Wrap Text
Report for the Quarter Ended 30 June 2014
Village Main Reef Limited
(formerly Village Main Reef Gold Mining Company (1934) Limited)
Incorporated in the Republic of South Africa
Registration number 1934/005703/06
JSE code: VIL ISIN: ZAE000154761
14 August 2014
REPORT FOR THE QUARTER ENDED 30 JUNE 2014 (Q4, FY2014) – STRONG PERFORMANCE BY TAU LEKOA
Key features: quarter ended 30 June 2014
- Gold production at Tau Lekoa increased from 647kg or 20,801oz in the March 2013 quarter to
869kg or 27,938oz in the June 2014 quarter. Tau achieved its annual target with 3,437kg
(110,499oz) produced for the 2014 financial year. Year on year, Tau production increased by 6%.
- Realised gold price achieved during the quarter amounted to R435,314/kg compared to
R450,854/kg, a 3% decrease. The all-in cost at Tau Lekoa on a per unit basis decreased by 17%
from R424,893/kg ($1,219/oz) to R353,560/kg ($1,039/oz) mainly due to the higher production
volumes.
- Profit before taxation at Tau Lekoa increased from R19 million to R65 million for the June, 2014
quarter.
- Headline earnings per share from continuing operations increased from 1.67 cents per share in
the previous quarter to 8.74 cents per share in the current quarter.
- NAV per share increased from 116 cents in the previous quarter to 118 cents per share in the
current quarter.
- Rehabilitation and clean-up operations at Buffels proceeding to plan and budget.
- Cons Murch continues to struggle to return to previous operating levels, with antimony production
decreasing by 38% from 671 tonnes to 419 tonnes and gold production decreasing by 30% from
49kg to 34kg.
- Good progress is being made in meeting the conditions precedent with regard to the disposal of
Cons Murch.
Statement by the Chief Executive Officer
We continue to make good progress in dealing with the underlying issues at the various operations
which will favourably impact on the cash flow and valuation of the Company. Tau had a significantly
improved quarter albeit it much in line with plan. Cons Murch continued to struggle, but plans are in
place to improve its interim operational performance. This mine requires a sizable capital investment
which will complete the transition to a more mechanised operation allowing it optimal access to the
remaining resources. Good progress is being made with meeting the remaining conditions precedent
which should see the transaction being put to shareholder vote by the end of September, 2014.
Buffels continues to make good progress with the rehabilitation of its surface area. The processing of
surface tonnages is contributing positively to the carrying cost of Buffels being much lower than what
was planned. We have engaged the other operators in the region to evaluate and consolidate ideas
on dealing with the future pumping of underground water in the region.
Financial review
Cash operating profit from continuing mining operations was R113 million compared to the R49
million achieved in the previous quarter, a direct result of the increased production at our Tau Lekoa
operation. Total gold production, including surface sources totalled 1,009kg (32,439oz) in the June
quarter which was 42% higher than the 711kg (22,859oz) achieved in the previous quarter. Profit from
continuing operations before taxation increased from R16 million to R69 million.
Following the lack of information and progress on the planned recapitalisation of Continental Coal, a
decision was taken to impair the remaining R12 million of the initial R80 million investment. Included
in the head office costs is an amount of R0.9 million in legal fees associated with the industry wide
silicosis litigation and legal fees of R1 million incurred with the disposal of Cons Murch and other
initiatives currently underway.
Profit after taxation increased from a loss of R32 million for the March, 2014 quarter to a profit of R22
million for the current quarter.
Headline earnings per share from continuing operations increased from 1.67 cents per share in the
previous quarter to 8.74 cents per share in the current quarter. The NAV per share increased from
116 per share in the previous quarter to 118 cents per share in the current quarter.
The Company plans to cancel 70 million shares (7% of issued shares) currently held as treasury
stock. This will require approval from shareholders and the resolution is to be put forward at the
November, 2014 AGM. The proposed buyback would improve the NAV per share to 1.27 cents per
share in the current quarter.
Village had a positive cash balance amounting to R153 million as at 30 June 2014. R81 million of this
is restricted in the form of cash backed guarantees for rehabilitation purposes. During the quarter
Village as a Group generated some R57 million of cash from all operations.
The table below sets out the unaudited results of the operations for the quarter ended 30 June 2014.
