Wrap Text
Unaudited interims for period September 2012 and renewal of cautionary
Trans Hex Group Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1963/007579/06)
Share code: TSX
ISIN: ZAE000018552
("Trans Hex" or "the Company")
Unaudited interim results for the six months ended 30 September 2012
Renewal of cautionary announcement relating to the acquisition of Namaqualand Mines
FINANCIAL HEADLINES
Sales revenue up to R330,7 million (September 2011: R272,0 million).
South African operations generated a profit before tax of R34,2 million (September 2011: R24,9 million).
Group profit after tax from continuing operations was R24,9 million (September 2011: R16,3 million).
Profit after tax from discontinued operations amounted to R8,0 million (September 2011: loss of R14,6 million).
Group net profit for the period was R32,9 million (September 2011: R1,7 million).
Net cash generated during the reporting period was R4,4 million (September 2011: net cash utilised R64,1 million)
resulting in the Groups net cash position at the end of the period being R351,7 million (September 2011: R203,4 million).
Earnings per share amounted to 31,6 cents (September 2011: 1,6 cents) and headline earnings per share
amounted to 21,5 cents (September 2011: 1,6 cents).
Net asset value per share increased to 466,0 cents (September 2011: 219,0 cents).
In Angola, Somiluana sales amounted to US$7,9 million (September 2011: US$9,8 million).
ABRIDGED CONSOLIDATED INCOME STATEMENT
30/09/12 30/09/11 31/03/12
Unaudited Unaudited Audited
Notes R'000 R'000 R'000
Continuing operations
Sales revenue 330 647 271 974 754 484
Cost of goods sold (267 594) (214 362) (563 150)
Gross profit 63 053 57 612 191 334
Royalties (9 225) (5 848) (21 447)
Selling and administration costs (33 843) (31 509) (61 948)
Mining profit 19 985 20 255 107 939
Exploration costs (3 237) (6 363) (9 225)
Other gains/(losses) net 1 15 164 7 474 7 795
Finance income 8 599 6 574 14 155
Finance costs (4 878) (6 319) (11 496)
Share of results of associated companies - - 117
Profit before income tax 35 633 21 621 109 285
Income tax (10 701) (5 344) (28 427)
Profit for the period from continuing
operations 24 932 16 277 80 858
Discontinued operations
Profit/(loss) for the period from discontinued
operations 2 7 994 (14 624) 127 438
Profit for the period 32 926 1 653 208 296
Attributable to:
Continuing operations 24 932 16 277 80 858
Owners of the parent 24 312 14 954 79 676
Non-controlling interest 620 1 323 1 182
Discontinuing operations
Owners of the parent 7 994 (14 624) 127 438
32 926 1 653 208 296
Earnings/(loss) per share (cents)
Continuing operations - Basic and diluted 23,0 15,4 75,4
Discontinued operations - Basic and diluted 7,6 (13,8) 120,6
Total - Basic and diluted 31,6 1,6 196,0
30/09/12 30/09/11 31/03/12
Unaudited Unaudited Audited
R'000 R'000 R'000
Shares in issue adjusted for treasury shares
(`000) 105 699 105 699 105 699
Average US$ exchange rate 8,29 6,89 7,55
HEADLINE EARNINGS/(LOSS)
Continuing operations 14 679 16 266 79 138
Discontinued operations 7 994 (14 624) 127 438
Total 22 673 1 642 206 576
HEADLINE EARNINGS/(LOSS) PER SHARE (cents)
Continuing operations 13,9 15,4 74,9
Discontinued operations 7,6 (13,8) 120,6
Total 21,5 1,6 195,5
ABRIDGED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
30/09/12 30/09/11 31/03/12
Unaudited Unaudited Audited
R'000 R'000 R'000
Profit for the period 32 926 1 653 208 296
Other comprehensive income net of tax:
Translation differences on foreign
subsidiaries (7 482) (77 849) (47 201)
- Before-tax amount (7 482) (38 768) (31 333)
- Tax expense - (39 081) (15 868)
Fair value adjustment on available-for-sale
financial assets (192) (757) (1 411)
