Wrap Text
Report for the quarter ended 30 June 2012
VILLAGE MAIN REEF LIMITED
(Incorporated in the Republic of South Africa)
(formerly known as Village Main Reef Gold Mining Company (1934) Limited)
(Registration number 1934/0057034/06)
Share Code: VIL ISIN: ZAE000154761
Report for the quarter ended 30 June 2012
Key Features
- Earnings per share of 9.81 cents for Q4 compared to 7.19 cents for Q3.
- Improved realised average gold price R423 872/kg in Q4 compared to R 419 810/kg in Q3.
- Steady gold production of 1 228kg (39 480oz) from the three operations Buffelsfontein (“Buffels”), Tau Lekoa (“Tau”), and Cons Murch, compared to 1 237kg
(39 770oz) in Q3.
- Antimony production increased 58% to 1 436 tons in Q4, compared to 909 tons produced in Q3.
- Part A closure of the Blyvooruitzicht Gold Mining Company Limited (“Blyvoor”) acquisition successfully concluded and Blyvoor consolidated with effect from
1 June 2012.
- Blyvoor contributes R5.6m towards operating profit in the first month under Village ownership.
- Secured Convertible Rand Denominated Mine Waste Solution Rand Notes (“MWS Notes”) redeemed in full enabling Village to declare a special dividend of
30c per share.
Joint CEO, Marius Saaiman commented: “We have made great progress in strengthening our balance sheet over the last 12 months. The most significant event
being the successful exit from our investments in First Uranium Corporation which resulted in some R600 million being realised. We paid our first special dividend
of 30 cents per share to shareholders, delivering on our promise to return excess cash to our shareholders. We are also very pleased that Part A closure in relation
to the Blyvoor acquisition was concluded during the quarter, providing Village with full management control of the operations from 1 June 2012”.
Quarterly performance data
Jun Mar
Quarter Quarter Jun Quarter Mar Quarter
GOLD 2012 2012 ANTIMONY 2012 2012
Blyvoor (Jun) Tau Lekoa Buffels TOTAL TOTAL Cons Murch Cons Murch
Tons milled - Surface 273 376 - - 273 376
Tons milled -
underground 33 315 259 217 82 144 374 676 369 612 Tons milled 66 405 54 670
Recovered grade - Recovered
Au g/t 5.6 3.1 3.5 3.3 3.2 grade - Au g/t 1.2 1.5
Gold produced
underground - kg 149 858 287 1 294 1 169
Gold produced Recovered
surface - kg 68 - - 68 - grade - Sb % 1.3 1.0
Gold produced - total Gold produced -
oz 6 944 27 585 9 227 43 756 37 590 oz 2 668 2 212
Antimony
Gold produced - total produced -
Kg 216 858 287 1 361 1 169 tonnes 1 436 909
Realised
Realised gold price - antimony price -
R/kg 430 030 422 496 422 496 423 872 419 810 R/t 42 989 38 460
Cash cost -
Cash cost - R/kg 498 017 245 511 565 080 353 016 293 543 R/ton ¹ 1 228 1 033
Notional cost -
Notional cost - R/kg 524 276 249 442 638 237 375 069 315 832 R/ton ¹ 1 487 1 255
Variance analysis of revenue and cash costs at operations Q4 vs Q3
Tau Buffels Cons Total
Volume (3) (7) 26 16
Price 3 1 2 6
Working costs (6) (23) (2) (31)
Total impact on profits (6) (29) 26 (9)
Prospects
Production volumes are traditionally higher during the September quarter than those achieved during the June quarter, and we expect all our operations to follow
this trend. However, costs are also significantly higher during the September quarter than those achieved during the previous quarter as a result of the increased
electricity tariffs during the winter months.
Statement by Chief Executive Officer
Village delivered earnings per share of 9.8 cents for the quarter, operating profit of R114.4m and free cash flow from operations of R62.7 million. We successfully
exited from our investments in FIU, and were delighted to declare a special dividend of 30c per share to shareholders, which was distributed on 6 August 2012.
Village achieved total gold production of 1 444kg (46 424oz) in the June 2012 quarter. Gold production for the fourth quarter, on a like for like basis, excluding gold
produced by Blyvoor was 0.73% or 9kg (289oz) lower than the third quarter ending 31 March 2012. Our Antimony production was 1436 tons in Q4 which was a
significant 58% or 527 tons improvement on the March 2012 quarter and more in line with our expectations from this operation.
