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Condensed annual financial statements for the year ended 30 September 2015
THARISA PLC
Incorporated in the Republic of Cyprus with limited liability
Registration number HE223412
JSE share code: THA
ISIN: CY0103562118
CONDENSED ANNUAL FINANCIAL STATEMENTS
For the year ended 30 September 2015
HIGHLIGHTS
PGM PRODUCTION
(6E)
UP 50.9%
118.0 koz
(2014: 78.2 koz)
CHROME CONCENTRATE PRODUCTION
UP 3.4%
1.122 Mt
(2014: 1.085 Mt)
Production of 112.8 kt of higher value chemical
and foundry grade concentrates (2014: 148.2 kt)
REVENUE
UP 2.5%
US$246.8m
(2014: US$240.7m)
OPERATING PROFIT
UP 211.9%
US$18.4m
(2014: US$5.9m)
NET CASH GENERATED
FROM OPERATIONS
UP 84.8%
US$41.4m
(2014: US$22.4m)
EBITDA
UP 75.8%
US$29.0m
(2014: US$16.5m)
HEADLINE EARNINGS
PER SHARE
US$2 cents
(2014: (US$20 cents loss)
PROFIT BEFORE TAX
US$9.6m
(2014:US$40.3m loss)
REVIEW FINANCIAL YEAR END SEPTEMBER 2015
Executive Chairman Loucas Pouroulis, Chief Executive Officer
Phoevos Pouroulis and Chief Finance Officer Michael Jones.
Dear Shareholder
In compiling this report we have been guided by materiality to
report concisely on those issues most material to our stakeholders
and our ongoing ability to create value. More detailed information
is available on our website, www.tharisa.com.
The year under review has presented the Group with
many challenges and has been underpinned by a number of
unprecedented structural changes within the mining industry.
The global macroeconomic slowdown, driven mainly by the
decline in Chinese demand and consumption of raw materials, has
necessitated the re-assessment of strategies and expansion plans
premised on unabated growth in consumption of commodities.
We have witnessed major mining houses that enjoy competitive
cost positions expand production in the face of softer demand.
This has squeezed out higher cost and marginal producers,
particularly in the iron ore industry. We have also observed a
significant increase in "business rescue" cases within the South
African resource sector. Business rescues afford the practitioner an
opportunity to salvage a business from liquidation. This is a similar
process to the Chapter 11 Protection provisions contained within
the United States Bankruptcy Code.
Structurally, however, Tharisa remains a low cost producer and it
is with this business model that we foresee ourselves succeeding
within this unpredictable and volatile commodity cycle. Our full
year results demonstrate a business that is in the final stages of
ramp up and yet to reach full maturity. The results from operating
activities amounted to US$18.4 million, resulting in a net profit
after tax of $6 million. This is encouraging and bodes well for a
business planning to reach steady state in the year ahead.
We must, however, note that post the financial year end a further
decline within the prevailing PGM basket and metallurgical chrome
concentrate prices occurred. This reinforces the need for the
business to be even more cost effective.
While the initiation of our cost cutting and financial optimisation
programmes are evidenced in the financial year under review,
further initiatives have been launched on the basis of the state of
current commodity spot prices.
These initiatives include plans to reduce overhead and operational
costs by at least 10%, improve efficiencies in mining by minimising
dilution and providing stable feed into the processing plants, which
would ultimately improve the recoveries of PGM and chrome
concentrates.
We are pleased to post our first annual profit, with headline
earnings per share US$ 2 cents.
SAFETY
Safety remains a priority at Tharisa and at 30 September 2015 our
LTIFR was 0.06.
However, as previously advised, it is with regret that we report
two fatalities. Mr Johan Raaths, an instrument technician, lost his
life in November 2014 during routine maintenance on the Voyager
Plant and on 28 September 2015, a mining contractor Mr Lampert
Petersen lost his life in a trackless mobile vehicle accident. Our
heartfelt condolences are extended to the family, friends and
colleagues of both men.
We continue to strive for a zero harm work environment and in
line with the DMR's drive to minimise all injuries within the South
African mining industry, we have renewed our commitment to
our stakeholders and taken the necessary steps in ensuring a safer
workplace.
The financial year was disrupted operationally by a number of
section 54 and section 55 instructions issued by the DMR in terms
of the Mine Health and Safety Act which required the halting of the
affected operations. These stoppages resulted in an estimated loss
in production of 3.6 koz contained PGMs and 47.4 kt of chrome
concentrates. We are working proactively with the inspectorate of
the DMR to improve our safety compliance.
OPERATIONAL OVERVIEW
A number of milestones were achieved during the financial year
including:
- 4.4 Mt milled being an increase of 12.5%
- 118.0 koz 6E contained PGM production, up by 50.9%
- 65.8% overall PGM recovery, an increase of 17.0%
- 1.1 Mt production of chrome concentrates, up by 3.4%.
A number of challenges were also encountered during the financial
year including:
- Reef and inter-burden extraction being below mining plan
- Sub-optimal run of mine stockpile levels impacting feed grades
- Section 54 instructions resulting in a loss of production
- Lower than planned feed grades due to additional dilution
within the pit
- Processing of a higher proportion of unscheduled weathered ore
The total ore mined was 4.2 Mt, representing a shortfall of 600 kt
against our steady state plan. This, together with a lack of available
inpit reef led to a strategic review of the multi-contractor mining
model. A decision was taken post the year end to revert to a single
mining contractor and the transition has since been implemented
according to plan.
Our objective of mining 4.8 Mt for FY2016 is still on track and the
newly empowered mining team is performing in accordance with
the mine schedule and in some instances exceeding the plan.
PROCESSING
The processing plants performed well when they were fed with
consistent ROM feed in spite of lower than anticipated feed
grades. Plant throughput equated to 91.7% of combined nameplate
capacity of the processing plants. The overall performance across
both plants saw a marked improvement in PGM recoveries of
65.8% demonstrating the benefits of the high energy flotation
circuit and a slight decrease in chrome recoveries of 1.4% year
on year. This decrease can mainly be attributable to lower and
unstable chrome feed grades into the chrome plants as well as
reprocessing of commissioning tails. The average chrome recovery
across all plants was 59.4%, falling short of the plan of 65%.
