Wrap Text
Report for the quarter ended 30 September 2012 (first quarter of the financial year ending 30 June 2013, “Q1”)
VILLAGE MAIN REEF LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number 1934/0057034/06)
Share code: VIL ISIN: ZAE000154761
(“VMR” or “the Company”)
REPORT FOR THE QUARTER ENDED 30 SEPTEMBER 2012
(BEING THE FIRST QUARTER OF THE FINANCIAL YEAR ENDING 30 JUNE 2013, “Q1”)
Key Features
- R108 million cash generated for Q1, 2013 compared to R116 million for Q4, 2012.
- Earnings per share lower at 2.14 cents compared to 9.81 cents for Q4, 2012.
- Improved realised average gold price R440,000/kg in Q1 compared toR423,872/kg, Q4, 2012.
- Gold production, excluding Blyvooruitzicht (Blyvoor), rose 11% to 1,366kg (43,925oz) from
Buffelsfontein (Buffels), Tau Lekoa (Tau), and Cons Murch, compared to 1,228kg (39,480oz) in Q4.
Blyvoor contributed 541kg (17,393oz) of gold during the first full quarter under Village ownership.
- Antimony production increased 3% quarter on quarter, to 1,473 tons from 1,436 tons produced in Q4.
- Achievement of the following safety milestones: fatality free quarter for the group. Buffels and Blyvoor
achieved 500,000 and 2.4 million fatality free-shifts respectively.
- Receipt of R405 million in cash from First Uranium Corporation (FIU), consisting of R392 million in
settlement of Village’s investment in the secured Mine Waste Solution (Pty) Ltd Rand notes (MWS
Notes) and R13 million as an interim dividend in relation to its equity investment in FIU.
- Payment of 30 cents per share special dividend on 06 August 2012.
Events post quarter end
- Towards the latter part of September, 1,700 employee members of the National Union of Mineworkers
(NUM) embarked on an illegal strike at the Blyvoor operations. The strike was settled some three weeks
later on 18 October 2012, when parties agreed to implement the wage settlement as negotiated
between the NUM and the Chamber of Mines.
- During this same period, a seismic event at Blyvoor’s underground operations resulted in a material
number of underground panels collapsing. After reviewing the damage the Management at Blyvoor
believe that these panels can be re-opened over a period of six months. Production from underground
operations will however be lower during the December quarter.
- A fall of ground related accident at Tau resulted in a fatality where one employee regrettably lost his
life.
- A strike at Buffels commenced during the night shift on 5 November and ended again during the night
shift on 7 November.
Statement by the Joint Chief Executive Officer
We are pleased with the free cash flow of R108 million generated by our operations, some 11 cents per
share, during a quarter which is typically adversely impacted by higher costs associated with increased
winter electricity tariffs. Tau, which benefited from a 15% surge in production, was the main contributor to
the cash generated. Our immediate challenge lies with our Buffels and Blyvoor operations which recorded
cash operating losses of R48 million and R46 million respectively. Management focus is on increasing
production and reducing costs at both these operations and plans to achieve this are well underway.
Village delivered earnings per share of 2.14 cents for the quarter; operating profit from mining activities
totalled R104 million and free cashflow from operations R108 million.
Gold production totalled 1,907kg (61,318oz) in the September quarter. Gold production for the first
quarter, on a like for like basis, excluding gold produced by Blyvoor was 11% or 138kg (4,437oz) higher
than that achieved during the June quarter. Blyvoor contributed 541kg of gold for the quarter, which was
well below expectations. Our antimony production of 1,473 tons in Q1 was 3% or 37 tons higher than Q4,
2012 and in line with our expectations for this operation. Revenue was positively impacted by the higher
realised gold price during the quarter of R440,000/kg compared to R423,872/kg in the June quarter. The
impact of winter electricity tariffs added some R36 million to the cost of all operations during the
September quarter.
The cash balance at 30 September 2012 was a positive R389 million, of which R210 million is restricted.
The restricted cash is for the commitments to the DMR in relation to rehabilitation guarantees of R105
million, and to Deutsche Bank (DB) in relation to the gold forward purchase agreement of R105 million.
