,940 78,849
ZCC – 1 $1,930 6,768 14,253 17,004 19,884 20,940 78,849
ZCC – 2 $1,930 5,250 36,000 36,000 35,000 - 112,250
18,786 64,506 70,008 74,768 41,880 269,948
10. Share capital
(a) Authorized share capital
The Company’s authorized share capital consists of an unlimited number of common shares
without par value.
(b) Public offering, March and April 2012
The Company completed a public offering on March 30, 2012 whereby it issued 66,700,000 units
(the “Units”) at a price of $0.75 per Unit. On April 5, 2012, the Company issued a further 10
million Units for proceeds of $7.5 million upon closing the offering’s overallotment. Each Unit
consisted of one common share (each, a “Common Share”) in the capital of the Company and
one-half of one common share purchase warrant (each whole common share purchase warrant, a
“Warrant”) of the Company.
Each Warrant entitles the holder thereof to purchase one Common Share at a price of $0.90 until
expiry on March 30, 2014.
On the date of issuance, the fair value of the 38,352,500 warrants was estimated at $0.12 per
warrant. The valuation was performed by using an option pricing model.
The Company paid the underwriters a fee of $2.9 million and incurred other share issue costs of
approximately $0.64 million. Net proceeds of $49.5 million and $4.3 million have been recorded
as share capital and warrants respectively.
(c) Share option plan
The continuity of share purchase options is as follows:
Contractual weighted
Weighted average Number of options average remaining life
exercise price (thousands) (years)
Opening total at January 1 $1.97 17,958 2.22
Granted to employees $0.95 12,490
Cancelled $1.71 (20,270)
Replaced $0.75 10,135
Expired $1.82 (1,227)
Forfeited $1.73 (2,309)
$0.83 16,777 3.70
Directors, employees and certain consultants were allowed to cancel unexercised employee and
non-employee stock options and receive new options equal to 50% of the cancelled options at an
exercise price of $0.75 and vesting period of 24 months. The cancellation of these options was
concluded on June 7, 2012.
The cancelled options were accounted for as cancellations in accordance with IFRS 2 where any
carry forward cost not yet recognized was recognized immediately in the statement of operations.
The new options issued were accounted for as modifications in accordance with IFRS 2, where
the incremental value was recorded as additional cost measured by the difference between the fair
value of the cancelled options calculated on the modification date and the value of the
replacement options at the modification date. The amount is recognized over the vesting period
of the replacement option. Any remaining compensation cost for as yet unvested cancelled
options is also recognized over the new vesting period.
As at June 30, 2012, 1.2 million of the outstanding options were exercisable at an average
exercise price of $1.87 per option and expiry dates ranging between March 26, 2013 and March
26, 2015.
On June 1, 2012, 677,766 out of plan options expired unexercised. These options were issued
with the acquisition of mineral properties in 2008.
Costs previously recognized on options were, upon forfeiture, reversed through the current
period’s consolidated statement of loss.
The exercise prices of all share purchase options granted during the three and six months ended
June 30, 2012 and 2011 were at or above the market price at the grant date.
Using an option pricing model with the assumptions noted below, the estimated fair value of
options granted to employees which have been included in the consolidated statement of loss for
the three and six months ended June 30, 2012, is as follows:
Three months ended June 30
2012 2011
$ ‘000 $ ‘000
Total compensation cost recognized, credited to contributed surplus 3,374 3,095
Compensation cost allocated to production cost (1,617) (1,521)
Share based payments expense 1,757 1,574
Six months ended June 30
2012 2011
$ ‘000 $ ‘000
Total compensation cost recognized, credited to contributed surplus 5,316 4,965
Compensation cost allocated to production cost (2,540) (1,854)
Compensation cost capitalized on Burnstone mine development - (96)
Share based payments expense 2,776 3,015
The weighted-average assumptions used to estimate the fair value of options granted during the
respective periods were as follows:
Three months ended Six months ended
June 30 June 30
2012 2011 2012 2011
Risk free interest rate 1.86% 3% 1.79% 2.68%
Expected life 3.9 years 5 years 3.6 years 3.6 years
Expected volatility 67% 74.2% 64.21% 81%
Expected dividends Nil Nil Nil Nil
11. Additional cash flow information
Supplementary information
Three months ended June 30
2012 2011
$’000 $’000
Income taxes paid - 2
Non-cash investing activities:
Depreciation capitalized to property, plant and machinery (note 7) 1,806 1,569
Fair value of stock options transferred to share capital from contributed - 762
surplus on options exercised
Fair value of warrants transferred to share capital on warrants exercised - 2,727
Six months ended June 30
2012 2011
$’000 $’000
Income taxes paid - 2
Non-cash investing activities:
Depreciation capitalized to property, plant and machinery (note 7) 3,463 2,318
Accrued interest capitalized to property, plant and machinery (note 7) - 2,515
Share based compensation capitalized (refer note 10(c)) - 96
Non-cash financing activities:
Fair value of stock options transferred to share capital from contributed - 1,574
surplus on options exercised
Fair value of warrants transferred to share capital on warrants exercised - 3,793
12. Segment disclosure
The Company operates in reportable operating segments to deliver on its strategy to explore,
develop and exploit mineral properties. Management has determined the operating segments
based on the reports reviewed by the Company's Chief Operating Decision Maker ("CODM") that
are used to make strategic decisions. The Company's CODM is its Chief Executive Officer.
