Wrap Text
Good Operational Performance at Tau Continues as Village Strategic Review Process gets Underway
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
GOOD OPERATIONAL PERFORMANCE AT TAU CONTINUES
AS VILLAGE STRATEGIC REVIEW PROCESS GETS UNDERWAY
12 November 2014
Key features: quarter ended 30 September 2014
- Gold production was ahead of plan with 894 kgs produced in the September quarter compared to
906 kgs in the June quarter despite losing 4 production days due to the Orkney earthquake on 5
August 2014. Gold sold at Tau Lekoa decreased by 83 kgs or 10% from 869kg or 27,938oz in the
June 2014 quarter to 786kg or 25,270oz in the September 2014 quarter, mainly due to gold lock
up in the metallurgical plant at quarter end.
- Realised gold price achieved during the quarter amounted to R443,599/kg compared to R435,
314/kg in the previous quarter, a 2% increase.
- After the inclusion of the annual labour increases and higher winter tariffs, Tau's cash cost was
R12 million lower at R280 million compared to R292 million in the previous quarter. On a unit cost
basis, cash cost increased by 7% from R336,360/kg ($980/oz) to R358,775/kg ($991/oz) mainly
due to the lower gold sales.
- Even after the inclusion of increased capital expenditure at Tau, all in sustainable costs (AISC)
were lower by 2% at R300 million compared to R307 million in the previous quarter. The AISC at
Tau Lekoa on a per unit basis however increased by 9% from R353,560/kg ($1,039/oz) to R384,273/kg
($1,062/oz) mainly due to lower gold sales.
- Positive progress was made with Tau's exploration drilling programme.
- Tau's life of mine extended to between 7 and 8 years based on latest Competent Persons Report
(CPR).
- Headline earnings per share from continuing operations decreased from 174.84 cents per share
in the previous quarter to 99.71 cents per share in the current quarter. (Restated for the 20 for 1
consolidation of VMR shares effective 3 November, 2014).
- Following a number of unsolicited offers, Village announced details of a Strategic Review
Process. Feedback on process planned for end November 2014.
- Shareholders voted in favour of Cons Murch disposal as well as share consolidation.
Statement by the Chief Executive Officer
Financial review
Cash operating profit from continuing mining operations at Tau Lekoa was lower at R84 million
compared to the R113 million achieved in the previous quarter mainly due to the lower gold sales.
Total gold production, including surface sources totalled 991kg (31,852oz) in the September quarter
which was 5% lower than the 1,046kg (33,631oz) achieved in the previous quarter. Profit before
taxation from continuing operations decreased from R69 million to R45 million.
Profit after taxation decreased from R22 million for the June, 2014 quarter to a loss of R12 million for
the current quarter mainly as a result of a loss of R51 million incurred at the Cons Murch operations.
Due to a significant decrease in the treatment of surface sources, Buffels reported a loss or carrying
cost of R6 million for the quarter. It is planned to increase the treatment of surface sources to previous
levels in the December quarter.
Post quarter end the company completed the consolidation of its authorised and issued share capital
on a basis of 1-for-20 shares. Every 20 shares held was consolidated into 1 share. In addition, the
company's authorised and issued share capital was converted from par value shares to no par value
shares. Before the consolidation, the company's issued share capital was 1,040,697,474 ordinary
shares. After the share consolidation the company's total issued share capital was 52,034,874
ordinary shares.
Headline earnings per share from continuing operations decreased from 174.84 cents per share in the
previous quarter to 99.71 cents per share in the current quarter. The NAV per share decreased
marginally from 2,399.76 cents per share 2,376.15 cents per share in the current quarter.
Village had a positive cash balance amounting to R94 million as at 30 September 2014. R81 million of
this amount is restricted in the form of cash backed guarantees for rehabilitation purposes.
The table below sets out the unaudited results of the operations for the quarter ended 30 September
2014.