LABOUR RELATIONS
Labour relations at the Tharisa Mine remained stable and
encouragingly, a three-year wage agreement was reached in the
second quarter of the year. The agreement sees annual salary
increases in line with this year's South African inflation rate. The
interface between the NUM, which represents the majority of our
employees, and the company is constructive and co-operative. Our
main contractor, MCC, has a nationwide recognition agreement,
which is governed by a central bargaining council in the construction
sector. There have been no material issues with the contractor's
labour during the financial period under review.
UTILITIES
The relationship with our primary utility supplier Eskom has been
cemented through clear and open communication lines. During
requests for partial load shedding we accommodated the utility
in an orderly manner without major disruption. Importantly, due
to our two independent processing plants with their distinct and
separate primary, secondary and tertiary crushing circuits there was
negligible impact on the overall plant throughput and production.
Being an open pit operation, mining is not dependent on electricity
and is reliant on diesel energy.
Water supply and sustainability in the face of one of the worst
droughts South Africa has experienced presents a risk to the
mining industry. While we have redundant sources of supply, a
continued drought could result in water supply restrictions.
LOGISTICS
2015 2014 Change
Average transport cost per US$/t 56 65 -13.9%
tonne of chrome concentrate –
CIF China basis
The chrome concentrates destined for main ports China were
shipped either in bulk from the Richards Bay Dry Bulk Terminal
or via containers from Johannesburg and transported by road to
Durban from where it is shipped. The economies of scale and in-
house expertise have ensured that our transport costs, a major
cost of the group, remain competitive.
Arxo Logistics has sufficient storage capacity at both the Richards
Bay Dry Bulk Terminal and the Durban container port to manage
Tharisa Minerals' full production capacity.
A total of 974.8 kt (2014: 902.5 kt) of chrome concentrates was
shipped by Arxo Logistics this year, mostly to main ports in China.
Of this, 87% was shipped in bulk, representing a 55% increase in
bulk material shipment. Bulk shipments are preferred by customers
due to ease of handling and reduced port charges, as well as
reduced levels of administration. The increase in bulk shipments
demonstrates the effectiveness of the newly upgraded rail siding
at Marikana and the use of the Richards Bay Dry Bulk Terminal link,
as well as the benefit of Arxo Logistics being certified as a clearing
agent with SARS at Richards Bay.
Negotiations regarding a planned public-private partnership for an
on-site railway siding at the Tharisa Mine are underway. This will not
only improve efficiencies and costs, but will also improve safety and
alleviate environmental impacts by reducing road freight haulage.
SUSTAINABILITY
Sustainability is at the heart of our business. We are proud of our
track record in minimising our environmental impact and, while we
strive to improve further, we take similar pride in our mature and
mutually beneficial relationships with the communities that border
the Tharisa Mine.
We not only understand our obligations to create social capital as
enshrined in the MPRDA, but strive to achieve these obligations in
ways that create ongoing sustainable social capital.
COMMODITY MARKETS AND SALES
2015 2014 Change
PGM basket price US$/oz 885 1 103 –19.8%
PGM basket price ZAR/oz 10 620 11 692 –9.2%
42% metallurgical grade
chrome concentrate US$/
contract price tonne 158 158 –
42% metallurgical grade
chrome concentrate ZAR/
contract price tonne 1 896 1 676 +13.2%
Chemical grade chrome US$/
concentrate price tonne 159 203 –21.8%
Exchange rate ZAR:US$ 12.0 10.6
PGM concentrate production continues to be sold to Impala
Refining Services in terms of the off-take agreement with a total of
119.9 koz of contained PGMs (on a 6E basis) being sold during the
year. This is an increase of 49.1% over the previous year's sales of
80.4 koz of contained PGMs (on a 6E basis).
The PGM prill split by mass is as follows:-
2015 2014
Platinum 56.2% 60.5%
Palladium 16.2% 15.8%
Rhodium 9.3% 8.1%
Gold 0.2% 0.1%
Ruthenium 13.7% 11.7%
Iridium 4.4% 3.8%
Tharisa Minerals is paid a variable percentage of the market
value of the contained PGMs in terms of an agreed formula. The
PGM basket commodity price has remained under pressure with
the average PGM basket price per ounce achieved by Tharisa
Minerals reducing by 19.8% to US$885/oz (2014: US$1 103/oz)
for the financial year. The Company benefited from a weakening
of the South African Rand (ZAR) relative to the US Dollar (US$),
resulting in the Rand basket price reducing by a lesser amount of
approximately 9.2%.
Chrome concentrate sales totalled 1.1 Mt, 136.1 kt of
which was higher value-add chemical and foundry grade chrome
concentrates with the bulk of the production being metallurgical
grade chrome concentrate. Chrome concentrate sales were in line
with those of the previous financial year at 1.2 Mt. The price for
metallurgical grade chrome concentrate on a CIF main ports China
basis remained flat in US$ terms at US$158/tonne.
China remains the main market for metallurgical chrome
concentrate.
Chemical and foundry grade chrome concentrates produced by
Arxo Metals continued to be sold to Rand York Minerals in terms
of an off-take agreement.
The segmental contribution to revenue and gross profit from PGM and
chrome concentrates is summarised below:
2015 2014
US$ m PGM CHROME TOTAL PGM CHROME TOTAL
Revenue 83.1 163.7 246.8 70.4 170.4 240.8
Cost of sales* 63.9 139.8 203.7 53.5 154.7 208.2
- Cost of sales excluding selling costs 63.7 80.8 144.5 53.4 91.9 145.3
- Selling costs 0.2 59.0 59.2 0.1 62.8 62.9
Gross profit contribution 19.2 23.9 43.1 16.9 15.7 32.6
Gross profit margin 23.1% 14.6% 17.5% 24.0% 9.2% 13.5%
* The allocation of the shared costs of producing PGMs and chrome
concentrates was, in accordance with the accounting policy, revised
to an equal sharing from the previous allocation of 40% to PGMs and
60% to chrome concentrates.