Significant cash payments made during the quarter included a R40 million repayment of the DB loan and
capital expenditure of R28 million. The realisation of the MWS notes resulted in an inflow of R392 million
during August 2012 which was partly used to fund the dividend payment of R302 million.
Marius Saaiman
Joint Chief Executive Officer
Quarterly performance data
Q1 FY Q4 FY Q1 FY Q4 FY
GOLD 2013 2012 ANTIMONY 2013 2012
Tau Cons Cons
Blyvoor Lekoa Buffels TOTAL TOTAL Murch Murch
Tons milled -
Surface 604 084 - - 604 084 273 376
Tons milled -
underground 100 439 247 214 80 206 427 859 374 676 Tons milled 69 993 66 405
Recovered
Recovered
grade - Au
grade - Au g/t
3.7 4.0 3.7 3.9 3.3 g/t 1.2 1.2
Gold produced
underground -
kg 353 987 293 1 633 1 294
Recovered
Gold produced grade - Sb
surface - kg 188 - - 188 68 % 1.6 1.3
Gold
Gold produced
produced -
- total oz
17 393 31 725 9 425 58 543 43 756 oz 2 775 2 668
Antimony
Gold produced produced -
- total Kg 541 987 293 1 821 1 361 tonnes 1 473 1 436
Realised
Realised gold
antimony
price - R/kg
442 597 438 822 438 822 440 000 423 872 price - R/t 41 273 42 989
Cash cost - Cash cost -
R/kg 527 623 252 440 601 376 382 608 353 016 R/ton ¹ 1 145 1 228
Notional cost - Notional
R/kg 533 800 275 500 616 400 394 689 375 069 cost - R/ton¹ 1 231 1 470
¹ - Excludes gold revenue credits
Variance analysis of revenue and cash costs at operations Q1 FY2013 vs Q4 FY2012
Tau Buffels Cons Total
Volume 62 3 3 68
Price 23 4 -1 26
Working costs -36 -12 2 -46
Total impact on profits 49 -5 4 48
Prospects
Production volumes are traditionally similar in the December quarter to those achieved in the September
quarter, while we should also see the benefits of the absence of winter tariffs. As indicated previously, we
expect production at Blyvoor underground operations to be lower as a result of the strike action and the
unavailability of mining panels associated with the seismic event.
Financial review
The table below sets out the unaudited results of the operations for the quarter ended 30 September 2012.
Variance
Q1 2013
excl
Variance Blyvoor
VILLAGE MAIN Q1 2013 Unaudited Unaudited vs Q4
REEF LIMITED Unaudited Unaudited vs. Q4 Q1 FY2013 Q4 FY2012 2012 excl
SELECTED Q1* Q4* 2012 Unaudited Excluding Excluding Blyvoor
FINANCIAL FY2013 FY2012 Blyvoor Q1 Blyvoor Blyvoor
INFORMATION R'000 R'000 % R'000 R'000 R'000 %
Statement of
Comprehensive
Income
Continuing
operations
Revenue 899 979 676 739 33% 239 445 660 534 566 763 17%
Total cash cost (762 447) (534 837) (43%) (280 580) (481 867) (427 166) (13%)
Total cash
operating profit /
(loss) 137 532 141 902 (3%) (41 135) 178 668 139 597 28%
Production-related
depreciation (33 312) (31 531) (6%) ( 1 348) (31 964) (30 894) (3%)
Rehabilitation
expenses (608) 3 736 (116%) (608) - 3 736 (100%)
Operating profit /
(loss) from mining
activities 103 612 114 107 (9%) (43 092) 146 704 112 440 30%
Non-production
related depreciation (1 949) (1 644) (19%) - (1 949) (1 644) (19%)
Other income 1 763 7 513 (77%) (4 327) 6 090 3 497 74%
Share option costs - (4 556) 100% - - (4 556) 100%
Head office costs 2 (18 965) (8 098) (134%) - (18 965) (8 098) (134%)
General
administrative and
overhead
expenditure 3 (21 717) ( 30 797) 29% (321) (21 395) (30 797) 31%
Profit / (loss) from
operations before
interest and
taxation 62 744 76 525 (18%) (47 740) 110 484 70 842 56%
Fair value
adjustments 4 (30 608) 34 454 (189%) - (30 608) 34 454 (189%)
Impairment of assets
& loans & movement
in environmental (3 553) (2 219) (60%) - (3 553) (2 219) (60%)
rehab liability
Profit/(Loss) from
equity-accounted
investment - - 0% - - - 0%
Profit from partial
disposal of
investment in
associate - - 0% - - - 0%
Restructuring costs - (3 077) 100% - - (3 077) 100%
(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) (10 155) (5 323) (91%) - (10 155) (5 323) (91%)
