Wrap Text
Audited summary consolidated financial statements for the year ended 31 March 2016
TRANS HEX GROUP LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1963/007579/06
Share code: TSX
ISIN: ZAE000018552
("Trans Hex" or the "Group" or the "Company")
AUDITED SUMMARY CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2016
HEADLINES
- Diamond prices declined by 23,5% compared to the previous year.
- Sales were positively affected by a 27,2% weakening of the Rand against the US Dollar.
- Sales revenue totalled R671,4 million (2015: R939,7 million).
- Cost of goods sold amounted to R678,2 million (2015: R778,1 million), including retrenchment costs of R46,6 million
at the Lower Orange River operations.
- South African land operations recorded a gross loss of R6,8 million (2015: profit of R161,6 million).
- Impairment charges in respect of the Lower Orange River operations amounted to R55,1 million (2015: R86,2 million).
- Equity accounting loss from West Coast Resources (Pty) Ltd amounted to R13,6 million (2015: profit of R123,3 million).
- Equity accounting loss from Somiluana Mine in Angola amounted to R15,8 million (2015: profit of R12,7 million).
- Group loss after tax from continuing operations amounted to R124,8 million (2015: profit of R169,1 million).
- Profit after tax from discontinued operations totalled R24,0 million (2015: profit of R21,5 million).
- Group net loss amounted to R100,8 million (2015: profit of R190,6 million).
- The Group's net cash position at the end of the year was R353,5 million (2015: R407,2 million).
- Loss per share amounted to 94,4 cents (2015: earnings of 181,1 cents) and headline loss per share amounted to
56,9 cents (2015: earnings of 78,6 cents).
- Net asset value per share amounted to 506,0 cents (2015: 630,0 cents).
SUMMARY CONSOLIDATED INCOME STATEMENT
2015
2016 Reclassified
Notes R'000 R'000
Continuing operations
Sales revenue 671 374 939 685
Cost of goods sold (678 158) (778 065)
Gross (loss)/profit (6 784) 161 620
Share of results of associated companies 1 (29 431) 135 976
Royalties (3 248) (20 656)
Selling and administration costs (92 542) (86 681)
Mining (loss)/profit (132 005) 190 259
Exploration costs (2 048) (2 171)
Other gains - net 2 15 115 53 369
Finance income 23 211 25 052
Finance costs (4 680) (4 705)
Impairment 3 (55 096) (86 170)
(Loss)/profit before income tax (155 503) 175 634
Income tax 30 730 (6 568)
(Loss)/profit for the year from
continuing operations (124 773) 169 066
Discontinued operations
Profit for the year from discontinued
operations 4 24 023 21 508
(Loss)/profit for the year (100 750) 190 574
Attributable to:
Continuing operations (124 773) 169 066
- Owners of the parent (123 788) 169 950
- Non-controlling interest (985) (884)
Discontinued operations
- Owners of the parent 24 023 21 508
(100 750) 190 574
(Loss)/earnings per share - basic and
diluted (cents)
- Continuing operations (117,1) 160,8
- Discontinued operations 22,7 20,3
Total (94,4) 181,1
Shares in issue adjusted for treasury
shares ('000) 105 699 105 699
Headline (loss)/earnings 5
- Continuing operations (84 119) 61 668
- Discontinued operations 24 023 21 508
Total (60 096) 83 176
Headline (loss)/earnings per share (cents)
- Continuing operations (79,6) 58,3
- Discontinued operations 22,7 20,3
Total (56,9) 78,6
Average ZAR/US$ exchange rate 14,06 11,05
SUMMARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2016 2015
R'000 R'000
(Loss)/profit for the year (100 750) 190 574
Other comprehensive loss net of tax: (19 442) (22 071)
Items that will not be reclassified to profit or loss
Remeasurements of post-employment benefit obligations 1 737 -
- Before-tax amount 2 412 -
- Tax expense (675) -
Items that may be subsequently reclassified to profit or loss
Translation differences on foreign subsidiaries
before and after tax (21 179) (17 529)
Reclassification of foreign currency differences on
repayment of long-term receivables from foreign operations - (4 542)