VILLAGE MAIN REEF LIMITED Unaudited Unaudited Variance
SELECTED FINANCIAL INFORMATION 30 June 2014 31 March 2014 Jun 2014 vs. Mar 2014
R'000 R'000 %
Statement of Comprehensive Income
Continuing operations
Revenue 378 288 291 702 30%
Total cash cost (1) (264 806) (242 225) -9%
Total cash operating profit/(loss) 113 482 49 477 100%
Production-related depreciation (24 485) (16 084) -52%
Operating profit/(loss) from mining activities 88 997 33 393 100%
Non-production related depreciation (1 309) (1 282) -2%
Other income 6 382 619 100%
Share option costs 7 371 - 100%
Head office costs (2) (10 166) (10 747) 5%
General administrative and overhead expenditure(3) (9 807) (7 208) -36%
Profit/(loss) from operations before interest and taxation 81 468 14 775 100%
Fair value adjustments 746 720 4%
Impairment of assets & loans & movement in environmental rehab liability (4) (12 868) (344) -100%
Foreign exchange gains/(losses) - - 0%
Net finance income/(charges) (312) 546 -100%
Profit/(loss) before taxation from continuing operations 69 034 15 697 100%
Profit/(Loss) from discontinuing operations 5 (45 301) (47 384) 4%
Profit/(loss) before taxation 23 733 (31 687) 100%
Taxation (2 063) - -100%
Profit/(loss) after taxation 21 670 (31 687) 100%
Basic earnings/(loss) per share from continuing operations (cents) 7.48 1.73 100%
Basic earnings/(loss) per share from discontinued operations (cents) (5.10) (5.11) 0%
Headline earnings/(loss) per share from continuing operations (cents) 8.74 1.67 100%
Headline earnings/(loss) cents per share from discontinued operations (cents) (5.53) (6.36) 13%
Net Asset Value Per share (cents) 118.05 115.77 2%
Statement of Financial Position
Total assets 2 041 895 2 104 880 -3%
Non-Current Assets held for Sale 334 576 292 425 14%
Cash and equivalents 153 428 140 761 9%
Financial assets 2 706 2 135 27%
Current liabilities- (6) (483 640) (566 738) 15%
Current liabilities (excluding Rehabilitation Provision) (271 114) (239 203) -13%
Non-current liabilities (157 619) (170 509) 8%
Non-Current Liabilities held for Sale (172 068) (162 799) -6%
Total equity (1 228 568) (1 204 834) 2%
Comments
(1) - Total cash costs are costs directly related to the physical activities of producing gold and antimony
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. Costs included are Head
office salaries, legal fees, audit fees and corporate consultant fees. The increase in the Head office
costs is as a result of the legal and consulting expenses incurred as a result of the potential sale of
Cons Murch.
(3) - General and admin costs relate to administrative costs such as legal fees, training of employees and
insurance premiums.
(4) - An amount of R0.9 million relating to environmental rehabilitation accretion is included in this amount.
An amount of R12 million was recognised as impairment in the quarter, relating to the investment in
Continental Coal Ltd. The investment In Continental Coal has been fully impaired.
(5) - Both Cons Murch and Buffelsfontein are shown as discontinued operations for the quarters
presented.
(6) - The balance includes an amount of R212 million which relates to the Buffelsfontein rehabilitation
provision, as the operation is on care and maintenance. An amount of R131 million is held in the Buffels
rehabilitation trust fund. The Buffelsfontein rehabilitation liability decreased by an amount of R115
million in the current quarter as a result of an offset against the reimbursive asset, due to the
abandonment of the relevant surface rights by VMR and the adoption of the relevant surface rights by
AngloGold Ashanti in the current quarter.
Operational review for the quarter ended 30 June 2014
GOLD Q4 FY 2014 Q3 FY 2014 ANTIMONY Q4 FY 2014 Q3 FY 2014
Tau Lekoa Buffels Surface Tau Lekoa Buffels Surface Cons Murch Cons Murch
Tons milled 237 253 135 795 161 850 20 629 Tons milled 38 132 46 761
Recovered grade - Au g/t 3.7 0.8 4.0 0.7 Recovered grade - Au g/t 1.95 1.73
Gold produced underground - kg 869 - 647 - Gold produced underground - kg 34 49
Gold produced surface - kg - 106 - 15 Recovered grade - Sb % 1.14 1.16
Gold produced - total oz 27 938 3 408 20 801 482 Gold produced - oz 1 095 1 575
Gold produced - total Kg 869 106 647 15 Antimony produced - tonnes 419 671
Realised gold price - R/kg 435 314 434 715 450 854 457 478 Realised antimony price - R/t 36 392 39 219
Cash cost/kg 336 360 310 253 397 400 565 652 Cash cost - R/ton (1) 2 272 1 355
All-in cost/kg(2) 353 560 310 253 424 893 565 652 Notional cash cost - R/ton (1) 2 625 1 574
Cash cost $/oz 989 912 1 140 1 642 Cash cost - $/ton (1) 215 125
All-in cost $/oz(2) 1 039 912 1 219 1 642 Notional cash cost - $/ton (1) 248 145
Tau Lekoa Gold Mine
Total gold produced was 34% (7,137 oz) higher at 869kg (27,938oz), compared to the 647kg
(20,801oz) produced during the March quarter. The increased production was primarily as a result of
the increase in production shifts and an improvement in our safety performance for the June quarter,
with less safety related stoppages during the quarter.
