Wrap Text
Quarter ended 31 December 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
("Village" or "the Company" or "the Group")
TAU DELIVERS STEADY PERFORMANCE AS VILLAGE CONTINUES TO RESTRUCTURE ASSET PORTFOLIO
19 February 2015
Key features: quarter ended 31 December 2014
- Gold production at Tau amounted to 891 kgs (28,646 oz) in the December quarter compared to 894 kgs
(28,742oz) in the September quarter. Gold sold at Tau Lekoa increased by 179 kgs or 23% from 786kg (25,270oz)
in the September 2014 quarter to 965kg (31,025oz) in the December 2014 quarter, mainly due to the previously
reported gold lock up in the metallurgical plant being released.
- Cash operating profit increased by 15% quarter on quarter, up from R83.6million to R96.5 million
- Profit before taxation, from continuing operations increased by 15% quarter on quarter, up from R44.9 million to
R51.5 million.
- Realised gold price achieved during the quarter decreased by 3% from R443,599/kg in the previous quarter to
R429,518/kg.
- Headline earnings per share from continuing operations increased from 99.71 cents per share in the previous
quarter to 113.62 cents per share in the current quarter.
- Going forward, Village will provide operational and financial results on a half-yearly basis with market updates if
necessary.
- Tau's cash cost was higher at R332 million compared to R282 million in the previous quarter mainly due to
increased production volumes. On a unit cost basis, cash cost decreased by 4% from R358,775/kg ($991/oz) to
R344,749/kg ($924/oz) mainly due to higher gold sales.
- All in sustainable costs (AISC) were higher by 17% at R352 million compared to R302 million in the previous
quarter mainly due to increased production volumes. The AISC at Tau Lekoa on a per unit basis however
decreased by 5% from R384, 273/kg ($1,062/oz) to R364,466/kg ($977/oz) mainly due to higher gold sales.
- Following the failure of Stibium to raise the funding to acquire Cons Murch, and the subsequent cessation of
funding of Cons Murch by Village, Cons Murch was placed in business rescue on 12 December 2014 and has
been deconsolidated from Village.
- Board restructured during quarter in line with the re-organisation of Village
- Firm intention received from Heaven-Sent Capital Group Co. Ltd ("Heaven-Sent") to acquire all the issued share
capital of Village at an all-cash offer of ZAR 12.25 per share. A shareholder meeting has provisionally been
scheduled for on or about the 2nd of April 2015.
Financial review
The table below sets out the unaudited results of the operations for the quarter and six months ended 31 December
2014.
VILLAGE MAIN REEF LIMITED
SELECTED FINANCIAL INFORMATION
**Unaudited *Unaudited
6 months 6 months Variance Variance
ended ended Dec **Unaudited *Unaudited Dec
31 31 2014 vs. 31 30 2014 vs.
December December Dec December September Sep
2014 2013 2013 2014 2014 2014
R'000 R'000 % R'000 R'000 %
Statement of Comprehensive Income
Continuing operations
Revenue 763 154 810 088 -6% 414 485 348 669 19%
Total cash cost (583 053) (535 309) -9% (317 964) (265 089) -20%
Total cash operating profit 180 101 274 779 -34% 96 521 83 580 15%
Production-related depreciation (38 974) (37 554) -4% (19 198) (19 776) 3%
Operating profit from mining activities 141 127 237 225 -41% 77 323 63 804 21%
Non-production related depreciation (2 508) (2 657) 6% (1 451) (1 057) -37%
Other income 2 369 4 625 -49% 1 093 1 276 -14%
Share option costs (2 662) (3 194) 17% (2 662) - -100%
Head office costs *** (19 259) (31 030) 38% (9 985) (9 274) -8%
General administrative and overhead expenditure**** (21 626) (21 282) -2% (11 096) (10 530) -5%
Profit from operations before interest and taxation 97 441 183 687 -47% 53 222 44 219 20%
Fair value adjustments - (354) 100% - - 0%
Impairment of assets & loans & movement in environmental rehab
liability (1 821) (23 842) 92% (925) (896) -100%
