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TRANS HEX GROUP LIMITED - Unaudited condensed consolidated interim financial statements for the six months ended 30 September 2016

Release Date: 02/11/2016 07:05
Code(s): TSX     PDF:  
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Unaudited condensed consolidated interim financial statements for the six months ended 30 September 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")


UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2016


HEADLINES
- Group net profit amounted to R32,5 million (September 2015: loss of R32,5 million).
- Sales revenue from the wholly owned South African operations increased by 2,5% compared to the corresponding period 
  to R275,3 million (September 2015: R268,7 million) 
- Gross profit from South African land operations amounted to R13,9 million (September 2015: loss of R24,7 million).
- Equity accounting loss from West Coast Resources (Pty) Ltd amounted to R9,0 million 
  (September 2015: loss of R8,8 million).
- Equity accounting profit from Somiluana Mine in Angola amounted to R34,2 million 
  (September 2015: profit of R7,1 million).
- The Group's net cash position at the end of the period was R322,4 million (September 2015: R347,5 million).
- Earnings per share amounted to 31,8 cents (September 2015: loss of 30,3 cents) and headline earnings per share 
  amounted to 31,4 cents (September 2015: loss of 30,3 cents).
- Net asset value per share amounted to 540,0 cents (September 2015: 575,0 cents).


CONDENSED CONSOLIDATED INCOME STATEMENT

                                                                                 30/09/15            
                                                             30/09/16           Unaudited            31/03/16
                                                            Unaudited        Reclassified             Audited
                                            Notes               R'000               R'000               R'000
Continuing operations
Sales revenue                                                 275 319             268 660             671 374 
Cost of goods sold                                           (261 440)           (293 320)           (678 158)
Gross profit/(loss)                                            13 879            (24 660)             (6 784)
Share of results of associated companies        1              25 155             (1 704)            (29 431)
Royalties                                                      (1 309)             (1 335)             (3 248)
Selling and administration costs                              (48 588)            (47 750)            (92 542)
Mining (loss)                                                 (10 863)            (75 449)           (132 005)
Exploration costs                                              (1 571)             (1 139)             (2 048)
Other gains – net                               2               9 269             11 590              15 115 
Finance income                                                 13 973             12 115              23 211 
Finance costs                                                  (2 695)             (2 338)             (4 680)
Impairment                                      3                   –                  –            (55 096)
Profit/(loss) before income tax                                 8 113            (55 221)           (155 503)
Income tax                                                        793             11 449              30 730 
Profit/(loss) for the period from 
continuing operations                                           8 906            (43 772)           (124 773)

Discontinued operations
Profit for the period from 
discontinued operations                         4              23 620             11 244              24 023 
Profit/(loss) for the period                                   32 526            (32 528)           (100 750)

Attributable to:
Continuing operations                                           8 906            (43 772)           (124 773)
 - Owners of the parent                                         9 988            (43 240)           (123 788)
 - Non-controlling interest                                    (1 082)               (532)               (985)
Discontinued operations 
 - Owners of the parent                                        23 620             11 244              24 023 
                                                               32 526            (32 528)           (100 750)
                                                               
Earnings/(loss) per share – basic and 
diluted (cents)
 - Continuing operations                                          9,5              (40,9)             (117,1)
 - Discontinued operations                                       22,3               10,6               22,7 
Total                                                            31,8              (30,3)              (94,4)

Shares in issue adjusted for treasury 
shares ('000)                                                 105 699            105 699            105 699 

Headline earnings/(loss)                        5
 - Continuing operations                                        9 552            (43 241)            (84 119)
 - Discontinued operations                                     23 620             11 244             24 023 
Total                                                          33 172            (31 996)            (60 096)

Headline earnings/(loss) per share (cents)
 - Continuing operations                                          9,1              (40,9)              (79,6)
 - Discontinued operations                                       22,3               10,6               22,7 
Total                                                            31,4              (30,3)              (56,9)

Average ZAR/US$ exchange rate                                   14,72              12,75              14,06 


CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

                                                             30/09/16            30/09/15            31/03/16
                                                            Unaudited           Unaudited             Audited
                                                                R'000               R'000               R'000
Profit/(loss) for the period                                   32 526            (32 528)           (100 750)

Other comprehensive profit/(loss) net of tax:                   2 785            (14 998)            (19 442)
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                                                   3 391            (14 998)            (21 179)
Reclassification of foreign currency differences on 
repayment of long-term receivables from foreign operations       (606)                  –                  – 

Total comprehensive income/(loss) for the period               35 311            (47 526)           (120 192)

Attributable to:
 - Owners of the parent                                        36 393            (46 994)           (119 207)
 - Non-controlling interest                                    (1 082)               (532)               (985)
                                                               35 311            (47 526)           (120 192)

 
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

                                                             30/09/16            30/09/15            31/03/16
                                                            Unaudited           Unaudited             Audited
                                            Notes               R'000               R'000               R'000
ASSETS 