Total comprehensive (loss)/income for the year (120 192) 168 503
Attributable to:
- Owners of the parent (119 207) 169 387
- Non-controlling interest (985) (884)
(120 192) 168 503
SUMMARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION
2016 2015
Notes R'000 R'000
ASSETS
Non-current assets 388 784 466 682
Property, plant and equipment 82 955 152 184
Investment in associates 6 219 777 253 635
Investments held by environmental trust 61 186 57 431
Other financial assets 3 000 3 000
Deferred income tax assets 21 866 432
Current assets 502 079 553 003
Inventories 7 110 997 105 868
Trade and other receivables 37 109 37 205
Current income tax 474 2 750
Cash and cash equivalents 353 499 407 180
Total assets 890 863 1 019 685
EQUITY AND LIABILITIES
Capital and reserves 535 965 665 742
Non-controlling interest (869) 116
Non-current liabilities 112 449 117 065
Deferred income tax liabilities - 8 632
Provisions 112 449 108 433
Current liabilities 243 318 236 762
Trade and other payables 122 668 117 268
Interest in joint ventures 4 120 650 119 450
Current income tax liabilities - 44
Total equity and liabilities 890 863 1 019 685
Net asset value per share (cents) 506 630
SUMMARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
2016 2015
R'000 R'000
Balance at 1 April 665 858 550 231
Total comprehensive (loss)/income for the year (120 192) 168 503
Dividends paid (10 570) (52 876)
Balance at end of year 535 096 665 858
SUMMARY CONSOLIDATED STATEMENT OF CASH FLOWS
2016 2015
R'000 R'000
Cash (utilised in)/generated from operations (32 982) 157 583
Movements in working capital 708 (6 783)
Income tax received/(paid) 2 220 (43 680)
Net cash (utilised in)/generated from operating activities (30 054) 107 120
Cash flows from investment activities (17 069) (45 936)
Property, plant and equipment
- Proceeds from disposal 2 931 19
- Replacement (51 045) (38 263)
- Additional (5 714) (9 657)
Proceeds from disposal of investment - 35 000
Proceeds from repayment of loan to Trans Hex Angola 18 386 7 477
Investment in associate - (57 200)
Interest received 18 373 19 688
Investment in other financial assets - (3 000)
Cash flows from financing activities (10 588) (54 241)
Borrowings repaid - (1 281)
Interest paid (18) (84)
Dividends paid (10 570) (52 876)
Effects of exchange rates on cash and cash equivalents 4 030 2 687
Net (decrease)/increase in cash and cash equivalents (53 681) 9 630
Cash and cash equivalents at beginning of year 407 180 397 550
Cash and cash equivalents at end of year 353 499 407 180
NOTES TO THE SUMMARY CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
2016 2015
R'000 R'000
1. Share of results of associated companies
Consists of the following categories:
- Somiluana - Sociedade Mineira, S.A. (15 835) 12 715
The 33% investment in Somiluana is accounted for as
an investment in an associate under the equity method.
- West Coast Resources (Pty) Ltd (13 596) 123 261
The 40% investment in West Coast Resources is accounted
for as an investment in an associate under the equity
method. Included in the 2015 financial year profit is
a gain of R132 million, being negative goodwill that
arose as a result of the acquisition of assets and
liabilities relating to Namaqualand Mines.
(29 431) 135 976
2. Other gains - net
Other gains - net consist of the following categories:
- Net foreign exchange gains 10 368 15 154
- Profit on sale of assets and investments - 35 019
- Commission on sale of diamonds 4 747 3 195
15 115 53 369
3. Impairment of assets
While conducting impairment reviews, the Group exercises
judgement in making assumptions about future rough diamond
prices, production volumes, ore reserves and resources
included in the current life of mine plans, feasibility
studies, future development and production costs, and
macroeconomic factors such as inflation and discount rates.
Value-in-use impairment models were prepared to assess
mining assets for impairment.