Net finance income 797 1 145 -30% (810) 1 607 -100%
Profit before taxation from continuing operations 96 417 160 636 -40% 51 487 44 930 15%
Loss before tax from discontinuing operations (305 093) (32 057) -100% (247 711) (57 382) -100%
(Loss)/Profit before taxation (208 676) 128 579 -100% (196 224) (12 452) -100%
Taxation (39) (597) 93% (39) - -100%
(Loss)/Profit after taxation (208 715) 127 982 -100% (196 263) (12 452) -100%
Basic earnings per share from continuing operations (cents) 214.74 346.79 -38% 114.71 100.03 15%
Basic (loss) per share from discontinued operations (cents) (675.36) 4.17 -100% (548.35) (127.01) -100%
Headline earnings per share from continuing operations (cents) 213.33 396.22 -46% 113.62 99.71 14%
Headline (loss) cents per share from discontinued operations
(cents) (253.05) (545.51) 54% (104.40) (148.65) -30%
Net Asset Value Per share (cents) 2,004.86 2,376.33 -16% 2,004.86 2,376.15 -16%
**6 months *6 months
ended 31 Dec ended 31 Dec
Statement of Financial Position 2014 2013 Variance Q2 2015 Q1 2015 Variance
Total assets 1,652,825 2,173,864 -24% 1,652,825 1,980,287 -17%
Non- Current Assets held for Sale 5,992 347,149 -98% 5,992 341,261 -98%
Cash and equivalents 94,185 148,487 -37% 94,185 94,318 0%
Financial assets 36,092 14,643 146% 36,092 2,740 100%
Current liabilities(incl bank overdraft) (422,286) (606,240) 30% (422,286) (436,950) 3%
Current liabilities( excluding Rehabilitation Provision) (259,520) (278,706) 7% (259,520) (224,425) -16%
Non-current liabilities (187,314) (172,837) -8% (187,314) (190,605) 2%
Non- Current Liabilities held for Sale - (158,269) 100% - (116,307) 100%
Total equity (1,043,225) (1,236,519) -16% (1,043,225) (1,236,425) -16%
* The results have been restated to reclassify Cons Murch Mine as a discontinued operation.
** The results for the quarter and six months ended 31 December 2014 includes the Cons Murch operation up to the 12th of December 2014. On the 12th of December
Cons Murch was placed into Business Rescue and subsequently the operation was deconsolidated from the Village Group.
*** Included in Head office costs is an amount of R2 million in legal fees for the quarter ended 31 December 2014, which relates to the ongoig Silicosis claims and the Cons Murch
disposal transaction.
**** Included in these costs are Insurance premiums, on site training costs and audit fees.
Operational review for the quarter ended 31 December 2014
GOLD Q2 FY 2015 Q1 FY 2015 6 months FY 2015 6 months FY 2014
Tau Lekoa Tau Lekoa Tau Lekoa Tau Lekoa
Tonnes milled 197,755 239,493 437,248 481,471
Recovered grade - Au g/t 4.5 3.7 4.1 3.7
Gold produced underground - kg 891 894 1,785 1,805
Gold produced surface - kg - - - 116
Gold produced - total oz 28,646 28,742 57,388 61,761
Gold produced - total kg 891 894 1,785 1,921
Gold sold- total oz 31,025 25,270 56,295 61,761
Gold sold- total kg 965 786 1,751 1,921
Realised gold price - R/kg 429,518 443,599 435,839 421,701
Cash cost/kg 344,749 358,775 350,577 300,079
All-in cost/kg 364,466 384,273 372,889 320,342
Cash cost $/oz 924 991 939 890
All-in cost $/oz 977 1,062 999 950
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 from underground was 3kg (96oz) lower at 891kgs (28,646oz), compared to the 894kgs
(28,742oz) produced during the September quarter and produced 1,785kgs for the six months ended 31 December
2014, down 1% from the 1,805kg in the corresponding six months ended 31 December 2013. Total gold sold in the
6 months ended 31 December 2013 included a total of 116kg gold from plant clean-up. Gold sold at Tau Lekoa
increased by 179kgs or 23% from 786kg (25,270oz) in the September 2014 quarter to 965kg (31,025oz) in the
December 2014 quarter, mainly due to the previously reported gold lock up in the metallurgical plant being released
which consequently impacted on the recovery grade which increased to 4.5 g/t from the 3.7g/t reported previously.