FINANCIAL OVERVIEW
Group revenue totaled US$246.8 million, a marginal increase of
2.5% relative to the previous year. The increase in revenue resulted
principally from the increase in PGM sales of 49.1% notwithstanding
the significant reduction in the PGM basket price of 19.8% from
an average of US$1 103 per ounce in FY2014 to an average of
US$885 per ounce for FY2015.
The gross profit margin of 17.5% compared favourably to the
comparable period's gross profit margin of 13.5%.
The PGM segment gross margin of 23.1% was marginally lower
than the previous year, with the sales revenue being negatively
impacted by reduced PGM commodity prices. The gross margin
was, however, maintained through the increased PGM sales
volumes which benefited from the improved PGM recoveries.
The chrome segment gross margin of 14.6% was significantly
higher than the year before with contributing factors including
competitively priced freight costs for bulk shipments of chrome
concentrates.
The change in the allocation of the shared costs impacted on the
gross margins with the PGM segment being allocated a higher
proportion of the shared costs (50% against 40% previously) and
the chrome segment being allocated a lower proportion (50%
against 60% previously).
The majority of the cost of sales (excluding the selling expenses) are
ZAR based costs while the commodity sales are US$ denominated
prices. With the weakening of the ZAR, the Group benefited from
an overall reduction in the cost base in US$ terms.
PGM cash cost of sales
Mining 55%
Utilities 6%
Reagents 7%
Steelballs 2%
Labour 5%
Diesel 16%
Overheads 9%
Chrome cash cost of sales
Mining 49%
Utilities 6%
Steelballs 5%
Labour 9%
Diesel 15%
Overheads 16%
After accounting for administrative expenses of US$24.8 million
(a reduction of 7.9% over the comparable period), the Group achieved
an operating profit of US$18.4 million. The administrative expenses
include the expense incurred from share based payments arising
from the conditional awards and appreciation rights awarded to
employees of the Group and consultants.
EBITDA amounted to US$29.0 million (2014: US$16.5 million).
Finance costs (totalling US$11.9 million) principally related to the
senior debt facility secured by Tharisa Minerals for the construction
of the Voyager Plant.
The Group recorded a substantial turn-around in profitability,
generating a profit before tax of US$9.6 million compared to
the comparable period loss of US$40.3 million. The amount of
the previous year's loss (for comparative purposes) needs to be
adjusted for the "changes in fair value of financial liabilities at fair
value through profit and loss" arising from the conversion of the
preference share liability into ordinary shares following the listing
of the Company on the JSE in the amount of US$32.4 million.
The pro forma comparable period loss was US$7.9 million.
The tax charge amounted to US$3.6 million, an effective charge of
37.6%, due to foreign currency losses of a subsidiary on inter-group
preference shares being treated as a permanent difference until
their redemption.
Foreign currency translation differences for foreign operations,
arising where the Company has funded the underlying subsidiaries
with US$ denominational funding and the reporting currency of the
underlying subsidiary is not in US$, amounted to US$39.4 million
against the prior year's charge of US$21.2 million. The average
exchange rate for the main operating subsidiary (which reports in
ZAR) weakened from ZAR10.60 in FY2014 to ZAR12.00 in the
current reporting period.
Basic and diluted profit per share for the year amounted to
US$ 2 cents (2014: loss of US$ 20 cents).
Additions to property, plant and equipment for the period amounted
to US$24.6 million, including an amount of US$15.2 million relating
to the capitalisation of deferred stripping.
During the financial year the Company issued 1 111 240 new
ordinary shares ranking pari passu with the existing issued ordinary
shares following the inaugural issue of shares that vested from the
award of the first tranche of the conditional awards.
The Group entered into a number of pre-pay transactions for the
forward delivery of chrome concentrates. As at 30 September
2015, outstanding deliveries for approximately 74.2 kt of
metallurgical and chemical grade chrome concentrates were still
due and the outstanding amount for the chrome pre-pay, which
is included in trade and other payables, as at that date amounted
to US$8.3 million.
The total debt amounted to US$75.6 million, resulting in a debt
to total equity ratio of 42.3%. Offsetting the debt service reserve
account amount of US$10.6 million, resulted in a pro forma debt
to equity ratio of 36.3%. The long-term targeted debt to equity
ratio is 15%.
The senior debt facility terms require the completion of certain
economic and technical completion tests.The technical completion
tests commenced on 1 August 2015. The long stop date for
achieving the technical completion tests was 28 November 2015.
Following the fatality at the Tharisa Mine on 28 September 2015
and the consequent and subsequent section 54 instructions from
the DMR, the technical completion tests were halted. The lenders
have agreed to extend the long stop date to 28 November 2016.
The Group generated net cash from operations of US$41.4 million
(2014: US$22.4 million). Cash on hand amounted to US$24.3 million.
In addition, the Group held US$10.6 million in a debt service
reserve account.
It is Company policy to pay an annual dividend of 10% of
consolidated net profit after tax. However, in the current commodity
price cycle with both PGM prices and chrome concentrate prices
reducing further post the financial year end, no dividends have been
proposed or paid to ordinary shareholders during the year under
review.
OUTLOOK
The general mining environment is under immense pressure and
this coupled with domestic challenges, means the Tharisa business
model is being stress tested. We are confident that we will succeed
and emerge leaner, more efficient and ready to reap the rewards of
an improving global commodity market. Our plans to reach steady
state remain a priority and we have made positive strides towards
achieving the recoveries required to attain those production levels.