The key assumptions used in performing the impairment tests
by cash generating unit ("CGU") were as follows:
2016 2015
Discount rate 15,72% 13,42%
Diamond price per carat US$983 - US$1 503 US$1 292 - US$1 679
Forecasted ZAR/US$ exchange rate R14,75/US$ - R15,01/US$ R11,65/US$ - R12,25/US$
The South African businesses consist of a number of CGUs that
are represented by mining areas operated by the Group. Baken
is a separate CGU that forms part of the South African reporting
segment. The recoverable value for this CGU was derived from the
value-in-use calculations performed, which were in excess of the
fair value less costs to sell. The impairment charge and recoverable
amount relating to this CGU are outlined below:
2016 2015
Baken R'000 R'000
Carrying value pre-impairment 96 601 96 601 200 939
Recoverable amount (41 505) (41 505) (114 769)
Impairment loss recognised 55 096 55 096 86 170
Impairment of property, plant and equipment
- Mining plant and equipment 55 096 82 867
- Mine development costs - 3 303
55 096 86 170
4. Discontinued operations
On 5 October 2011, the Angolan Ministry of Geology, Mines and
Industry revoked the mining rights of the Luarica and Fucauma
joint ventures as no mining activities had been performed at
the sites for a period of three years as a result of the projects
being placed under care and maintenance.
The prescription of unclaimed debts of R24,0 million
(2015: R21,5 million) is included below.
Angolan joint ventures
Balance at beginning of year 119 450 125 188
Share of income from joint ventures (24 023) (21 508)
Profit before income tax (24 023) (21 508)
Taxation - -
Foreign exchange losses 25 223 15 770
Closing balance at end of year 120 650 119 450
5. Reconciliation of headline earnings
Continuing operations
(Loss)/profit for the year (123 788) 169 950
- Profit on sale of assets - (19)
- Taxation impact - 5
- Profit on sale of investment - (35 000)
- Taxation impact - -
- Impairment of assets 55 096 86 170
- Taxation impact (15 427) (24 128)
- Foreign currency differences on repayment of
long-term receivables from foreign operations
reclassified to profit or loss - (4 542)
- Taxation impact - 1 272
- Negative goodwill on assets acquired by associate - (132 040)
Headline (loss)/earnings (84 119) 61 668
Discontinued operations
Profit for the year 24 023 21 508
Headline earnings 24 023 21 508
6. Investment in associates
- Loan to associate: Somiluana - Sociedade Mineira, S.A. 52 912 59 276
Balance at beginning of year 59 276 59 580
Repayment of loan amount (18 386) (7 477)
Foreign exchange differences 12 022 7 173
The loan to Somiluana represents a portion of the exploration
costs previously incurred by the Group which is recoverable
from the mining company. The loan does not form part of the
net investment in the associate as settlement of the loan is
considered likely to occur in the foreseeable future.
- Investment in associate: Somiluana - Sociedade Mineira, S.A. - 13 898
Balance at beginning of year 13 898 -
Share of results of associated company (15 835) 12 715
Foreign exchange differences 1 937 1 183
The 33% investment in Somiluana is accounted for as an investment
in an associate under the equity method. During 2016, Somiluana
recorded losses to the extent that the Group's share of these
losses exceeded its investment in Somiluana. Accordingly, the Group
discontinued the recognition of its share of further losses after
the investment was reduced to zero, as the Group has not provided
any guarantees to Somiluana creditors.
- Investment in associate: West Coast Resources (Pty) Ltd 166 865 180 461
Balance at beginning of year 180 461 -
Proportionate shareholder funding - 52 000
Preferential loan - 5 200
Share of results of associated company (13 596) 123 261
Effective 28 October 2014, West Coast Resources (Pty) Ltd, in
which the Group holds a 40% interest, acquired assets and
liabilities relating to Namaqualand Mines.
219 777 253 635
7. Inventories
Diamonds 105 322 99 456
Consumables 5 675 6 412
110 997 105 868
The carrying value of diamond inventories, carried at net
realisable value, amounted to R11 018 880 (2015: R751 566).
Slow-moving consumable stock to the value of Rnil
(2015: R14,0 million) has been written off.
Cost of inventories included in cost of goods sold amounted
to R667 million (2015: R767 million).
8. Capital commitments
(including amounts authorised, but not yet contracted) 43 999 66 528
These commitments will be financed from the Group's own
resources or with borrowed funds.