The higher volume gold sales resulted in 19% higher gold revenue amounting to R414 million compared to R349
million reported in the previous quarter.
Average gold price realised amounted to R429,518/kg, down 3% from R443,599/kg. Gold revenue generated by Tau
in the six months ended 31 December 2014 amounted to R763 million at an average gold price of R435,839/kg
compared to R810 million at an average gold price of R421,701/kg in the corresponding 6 month period.
Cash costs for Tau Lekoa increased to R332 million compared to R282 million in the previous quarter mainly due to
higher gold production. On a per unit basis the cash costs decreased to R344,749/kg ($924/oz) from R358,775/kg
($991/oz) due to higher gold sales. For the six month period ended 31 December 2014 cash cost increased by 6%
from R576 million for the 31 December 2013 period to R 613 million for the six months ended 31 December 2014
mainly as a result of lower volumes and CPI increases.
All-in sustaining costs for Tau Lekoa amounted to R352 million for the quarter ended 31 December 2014 and was
17% higher than the R302 million in the September quarter mainly due to increased production volumes. On a per unit
cost basis, AISC cost decreased quarter-on-quarter, R364,466/kg ($977/oz) in the December quarter compared to
R384,273/kg ($1,062/oz) in the September quarter. For the six months ended 31 December 2014, the AISC increased
by 6% from R615 million to R653 million. On a per unit basis AISC increased from R320,342/kg to R372,889/kg
mainly due to lower production volumes. When measured on an AISC basis, over the past 6 months Tau Lekoa
operated at a healthy 17% profit margin.
Buffelsfontein Gold Mine
In the December quarter Buffels realised a cash operating loss amounting to R3 million compared to a cash operating
loss of R6 million in the previous quarter. Buffels continues to treat surface material which contributes to offsetting the
carrying cost of the operation whilst rehabilitation activities are underway. In line with our plan to increase throughput
of surface sources, a total of 76kgs of gold were produced in the current quarter compared to 59kgs in the previous
quarter. An amount of R8 million was also recovered from the sale of scrap items as part of the rehabilitation activities
underway. After continually informing all stakeholders of the deterioration in security in the operating environment at
Buffels, mainly due to the increase in activities of illegal miners, and the potential impact thereof on the safety of our
employees, pumping at 2 shaft was stopped post quarter end, in early January, 2015.
Based on the amended Environmental Management Plan which was submitted to the Department of Mineral
Resources in 2013, a reversal amounting to R27 million has been accounted for, decreasing the previously
recognised rehabilitation liability from R212 million to the currently approved amount of R185 million. The liability has
been further reduced as a result of ongoing rehabilitation activities amounting to R22 million.
With a significant amount of rehabilitation already completed and with current rehabilitation activities underway,
indications are that a significantly revised lower amount will be submitted as part of the annual EMP submission.
Buffels has an amount of R147 million in its rehabilitation trust fund and based on contractual agreements entered
into, it has sufficient funds to complete the rehabilitation activities underway.
Cons Murch Antimony and Gold Mine
Village has over the past year been involved in negotiations to sell the shares in Cons Murch to Stibium Mining (Pty)
Ltd, an Australian company.
The negotiated transaction to sell the shares in Cons Murch failed on 10 December 2014 when Stibium, the
purchaser, was unable to obtain the necessary funding to implement the acquisition of the shares of the company. As
it became clear that the aforementioned transaction would not be consummated, and due to the lack of cash
resources available to Village to continue funding the significant operational losses at Cons Murch, the Board of
Village resolved that it was unable to continue funding Cons Murch, therefore resulting in Cons Murch becoming
financially distressed.