Revenue was positively impacted as a result of a higher realised gold price over the quarter of R423 872/kg compared to R419 810/kg over the March quarter.
Costs were well controlled at all operations, although the impact of winter electricity tariffs added some R30 million to the cost of all operations during June 2012.
Notwithstanding the fact that gold production at our operations was similar to that achieved in Q3, production could have been higher. Safety related stoppages
resulted in a loss of 107kg of gold and 53 tons of antimony production during the quarter, a loss of some R47.7 million in revenue. As a management team we
continue to enforce and improve rigorous safety systems and operating procedures at our operations to ensure that we mine safely and that similar disruptions are
minimised in future. We are also working closely with the relevant regulators and industry forums to ensure that the impact of mine wide stoppages under Section
54 of the Mine Health and Safety Act are fair and clear and that all parties engage on a collaborative basis.
Village welcomed Blyvoor into our operational fold during the quarter. We are excited about the addition of Blyvoor to the Village portfolio and especially pleased
that the mine contributed R5.6m of operating profit during the first month under Village management, notwithstanding the negative impact of winter electricity tariffs
on the Blyvoor cost base.
Overall performance at the Buffels operation remains below expectation, with both production and costs outside the parameters of the business plan. Performance
at Buffels was adversely impacted by Section 54 safety related work stoppages and this combined with higher costs has resulted in losses at Buffels. Executive
management has embarked on a review of the current business and life of mine plans to evaluate the viability of Buffels, given the impact of regular work
stoppages and the impact of above inflationary cost increases at the operations.
Financial review
The table below sets out the unaudited results of the operations for the quarter ended 30 June 2012
Variance
VILLAGE MAIN REEF LIMITED
Variance Q4 2012
SELECTED FINANCIAL INFORMATION
Q4 2012 Q4 excl
Q4 Q3 vs. Q3 FY2012 Blyvoor vs
FY2012 FY2012 2012 R'000 excl Q3 2012
R'000 R'000 % Blyvoor Q4 Blyvoor %
Statement of Comprehensive Income
Continuing operations
Revenue 676 739 543 289 25% 109 976 566 763 4%
Total cash cost 1 (534 837) (399 289) 34% (107 671) (427 166) 7%
Total cash operating profit / (loss) 141 902 144 000 (1%) 2 305 139 597 (3%)
Production-related depreciation (31 531) (30 628) 3% (638) (30 894) 1%
Rehabilitation expenses 3 736 (712) (625%) - 3 736 119%
Operating profit / (loss) from mining activities 114 107 112 660 1% 1 667 112 440 (0%)
Non-production related depreciation (1 644) (1 542) 7% - (1 644) 6%
Other income 7 513 8 728 (14%) 4 016 3 497 (150%)
Share option costs (4 556) (5 261) (13%) - (4 556) (15%)
Head office costs 2 (8 098) (20 890) (61%) - (8 098) (158%)
General administrative and overhead expenditure 3 (30 797) (25 706) 20% - (30 797) 17%
Profit / (loss) from operations before interest and taxation 76 525 67 990 13% 5 683 70 842 4%
Fair value adjustments 4 34 454 16 019 115% - 34 454 54%
Impairment of assets & loans & movement in environmental rehab
liability 5 (2 219) (1 909) 16% - (2 219) 14%
Profit/(Loss) from equity-accounted investment - - 0% - - 0%
Profit from partial disposal of investment in associate - - 0% - - 0%
Restructuring costs (3 077) (1 463) 110% - (3 077) 52%
Loss on sale of investment - - 0 -
(Loss) / gain on non-current assets held for sale - - 0% - - 0%
Realisation of foreign currency translation reserve - - 0% - - 0%
Gain on bargain purchase - - 0% - - 0%
Foreign exchange gains / (losses) (5 323) 76 (7149%) - (5 323) 101%
Business optimisation project 6 10 000) (28 000) (64%) - (10 000) (180%)
Aberdeen dispute settlement expense - - 0% - - 0%
Net finance income / (charges) 2 407 12 140 (80%) ( 42) 2 449 (396%)
Profit / (loss) before taxation from continuing operations 92 766 64 853 43% 5 641 87 125 26%
Loss from discontinuing operations - - 0% - - 0%
Profit / (loss) before taxation 92 766 64 853 43% 5 641 87 125 26%
Variance
VILLAGE MAIN REEF LIMITED
Variance Q4 2012
SELECTED FINANCIAL INFORMATION
Q4 2012 Q4 excl
Q4 Q3 vs. Q3 FY2012 Blyvoor vs
FY2012 FY2012 2012 R'000 excl Q3 2012