9. Reclassification of costs previously included under
"Cost of goods sold"
Previously a percentage of head office costs was included
under "Cost of goods sold". The Company reviewed its cost
allocations and reporting requirements during 2016 and decided
that it would be more accurate and transparent to include all
head office costs under "Selling and administration costs"
in order to more appropriately reflect the way in which economic
benefits are derived from these costs.
The impact on the 2015 income statement is as follows:
Cost of goods sold
As reported 788 847
Head office costs previously included under
"Cost of goods sold" (10 782)
Reclassified 778 065
Selling and administration costs
As reported 75 899
Head office costs previously included under
"Cost of goods sold" 10 782
Reclassified 86 681
There was no impact on the statement of financial position
or the statements of comprehensive income as a result of
the reclassification of these costs.
10. Fair value estimation
Items carried at fair value are classified according to the fair
value hierarchy, by valuation method. The different levels have
been defined as follows:
- Quoted prices (unadjusted) in active markets for identical
assets or liabilities (Level 1).
- Inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly
(that is, as prices) or indirectly (that is, derived from
prices) (Level 2).
- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (Level 3).
Financial assets are classified as Level 1 according to the fair
value hierarchy. Investments held by the environmental trust are
the only financial assets carried at fair value, however, this fund
consists primarily of cash and cash equivalents with the largest
driver of the growth in the trust fund being attributable to interest
received.
10. Segment information
Operating segments
CONTINUING DISCONTINUED
Year ended 31 March 2016 South Africa Angola Total Angola
Carats sold 48 708 - 48 708 -
R'000 R'000 R'000 R'000
Revenue 671 374 - 671 374 -
Cost of goods sold (678 158) - (678 158) -
Gross (loss) (6 784) - (6 784) -
Share of results of associated companies (13 596) (15 835) (29 431) -
Royalties (3 248) - (3 248) -
Selling and administration costs (73 559) (18 983) (92 542) -
Mining (loss) (97 187) (34 818) (132 005) -
Exploration costs (2 048) - (2 048) -
Other gains - net 16 724 (1 609) 15 115 -
Profit for the year from discontinued operations - - - 24 023
Finance income 23 211 - 23 211 -
Finance costs (4 680) - (4 680) -
Impairment of assets (55 096) - (55 096) -
(Loss)/profit before income tax (119 076) (36 427) (155 503) 24 023
Depreciation included in the above (67 953) (15) (67 968) -
Net assets/(liabilities) 560 737 94 975 655 712 (120 616)
Capital expenditure 56 759 - 56 759 -
Net asset value per share (cents) 531 89 620 (114)
CONTINUING DISCONTINUED
Year ended 31 March 2015 (Reclassified) South Africa Angola Total Angola
Carats sold 62 819 - 62 819 -
R'000 R'000 R'000 R'000
Revenue 939 685 - 939 685 -
Cost of goods sold (778 065) - (778 065) -
Gross profit 161 620 - 161 620 -
Share of results of associated companies 123 261 12 715 135 976 -
Royalties (20 656) - (20 656) -
Selling and administration costs (77 150) (9 531) (86 681) -
Mining profit 187 075 3 184 190 259 -
Exploration costs (2 171) - (2 171) -
Other gains - net 54 159 (790) 53 369 -
Profit for the year from discontinued operations - - - 21 508
Finance income 25 052 - 25 052 -
Finance costs (4 705) - (4 705) -
Impairment of assets (86 170) - (86 170) -
Profit before income tax 173 240 2 394 175 634 21 508
Depreciation included in the above (88 542) (24) (88 566) -
Net assets/(liabilities) 694 658 90 625 785 283 (119 425)
Capital expenditure 47 920 - 47 920 -
Net asset value per share (cents) 657 86 743 (113)
During the current year, the Group changed the measurement method used to determine reported segment profit or loss.
This was done by including in the Angola segment some costs paid in South Africa in relation to activities in Angola.
During the current year, this resulted in the loss for Angola being R7 533 701 higher than it would have been had the
measurement methods not changed. As this does not amount to a change in the composition of the segments, the comparative
figures have not been reclassified to account for this change.