The higher gold production resulted in 29% higher gold revenue amounting to R378 million compared
to R292 million reported in the previous quarter. The increase in production volumes was offset by the
decrease in the average gold price received, down by 3% from R450,854/kg to R435,314/kg. The
cash generated from operations was higher at R86 million compared to the R35 million for the
previous quarter.
All-in costs for Tau Lekoa amounted to R307 million and were 12% higher than the R275 million in the
March quarter. This is as a direct result of the higher production volumes as well as the increase in
electricity tariffs during winter months. On a per unit cost basis, all-in cost decreased quarter-on-
quarter, R424,893/kg ($1,219/oz) in the March quarter compared to R353,560/kg ($1,039/oz) in the
June quarter.
Cons Murch Antimony and Gold Mine
Cons Murch Mine suffered further major production setbacks in the June quarter, mainly attributed to
lower volumes and inconsistent mill-feed, which were a function of both breakdowns and safety
related stoppages. Low equipment availability and ageing infrastructure added to the lower production
volumes in the June quarter. The total planned production volumes lost, as a result of breakdowns
and safety related stoppages, amounted to 11,000 tonnes which equates to lost production of 11kg of
gold and 129 tonnes of antimony.
Cons Murch produced 419 tonnes of antimony and 34kg (1,095oz) of gold for the June quarter, a
decrease of 38% (252 tonnes) in antimony and a 31% (480oz) decrease in gold compared to the
March 2014 quarter.
Revenue decreased by 30% to R31 million in the June quarter compared to R44 million in the March
quarter. All-in cash costs increased to R84 million for the quarter with notional cash cost per tonne
increasing by 66% to R2,625/tonne compared to R1,574/tonne in the March quarter as a result of
lower production volumes. Cons Murch incurred cash operating losses amounting to R54 million, after
stock adjustments of R16.1 million, compared to an R19 million cash loss in the previous quarter.
A number of activities are underway to deal with the inconsistent mill performance which will improve
plant recoveries; the arrival of new mechanised equipment and a focus on increasing underground
development meters will in turn see increased tonnages from underground. These activities will assist
in Cons Murch returning to normalised levels of production and profitability in the next six months.
Good progress is being made with meeting the remaining conditions precedent to the Sale of Shares
Agreement with Stibium Mining, which should see the sale of Cons Murch being put to shareholder
vote by the end of September, 2014.
Buffelsfontein Gold Mine
In the June quarter Buffels realised a cash operating profit amounting to R9 million compared to a
cash operating loss of R14 million in the previous quarter. This was after the reversal of certain
provisions for underground water pumping costs, which Buffels should not have incurred. as well as
the settlement agreement reached between Harmony and Buffels, whereby Buffels received
R 24 million in July 2014.
Buffels continues to treat surface material which contributes to offsetting the carrying cost of the
operation whilst rehabilitation activities are underway. A total of 106 kg’s of gold were produced in the
current quarter from surface operations, at an all in cost of R424,893 per kg.
Following an independent review of the cost of activities required in the rehabilitation of Buffels,
indications are that the Company is adequately funded to complete the process.
Contacts
Village CEO: Ferdi Dippenaar; ferdi@villagemainreef.co.za
Village CFO: Clinton Halsey; chalsey@villagemainreef.co.za
Village media and investor relations: Russell and Associates
Sponsor
Bravura Capital (Pty) Ltd
CEO tele-conference call
14 August 2014
15h00 [GMT+2]
Live Call Access Numbers For Participants
Country Access Number
Other Countries +27 11 535 3600
Other Countries +27 10 201 6800
South Africa (Toll-Free) 0 800 200 648
South Africa - Cape Town 021 819 0900
South Africa - Durban 031 812 7600
South Africa - Johannesburg 011 535 3600
South Africa - Johannesburg Alternate 010 201 6800
UK (Toll-Free) 0808 162 4061
USA and Canada (Toll Free) 1 855 481 5362
Please note that a recording on the conference call will also be made available on www.villagemainreef.co.za
after the call.
Date: 14/08/2014 10:00:00 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.
Sharenet Sites 