Segment statement of income
North South
American African Tanzanian
1
operations operations operations Other Total
$’000 $’000 $’000 $’000 $’000
Revenue 23,111 9,260 - - 32,371
Cost of operations
Production cost (16,542) (13,623) - - (30,165)
Depletion charge (1,086) (51) - - (1,137)
Depreciation charge (993) (3,050) - - (4,043)
Expenses
Exploration expenses (2,226) (71) (308) - (2,605)
Pre-development expenses (5,009) - - - (5,009)
Corporate and administrative cost - (22) (34) (1,410) (1,466)
Environmental impact study (362) - - - (362)
Foreign exchange gain (loss) - 47 (4) (3,375) (3,332)
Salaries and compensation
Salaries and wages - - - (2,136) (2,136)
Share based compensation - - - (1,757) (1,757)
Loss from operating activities (3,107) (7,510) (346) (8,678) (19,641)
Interest expense (728) (2,004) - (4,540) (7,272)
Interest income - 394 - 32 426
Net interest expense (728) (1,610) - (4,508) (6,846)
Loss from operating activities
after net interest (3,835) (9,120) (346) (13,186) (26,487)
Impairment of loan due from related
party - - - (1,377) (1,377)
Profit on derivative instruments – net 2,452 5,656 - - 8,108
Loss before income taxes (1,383) (3,464) (346) (14,563) (19,756)
Income tax expense (2,234) - - - (2,234)
Net loss for the period (3,617) (3,464) (346) (14,563) (21,990)
1 Corporate entities
North South
American African Tanzanian
1
operations operations operations Other Total
$’000 $’000 $’000 $’000 $’000
Revenue 48,686 8,052 - - 56,738
Cost of operations
Production cost (20,839) (8,433) - - (29,272)
Depletion charge (1,615) (241) - - (1,856)
Depreciation charge (1,258) (4,726) - - (5,984)
Expenses
Exploration expenses (3,063) (83) (297) - (3,443)
Pre-development expenses (3,686) - - - (3,686)
Corporate and administrative cost - - (255) (1,915) (2,170)
Environmental impact study (488) - - - (488)
Foreign exchange (loss) gain - - (6) 720 714
Salaries and compensation
Salaries and wages - - - (2,171) (2,171)
Share based compensation - - - (1,574) (1,574)
Profit (loss) from operating activities 17,737 (5,431) (558) (4,940) 6,808
Interest expense (656) (1,245) - (4,225) (6,126)
Interest income - 340 - 64 404
Net interest expense (656) (905) - (4,161) (5,722)
Profit (loss) from operating
activities after net interest 17,081 (6,336) (558) (9,101) 1,086
(Loss) profit on derivative
instruments – net (1,226) (147) - - (1,373)
Profit (loss) before income taxes 15,855 (6,483) (558) (9,101) (287)
Income tax expense (764) - - - (764)
Net profit (loss) for the period 15,091 (6,483) (558) (9,101) (1,051)
1 Corporate entities
North South
American African Tanzanian
1
operations operations operations Other Total
$’000 $’000 $’000 $’000 $’000
Revenue 46,164 19,580 - - 65,744
Cost of operations
Production cost (29,584) (27,652) - - (57,236)
Depletion charge (2,090) (107) - - (2,197)
Depreciation charge (1,963) (5,467) - - (7,430)
Expenses
Exploration expenses (3,891) (189) (639) - (4,719)
Pre-development expenses (9,751) - - - (9,751)
Corporate and administrative cost - (46) (58) (2,942) (3,046)
Environmental impact study (882) - - - (882)
Foreign exchange gain (loss) - 92 (5) (510) (423)
Salaries and compensation
Salaries and wages - - - (4,575) (4,575)
Share based compensation - - - (2,776) (2,776)
Loss from operating activities (1,997) (13,789) (702) (10,803) (27,291)
Interest expense (1,766) (3,641) - (8,956) (14,363)
Interest income - 807 - 41 848
Net interest expense (1,766) (2,834) - (8,915) (13,515)
Loss from operating activities
after net interest (3,763) (16,623) (702) (19,718) (40,806)
Impairment of loan due from related
party - - - (4,000) (4,000)
Profit on derivative instruments – net 3,313 4,297 - - 7,610
Loss before income taxes (450) (12,326) (702) (23,718) (37,196)
Income tax expense (2,564) - - - (2,564)
Net loss for the period (3,014) (12,326) (702) (23,718) (39,760)
1 Corporate entities
North South
American African Tanzanian
1
operations operations operations Other Total
$’000 $’000 $’000 $’000 $’000
Revenue 71,195 11,886 - - 83,081
Cost of operations
Production cost (32,078) (10,890) - - (42,968)
Depletion charge (2,720) (270) - - (2,990)
Depreciation charge (1,986) (5,212) - - (7,198)
Expenses
Exploration expenses (5,498) (207) (639) - (6,344)
Pre-development expenses (7,425) - - - (7,425)
Corporate and administrative cost - - (306) (4,146) (4,452)
Environmental impact study (925) - - - (925)
Foreign exchange (loss) gain - - (12) 3,189 3,177
Salaries and compensation