- Before-tax amount (192) (757) (1 411)
- Tax benefit/(expense) - - -
Total comprehensive income/(loss) for the
period 25 252 (76 953) 159 684
Attributable to:
- Owners of the parent 24 632 (78 276) 158 502
- Non-controlling interest 620 1 323 1 182
25 252 (76 953) 159 684
ABRIDGED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30/09/12 30/09/11 31/03/12
Unaudited Unaudited Audited
R'000 R'000 R'000
Assets
Property, plant and equipment 354 751 398 174 384 858
Financial assets 106 029 101 072 99 015
Current assets 509 964 422 333 466 720
Inventories 140 901 172 634 97 776
Trade and other receivables 17 364 18 972 21 593
Cash and cash equivalents 351 699 230 727 347 351
970 744 921 579 950 593
Equity and liabilities
Total shareholders' interest 494 743 233 333 470 111
Non-controlling interest (414) (893) (1 034)
Borrowings 8 074 40 653 24 401
Deferred income tax liabilities 60 451 101 016 70 735
Provisions 95 206 86 971 91 473
Deferred income 1 114 7 798 4 456
Current liabilities 311 570 452 701 290 451
Trade and other payables 223 721 309 272 216 325
Current income tax liabilities 15 499 12 196 4 787
Borrowings 72 350 103 930 69 339
Bank overdraft - 27 303 -
970 744 921 579 950 593
Net asset value per share (cents) 466 219 442
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
30/09/12 30/09/11 31/03/12
Unaudited Unaudited Audited
R'000 R'000 R'000
Balance at 1 April 469 077 309 393 309 393
Total comprehensive income/(loss) for the period 25 252 (76 953) 159 684
Balance at end of period 494 329 232 440 469 077
ABRIDGED CONSOLIDATED STATEMENT OF CASH FLOWS
30/09/12 30/09/11 31/03/12
Unaudited Unaudited Audited
R'000 R'000 R'000
Cash available from operating activities 66 902 26 085 199 815
Movements in working capital (32 015) (40 004) 12 770
Income tax paid (10 283) (12 978) (50 539)
Cash generated from operations 24 604 (26 897) 162 046
Cash employed (20 256) (37 149) (82 165)
Property, plant and equipment
- Proceeds from disposal 13 368 15 672
- Replacement (13 120) (12 860) (33 087)
- Additional (4 356) (7 733) (17 056)
Borrowings (16 148) (16 571) (32 694)
Net increase/(decrease) in cash and cash
equivalents 4 348 (64 046) 79 881
Cash and cash equivalents at beginning of period 347 351 267 470 267 470
Cash and cash equivalents at end of period 351 699 203 424 347 351
NOTES
30/09/12 30/09/11 31/03/12
Unaudited Unaudited Audited
R'000 R'000 R'000
1. Other gains/(losses) net
Other gains/(losses) net consists of the
following categories:
- Net foreign exchange gains 4 853 7 474 7 795
- Profit on sale of assets and investments 10 311 - -
(Profit on sale of assets and investments was
previously included under cost of goods sold)
15 164 7 474 7 795
2. Discontinued operations
On 5 October 2011 the Angolan Ministry of Geology,
Mines and Industry revoked the mining rights of the
Luarica and Fucaúma joint ventures as no mining
activities had been performed at the sites for a
period of three years as a result of the projects
being placed under care and maintenance.
Trans Hex currently has a legally enforceable right
to set-off a portion of the amounts owed by the other
joint venture parties to Trans Hex against its pro-rata
share of certain of the joint ventures' liabilities.
Due to the set-off, this portion of the liabilities owed
by the other joint venture parties to Trans Hex became
recoverable which resulted in a reversal of impairment of
R84,6 million during the 2012 financial year.
Other gains during the reporting period relate to the
prescription of unclaimed debts of R9,7 million (31/3/2012:
prescription of unclaimed debts of R38,2 million and a
change in estimate of provisions of R20,9 million).