R'000 R'000 % Blyvoor Q4 Blyvoor %
Statement of Financial Position
Total assets 4 139 544 2 963 191 40% 1 068 416 3 071 128 4%
Cash and equivalents 265 907 309 600 (14%) - 265 907 (16%)
Financial assets 448 874 390 047 15% 9 448 865 13%
Current liabilities (571 357) (514 647) 11% (206 386) (364 971) (41%)
Non-current liabilities (579 491) (478 234) 21% (75 083) (504 408) 5%
Total equity (2 988 696) (1 970 310) 52% (786 956) (2 201 740) 11%
Comments
1 – Total cash costs are costs directly related to the physical activities of producing gold and include mining costs, administrative costs, royalties, on-mine drilling
expenditures that are related to production and other direct costs. Sales of by-product metals are deducted from the above in computing cash costs. Cash costs
exclude depreciation, depletion and amortisation, exploration costs, finance charges, and pre-feasibility costs and accruals for mine reclamation but include
central costs such as human resources and technical services.
2 – Head office costs represent the costs incurred in relation to the running of the Village Head Office and is mostly related to salaries of the executive directors
and related costs to maintain the listing of Village, included in this number was salary costs (R4.1 million), these costs are similar to that incurred during Q3
3 – Amounts included in General and Administration fees related to Head office salary costs (R 4,1 million), consultant costs (R 3,1 million)and other corporate
overhead costs (R 1 million). In the previous quarter certain working costs were included in General and Admin costs and has been corrected in Q4. On a like for
like basis the Q3 General and Admin costs amounted to R 20,8 million of which R 10 million was paid as consulting retainer fees.
4 – Fair value adjustments relate to the 1% perpetual liability payable to Aberdeen from all gold produced at Buffels, R29.4 million fair value loss; a write up in
the value of the Mine Waste Solution Rand Notes of R40.9 million to account for the Notes as to show at face value, reduced period to maturity; a gain in the
Deutsche Bank Gold Forward liability of R13.6million; a mark to market gain in relation to the remaining equity investment in First Uranium Corporation of
R10 million.
5 – This relates to the provision for rehabilitation liabilities over the quarter at all of the Village operations
6 – Village has embarked on a business optimisation process at Tau. The process is aimed at increasing gold production. This project is now complete.
The Group generated revenue of R676 million for the quarter, whilst cash costs of R566 million were incurred. Net cash flow from operations of R62.7 million was
generated which was 14% lower than March quarter’s net cash from operations of R73.2 million. This was due to increased capital expenditure of R47 million,
compared to R37 million spent in Q3. Significant cash payments made in Q4 included R36 million in respect of the Deutsche Bank gold loan and payment in
relation to the Tau improvement project of R10 million.
Operational review
Tau
Total gold produced at Tau was 858kg (27 585oz) in Q4, which was 8kg (257oz) lower than the 866kg (27 842oz) produced during Q3.
Gold revenue of R364 million in Q4 was similar to the R363 million earned in Q3. The realised Rand per kilogram gold price achieved during the quarter, of
R422 496/kg was slightly higher than the R419 810/kg achieved during Q3 and compensated for the marginally lower production from Tau. Cash costs for Tau
increased by 3% to R211m in Q4 from R205m in Q3. The increase in power costs of R5 million was attributed to the higher winter tariffs. The cash cost per kg
increased to R245 511/kg in Q4 from R236, 734 in Q3. The cash generated from operations was a positive R153m for the quarter.
Production volumes at Tau were much improved during most of the quarter showing positive results from the business improvement program initiated during the
latter part of Q2. The tragic loss of life resulting from a blasting related accident and the related work stoppage negatively impacted on the positive production
momentum. Management is confident that the positive improvements at Tau will manifest during the coming quarter.
Buffels
Total gold production from Buffels was 287kg (9 227oz) in Q4 which was lower than the 303kg (9 741oz) produced during Q3.