Importantly, our financial performance proves that we can still
remain profitable and continue our operations based upon the
revised plan and trajectory as set out during the first half of the
year. With the stringent management of our costs and improved
efficiencies, we continue to be firmly positioned in the lowest cost
quartile for both PGM and chrome concentrate producers.
We would like to thank our stakeholders for their support and
continued belief in the Tharisa group of companies. You have our
commitment that as the leadership of this Group we will continue
to seek out opportunities to improve our efficiencies and create
additional value for all stakeholders.
Ioannis Drapaniotis who has served the Tharisa board as an
independent non-executive director since 2008 will be retiring at
the next AGM and will not be available for re-election. The Board
thanks Ioannis for the invaluable contribution he has made to the
Company since his appointment.
We thank our Board, management, employees, customers, suppliers
and partners who have assisted the Company during this profitable
year.
PREPARATION OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated financial statements
for the year ended 30 September 2015 have been
extracted from the audited financial statements of the
Group, but have not been audited. The auditor's report
on the audited financial statements does not report on
all of the information contained herein. Shareholders
are therefore advised that in order to obtain a full
understanding of the financial position and results of
the Group, these condensed statements should be read
together with the full audited financial statements and
full audit report.
These condensed statements and the audited financial
statements, together with the audit report, are available on
the Company's website, www.tharisa.com and are available
for inspection at the registered office of the Company.
The directors take full responsibility for the preparation
of this report and the correct extraction of the financial
information from the underlying financial statements.
While the consolidated financial statements have been
reported on without qualification by KPMG Limited, an
emphasis of matter paragraph is contained within the
audit report drawing shareholder's attention to the
disclosure on "going concern", which is set out in note 2
to these condensed results.
The preparation of these condensed results was
supervised by the Chief Finance Officer, Michael Jones, a
Chartered Accountant (SA).
The consolidated Annual Financial Statements have
been approved by the Board on 3 December 2015.
Consolidated statement of profit or loss and other
comprehensive income
for the year ended 30 September 2015
30 Sept 2015 30 Sep 2014
Notes US$'000 US$'000
Revenue 4 246 782 240 731
Cost of sales 4 (203 692) (208 119)
Gross profit 43 090 32 612
Other income 42 149
Administrative expenses 5 (24 777) (26 908)
Results from operating activities 18 355 5 853
Finance income 1 185 897
Finance costs (11 855) (13 996)
Changes in fair value of financial assets at fair value through profit or loss (25) (659)
Changes in fair value of financial liabilities at fair value through profit or loss 1 972 (32 420)
Net finance costs (8 723) (46 178)
Profit/(loss) before tax 9 632 (40 325)
Tax 6 (3 617) (14 548)
Profit/(loss) for the year 6 015 (54 873)
Other comprehensive income
Items that may be classified subsequently to profit or loss:
Foreign currency translation differences for foreign operations, net of tax (39 399) (21 162)
Other comprehensive income, net of tax (39 399) (21 162)
Total comprehensive income for the year (33 384) (76 035)
Profit/(loss) for the year attributable to:
Owners of the Company 4 623 (48 997)
Non-controlling interests 1 392 (5 876)
6 015 (54 873)
Total comprehensive income for the year attributable to:
Owners of the Company (24 721) (66 188)
Non-controlling interests (8 663) (9 847)
(33 384) (76 035)
Basic and diluted earnings per share (US$ cents) 7 2 (20)
Headline and diluted headline earnings per share (US$ cents) 7 2 (20)
Consolidated statement of financial position
as at 30 September 2015
30 Sep 2015 30 Sep 2014
Note US$'000 US$'000
Assets
Property, plant and equipment 8 214 518 253 356
Goodwill 919 1 211
Other financial assets 1 636 5 008
Long term deposits 9 10 656 14 479
Deferred tax assets 10 1 954 5 970
Non current assets 229 683 280 024
Inventories 11 8 951 14 567
Trade and other receivables 37 979 32 515
Other financial assets 55 442
Current taxation 144 3
Cash and cash equivalents 12 24 265 19 629
Current assets 71 394 67 156
Total assets 301 077 347 180
Equity
Share capital 13 256 255
Share premium 13 452 512 452 363
Other reserve 13 47 245 47 245
Foreign currency translation reserve 13 (76 705) (47 361)
Revenue reserve 13 (206 566) (216 596)
Equity attributable to owners of the Company 216 742 235 906
Non-controlling interests 13 (37 794) (26 052)
Total equity 178 948 209 854
Liabilities
Provisions 4 088 4 452
Borrowings 14 36 329 64 223
Deferred tax liabilities 10 13 20
Non current liabilities 40 430 68 695
Borrowings 14 33 692 30 986
Other financial liabilities 388 –
Current taxation 98 421
Trade and other payables 47 521 37 224
Current liabilities 81 699 68 631
Total liabilities 122 129 137 326
Total equity and liabilities 301 077 347 180
The consolidated financial statements were authorized for issue by the Board of Directors on 3 December 2015.