Revenue - - -
Other operating expenses : Luarica and Fucaúma care and
maintenance costs (1 754) (10 660) (12 301)
Other gains net 9 748 - 59 079
Finance costs - (3 964) (3 965)
Reversal of impairment of assets - - 84 625
Profit/(loss) before income tax 7 994 (14 624) 127 438
Taxation - - -
Profit/(loss) for the period 7 994 (14 624) 127 438
3. Reconciliation of headline earnings
Continuing operations
Profit for the period 24 312 16 277 79 676
- Profit on sale of assets (10 231) (15) (423)
- Taxation impact 678 4 118
- Profit on sale of listed investment (80) - (233)
- Taxation impact - - -
Headline earnings 14 679 16 266 79 138
Discontinued operations
Profit/(loss) for the period 7 994 (14 624) 127 438
Headline loss 7 994 (14 624) 127 438
4. Capital commitments
(including amounts authorised, but not yet contracted)
These commitments will be financed from the Group's
own resources or with borrowed funds. 35 397 33 991 52 979
5. Segment information
Operating segments
Continuing Discontinued
Six months ending 30 September 2012 South Africa Angola Total Angola
Carats sold 33 093 - 33 093 -
R'000 R'000 R'000 R'000
Revenue 330 647 - 330 647 -
Cost of goods sold (267 170) (424) (267 594) -
Gross profit/(loss) 63 477 (424) 63 053 -
Other operating expenses - - - (1 754)
Royalties (9 225) - (9 225) -
Selling and administration costs (30 640) (3 203) (33 843) -
Mining profit 23 612 (3 627) 19 985 (1 754)
Exploration costs (3 237) - (3 237) -
Other gains - net 10 069 5 095 15 164 9 748
Finance income 8 599 - 8 599 -
Finance costs (4 878) - (4 878) -
Profit before income tax 34 165 1 468 35 633 7 994
Depreciation included in the above (45 054) (280) (45 334) -
Assets 900 550 70 194 970 744 -
Liabilities 339 436 3 640 343 076 133 339
Capital expenditure 17 473 3 17 476 -
Net asset value per share (cents) 529 63 592 (126)
Continuing Discontinued
Six months ending 30 September 2011 South Africa Angola Total Angola
Carats sold 28 771 - 28 771 -
R'000 R'000 R'000 R'000
Revenue 271 974 - 271 974 -
Cost of goods sold (213 915) (447) (214 362) -
Gross profit/(loss) 58 059 (447) 57 612 -
Other operating expenses - - - (10 660)
Royalties (5 848) - (5 848) -
Selling and administration costs (28 697) (2 812) (31 509) -
Mining profit/(loss) 23 514 (3 259) 20 255 (10 660)
Exploration costs (6 363) - (6 363) -
Other gains/(losses) - net 7 474 - 7 474 -
Finance income 6 574 - 6 574 -
Finance costs (6 319) - (6 319) (3 964)
Profit/(loss) before income taxation 24 880 (3 259) 21 621 (14 624)
Depreciation included in the above (34 410) (447) (34 857) -
Assets 852 173 69 406 921 579 -
Liabilities 406 539 8 762 415 301 273 838
Capital expenditure 20 489 - 20 489 -
Net asset value per share (cents) 420 57 477 (258)
Continuing Discontinued
Twelve months ending 31 March 2012 South Africa Angola Total Angola
Carats sold 83 324 - 83 324 -
R'000 R'000 R'000 R'000
Revenue 754 484 - 754 484 -
Cost of goods sold (562 345) (805) (563 150) -
Gross profit/(loss) 192 139 (805) 191 334 -
Other operating expenses - - - (12 301)
Royalties (21 447) - (21 447) -
Selling and administration costs (57 396) (4 552) (61 948) -
Mining profit/(loss) 113 296 (5 357) 107 939 (12 301)
Exploration costs (9 225) - (9 225) -
Other gains - net 7 795 - 7 795 59 079
Finance income 14 155 - 14 155 -
Finance costs (11 496) - (11 496) (3 965)
Reversal of impairment of assets - - - 84 625
Share of results of associated companies 117 - 117 -
Profit/(loss) before income tax 114 642 (5 357) 109 285 127 438
Depreciation included in the above (81 082) (805) (81 887) -
Assets 886 745 63 673 950 418 175
Liabilities 347 003 3 160 350 163 131 353
Capital expenditure 57 041 - 57 041 -
Net asset value per share (cents) 509 57 566 (124)
Revenues from transactions with certain customers amount to ten percent or more of total revenue. During the period under review total
revenue from these customers amounted to R0,0 million (31/03/2012: R82,5 million; 30/09/2011: R66,4 million).
6. Mineral resources and mineral reserves
No adjustments have been made to the statement of mineral resources and mineral reserves as contained in the 2012 Annual Report. Annual
reconciliation of production data will take place in March 2013 and an updated resource and reserve statement will be published in the
2013 Annual Report.
7. Contingent liabilities
There have been no material changes to contingent liabilities previously reported in the Annual Report.
8. Accounting policies
The accounting policies are consistent with the annual report and the corresponding prior year period in accordance with International
Financial Reporting Standards. These abridged financial statements comply with IAS34, the AC 500 Standards as issued by the Accounting
Practices Board, the JSE Limited's Listings Requirements and the requirements of the Companies Act of South Africa. Income does not
accrue evenly throughout the year and the income for the six months, therefore, does not necessarily represent half of a full financial
year's income.