Gold revenue decreased by 5% to R121 million in Q4 compared to R127 million in Q3.
Cash costs for Buffels increased quarter on quarter by 16% to R162 million in Q4 from R139m in Q3. The increase in costs is largely attributed to an increase in
electricity charges due to winter tariffs (R15.4m) and an adjustment to working costs as a result of movements in gold inventory (R7m). The increased costs
combined with lower production increased cash cost per kg to R565 080/kg in Q4 from R459 585/kg in Q3. Buffels reported a cash operating loss of R41 million in
Q4, compared to a cash operating loss of R20 million during Q3.
South Plant (Buffels plant)
Recoveries at South plant increased significantly during the quarter to an average of 96% in Q4 from 93% in Q3. The increase in overall recovery at the plant is
partly attributed to higher grade feed from Blyvoor underground and also other efficiency improvements in the leaching circuit. All Blyvoor underground ore is
trucked to and treated at South Plant, where achieved gold recoveries are materially higher than recoveries previously achieved at the Blyvoor gold plant. All
surface gold material continues to be processed through the surface plant and related facilities at Blyvoor.
Blyvoor
Blyvoor recorded total gold production of 216kg during the month of June 2012, of which 149kg and 68kg was from underground and surface operations
respectively. A profit of R5.6 million was generated of which R1.6 million was from mining operations and R4 million from the sale of Rand Refinery shares. Cash
generated from operations for the month of June 2012 was R2.3m.
Village appointed independent competent persons to review the stated mineral resources and reserves at Blyvoor for inclusion in the annual report. No issues
were found in the mineral resources estimation, of 30.39 Moz. However, the mineral reserves portion was found to be non-SAMREC compliant as the life of mine
plan is currently being updated. The revision has led to the mineral reserve estimate being restated as 828 koz (based on a 5 year life of mine plan) from the
previous estimate of 7 Moz. The completion of the life of mine planning process could lead to an increase of the mineral reserves in future.
Cons Murch
Antimony production quarter on quarter was 58% higher at 1436 tons in Q4 compared to 909 tons in Q3. Cons Murch produces gold as a by-product from its core
antimony production. Gold production in the June quarter of 83kg (2 668oz) was a significant improvement on the 68kg (2 186oz) produced in the March quarter.
Cash operating profit was R11.6 million for the June 2012 quarter compared to a cash operating loss of R17.6 million for Q3.
Antimony production benefitted from better grade control and the successful commissioning of additional trackless machinery.
Lesego
As reported in our SENS announcement on 12 June 2012, we have completed the independent pre-feasibility study which reveals a robust mining case with an
IRR of 18.7% and an NPV of R6.7 billion. There is greater confidence in the ore body after completion of the drilling programme which transferred 65% of the ore
body into the Measured and Indicated Categories. It is very encouraging to note that the Ore body defined is from 300m below surface. We also have a total
resource of 204 Mt at an average grade of 5.95 g/t over a width of 1.23 m after applying 17% for geological losses.
In Q4 2012 a total of R15 million was spent on feasibility activities compared to R11.3 million during the previous quarter. These costs continue to be capitalised to
the project.
Contacts
Village Joint CEO | Marius Saaiman | msaaiman@villagemainreef.co.za | 082 458 3420
Vestor | Media and Investor Relations | Louise Brugman | louise@vestor.co.za | 011 787 3015 | 083 504 1186
Riverside Energy partners | North American Media and Investor Relations | dmorgan@umbono.com | +1 (231) 421 8441
CEO Tele-conference call
21 August 2012
15h00 [GMT+1]
Live Call Access Numbers
South Africa - Johannesburg 011 535 3600
UK (Toll-Free) 0 800 917 7042
South Africa – Johannesburg alternate 010 201 6616
South Africa - Cape Town 021 819 0900
South Africa (Toll-Free) 0 800 200 648
Other Countries (Intl Toll) +27 11 535 3600
USA 1 800 860 2442
Playback Access Numbers code – 21892#
South Africa 011 305 2030
Other countries +27 11 305 2030
UK (Toll Free) 0 808 234 6771
Canada and US 1-412-317-0088
Please note that a recording on the conference call will also be made available on www.villagemainreef.co.za after the call.
21 August 2012
Sponsor
Java Capital
Date: 21/08/2012 08:31:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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