P Pouroulis MG Jones
Director Director
Consolidated statement of changes in equity
for the year ended 30 September 2015
Attributable to owners of the Company Attributable to owners of the Company
Foreign
currency Non-
Share Share Other translation Revenue controlling Total
capital premium reserve reserve reserve Total interests equity
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1 October 2013 6 113 342 47 245 (30 170) (167 859) (37 436) (16 205) (53 641)
Total comprehensive income for the year
Loss for the year – – – – (48 997) (48 997) (5 876) (54 873)
Other comprehensive income:
Foreign currency translation reserve – – – (17 191) – (17 191) (3 971) (21 162)
Total comprehensive income for the year 6 113 342 47 245 (17 191) (48 997) (66 188) (9 847) (76 035)
Transactions with owners of the Company, recognised directly in equity
Share issue expenses – (1 416) – – – (1 416) – (1 416)
Equity-settled share based payments – – – – 260 260 – 260
Issue of share capital for cash 13 47 847 – – – 47 860 – 47 860
Issue of ordinary shares to employees resulting from share grants – 115 – – – 115 – 115
Issue of ordinary shares from bonus issue 154 (154) – – – – – –
Issue of ordinary shares from conversion of redeemable convertible preference shares 82 292 629 – - – 292 711 – 292 711
Contribution by owners of the Company 249 339 021 – – 260 339 530 – 339 530
Total transactions with owners of the Company 249 339 021 – – 260 339 530 – 339 530
Balance at 1 October 2014 255 452 363 47 245 (47 361) (216 596) 235 906 (26 052) 209 854
Total comprehensive income for the year
Profit for the year
Other comprehensive income: – – – – 4 623 4 623 1 392 6 015
Foreign currency translation reserve – – – (29 344) – (29 344) (10 055) (39 399)
Total comprehensive income for the year – – – (29 344) 4 623 (24 721) (8 663) (33 384)
Transactions with owners of the Company, recognised directly in equity
Reclassification of non-controlling interest – – – – 3 079 3 079 (3 079) –
Equity-settled share based payments – – – – 2 317 2 317 – 2 317
Issue of ordinary shares 1 149 – – 11 161 – 161
Contributions by owners of the Company 1 149 – – 5 407 5 557 (3 079) 2 478
Total transactions with owners of the Company 1 149 – – 5 407 5 557 (3 079) 2 478
Balance at 30 September 2015 256 452 512 47 245 (76 705) (206 566) 216 742 (37 794) 178 948
Consolidated statement of cash flows
for the year ended 30 September 2015
30 Sep 2015 30 Sep 2014
US$'000 US$'000
Cash flows from operating activities
Profit/(loss) for the year 6 015 (54 873)
Adjustments for:
Depreciation of property, plant and equipment 10 256 10 764
Write off of property, plant and equipment – 25
Impairment losses on property, plant and equipment 3 –
Impairment losses on goodwill 63 72
Impairment losses on inventory 217 1 195
Impairment losses on other financial assets 27 –
Changes in fair value of financial liabilities at fair value through profit and loss (1 972) 32 420
Changes in fair value of financial assets at fair value through profit and loss 25 659
Interest income (777) (897)
Interest expense 11 754 13 400
Tax 3 617 14 548
Equity-settled share based payments 3 157 389
32 385 17 702
Changes in:
Inventories 5 811 8 144
Trade and other receivables (5 464) (3 392)
Trade and other payables 10 296 996
Provisions (777) (152)
Cash from operations 42 251 23 298
Income tax paid (847) (942)
Net cash flows from operating activities 41 404 22 356
Cash flows from investing activities
Interest received 669 699
Additions to property, plant and equipment (24 591) (24 289)
Proceeds from disposal of property, plant and equipment 3 37
Refunds of/(additions to) other financial assets 2 702 (1 606)
Net cash flows used in investing activities (21 217) (25 159)
Cash flows from financing activities
Proceeds from issue of ordinary shares – 47 860
Refund/(establishment) of long term deposits 2 367 (6 771)
Proceeds from/(repayment of) bank credit and other facility borrowings 7 523 (2 835)
Net proceeds from obligations under new loan 146 –
Repayment of secured bank borrowings and loan to third party (27 267) (30 989)
Interest paid (1 134) (349)
Redemption of Class B preference shares – (6 818)
Share issue expenses capitalised to share premium – (1 416)
Net cash flows used in financing activities (18 365) (1 318)
Net increase/(decrease) in cash and cash equivalents 1 822 (4 121)
Cash and cash equivalents at the beginning of the year 19 629 28 017
Effect of exchange rate fluctuations on cash held 2 814 (4 267)
Cash and cash equivalents at the end of the year 24 265 19 629
Notes to the condensed consolidated financial statements
for the year ended 30 September 2015
1. REPORTING ENTITY
Tharisa plc ("the Company") is a company domiciled in Cyprus.
These condensed consolidated financial statements of the
Company for the year ended 30 September 2015 comprise
the Company and its subsidiaries (together referred to as "the
Group"). The Group is primarily involved in platinum group
metals ("PGM") and chrome mining, processing, trading and the
associated logistics.
2. BASIS OF PREPARATION
a Statement of compliance
These condensed consolidated financial statements have
been prepared in accordance with International Financial
Reporting Standards ("IFRS"), International Accounting
Standards, IAS 34 Interim Financial Reporting, the Listings
Requirements of the Johannesburg Stock Exchange and the Cyprus Companies
Law, Cap. 113. Selected explanatory notes are included
to explain events and transactions that are significant to
an understanding of the changes in financial position and
performance of the Group since the last consolidated
financial statements as at and for the year ended
30 September 2014. These condensed consolidated
financial statements do not include all the information
required for full consolidated financial statements prepared
in accordance with IFRS.
These condensed consolidated financial statements were
approved by the Board of Directors on 3 December 2015.
b Use of estimates and judgements
Preparing the condensed consolidated financial statements
requires management to make judgements, estimates
and assumptions that affect the application of accounting
policies and the reported amounts of assets and liabilities,
income and expenses. Actual results may differ from these
estimates.
In preparing these condensed consolidated financial
statements, significant judgements made by management in
applying the Group's accounting policies and the key sources
of estimation uncertainty were the same as those applied to
the consolidated financial statements as at and for the year
ended 30 September 2014.
c Going concern basis
Notwithstanding that the Group made a profit for
the year ended 30 September 2015 of US$6.0 million
(2014: US$54.9 million (loss)) as at that date its current
liabilities exceeded its current assets by US$10.3 million
(2014: US$1.5 million).