9. Preparation of financial statements
The preparation of the abridged unaudited interim financial statements was supervised by the financial director, IP Hestermann CA(SA).
OVERVIEW
In this commentary, results are compared with the first six months of the 2011/2012 financial year (in brackets).
South African operations showed a profit before tax of R34,2 million (September 2011: R24,9 million). Total US$ sales attributable to the
South African operations remained stable at US$39,9 million (September 2011: US$39,5 million), at an average price of US$1,205 per carat
(September 2011: US$1,372). In Rand terms, revenue was up by 21,6% to R330,7 million (September 2011: R272,0 million).
South African production during the reporting period amounted to 35,865 carats (September 2011: 33,199 carats). The total volume of gravels
treated at the land operations increased by 9,0% and the average grade was 1,20 carats/100m3 (September 2011: 1,24 carats/100m3). The unit
cost of production increased by 2,4%.
The cost of goods sold increased to R267,6 million (September 2011: R214,4 million) due to the higher volumes of gravel treated, together
with above-inflation increases in the costs of labour, fuel, electricity and maintenance.
In Angola, production at Somiluana, in which Trans Hex holds a 33% stake, amounted to 22,600 carats during the period (September 2011: 20,473
carats). Total sales amounted to US$7,9 million at an average price of US$337 per carat (September 2011: sales amounted to US$9,8 million at
an average price of US$434 per carat).
The profit from Angolan continuing operations amounted to R1,5 million, mainly attributable to a profit of R5,1 million on the sale of assets
by Trans Hex Angola to Somiluana.
The Group reports an after-tax profit for the period from continuing operations of R24,9 million (September 2011: R16,3 million).
Profit from the discontinued Luarica and Fucaúma operations in Angola amounted to R8,0 million, primarily as a result of the prescription of
unclaimed debts.
The Group therefore reports a profit for the period of R32,9 million (September 2011: R1,7 million).
Cash and cash equivalents at the end of the reporting period amounted to R351,7 million (September 2011: R203,4 million).
OPERATING PERFORMANCE
Detailed Project Information
Six months ended 30 September 2012 Six months ended 30 September 2011
Average Average
price price
Average Average per carat Average Average per carat
Detailed project grade Carats carats achieved grade per Carats carats per achieved
information (Unaudited) per 100m3 produced per stone (US$) 100m3 produced stone (US$)
South Africa
Baken - total 1,23 25 825 1,10 1 287 1,31 23 789 1,05 1 235
Richtersveld
Operations 1,08 6 236 1,78 1 519 1,04 6 692 1,48 2 044
Shallow water - 3 804 0,32 411 - 2 719 0,32 616
Total SA 1,20 35 865 0,92 1 205 1,24 33 199 0,93 1 372
Angola
Somiluana 18,04 22 600 0,40 337 18,19 20 473 0,45 434
Note: Average grade in South Africa is calculated excluding Shallow water production.
South Africa
South African production increased to 35,865 carats compared to 33,199 carats in the corresponding previous reporting period.
The total volume of gravels treated at the land operations increased by 9,0% and the average grade decreased to 1,20 carats/100m3 compared to
1,24 carats/100m3 in the corresponding previous reporting period.
Total sales attributable to the South African operations amounted to US$39,9 million at an average price of US$1,205 per carat (Sep 2011:
US$39,5 million at US$1,372 per carat).
Angola
Production at Somiluana, in which Trans Hex holds a 33% stake, increased to 22,600 carats compared to 20,473 carats in the corresponding
previous reporting period. The average grade achieved was 18,04 carats/100m3, compared to 18,19 carats/100m3.
Total sales attributable to the mine during the period amounted to US$7,9 million, at an average price of US$334 per carat. No repayment was
made to Trans Hex against the outstanding investment amount as cash was retained to develop the mine.
Projects Luarica and Fucaúma remained under care and maintenance throughout the period and are disclosed as discontinued operations as the
mining licenses have been formally revoked by the Angolan State.
OUTLOOK
Baken mine continues to concentrate on lowering unit costs and generating an acceptable margin, primarily through processing existing low
grade stockpiles and shallow gravels at increased throughput levels. In the light of current exchange rates, consideration is being given to
restarting the stripping operations that were suspended during 2010.
South African production for the 2013 financial year is now expected to be 75,000 carats.
In Angola, third party funding to increase production capacity at Somiluana is proving to be difficult to secure and the partners in the
project are not willing to fund the capital required. Production for the 2013 financial year is therefore expected to remain at around 42,000
carats.