Unaudited Unaudited Variance
VILLAGE MAIN REEF LIMITED 30 September 2014 30 June 2014 Sep 2014 vs. Jun 2014
SELECTED FINANCIAL INFORMATION R'000 R'000 %
Statement of Comprehensive Income
Continuing operations
Revenue 348 669 378 288 -8%
Total cash cost(1) (265 089) (264 806) 0%
Total cash operating profit / (loss) 83 580 113 482 -26%
Production-related depreciation (19 776) (24 485) 19%
Operating profit / (loss) from mining activities 63 804 88 997 -28%
Non-production related depreciation (1 057) (1 309) 19%
Other income 1 276 6 382 -80%
Share option costs - 7 371 100%
Head office costs(2) (9 274) (10 166) 9%
General administrative and overhead expenditure(3) (10 530) (9 807) -7%
Profit / (loss) from operations before interest and taxation 44 219 81 468 -46%
Fair value adjustments - 746 -100%
Impairment of assets & loans & movement in environmental rehab liability(4) (896) (12 868) 93%
Net finance income / (charges) 1 607 (312) 100%
Profit / (loss) before taxation from continuing operations 44 929 69 034 -35%
Profit/(Loss) from discontinuing operations(5) (57 382) (45 301) -27%
Profit / (loss) before taxation (12 453) 23 733 -100%
Taxation - (2 063) 100%
Profit / (loss) after taxation (12 453) 21 670 -100%
Pre share consolidation*
Basic earnings/(loss) per share from continuing operations (cents) 5.00 7.48 -33%
Basic earnings/(loss) per share from discontinued operations (cents) (6.35) (5.10) -25%
Headline earnings/(loss) per share from continuing operations (cents) 4.99 8.74 -43%
Headline earnings/(loss) cents per share from discontinued operations (cents) (7.43) (5.53) -34%
Net Asset Value Per share (cents) 118.81 119.99 -1%
Post share consolidation**
Basic earnings/(loss) per share from continuing operations (cents) 100.03 149.62 -33%
Basic earnings/(loss) per share from discontinued operations (cents) (127.01) (102.01) -25%
Headline earnings/(loss) per share from continuing operations (cents) 99.71 174.84 -43%
Headline earnings/(loss) cents per share from discontinued operations (cents) (148.65) (110.54) -34%
Net Asset Value Per share (cents) 2 376.15 2 399.76 -1%
Statement of Financial Position
Total assets 1 980 287 2 028 346 -2%
Non- Current Assets held for Sale 341 261 331 861 3%
Cash and equivalents 94 318 153 428 -39%
Financial assets 2 740 2 705 1%
Current liabilities-(6) (436 950) (483 062) 10%
Current liabilities ( excluding Rehabilitation Provision) (224 425) (270 536) 17%
Non-current liabilities (190 605) (186 915) -2%
Non- Current Liabilities held for Sale (116 307) (109 655) -6%
Total equity (1 236 425) (1 248 714) -1%
Comments
* Based on number of shares in issue as at 30 September 2014
**Based on number of shares in issue post share consolidation effective 3 November 2014
(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.
(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 accretion is included in this amount.
(5) - Both Cons Murch Mine and Buffelsfontein are shown as discontinued operations for the quarter.
(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 R135 million is held in the Buffels
rehabilitation trust fund.
Operational review for the quarter ended 30 September 2014
GOLD Q1 FY 2015 Q4 FY 2014 ANTIMONY Q1 FY 2015 Q4 FY 2014
Tau Lekoa Tau Lekoa Cons Murch Cons Murch
Tonnes milled 239 493 237 253 Tonnes milled 43 115 38 132
Recovered grade - Au g/t 3.7 3.8 Recovered grade - Au g/t 2.14 1.95
Gold produced underground - kg 894 906 Gold produced underground - kg 38 34
Gold produced surface - kg - - Recovered grade - Sb % 0.76 1.14
Gold produced - total oz 28 742 29 128 Gold produced - oz 1 224 1 095
Gold produced - total kg 894 906 Antimony produced - tonnes 270 419
Gold sold- total oz 25 270 27 938 Gold sold-oz 1 224 1 095
Gold sold- total kg 786 869 Antimony sold-tonnes 270 419
Realised gold price - R/kg 443 599 435 314 Realised antimony price - R/t 35 668 36 392
Cash cost/kg 358 775 336 360 Cash cost - R/ton (1) 1 689 2 272
All-in cost/kg(2) 384 273 353 560 Notional cash cost - R/ton (1) 1 879 2 625
Cash cost $/oz 991 989 Cash cost - $/ton (¹) 150 215
All-in cost $/oz(2) 1 062 1 039 Notional cash cost - $/ton (1) 167 248
(1) - Excludes gold revenue credits
(2) - World Gold Council proposes disclosure of "All-in sustaining" cost and "All-in" cost. Village will only report
the "All-in sustaining" costs, as all costs relate to well established operations.
Tau Lekoa Gold Mine
Total gold produced was 1% (386oz) lower at 894kg (28,742oz), compared to the 906kg (29,128oz)
produced during the June quarter. Despite a continued improvement in safety performance, with only
one safety related stoppage in the quarter, the Tau operations were adversely impacted by the
Orkney earthquake on 5 August, 2014 which led to a loss of 4 days or 45 kgs of production. We are
pleased to report that none of our employees were injured in the event and no significant damage was
reported to the underground and surface infrastructure. Tau plans to produce between 105 000 oz
and 115 000 oz for the current financial year.
The lower gold sales resulted in 8% lower gold revenue amounting to R349 million compared to
R378 million reported in the previous quarter. Average gold price realised amounted to R443,599/kg,
up 2% from R435,314/kg.