Non-current assets                                            427 015            463 300            388 784 
Property, plant and equipment                                  81 312            144 205             82 955 
Investment in associates                        6             256 424            253 500            219 777 
Investments held by environmental trust                        63 539             59 195             61 186 
Other financial assets                                          3 000              3 000              3 000 
Deferred income tax assets                                     22 740              3 400             21 866 

Current assets                                                472 624            499 270            502 079 
Inventories                                     7             129 078            131 299            110 997 
Trade and other receivables                                    21 158             20 173             37 109 
Current income tax                                                  –                342                474 
Cash and cash equivalents                                     322 388            347 456            353 499 

Total assets                                                  899 639            962 570            890 863 

EQUITY AND LIABILITIES

Capital and reserves                                          572 358             608 143             535 965 

Non-controlling interest                                       (1 951)               (416)               (869)

Non-current liabilities
Provisions                                                    116 230            111 747            112 449 

Current liabilities                                           213 002            243 096            243 318 
Trade and other payables                                      122 674            116 998            122 668 
Interest in joint ventures                      4              90 252            126 006            120 650 
Current income tax liabilities                                     76                 92                  –  

Total equity and liabilities                                  899 639            962 570            890 863 

Net asset value per share (cents)                                 540                575                506 


CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

                                                             30/09/16            30/09/15            31/03/16
                                                            Unaudited           Unaudited             Audited
                                                                R'000               R'000               R'000
Balance at 1 April                                            535 096            665 858            665 858 
Total comprehensive income/(loss) for the period               35 311            (47 526)           (120 192)
Dividends paid                                                      –            (10 605)            (10 570)
Balance at end of period                                      570 407            607 727            535 096 


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

                                                             30/09/16            30/09/15            31/03/16
                                                            Unaudited           Unaudited             Audited
                                                                R'000               R'000               R'000
Cash utilised in operations                                   (12 391)            (38 202)            (32 982)
Movements in working capital                                     (899)             (8 987)                708 
Income tax received                                               471              2 297              2 220 
Net cash utilised in operating activities                     (12 819)            (44 892)            (30 054)

Cash flows from investment activities                         (16 694)             (7 235)            (17 069)
Property, plant and equipment
 - Proceeds from disposal                                           –                  –              2 931 
 - Replacement                                                (14 416)            (23 019)            (51 045)
 - Additional                                                  (1 166)             (4 130)             (5 714)
Proceeds from repayment of loan to Trans Hex Angola             1 935              9 833             18 386 
Loan to associate                                             (20 000)                  –                  – 
Dividends received                                              4 572                  –                  – 
Interest received                                              12 381             10 081             18 373 

Cash flows from financing activities                               (1)            (10 612)            (10 588)
Interest paid                                                      (1)                 (7)                (18)
Dividends paid                                                      –            (10 605)            (10 570)

Effects of exchange rates on cash and cash equivalents         (1 597)              3 015              4 030 
Net decrease in cash and cash equivalents                     (31 111)            (59 724)            (53 681)
Cash and cash equivalents at beginning of period              353 499            407 180            407 180 
Cash and cash equivalents at end of period                    322 388            347 456            353 499 


NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

                                                             30/09/16            30/09/15            31/03/16
                                                            Unaudited           Unaudited             Audited
                                                                R'000               R'000               R'000
1.  Share of results of associated companies
    Consists of the following categories:

     - Somiluana – Sociedade Mineira, S.A.                     34 195               7 095            (15 835)
       The 33% investment in Somiluana is accounted 
       for as an investment in an associate under 
       the equity method.
       
     - West Coast Resources (Pty) Ltd                          (9 040)             (8 799)            (13 596)
       The 40% investment in West Coast Resources 
       is accounted for as an investment in an 
       associate under the equity method.           
                                                               25 155              (1 704)            (29 431)

2.  Other gains – net
    Other gains – net consist of the following categories:
     - Net foreign exchange gains                               4 955             10 392             10 368 
     - Commission on sale of diamonds                               –                807              4 747 
     - Marketing and management fee                             4 314                396                  – 
                                                                9 269             11 590             15 115 

3.  Impairment of assets
    Impairment of property, plant and equipment
    Mining plant and equipment                                      –                  –             55 096  

    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:
    
                                                      30/09/16                  30/09/15                  31/03/16
                                                     Unaudited                 Unaudited                   Audited
    Discount rate                                       15,50%                    13,42%                    15,72%
    Diamond price per carat                US$1 094 – US$1 690         US$984 – US$1 355         US$983 – US$1 503
    Forecasted ZAR/US$ exchange rate   R14,25/US$ – R14,76/US$   R13,29/US$ – R14,02/US$   R14,75/US$ – R15,01/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, as at 31 March 2016, 
    are outlined below. No additional impairment 
    was recognised at 30 September 2016.

                                                                                                     31/03/16
                                                                                                      Audited                                                                                                     
                                                                                  Baken                Total
                                                                                  R'000                 R'000 
    Carrying value pre-impairment                                               96 601               96 601 
    Recoverable amount                                                         (41 505)              (41 505)
    Impairment loss recognised                                                 55 096               55 096 

    For the year ended 31 March 2016, an impairment 
    charge of R55,1 million was recognised.

