Wrap Text
Report for quarter ended 31 March 2013(Q3 FY2013)
VILLAGE MAIN REEF LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1934/005703/06)
Share Code: VIL ISIN: ZAE000154761
(“Village”)
REPORT FOR QUARTER ENDED 31 MARCH 2013 (Q3 FY2013)
Key Features
- R9m of cash generated from operations for the quarter ended 31 March 2013 (Q3 FY2013)
- Basic loss per share of 2.67 cents compared to an earnings per share of 2.38 cents for the quarter ended 31 December 2012
- Gold production for the Group was 1,394kg (44,806oz) compared to 1,527kg (49,111oz) for the previous quarter, a decrease of
9%
- Antimony production was 1,433t compared to 1,255t for the prior quarter, an improvement of 14%
- Realised average gold price of R467,358/kg compared to R476,803/kg for Q2, a decrease of 2%
- Cash costs for Q3 was R484,151/kg compared to R428,505/kg for the previous quarter, an increase of 13% mainly due to
volume decreases
- Blyvoor restructuring completed, delivering a positive cash contribution of R17m during February and March 2013
- R12m received from First Uranium Limited (“FIU”) as a final dividend
- Village repurchased a further 35.2m ordinary shares at a cost of R43m. Since December 2012, Village has purchased 60.5m
shares at a total cost of R73.3m, totalling 6% of the total issued share capital, are held through Buffelsfontein Gold Mines
Limited (“Buffels”) as treasury stock
- Village concluded a binding agreement to subscribe for 100m shares in Continental Coal Limited (“Conti”) an Australian-listed
South African thermal coal producer for a total investment of AS$ 8m. On completion, Village will hold approximately 19% of
the issued shares in Conti
Events post quarter end
- The Cons Murch Gold and Antimony Mine (“Cons Murch”) competitive bid process announced in February 2013, is progressing
well. A number of attractive offers were received and the short-listed bidders have started their due diligence processes
- During April 2013, Village will fully settle the remnant Simmer and Jack gold loan to Deutsche Bank. This will see the release
of some R105m that was pledged as security against the loan
- Subject to South African Reserve Bank approval, Village will conclude the Conti transaction
- Gold price volatility continues with the realised gold price averaging approximately R430,000/kg in April 2013, compared to
the R467,000/kg achieved during the March quarter. Should the lower gold price persist it will negatively affect gold revenues
and profitability at all Village operations during the June quarter
Statement by the Joint Chief Executive Officer
Marius Saaiman, Village Joint CEO commented: “The March quarter is traditionally a weak quarter for the mining industry. The
slow start up following the festive season, combined with the safety-related stoppages arising from the fatal accidents at our Tau
Lekoa and Buffels mines, contributed to slightly lower overall gold production.
Nonetheless, there were a number of positive achievements during the quarter, the most significant being the positive cash
contribution by Blyvoor during February and March. This performance highlights the importance of labour stability and the positive
impact the restructuring plan has had.
At Cons Murch, antimony and gold production increased by a pleasing 14% and 38% respectively. The Cons Murch disposal
process is well underway and we are confident that the disposal will unlock value for Village shareholders.
Village took a significant step towards diversifying our asset portfolio, through our investment in Conti. Village has consistently
indicated our desire to be a participant in the thermal coal sector and Conti, through its strong management team and attractive mix
of assets, ranging from producing mines to large scale exploration projects, provides an ideal opportunity to achieve this. The
investment is an important first step towards becoming a diversified resource investment company.
The decline in the gold price during April, combined with the impact of higher electricity costs due to winter tariffs will have a
negative impact on the profitability of the Village operations during the June quarter. Our focus will continue to be on elements that
are within our control, specifically focusing on normalised production volumes at all operations as well as cost reductions to help
mitigate the impact of the current lower gold price.”
Performance for the quarter ended 31 March 2013 (“Q3”)
Gold production totalled 1,394kg (44,806oz) in the March quarter, which was 9% lower than the 1,527kg (49,111oz) achieved in the
December quarter. Our antimony production of 1,433t in Q3 was 14% or 178t higher than in Q2. Revenue was negatively affected
by lower gold production, as well as the lower realised gold price of R467,358/kg compared to R476,803/kg in the December
quarter. Total cash costs continued to be well controlled, increasing by only 2% to R680m in Q3 compared to R667m in Q2. At
Blyvoor, we incurred R19m in retrenchment costs as part of implementing our restructuring plans at the mine. Overall, cash cost on
a per kilogram basis, increased by 13% to R484,151/kg from R428,505/kg in the previous quarter, largely due the lower production
volumes. Village incurred an operating loss from mining activities of R16m compared to the R18m profit achieved in the previous
quarter.