12. Mineral resources and mineral reserves
Total carats in reserve at Baken Mine increased by 10%, or 6 538 carats, year-on-year mainly as a result of a
re-evaluation of ore accounting procedures that resulted in positive grade adjustments, as well as a favourable ZAR/US$
exchange rate. The total carat resource also increased by 23% primarily due to the grade adjustments and delineation of
new resource blocks, supported by a programme of reverse circulation drilling of selected targets in the ore body and
bulk sampling. Indicated resources increased by 51% and inferred resources increased by 10%, i.e. an increase of
137 829 carats in total.
Total carats in reserve at Bloeddrif Mine decreased by 45% primarily due to a revision of diamond resource estimates
and changes in economic assumptions which prevent the conversion of resources to reserves in certain areas. The total
carat resource increased by 5%, or 10 914 carats, due to a resource review during the year which affected overburden,
ore volumes, grades and stone sizes.
Total carats in reserve at Somiluana Mine increased by more than 441% due to bulk sampling activities which, after
evaluation, indicated high-grade areas that significantly added to the reserves. Indicated resources increased by 108%,
mainly as a result of continuous sonic drilling activities on the east bank of the Luana River.
13. Contingent liabilities
There have been no material changes to contingent liabilities previously reported in the Integrated Annual Report.
14. Events after the reporting period
No events which may have a material effect on the Group occurred between the reporting date and the issuing of this
announcement.
15. Accounting policies
The summary consolidated financial statements are prepared in accordance with the JSE Limited Listings Requirements
("Listing Requirements") for preliminary reports and the requirements of the Companies Act applicable to summary
financial statements. The Listings Requirements require preliminary reports to be prepared in accordance with the
framework concepts, the measurement and recognition requirements of International Financial Reporting Standards ("IFRS"),
the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as
issued by the Financial Reporting Standard Council, and to also, as a minimum, contain the information required by
IAS 34, "Interim Financial Reporting".
The accounting policies applied in the preparation of the consolidated financial statements from which the summary
consolidated financial statements were derived are in terms of IFRS and are consistent with those accounting policies
applied in the preparation of the previous consolidated annual financial statements.
16. Preparation of financial statements
The preparation of the condensed consolidated financial statements was supervised by the Financial Director,
IP Hestermann CA(SA).
17. Report of independent auditor
These summary consolidated financial statements for the year ended 31 March 2016 have been audited by
PricewaterhouseCoopers Inc., who expressed an unmodified opinion thereon. The auditor also expressed an unmodified
opinion on the annual financial statements from which these summary consolidated financial statements were derived.
A copy of the Auditor's Report on the summary consolidated financial statements and of the Auditor's Report on the
annual consolidated financial statements are available for inspection at the Group's registered office, together
with the financial statements identified in the respective Auditor's Reports.
The Auditor's Report does not necessarily report on all of the information contained in this announcement/financial
results. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor's
engagement, they should obtain a copy of the Auditor's Report together with the accompanying financial information
from the issuer's registered office.
OVERVIEW
In this commentary, results are compared with the 12 months of the 2015 financial year (in brackets).
Sales revenue from the South African operations decreased by 28,6% in Rand terms from R939,7 million in 2015 to
R671,4 million in 2016. The disposal of the Remhoogte mining right and the discontinuation of operations at Reuning
Mine accounted for 14,4% of the decrease. Sales from the Lower Orange River ("LOR") and shallow water operations
decreased by 15,4% due to a decline of 23,5% in US$ diamond prices and 16% fewer carats sold. Revenue was, however,
positively affected by a 27,2% weakening in the Rand.
South African production decreased by 21,5% to 48 435 carats (2015: 61 688 carats), mainly as a result of a
13,4% reduction in gravel treated and a 5,4% decline in average grade at the LOR operations to 1,22 carats/100 m3
(2015: 1,29 carats/100 m3). The voluntary retrenchment of 22% of the workforce in February 2016, as well as the
accompanying shift changes, as announced on the JSE Limited's Stock Exchange News Service ("SENS") on 22 February 2016,
contributed to the decline in volumes treated.
The cost of goods sold decreased to R678,2 million (2015: R778,1 million). Key contributors included:
- a decrease in contractors fees in respect of Remhoogte (R90,6 million);
- the discontinuation of the Reuning operations (R56,2 million);
- stock movement (R24,1 million);
- lower depreciation (R20,6 million); and
- retrenchment costs of R46,6 million.