Business optimisation
project 5 - (10 000) 100% - - (10 000) 100%
Aberdeen dispute
settlement expense - - 0% - - - 0%
Net finance income /
(charges) 1 014 2 407 (58%) (434) 1 449 2 449 (41%)
Profit / (loss)
before taxation
from continuing
operations 19 442 92 766 (79%) (48 174) 67 616 87 125 (22%)
Loss from
discontinuing
operations - - 0% - - - 0%
Profit / (loss)
before taxation 19 442 92 766 (79%) (48 174) 67 616 87 125 (22%)
Statement of
Financial Position
Total assets 3 377 638 3 738 423 (10%) 498 167 2 879 471 3 071 128 (6%)
Cash and equivalents 389 370 266 650 46% 11 165 378 205 265 907 42%
Financial assets 47 463 418 576 (89%) 9 47 454 448 865 (89%)
Current liabilities (668 247) (1 110 341) 40% (278 742) (389 505) (364 971) (7%)
Non-current liabilities (885 523) (823 602) (8%) (580 065) (305 458) (504 408) 39%
Total equity (1 823 869) (1 804 480) 1% 360 640 (2 184 508) (2 201 740) (1%)
* Includes 3 months of Blyvoor in Q1 vs 1 month of Blyvoor in Q4
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, corporate general
and administrative expenses, 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 directors and costs incurred in maintaining the head office. Success fees amounting to R 6 million were incurred relating to the
successful completion of the Blyvoor transaction. Other administration costs incurred amounted to R 4.8 million.
3
- General and Administrative costs comprise mainly of Insurance costs ( R3 million), the Buffels contribution to the Margaret Water
company costs amounting to R 6 million. Welfare and training costs amounted to R 5 million. An amount of R 2 million was paid to
corporate consultants and an amount of R6 million were spent on administrative costs.
4 –
Fair value adjustments relate to the 1% perpetual liability payable to Aberdeen from all gold produced at Buffels, R7 million fair
value loss; ; a loss in the Deutsche Bank Gold Forward liability of R14.9million; a mark to market loss in relation to the remaining
equity investment in First Uranium Corporation amounting to R8 million.
5–
Village embarked on a business optimisation process at Tau. The optimisation project has been completed and increase in
production is seen at Tau. No further costs are incurred with relation to this project.
Earnings per share
We generated a cash operating profit of R108 million equating to 11 cents per share. Non cash cost
adjustments of R66 million relating to amortisation and fair value adjustments for the Deutsche second
gold loan and the perpetual Premier Royalty amounted to 7 cents per share as detailed in the financial
review section. A further 2 cents per share relates to Head office and rehabilitation accretion costs of
R23 million, resulting in earnings per share of 2 cents per share.
Operational review
Tau Lekoa Gold Mine
Total gold produced at Tau was 987kg (31,725oz) in Q1, 2013 which increased by 15% (4,140oz)
compared to the 858kg (27,585oz) produced during Q4, 2012.
This can largely be ascribed to higher grades mined and improved volumes as the impact from the
business improvement project and orebody optimisation process implemented earlier in the year continues
to materialise.
The cash generated from operations was a positive R184 million for the quarter. Higher production and an
increased average gold price resulted in gold revenues being 19% higher, at R433 million (Q4, 2012, R364
million). The realised Rand per kilogram gold price achieved during the quarter, of R438,822/kg was 4%
higher than the R422,496/kg achieved during Q4. Cash costs for Tau rose by 18% to R249 million,
reflecting higher winter electricity costs (R5 million), labour costs (R17 million) and production-related costs
(R16 million). On a unit cost basis cash cost increases were contained to 3% quarter on quarter, rising
from R245,511/kg in the June quarter to R252,440/kg.