Based on the commodity prices prevailing at the financial
year end, the short term cash flow forecasts of the Group
reflect a positive cash flow position sufficient to meet the
operational cash flows, the approved capital expenditure
and the debt repayments. However, subsequent to the
financial year end, global commodity prices weakened
significantly and the weakening of the South African
Rand against the US$ has been insufficient to off-set the
weakened commodity prices. Based on current commodity
spot prices and US$ exchange rate, the short term cash
flow forecasts reflect a shortfall in cash. Should the current
depressed commodity prices persist beyond the near
term and/or should forecast production not be achieved,
the Group will need to source additional cash to fund its
operations. The operations are, in part, funded through
chrome pre-pay transactions and it is the intention of the
Group to continue with these arrangements. In addition,
the Group may secure a further working capital facility or
the Company may undertake a placement of shares to
provide this funding should this be required. In addition, the
Group is reviewing its cost structure in order to reduce
operating costs.
The financial statements continue to be prepared on
the going concern basis. In the event that the weakened
commodity prices persist, forecast production is not
achieved and the Group is unable to raise further funding,
a material uncertainty will exist which may cast significant
doubt on the ability of the Group to continue as a going
concern and, therefore, it may be unable to realise its assets
and settle its liabilities in the normal course of business.
d New and revised International Financial Reporting Standards
and Interpretations
As from 1 October 2014, the Group adopted all changes
to IFRS, which are relevant to its operations. The adoption
did not have a material effect on the accounting policies of
the Group.
The following Standards, Amendments to Standards and
Interpretations have been issued but are not yet effective
for annual periods beginning on 1 October 2014. The Board
of Directors is currently evaluating the impact of these on the Group.
Standards and Interpretations
- IAS 1 (Amendments) Disclosure Initiative (effective for annual
periods beginning on or after 1 January 2016).
- IAS 27 (Amendments) Equity method in Separate Financial
Statements (effective for annual periods beginning on or after
1 January 2016).
- IFRS 9 Financial Instruments (effective the latest as from the
commencement date of the first annual period beginning on
or after 1 January 2018).
- IFRS 10, IFRS 12, and IAS 28 (Amendments) Investment
Entities: Applying the Consolidation Exception (effective for
annual periods beginning on or after 1 January 2016).
- IFRS 14 Regulatory Deferral Accounts (effective the latest as
from the commencement date of the first annual period
beginning on or after 1 January 2016).
- IFRS 15 Revenue from Contracts with Customers (effective for
annual periods beginning on or after 1 January 2018).
- Annual Improvements to IFRSs 2012 – 2014 Cycle (effective
the latest as from the commencement date of the first annual
period beginning on or after 1 January 2016).
- IAS 10 and IAS 28 (Amendments) Sale or Contribution
of Assets between an Investor and its Associate or Joint
Venture (effective for annual periods beginning on or after
1 January 2016).
- IAS 16 and IAS 41 (Amendments) Bearer Plants (effective for
annual periods beginning on or after 1 January 2016).
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies applied by the Group in these
condensed consolidated financial statements are the same as
those applied by the Group in its audited consolidated financial
statements as at and for the year ended 30 September 2014.
4. OPERATING SEGMENTS
Segmental performance is measured based on segment revenue, cost of sales and gross profit or loss, as included in the internal
management reports that are reviewed by the Group's management.
PGM CHROME TOTAL
30 September 2015 US$'000 US$'000 US$'000
Revenue 83 053 163 729 246 782
Cost of sales
Cost of sales excluding selling costs (63 674) (80 834) (144 508)
Selling costs (193) (58 991) (59 184)
(63 867) (139 825) (203 692)
Gross profit 19 186 23 904 43 090
30 September 2014
Revenue 70 365 170 366 240 731
Cost of sales
Cost of sales excluding selling costs (53 347) (91 893) (145 240)
Selling costs (138) (62 741) (62 879)
(53 485) (154 634) (208 119)
Gross profit 16 880 15 732 32 612
The overhead costs relating to the manufacturing of the PGM and the chrome concentrates are allocated to the relevant products
based on the relative sales value per product.The allocated percentage for PGM concentrate and chrome concentrates accounted for
this financial year is 50% for each segment. The allocated percentage for PGM concentrate and chrome concentrates accounted for in
the previous financial year was 40% and 60% respectively.
Geographical information
The following table sets out information about the geographical location of the Group's (i) revenue from external customers, and
(ii) property, plant and equipment and goodwill ("specified non-current assets"). The geographical location analysis of revenue from
external customers is based on the country of establishment of each customer. The geographical location of the specified non-
current assets is based on the physical location of the asset in the case of property, plant and equipment and the location of the
operation to which they are allocated in the case of goodwill.
30 Sep 2015 30 Sep 2014
US$'000 US$'000
Revenue from external customers
China 65 432 71 136
South Africa 95 038 94 187
Singapore 7 927 27 220
Hong Kong 55 175 37 653
South Korea 10 673 –
Other countries 12 537 10 535
246 782 240 731
Revenue represents the sales value of goods supplied to customers, net of value-added tax.The Group had one customer with whom
transactions have individually exceeded 10% of the Group's revenues. Revenue from the largest customer of the Group represented
approximately US$82.9 million and US$70.2 million for each of the financial years ended 30 September 2015 and 30 September 2014
respectively and relates to revenues of the PGM segment. Revenue from the second largest customer of the Group represented
approximately US$15.1 million and US$24.5 million for each of the financial years ended 30 September 2015 and 30 September 2014
respectively and relates to revenues of the chrome segment.
30 Sep 2015 30 Sep 2014
US$'000 US$'000
Specified non-current assets
South Africa 215 430 254 547
Cyprus 5 14
China 2 6
215 437 254 567
30 Sep 2015 30 Sep 2014
US$'000 US$'000
5. ADMINISTRATIVE EXPENSES
Directors and staff costs
Non-executive directors 504 598
Executive directors 1 396 1 498
Other key management 1 000 1 135
Group employees 9 114 10 980
12 014 14 211
Audit 488 505
Consulting 2 207 1 157
Corporate social investment 309 475
Depreciation 255 365
Discount facility and related fees 366 85
Equity-settled share based expense 3 157 389
Fees for the professional services of the listing – 2 610
Health and safety 167 43
Impairment losses on property, plant and equipment 3 –
Insurance 856 623
Legal and professional 414 488
Rent and utilities 867 1 624
Security 608 698
Telecommunications and IT related 581 617
Training 420 116
Travelling and accommodation 580 767
Sundry expenses 1 485 2 135
24 777 26 908
During the year ended 30 September 2015, the Group realised a net gain on disposal of US$376 (2014: Nil) of property, plant
and equipment.