The LOR operations unit cost of production for current operations increased by 18,8% due to a reduction in volumes
treated and an 8,4% increase in operating costs.
The gross loss for the South African operations amounted to R6,8 million (2015: profit of R161,6 million).
Impairment charges in respect of the LOR operations amounted to R55,1 million (2015: R86,2 million).
The South African operations recorded a loss before tax of R119,1 million (2015: profit of R173,2 million).
At West Coast Resources, in which Trans Hex holds a 40% stake, production commenced during the year and amounted to
24 930 carats. Sales amounted to R49,4 million at an average price of US$208 per carat. The equity accounted loss for
the year amounted to R13,6 million (2015: profit of R123,3 million).
In Angola, production at Somiluana Mine, in which Trans Hex holds a 33% stake, amounted to 99 572 carats
(2015: 94 483 carats) due to a 14,2% increase in average grade, partly offset by a 7,7% decrease in gravel treated.
Total sales amounted to US$34,2 million at an average price of US$351 per carat (2015: sales of US$43,9 million at
an average price of US$458 per carat). Repayments of US$1 million were made to Trans Hex against the outstanding
investment amount and the Group received US$330 000 in dividends.
The loss from the Angolan continuing operations amounted to R36,4 million (2015: profit of R2,4 million), consisting
of Somiluana's equity accounted loss of R15,8 million and Angola head office costs of R20,6 million.
The Group reports an after-tax loss for the year from continuing operations of R124,8 million (2015: profit of R169,1 million).
Profit from the discontinued Luarica and Fucauma operations amounted to R24,0 million (2015: R21,5 million).
The Group therefore reports a loss for the year of R100,8 million (2015: profit of R190,6 million).
Cash and cash equivalents at the end of the year amounted to R353,5 million (2015: R407,2 million).
OPERATING PERFORMANCE
Detailed project information
Year ended 31 March 2016 Year ended 31 March 2015
Average Average
price per price per
Detailed project Average Average carat Average Average carat
information grade per Carats carats per achieved grade per Carats carats per achieved
(unaudited) 100 m3 produced stone (US$) 100 m3 produced stone (US$)
SOUTH AFRICA
- Baken 1,28 37 603 1,42 986 1,34 43 534 1,22 1 261
- Bloeddrif 0,80 3 538 2,19 1 472 1,36 6 081 2,21 2 055
- Reuning - - - - 0,34 696 2,77 2 491
- Remhoogte - - - - - 4 241 3,12 2 272
- Shallow water - 7 294 0,34 520 - 7 136 0,33 518
Total South Africa 1,22 48 435 0,97 981 1,29 61 688 1,00 1 353
West Coast Resources 53,34 24 930 0,30 208 - - - -
ANGOLA
Somiluana 31,96 99 572 0,57 351 27,99 94 483 0,53 458
Note: Average grade in South Africa is calculated excluding Remhoogte and shallow water production.
Lower Orange River operations
In February, the Company concluded an agreement with the National Union of Mineworkers to change the production shift
system effective from 29 February 2016. Operations changed from a four-shift system, running seven days per week, to
a three-shift system, working a five and a half day week. Overburden stripping rates and the volumes of gravel mined
and treated were adjusted to ensure the most sustainable model for each mine going forward. A total of 125 employees
(22% of the workforce) accepted voluntary retrenchment packages, effective on 29 February 2016. The majority of the
volunteers were older employees with long service.
During the year under review stripping of overburden in the main channel at Baken continued. The average grade decreased
slightly from 1,34 carats/100 m3 in 2015 to 1,28 carats/100 m3 in 2016. The average price of Baken stones declined in
line with the softer market from US$1 261 per carat in 2015 to US$986 per carat in 2016 despite a 16% increase in
average stone size to 1,42 carats per stone (2015: 1,22 carats per stone).
Results at Bloeddrif Mine were negatively affected by a substantial decrease in average grade from 1,36 carats/100 m3
in 2015 to 0,80 carats/100 m3 in 2016. More than 63% of the total volumes mined during the year originated from lower
grade suspended gravel which was mined to gain access to higher grade basal gravel.