The cash balance at 31 March 2013 was a positive R261m, of which R210m is currently restricted. The restricted cash is related to
the commitments to the Department of Mineral Resources for rehabilitation guarantees of R105m, and to R105m Deutsche Bank
(“DB”) for the gold forward purchase agreement. The DB gold loan will be fully settled at the end of April 2013 which will release
R105m from restricted cash. Cash receipts included R12m received as an interim dividend from FIU. Significant cash payments
made during the quarter included a R42m repayment of the DB loan, capital investment of R37m, investment in Conti of R19m and
the share buyback of R43m.
Quarterly performance data
Q3 Q2 Q3 Q2
GOLD FY 2013 FY 2013 ANTIMONY FY 2013 FY 2013
Tau Cons Cons
Blyvoor Lekoa Buffels TOTAL TOTAL Murch Murch
Tons milled -
Surface 513 753 513 753 470 945
Tons milled -
underground 60 198 197 506 62 236 319 940 349 834 Tons milled 70 089 58 250
Recovered Recovered
grade - Au g/t 0.8 3.7 4 1.7 3.7 grade - Au g/t 2.1 1.1
Gold produced
underground - kg 268 649 222 1 139 1 295
Gold produced Recovered grade
surface - kg 168 - - 168 169 - Sb % 1.5 1.3
Gold produced Gold produced
- total oz 13 985 20 865 7 150 42 000 47 074 - oz 2 806 2 037
Antimony produced
Gold produced - tonnes 1 433 1 255
- total Kg 436 649 222 1 307 1 464
Realised antimony
Realised gold price - R/t 41 045 39 514
price - R/kg 468 280 466 898 466 898 467 358 476 803 Cash cost -
R/kg 523 010 363 976 758 723 484 151 428 505 - R/ton ¹ 1 139 1 270
Notional cost - Notional cost
R/kg 526 223 401 263 777 693 506 964 449 819 - R/ton ¹ 1 252 1 535
Variance analysis of revenue and cash costs in Rm at operations Q3 FY2013 vs Q2 FY2013
Tau Buffels Cons Blyvoor Total
Volume -96 -44 11 72 -57
Price -3 -3 -5 -5 -16
Working costs 12 -3 -6 -8 -5
Total impact on profits -87 -50 0 59 -78
Prospects
During April 2013 we saw a return to normalised production volumes following the challenges we endured through the previous
quarter. We expect total production volumes during the June quarter to be better than those achieved in Q3. Cash costs during the
June quarter are usually higher than those reported for the December and March quarters as a result of the increased electricity
tariffs charged during the winter months.
Financial review
The table below sets out the unaudited results of the operations for the quarter ended
31 March 2013
Unaudited Unaudited
VILLAGE MAIN REEF LIMITED Q3 Q2 Variance
SELECTED FINANCIAL INFORMATION FY2013 FY2013 Q3 2013 vs.
R'000 R'000 Q2 2013
%
Statement of Comprehensive Income
Continuing operations
Revenue 703 303 769 961 -9%
Total cash cost (679 506) (666 706) -2%
Total cash operating profit / (loss) 23 797 103 255 -77%
Production-related depreciation (38 911) (85 126) 54%
Rehabilitation expenses (1 278) (406) -215%
Operating profit / (loss) from mining activities (16 392) 17 723 -100%
Non-production related depreciation (4 534) (2 690) -69%
Other income 5 19 913 28 173 -29%
Share option costs - (7 924) 100%
Head office costs 2 (12 160) (9 165) -33%
General administrative and overhead expenditure 3 (18 274) (24 020) 24%
Profit / (loss) from operations before interest and taxation (31 447) 2 097 -100%
Fair value adjustments 4 5 510 18 218 -70%
Impairment of assets & loans & movement in environmental rehab liability (4 532) (5 195) 13%
Foreign exchange gains / (losses) (6 277) (18 455) 66%
Net finance income / (charges) 2 465 3 430 -28%
Profit / (loss) before taxation from continuing operations (34 280) 96 -100%
Loss from discontinuing operations - - 0%
Profit / (loss) before taxation (34 280) 96 -100%
Statement of Financial Position
Total assets 3 189 447 3 325 379 -4%
Cash and equivalents 261 516 352 573 -26%
Financial assets 1 881 20 701 -91%
Current liabilities (672 186) (641 024) -5%
Non-current liabilities (803 161) (894 527) 10%
Total equity (1 714 100) (1 789 828) -4%
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 cost relates to the costs incurred to run the Village head office. These costs include salaries to the amount of R6m,
legal fees relating to the unprotected strikes, travel expenses and other related matters such as consulting fees and administration
costs amounted to R6m.
3.General and admin costs reduced by R6m, largely due to the increased focus on cost saving initiatives.
4.Fair value adjustments relate to a gain on the Deutsche Bank Gold Forward liability of R11m and a mark to market loss in
relation to the remaining equity investment in First Uranium Corporation of R5m.
5.Other income includes the liquidation dividend from FIU (R12m). Other amounts included is scrap sales(R 5 million) as well as
government grant received (R2m).