30 Sep 2015 30 Sep 2014
US$'000 US$'000
6. TAX
Corporate income tax for the year
Cyprus 240 765
South Africa 143 300
Special contribution for defence in Cyprus for the year 3 1
Deferred tax
Origination and reversal of temporary differences 3 231 13 482
Tax charge 3 617 14 548
7. EARNINGS PER SHARE
i.Basic and diluted earnings per share
The calculation of basic and diluted earnings per share was based on the profit/(loss) attributable to the ordinary shareholders of the
Company and the weighted average number of ordinary shares outstanding.
30 Sep 2015 30 Sep 2014
US$'000 US$'000
Profit/(loss) for the year attributable to ordinary shareholders 4 623 (48 997)
Weighted average number of ordinary shares at 30 September ('000) 255 076 247 879
Basic and diluted earnings per share (US$ cents) 2 (20)
At 30 September 2014, for the purposes of calculating basic and diluted earnings per share, the weighted average number of ordinary
shares used in the above calculations reflects the effect of the bonus issue and the conversion of the redeemable convertible
preference shares as if it had occurred at the beginning of the earliest period presented.
At 30 September 2015, LTIP and SARS awards were excluded from the diluted weighted average number of ordinary shares
calculation because their effect would have been anti dilutive. The average market value of the Company's shares for the purpose
of calculating the potential dilutive effect of SARS was based on quoted market prices for the year during which the options were
outstanding.
ii. Headline and diluted headline earnings per share
30 Sep 2015 30 Sep 2014
US$'000 US$'000
Headline earnings for the year attributable to ordinary shareholders 4 688 (48 925)
Weighted average number of ordinary shares at 30 September ('000) 255 076 247 879
Basic and diluted headline earnings per share (US$ cents) 2 (20)
Reconciliation of profit/loss to headline earnings
Profit/(loss) attributable to ordinary shareholders of the Company 4 623 (48 997)
Adjustments:
Impairment losses on goodwill 63 72
Impairment losses on property, plant and equipment 2 –
Headline earnings 4 688 (48 925)
30 Sep 2015 30 Sep 2014
US$'000 US$'000
8. PROPERTY, PLANT AND EQUIPMENT
Total cost 243 931 278 838
Total accumulated depreciation (29 413) (25 482)
Net book value 214 518 253 356
Reconciliation of net book value
Opening net book value 253 356 269 130
Additions 24 591 24 289
Net disposals (7) (36)
Depreciation (10 256) (10 764)
Exchange adjustment on translation (53 166) (29 263)
Closing net book value 214 518 253 356
Capital commitments
At 30 September 2015 the Group's capital commitments for contracts to purchase property, plant and equipment amounted to
US$1.4 million (30 September 2014: US$4.4 million).
Securities
At 30 September 2015 an amount of US$196.4 million (30 September 2014: US$228.4 million) of the carrying amount of the Group's
tangible property, plant and equipment was pledged as security against secured bank borrowings.
30 Sep 2015 30 Sep 2014
US$'000 US$'000
9. LONG TERM DEPOSITS
Restricted cash 10 656 14 479
The restricted cash is designated as a "debt service reserve account" as required by the terms of the secured bank borrowings.
10. DEFERRED TAX
In the prior year, the Group derecognised a portion of the deferred tax asset relating to exchange losses on the intergroup preference
share funding arrangements due to the cash flow projections in the prior year which indicated that the earliest redemption date
of the preference shares was unlikely to be in the near term. The determination of the deductibility of the exchange losses on the
preference shares will only be finally determined on the redemption of the preference shares and in the light of this uncertainty,
management have decided to treat these differences as non deductible until such time as the preference share liability is settled and
the final determination on the deductibility of the realised losses at that date have been determined.
In assessing the recoverability of the deferred tax recognised, management is satisfied that the subsidiary in South Africa that substantially
all the deferred tax assets relate to, will generate sufficient taxable income against which the recognised deferred tax asset on the tax
losses and deductive temporary differences can be utilised.
30 Sep 2015 30 Sep 2014
US$'000 US$'000
11. INVENTORIES
Finished products 4 283 6 891
Ore stockpile 1 257 1 517
Work in progress 195 3 011
Consumables 3 216 3 148
8 951 14 567
During the year ended 30 September 2015 and 30 September 2014, the Group wrote down its inventories by US$0.2 million and
US$1.2 million respectively. The write down is included in cost of sales.
Inventories have a general notarial bond in favour of the lenders of the secured bank borrowings.
30 Sep 2015 30 Sep 2014
US$'000 US$'000
12. CASH AND CASH EQUIVALENTS
Bank balances 24 005 19 370
Call deposits 260 259
24 265 19 629
US$4.4 million (30 September 2014: US$4.8 million) was provided as security for certain credit facilities and bank guarantees of
the Group.
13. SHARE CAPITAL AND RESERVES
During the year ended 30 September 2015, 1 111 240 ordinary shares were issued and allotted in terms of the Group's share award
scheme for 2014 which was the vesting of the first tranche of the Conditional Awards granted on 9 April 2014.
The issued and fully paid share capital of the Company at 30 September 2015 consisted of 255 891 886 ordinary shares of US$0.001
each (30 September 2014: 254 780 646 ordinary shares of US$0.001 each).
During the year ended 30 September 2015, the Company reassessed its interpretation and application of IFRS10: Consolidated
Financial Statements. Consequently the treatment of the intergroup funding transactions on a consolidated level and the impact
of these transactions on the non-controlling interests were reconsidered. This resulted in a reclassification from non-controlling
interest to the revenue reserve.