West Coast Resources operations
Net revenue from the treatment of the small remaining tonnages of final recovery tailings and initial production was not
expected to cover project operational expenditure during the 2016 financial year. As this project was in a start-up phase,
an expected loss was incurred for the year.
Construction of the Mitchell's Bay production plant was completed towards the end of the 2015 calendar year. The 50 tons/hour
DMS plant was commissioned in November, followed by the washing and screening plant in December.
Mining operations commenced in December 2015 in the Langklip area and produced 16 517 carats at an average grade of
37,40 carats/100 m3.
During the year the final recovery plant at Kleinzee treated final recovery tailings and produced 8 413 carats.
Angolan operations
In the previous financial year, funds generated from sales were retained to develop the Mine. However, a decline in diamond
prices, and the subsequent impact on revenue, halted some equipment purchases planned for the year under review.
Carat production started to decline mid-2015 when mining operations encountered areas with high overburden and stripping
operations were hampered by the equipment shortage.
In February 2016, mining operations were moved to a new part of the concession characterised by less overburden as well as
promising grades and stone sizes. Production from the new area, also located on the east bank of the Luana River,
commenced late March 2016.
OUTLOOK
Lower Orange River operations
Stripping operations in the Baken central channel will continue until the economically viable gravel in the main channel
has been exhausted, which is expected to be towards the end of the 2018 financial year.
Performance at Bloeddrif Mine is expected to improve with the mining of higher grade gravel from the exposed basal gravel.
South African production for the 2017 financial year is expected to be in the order of 41 000 carats, compared to 2016
actual production of 48 435.
West Coast Resources operations
On-going drilling and prospecting will continue to target high-priority areas that may identify additional resources for
mining.
Mining activities will remain focused on the Langklip area and on other sections of the Koingnaas area which is projected
to yield gravel by June 2016.
Production for the 2017 financial year is expected to be in the order of 123 000 carats, compared to 2016 actual
production of 24 930 carats.
Angolan operations
Mining operations will continue on the east bank of the Luana River and prospecting activities will remain focused on the
new location to direct operations to areas of interest.
In order to speed up the expansion of the production footprint, external funding is being sought.
Production results and geological work through drilling and bulk testing indicate that carat production for the 2017
financial year will surpass the 99 500 carats achieved in 2016.
Market
Demand for rough and polished stones improved at the start of the 2016 calendar year after months of low manufacturing
output and reduced inventories at the cutting centres. Shortage of stock in the Indian manufacturing sector and at the
US retailers boosted rough diamond prices, supported by healthy trading activity in the secondary market.
Post year-end, the diamond market is enjoying a relatively stable period, improving the confidence of traders and dealers.
DIVIDEND
The Board has resolved not to declare a final dividend.
CHANGES TO THE BOARD OF DIRECTORS
Shareholders are advised of the following changes to the Board of Directors:
Mr Derek Wolstenholme resigned from the Board of Directors, effective 29 February 2016.
Mr Leon van Schalkwyk was appointed as Non-executive Director, effective 1 March 2016.
Following the acquisition of a 26,18% beneficial interest in the Company's securities by M Cubed Holdings Ltd, as
announced on SENS on 7 March 2016, Mr Quinton George and Mr Marco Wentzel were appointed as Non-executive Directors
with effect from 4 April 2016. In addition, Mr Richard Tait was appointed as an Alternate Director to Mr Wentzel with
effect from 4 April 2016.
Mr Piet Viljoen was appointed as Alternate Director to Mr Theunis de Bruyn, effective 18 April 2016.
By order of the Board
BR van Rooyen L Delport
Chairman Chief Executive Officer
Parow
31 May 2016
REGISTERED OFFICE
405 Voortrekker Road, Parow 7500
PO Box 723, Parow 7499
JSE SPONSOR
One Capital
TRANSFER SECRETARIES
Computershare Investor Services (Pty) Ltd
DIRECTORATE
BR van Rooyen (Chairman), AR Martin, T de Bruyn, BP Lekubo, LC van Schalkwyk, QJ George, MVZ Wentzel,
RM Tait (Alternate), PG Viljoen (Alternate), L Delport (Chief Executive Officer), IP Hestermann (Financial Director),
GM van Heerden (Company Secretary)
Date: 02/06/2016 07:05:00 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.
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