Salaries and wages - - - (4,510) (4,510)
Share based compensation - - - (3,015) (3,015)
Profit (loss) from operating activities 20,563 (4,693) (957) (8,482) 6,431
Interest expense (812) (2,515) - (7,870) (11,197)
Interest income - 708 - 85 793
Net interest expense (812) (1,807) - (7,785) (10,404)
Profit (loss) from operating
activities after net interest 19,751 (6,500) (957) (16,267) (3,973)
(Loss) profit on derivative
instruments – net (9,677) 2,289 - (8,817) (16,205)
Profit (loss) before income taxes 10,074 (4,211) (957) (25,084) (20,178)
Income tax expense (1,214) - - - (1,214)
Net profit (loss) for the period 8,860 (4,211) (957) (25,084) (21,392)
Refined precious metals were sold to RK Mine Finance Trust I (“RK Mine”) under the terms of
an off-take agreement.
Statement of financial position
North South
American African Tanzanian
1
operations operations operations Other Total
June 30, 2012 $’000 $’000 $’000 $’000 $’000
Total assets 178,640 647,762 45,198 16,436 888,036
Total liabilities 104,933 193,215 114 105,150 403,412
1 Corporate entities
Segment disclosure (continued)
Statement of financial position (continued)
North South
American African Tanzanian
1
operations operations operations Other Total
December 31, 2011 $’000 $’000 $’000 $’000 $’000
Total assets 180,682 613,772 45,392 10,464 850,310
Total liabilities 100,198 174,941 19 103,584 378,742
1 Corporate entities
Additions to non-current assets2
North South
American African Tanzanian
1
operations operations operations Other Total
$’000 $’000 $’000 $’000 $’000
June 30, 2012 3,494 61,343 - 86 64,923
December 31, 2011 7,353 143,641 (117) 89 150,966
1 Corporate entities
2 Additions to non-current assets exclude financial instruments and deferred tax assets
13. Liquidity
The operational performance from the Nevada and South African operations resulted in a
working capital deficit of approximately $23 million on June 30, 2012. The Board of Directors
has recently initiated a review process to consider a range of strategic alternatives with a view to
preserving and enhancing shareholder value in light of the continuing financial challenges.
Strategic alternatives are likely to include, but are not limited to, the sale of all or a portion of the
Company's assets, a merger or other business combination transaction involving a third party
acquiring all of the Company, a capital raising, recapitalization, reorganization, or restructuring of
the Company, as well as continued execution of the Company's existing business plan, or some
combination of these alternatives. The Company is also working with its lenders to potentially
restructure the current term loan facilities to improve the Company’s cash flow in the short to
medium term.
In assessing whether the Company was a going concern management was cognizant of the near
term liquidity challenges. However after assessing the carrying value of the principal assets
management concluded that the realizable value of the Company’s aggregate assets continues to
exceed aggregate liabilities by a significant margin. Given the residual shareholders’ equity in the
business, management believes that a solution to the liquidity issue is more likely than not and
hence has concluded in favour of going concern treatment.
14. Subsequent events
Subsequent to June 30, 2012
(a) Related party transaction
Following negotiations between the Company, Tranter and Investec, a Term sheet was agreed to
during late April 2012 setting out the mutually beneficial proposal whereby the Company
provides Tranter with further financial assistance over a period of 18 months to enable them to
meet their proposed restructured loan repayment obligations to Investec and thereby remove their
current breach on the loan agreement. In terms of the proposal Investec will remove all cash
margin requirements and also restructure the repayment in such a manner that the required
assistance from the Company does not impact on its short term cash requirements. The parties are
currently working on finalizing the legal agreements and obtaining the required approvals to enter
into the binding legal agreements. Finalization of this restructured financial support is being
delayed as a result of the strategic review process the Company has initiated.
Refer to note 6 for information on the loan advanced to Tranter.
Johannesburg
15 August 2012
Sponsor
Sasfin Capital (a division of Sasfin Bank Limited)
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