Despite increased electricity tariffs during the winter months as well as annual labour increases, cash
costs for Tau Lekoa decreased to R280 million compared to R292 million in the previous quarter. On
a per unit basis the cash costs increased to R358,775/kg ($991/oz) from R336,360/kg ($989/oz) due
to lower gold sales.
All-in sustaining costs for Tau Lekoa amounted to R300 million and was 2% lower than the R307
million in the June quarter. On a per unit cost basis, AISC cost increased quarter-on-quarter,
R384,273/kg ($1,062/oz) in the September quarter compared to R353,560/kg ($1,039/oz) in the June
quarter. These AISC included costs associated with the Tau exploration drilling programme and the
introduction of Self Contained Self Rescuers (SCSR) throughout the mine in line with our safety
strategy.
The mine commissioned a Competent Persons Report (CPR) which was completed by Minxcon. The
outcome of the report was positive indicating that Tau's life of mine (LOM) extends to end of 2021, a
life of between 7 and 8 years.
The Tau exploration project has progressed well thus far and has provided the mine with good
geological information of the two targeted areas. This has resulted in an extension to the scope of the
project which will include the drilling of an additional two holes. Two holes have been completed
towards the north and one is in progress. Hole UGBH 01 progressed 459m and as expected
intersected foot wall/hanging wall conditions. Hole UGBH 03 progressed for 346m and intersected
foot wall/hanging wall conditions 100m away from UGBH 01.
The coincidence of the two boreholes intersecting foot wall/hanging wall conditions at the same
elevation 100m apart suggested that we have drilled into a slope facies. The current hole is
progressing well as we expect that it will intersect a few more developed conglomerate bands. To
date we have gone through conglomerate units of the Livingston Formation, Denny's reef
conglomerate and we expect a well-developed VCR reef to be intersected. The current hole is at a
depth of 329m and we expect reef at 390m.
At the second drill site in the south, a hole was drilled up to 386m and intersected reef at 301m, the
reef is corrected to be 80cm thick. Although the reef is a poorly developed conglomerate unit of the
upper plateau facies it does contain gold mineralisation. We are currently completing the QA/QC
process for the holes as well as assays.
Cons Murch Antimony and Gold Mine
As a result of the previously reported capital constraints and a fatal accident, Cons Murch lost
available production shifts, specifically from the high grade antimony Athens shaft, which had a
negative impact on production volumes. The recapitalisation programme commenced with the
delivery of critical items expected in the second quarter, which will see a focus on increasing
development rates which in turn will increase the number of stopes available for mining, which should
lead to an improvement in production rates.
Cons Murch produced 270 tonnes of antimony and 38kg (1,224 oz) of gold for the September quarter,
a decrease of 36% (149 tonnes) in antimony and an increase of 12% (129 oz) in gold compared to the
June 2014 quarter.
Revenue increased by 6% to R33 million in the September quarter compared to R31 million in the
June quarter. Notional cash costs amounted to R81 million for the quarter with notional cash cost per
tonne decreasing by 28% to R1,879/tonne compared to R2,625/tonne in the June quarter as a result
of increased tonnages milled, which was offset by significantly lower underground antimony grades
mined and plant recovery rates. Cons Murch incurred cash operating losses amounting to R55 million
compared to a R45 million cash loss in the previous quarter.
On 12 September 2014, shareholders voted in favour of the disposal of Cons Murch. Progress is
being made to finalise the last conditions precedent to the transaction, with the first phase of the
transaction expected to close in the latter portion of November 2014,
Buffelsfontein Gold Mine
In the September quarter Buffels realised a cash operating loss amounting to R6 million compared to
a cash operating profit of R9 million in the previous quarter. Included in the previous quarter results
was a R24 million payment received as refund for pumping charges paid on behalf of third parties.
Buffels continues to treat surface material which contributes to offsetting the carrying cost of the
operation whilst rehabilitation activities are underway. A total of 59 kgs of gold were produced in the
current quarter. Plans are underway to increase the surface throughput to produce between 70 and
80 kgs per quarter.
Rehabilitation continues with good progress being made with the demolition of the low grade plant, 4
and 6 shafts and the old main office buildings. Rehabilitation costs of approximately R12 million were
incurred in the past quarter and will be recovered from the rehabilitation trust fund. An amended
Environmental Management Plan was submitted to the Department of Mineral Resources: approval
thereof should reconfirm that Buffels is adequately funded to rehabilitate the mining affected area.
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
12 November 2014
15h00 [GMT+2]
Live Call Access Numbers for Participants
Country Access Number
Other Countries – International +27 11 535 3600
Other Countries – International +27 10 201 6800
South Africa - Cape Town 021 819 0900
South Africa – Durban 031 812 7600
South Africa - Johannesburg Neotel 011 535 3600
South Africa - Johannesburg Telkom 010 201 6800
South Africa - Toll-Free 0 800 200 648
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.
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