Trans Hex is continuing with the appropriate course of action to exit from the discontinued Luarica and Fucaúma projects in Angola.
Tight controls over cash and costs will continue to be exercised in all areas of the Group's business.
In respect of market conditions, the interim reporting period saw rough prices increase steadily before correcting to lower levels as the
result of polished prices failing to increase and a slowdown in the Far East consumer markets affecting sales and demand. Given the still
fragile recovery in the major economies, the market for rough and polished diamonds seems likely to remain subject to short-term volatility
until demand for the polished product shows sustained improvement.
Exploration activities are continuing in Southern Africa and potential new ventures are evaluated on an ongoing basis.
With regards to Namaqualand Mines, and as reported previously on SENS, an agreement with De Beers Consolidated Mines Limited ("DBCM") was
signed on 6 May 2011, in terms of which Trans Hex's 50% held joint venture company, Emerald Panther Investments 78 (Pty) Limited, will
acquire assets and liabilities relating to Namaqualand Mines. Following subsequent negotiations between the Purchaser and DBCM, the terms of
the agreement have been amended such that DBCM will retain in excess of 50% of the Namaqualand Mines environmental rehabilitation liability.
The key amendments to the Proposed Transaction are as follows:
1. certain assets and liabilities relating to the Namaqualand Mines' Buffels Marine Complex ("BMC") are to be removed from the proposed
transaction (including the environmental rehabilitation liability);
2. the Purchaser and DBCM will enter into a put, call and pre-emptive arrangement in respect of these BMC assets and liabilities; and
3. the revised transaction, excluding the abovementioned put, call and pre-emptive arrangement, is now valued at R166 million.
Trans Hex believes that the exclusion of the BMC assets and liabilities from the Proposed Transaction significantly reduces risk for Trans
Hex as the environmental liability associated with the BMC constitutes a substantial proportion of the original environmental rehabilitation
liability, whilst the BMC itself is a lower priority asset in comparison with the Buffels River and Koingnaas Complex assets which remain in
the proposed transaction.
The proposed acquisition remains subject to a number of conditions precedent being met, including all necessary statutory and regulatory
approvals and approval by Trans Hex shareholders. In particular, clarity is still awaited from the State, through the Department of Mineral
Resources, in respect of its intentions regarding the States 20% interest in Namaqualand Mines. Thereafter, the necessary approval
processes are expected to take approximately three months. A renewal of the cautionary announcement relating to this transaction is
included in this announcement below.
Dividend
In order to maintain cash resources given the pending transaction in respect of Namaqualand Mines, the absence of any short-term credit
facilities and the still volatile nature of the global economy, the directors deem it prudent not to declare an interim dividend.
Renewal of cautionary announcement relating to the acquisition of Namaqualand Mines
Shareholders are referred to prior cautionary announcements, the last of which was released on SENS on 20 September 2012, wherein Trans Hex
announced certain key amendments to the original agreement with De Beers Consolidated Mines Limited ("DBCM") which had been signed in terms
of which, and subject to certain conditions precedent, its 50% held joint-venture company, Emerald Panther Investments 78 (Proprietary)
Limited, will acquire assets and liabilities relating to Namaqualand Mines, a division of DBCM ("the Proposed Transaction").
Shareholders are advised that Trans Hex is currently finalising certain aspects of the Proposed Transaction and therefore shareholders should
continue to exercise caution when dealing in the Company's securities until a full terms announcement is made.
By order of the board
BR van Rooyen L Delport
Chairman Chief Executive Officer
Parow
29 October 2012
REGISTERED OFFICE
405 Voortrekker Road, Parow 7500 PO Box 723, Parow 7499
JSE share code: TSX
ISIN: ZAE000018552
Registration number: 1963/007579/06
Incorporated in the Republic of South Africa
("Trans Hex" or "the Company or "the Group")
JSE SPONSOR
Sasfin Capital (a division of Sasfin Bank Limited)
TRANSACTIONAL ADVISOR
QuestCo (Pty) Limited
TRANSACTIONAL SPONSOR
QuestCo (Pty) Limited
TRANSACTIONAL ATTORNEYS TO TRANS HEX
Bowman Gilfillan Attorneys Inc
TRANSFER SECRETARIES
Computershare Investor Services (Pty) Limited
PO Box 61051, Marshalltown 2107
DIRECTORATE
BR van Rooyen (Chairman), L Delport (Chief Executive Officer), IP Hestermann (Financial Director),
T de Bruyn, AR Martin, GM van Heerden (Company Secretary)
Date: 29/10/2012 03:49:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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