Buffels Gold Mine
Total gold production from Buffels was 293kg (9,425oz) in Q1, 2013 which rose by 2% compared to the
287kg (9,227oz) produced during Q4, 2012.
Although production was slightly higher quarter on quarter, Buffels remained under pressure, with mine
wide and shaft specific safety-related stoppages resulting in a loss of ten production days (translating into
approximately 50kg of gold) during the quarter. Actual gold yield also impacted negatively on production,
particularly at our high volume 7 Shaft where the impact of intense geological structures and limited mining
flexibility adversely affected volumes and grade.
Gold revenue increased by 7% to R129 million from R121 million in Q4, 2012.
Cash costs for Buffels increased by 9% quarter on quarter from R162 million in Q4 to R176 million in Q1,
2013. The increase in costs is largely attributable to the higher electricity charges associated with winter
tariffs (R7 million), pumping-related costs (R3 million), labour (R2 million) and other production-related
costs (R2 million). The higher costs combined with lower production had a predictably adverse effect on
unit cash costs, which rose to R601,376/kg. Buffels reported a cash operating loss of R48 million up from
the loss of R41 million during Q4, 2012.
The focus in the next quarter will continue to be on improving mining flexibility and face length creation
and ensuring optimal blending which should translate into better grades. A safety systems review and re-
design is also underway to address areas that are negatively resulting in safety related stoppages.
Blyvoor
In the first full production quarter at Blyvoor under Village ownership, gold production was 541kg
(17,393oz). This was lower than planned, mainly due to lower gold grades from both underground and
surface sources. A mine wide stoppage related to a pumping infrastructure upgrade towards the end of the
quarter also negatively impacted gold production. This has since been resolved.
Higher than planned cash costs of R285 million resulted in Blyvoor reporting a cash operating loss of R46
million. Cash costs per kilogram increased by 6% to R527,623/kg compared to R498,017/kg achieved in
June 2012. This is largely attributed to higher electricity costs during winter and the proportionately lower
production performance over the quarter.
The operational underperformance at Blyvoor, which has been exacerbated by the illegal strike-related
productionlosses in October, has placed pressure on the cash available at Blyvoor. To date Village has
provided funding of R85 million to Blyvoor. Blyvoor management is close to finalising a revised business
plan and an operational optimisation process that will see Blyvoor return to profitability in the medium
term. It is anticipated that Village will continue to fund Blyvoor until it returns to profitability subject to an
acceptable turnaround plan which would be agreed to by all stakeholders.
Cons Murch Antimony
Antimony production quarter on quarter was 3% higher at 1,473 tons (1,436 tons in Q4, 2012), a by-
product from its core antimony process production. Gold production in the September quarter was higher
at 86kg (2,775oz) than the 83kg (2,668oz) produced in the June quarter.
Antimony production continued to benefit from improved grade control and the implementation of
additional trackless machinery.
The cash cost per ton improved by 7% to R1,145/ton compared to R1,228/ton in the June quarter. This is
attributed to better cost control and improved production performance. Cash generated from operations
was R18 million during the quarter.
A significant milestone was reached at our Gravellote Project, with the first blast of the surface decline.
This project is now well on track and expected to start contributing to Cons Murch’s antimony production
during the current financial year.
Lesego Platinum
The Definitive Feasibility Study continues to progress in accordance with plan, with the mine design
process having been completed. A total of R9 million was spent on feasibility activities in Q1, 2013
compared to R15 million during the previous quarter.
These costs continue to be capitalised to the project.
Key focus areas for the next quarter are the mine scheduling process and the submission of applications for
the various regulatory licences.
Contacts
Village Joint CEO: Marius Saaiman; msaaiman@villagemainreef.co.za 082 458 3420
Village Media and Investor Relations: Cheryl Walton; cwalton@villagemainreef.co.za 084 460 8602
13 November 2012
Sponsor
Java Capital
CEO Tele-conference call
13 November 2012
15h30 [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 – 22569#
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.
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