Operational review
Tau Lekoa Gold Mine (“Tau”)
Total gold produced at Tau Lekoa was 649kg (20,865oz) in Q3, a decrease of 24% (6,495oz) compared to the 851kg (27,360oz)
produced during Q2.
The lower production was largely as a result of safety-related stoppages following a fatal accident and the impact of lower production
volumes on the overall mining mix, which resulted in a lower recovered grade. Production volumes and mining mix improved towards
the latter part of the quarter following specific interventions and the implementation of safety improvement plans. We expect these
efforts to positively affect production during the June quarter.
Lower gold production, together with a lower realised average gold price of R466,898/kg compared to R478,885/kg in the previous
quarter, resulted in gold revenues being 25% lower, at R303m compared to R402m in Q2. Cash costs for Tau Lekoa were well
controlled at R236m and were lower than the R248m in the December quarter. On a unit cost basis cash cost increased by 25% quarter
on quarter, rising from R291,811/kg in the December quarter, to R363,976/kg. The cash generated from operations was a positive
R67m for the March quarter, compared to R154m for the previous quarter.
Buffelsfontein Gold Mine (“Buffels”)
Total gold production from Buffels was 222kg (7,150oz) in Q3 which decreased by 31% compared to the 322kg (10,359oz) produced
during Q2.
The high grade 2-Shaft experienced a number of stoppages, resulting in almost no production contribution from this shaft during the
quarter. In addition, safety stoppages following a fatal accident at our high volume 6-Shaft, had a significant impact on both production
volumes and grade. The action plans arising from an independent safety system audit have been implemented and we continue to
strategise to de-risk the operation from ongoing safety stoppages.
Gold revenue decreased by 31% to R104m in Q3 compared to R151m in Q2, at a realised gold price of R466,898/kg.
Cash costs at Buffels increased quarter-on-quarter by 2% to R169m in Q3 from R166m in Q2. Cash costs on a per unit basis amounted
to R758,723/kg in Q3 from R502,182/kg in Q2. Buffels reported a cash operating loss of R65m for the quarter compared to R15m loss
in the previous quarter.
Continuing losses at Buffels has again placed the viability of the operations under the spotlight. Management is actively engaging with
the relevant regulatory authorities to determine if there is a more sustainable way to operate, or whether Buffels should be closed. Our
focus is on finding a solution to reduce or eliminate some of the fixed pumping related costs at Buffels that add some R30m for this
quarter to the cost base. Given the current lower gold price environment, a decision as to the future of Buffels will be communicated to
all interested parties as soon as the required consultations and interactions have taken place.
Blyvooruitzicht Gold Mine (“Blyvoor”)
Total gold production from Blyvoor, at 436kg (13, 985oz) in Q3, was materially higher than the 291kg (9,355oz) produced during Q2.
Production volumes from underground operations improved significantly following improved labour relations, combined with the
positive impact of more available working areas resulting from the re-establishment of affected panels post the seismic event in the
previous quarter. In line with the overall turnaround strategy a revised fall of ground management strategy and ore reserve management
techniques were also implemented during the quarter. Blyvoor successfully concluded a restructuring plan during the quarter resulting
in some 960 employees being retrenched. Though regrettable, the resulting cost benefit thereof should be evident in the June quarter
and will contribute to the ongoing sustainability of the mine. During the month of February and March, Blyvoor made a positive cash
contribution to the amount of R17m.
Gold revenue increased by 50% to R204m in Q3 compared to R136m in Q2.
Cash costs at Blyvoor increased quarter on quarter by 6% to R227m from R219m in Q2. Cash operating loss decreased by 71% to
R24m in Q3 from a cash operating loss of R83m in Q2. Cash costs per kilogram decreased by 30% to R523,010/kg compared to
R746,246/kg achieved during the December 2012 quarter.
Cons Murch Gold and Antimony Mine (“Cons Murch”)
Cons Murch produced 1,433t of antimony and 87kg (2,806oz) of gold for the March quarter, an increase of 14% (178t) in antimony and
38% (769oz) in gold compared to the December 2012 quarter.
Revenue increased by 13% to R93m in Q3 compared to R82m in Q2.
Total cash costs increased by 8% to R80m in Q3 from R74m in Q2. The cash cost per tonne decreased by 10% to R1,139/t compared to
R1,270/t in the March quarter as a result of the increase in production. Cons Murch generated R4m of cash operating profits for the
quarter which was similar to the R4m cash generated in the previous quarter.
Lesego Platinum Project
Due to the current platinum price environment, the Definitive Feasibility Study (“DFS”) is currently undergoing various optimisations
to maximise financial returns on the project.
Various licensing processes are underway, included applications to the Department of Water Affairs for an Integrated Water Use
Licence (IWUL), Department of Environmental Affairs for submission of the Environmental Impact Assessment, and Department of
Mineral Resources for the Mining Right Application.
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
Sponsor
Java Capital
CEO Tele-conference call
30 April 2013
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 – 23941#
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 of the conference call will also be made available on www.villagemainreef.co.za after the call.
25 April 2013
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