30 Sep 2015 30 Sep 2014
US$'000 US$'000
14. BORROWINGS
Non-current
Secured bank borrowing 36 329 63 333
Other borrowings – 890
36 329 64 223
Current
Secured bank borrowing 14 346 17 899
Other borrowings 19 346 13 087
33 692 30 986
During the year the Group settled a loan payable to a third party in full and obtained a new loan to the amount of ZAR13.3 million.
Except for the above, there have been no changes in the terms, securities and financial covenants of the above borrowing facilities
during the year ended 30 September 2015.
30 Sep 2015 30 Sep 2014
US$'000 US$'000
15. FINANCIAL INSTRUMENTS
Financial assets – carrying amount
Loans and receivables 34 351 27 734
Financial instruments at fair value through profit and loss 1 691 5 450
36 042 33 184
Financial liabilities – carrying amount
Financial liabilities at amortised cost:
Borrowings 70 021 95 209
Trade payables and commitments 31 915 25 998
Discount facility 388 –
Income received in advance 8 348 3 409
Other payables 5 679 5 899
116 351 130 515
The Board of Directors considers that the fair values of financial assets and liabilities approximate their carrying values at each reporting date.
30 Sep 2015 30 Sep 2014
US$'000 US$'000
16. RELATED PARTY TRANSACTIONS
Key management compensation
Non-executive directors' remuneration 504 598
Executive directors' remuneration 1 396 1 498
Other key management 1 000 1 135
2 900 3 231
30 Sep 2015 30 Sep 2014
US$'000 US$'000
17. COMPARATIVE FIGURES
The Group made certain reclassifications to the comparative period:
Consolidated statement of profit or loss and other comprehensive income:
Cost of sales – (1 304)
Administrative expenses – 1 304
Consolidated statement of financial position: Trade and other payables
Trade payables – third parties – (3 409)
Income received in advance – 3 409
18. CONTINGENT LIABILITY
During the year ended 30 September 2015, the Company received a "letter before action" from a firm of solicitors representing a
shareholder which asserts intended claims against, inter alia, the Company for damages purporting to arise in the context of the listing
of the Company on the JSE Limited and the compulsory conversion of the convertible redeemable preference shares held by that
shareholder in the Company into ordinary shares as provided for in the terms of the convertible redeemable preference shares. The
matter is subject to the contractual arbitration proceedings agreed between the parties. The shareholder has as yet not invoked the
arbitration proceedings.
19. SUBSEQUENT EVENTS
Subsequent to the financial year end, Tharisa Minerals terminated the services of a mining contractor based on non-
performance and instituted proceedings to recover damages arising from the non-performance. The contractor has, as a consequence
of the termination of the contract, instituted legal proceedings against Tharisa Minerals claiming unlawful dispossession of the mine or
alternatively those parts of the mine which it was working at the time of termination. Tharisa Minerals has taken legal advice and, based
on the advice received, is of the view that the mining contractor's case has no merit and Tharisa Minerals will defend itself against any
action taken against it.
The terms of the senior debt facility require the completion of technical tests by 28 November 2015. The tests commenced on
1 August 2015. As a consequences of certain stoppages as instructed by the South African Department of Mineral Resources in
terms of the Mine Health and Safety Act, Tharisa Minerals was not in a position to complete the technical tests and the tests were
halted on 28 October 2015. The senior debt providers have extended the date by which the technical tests need to be completed
to 28 November 2016.
Other than the matters referred to above, the Board of Directors is not aware of any matter or circumstance arising since the end of the financial
year that will impact these financial results.
20. DIVIDENDS
No dividends were declared in respect for the financial year ended 30 September 2015 (30 September 2014: no dividends).
The full audited Annual Financial Statements and the results presentation will be available for download in the Investor Relations section of the website
on 9 December 2015. For any questions regarding the results, please contact our Investor Relations Manager, Sherilee Lakmidas at slakmidas@tharisa.com.
CORPORATE INFORMATION
REGISTERED ADDRESS
Office 108 – 110
S. Pittokopitis Business Centre
17 Neophytou Nicolaides and Kilkis Streets
8011 Paphos
Cyprus
POSTAL ADDRESS
PO Box 62425
8064 Paphos
Cyprus
DIRECTORS OF THARISA
Loucas Christos Pouroulis (Executive Chairman)
Phoevos Pouroulis (Chief Executive Officer)
Michael Gifford Jones (Chief Finance Officer)
John David Salter (Lead Independent non-executive director)
Ioannis Drapaniotis (Independent non-executive director)
Antonios Djakouris (Independent non-executive director)
Omar Marwan Kamal (Independent non-executive director)
Brian Cheng (Non-executive director)
Joanna Cheng (Alternate non-executive director)
JOINT COMPANY SECRETARIES
Lysandros Lysandrides
26 Vyronos Avenue
1096 Nicosia
Cyprus
Sanet de Witt
Eland House, The Braes
3 Eaton Avenue
Bryanston
Johannesburg 2021
South Africa
Email: secretarial@tharisa.com
INVESTOR RELATIONS
Sherilee Lakmidas
Eland House, The Braes
3 Eaton Avenue
Bryanston
Johannesburg 2021
South Africa
Email: ir@tharisa.com
TRANSFER SECRETARIES
Computershare Investor Services Proprietary Limited
Registration number: 2004/003647/07
70 Marshall Street
Johannesburg 2001
(PO Box 61051, Marshalltown 2107)
South Africa
Cymain Registrars Limited
Registration number: HE174490
26 Vyronos Avenue
1096 Nicosia
Cyprus
SPONSOR
Investec Bank Limited
Registration number: 1969/004763/06
100 Grayston Drive
Sandown
Sandton 2196
(PO Box 785700, Sandton 2146)
South Africa
AUDITORS
KPMG Limited (Cyprus)
Registration number: HE132527
14 Esperidon Street
1087 Nicosia
Cyprus
www.tharisa.com
Date: 09/12/2015 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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