Given the above factors the board of directors of Cons Murch met on Friday, 12 December 2014, and concluded that
although Cons Murch was financially distressed, there appeared to be a reasonable prospect of rescuing Cons Murch
due to the amount of interest shown by potential buyers in the operation. Consequently Cons Murch voluntarily
commenced with business rescue proceedings as provided for by Section 129 of the Companies Act on 12 December
2014.
On 5 February, 2015, the business rescue practitioner of Cons Murch applied to Court in terms of section 141(2)(a)(i)
of the Companies Act, 2008 (Act 71 of 2008) as amended ("the Companies Act"), to discontinue the business rescue
proceedings of Cons Murch and place Cons Murch in provisional liquidation. Village has committed a maximum
amount of R22 million, as post commencement finance to Cons Murch to fund certain business rescue and liquidation
expenses.
Cons Murch was deconsolidated from the Village group effective 12 December 2014 as control over the operation
ceased when it was placed in business rescue. A total amount of R272 million is included in the loss from
discontinued operations on the statement of comprehensive income for the quarter and an amount of R324 million for
the six months ended 31 December 2014. This reflects the operational losses for the period as well as the effect of the
deconsolidation from the Group. A total amount of R49 million is included under loss from discontinued operations for
the six months ended 31 December 2013.
Half-yearly reporting cycle.
Going forward, Village will provide operational and financial results on a half-yearly basis with market updates if
necessary.
Restructure of Board
On 26 January 2015 Village announced the restructuring of the Board of Directors of Village in line with the re-
organisation of the Company.
Ms Octavia Matloa has been appointed as deputy chairman and lead independent non-executive director. Mr Godfrey
Ntoele was also appointed as an independent non-executive director. Mr Ntoele has also been appointed as a
member of the Company's Audit and Risk Committee.
Ms Khetiwe McClain and Mr Dalu Ncube announced their resignations as directors of the Company to pursue
personal business interests.
Firm intention by Heaven-Sent to make a cash offer to acquire the entire issued share capital of
Village
Further to the cautionary announcements dated 13 October 2014, 25 November 2014, 11 December 2014 and 28
January 2015, respectively, the Boards of directors of Village and Heaven-Sent are pleased to advise shareholders of
Village that as part of the strategic review process to unlock value for the Company's shareholders the parties have
entered into an implementation agreement on 4 February 2015. The Implementation Agreement constitutes a firm
intention offer by Heaven-Sent, which offer may be implemented either directly by Heaven-Sent or through a
nominated subsidiary, to acquire by way of a scheme of arrangement in terms of section 114 of the South African
Companies Act No 71 of 2008 (the "Companies Act"), the entire issued share capital of Village, for an all-cash
consideration of ZAR12.25 per Village share on the terms and conditions set out in the Implementation Agreement
("Scheme Consideration").
Heaven-Sent will fund the Scheme Consideration from its own cash resources, which are sufficient for the purposes of
satisfying the full Scheme Consideration. The South African Takeover Regulation Panel, established in terms of
section 196 of the Companies Act ("Takeover Panel"), has been provided with an irrevocable and unconditional bank
guarantee from The Standard Bank of South Africa Limited for the purpose of satisfying the full Scheme Consideration
in compliance with regulations 111(4) and 111(5) of the Takeover Regulations.
Further details of the Scheme will be included in the Circular to be posted to Village Shareholders on or about 4 March
2015, which will include, inter alia, the notice of Scheme Meeting to be held on or about 2 April 2015 for the purposes
of considering and, if deemed fit, passing the special resolution required to approve the Scheme and other resolutions
which may be necessary in order to implement the Scheme. The salient dates in relation to the Scheme will be
published prior to the posting of the Circular.
The proposed transaction is fully funded, not subject to further due diligence, bears no substantive regulatory
execution risk and offers Village shareholders an opportunity to crystallise the value of their shareholding in Village.
The full Firm Intention Announcement is available on Village's website.
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
19 February 2015
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 0800 200 648
UK - Toll-Free 0808 162 4061
USA and Canada - Toll Free 1855 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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