                                                             30/09/16            30/09/15            31/03/16
                                                            Unaudited           Unaudited             Audited
                                                                R'000               R'000               R'000
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 R23,7 million 
    (31/03/16: R24,0 million; 30/09/15: R11,2 million) 
    is included below.

    Angolan joint ventures
    Balance at beginning of period                            120 650            119 450            119 450  
    Share of income from joint ventures                       (23 620)            (11 244)           (24 023) 
    Profit before income tax                                  (23 620)            (11 244)           (24 023) 
    Taxation                                                        –                  –                  –  
    Foreign exchange (profits)/losses                          (6 778)             17 800             25 223  
    Closing balance at end of period                           90 252            126 006            120 650  

5.  Reconciliation of headline earnings
    
    Continuing operations
    Profit/(loss) for the period                                9 988            (43 241)           (123 788)
     - Impairment of assets                                         –                  –             55 096 
     - Taxation impact                                              –                  –            (15 427)
     - Foreign currency differences on repayment 
       of long-term receivables from foreign operations 
       reclassified to profit or loss                            (606)                  –                  – 
     - Taxation impact                                            170                  –                  – 
    Headline earnings/(loss)                                    9 552            (43 241)            (84 119)

    Discontinued operations 
    Profit for the period                                      23 620             11 244             24 023 
    Headline earnings                                          23 620             11 244             24 023 

6.  Investment in associates

    - Loan to associate: Somiluana – Sociedade Mineira, S.A.   47 611             57 767             52 912 
      Balance at beginning of period                           52 912             59 276             59 276 
      Repayment of loan amount                                 (1 935)            (9 833)            (18 386)
      Foreign exchange differences                             (3 366)             8 324             12 022 

      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.                                            28 028             24 071                  – 
      Balance at beginning of period                                –             13 898             13 898 
      Share of results of associated company                   34 195              7 095            (15 835)
      Dividends paid                                           (4 572)                  –                  –  
      Foreign exchange differences                             (1 595)              3 078              1 937 

      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.

    - Loan to associate: West Coast Resources (Pty) Ltd        28 160              5 200              5 200 
      Balance at beginning of period                            5 200              5 200              5 200 
      Loan advances during the period                          20 000                  –                  –  
      Capitalised interest                                      2 960                  –                  –  

      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: West Coast Resources 
      (Pty) Ltd                                               152 625            166 462            161 665 
      Balance at beginning of period                          161 665            175 261            175 261 
      Share of results of associated company                   (9 040)             (8 799)            (13 596)

      The 40% investment in West Coast Resources (Pty) Ltd 
      is accounted for as an investment in an associate 
      under the equity method.
      
                                                              256 424            253 500            219 777 

7.  Inventories
    Diamonds                                                  124 289            126 834            105 322 
    Consumables                                                 4 789              4 465              5 675  
                                                              129 078            131 299            110 997 

8.  Capital commitments
    (including amounts authorised, but not yet contracted)     20 143             28 434             43 999 
    
    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 income statement for the six 
    months ending 30 September 2015 is as follows:

    Cost of goods sold
    As reported                                                     -             299 433                   - 
    Head office costs previously included under 
    "Cost of goods sold"                                            -              (6 113)                  -
    Reclassified                                                    -             293 320                   -

    Selling and administration costs
    As reported                                                     -              41 637                   -  
    Head office costs previously included under 
    "Cost of goods sold"                                            -               6 113                   - 
    Reclassified                                                    -              47 750                  -

    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.

11. Segment information
 
    Operating segments
    
                                                                      CONTINUING                            DISCONTINUED
    Period ended 30 September 2016                 South Africa              Angola               Total              Angola
    Carats sold                                          18 192                  -              18 192                   - 
                                                          R'000               R'000               R'000               R'000
    Revenue                                             275 319                  –            275 319                  – 
    Cost of goods sold                                 (261 440)                  –           (261 440)                  – 
    Gross profit                                         13 879                  –             13 879                   – 
    Share of results of associated companies             (9 040)             34 195             25 155                  – 
    Royalties                                            (1 309)                  –             (1 309)                  – 
    Selling and administration costs                    (36 124)            (12 443)            (48 567)                  – 
    Mining (loss)/profit                                (32 595)             21 732             (10 863)                  – 
    Exploration costs                                    (1 571)                  –             (1 571)                  – 
    Other gains – net                                     9 448               (179)              9 269                  – 
    Profit for the period from discontinued 
    operations                                                –                   –                  –             23 620
    Finance income                                       13 973                  –             13 973                  – 
    Finance costs                                        (2 695)                  –             (2 695)                  – 
    Impairment of assets                                      –                  –                  –                  – 
    (Loss)/profit before income tax                     (13 440)             21 553              8 906             23 620
    
    Depreciation included in the above                  (17 240)                 (4)            (17 244)                  – 
    Net assets/(liabilities)                            546 633            114 026            660 659            (90 252)
    Capital expenditure                                  15 294                  –             15 294                  – 
    Net asset value per share (cents)                       517                132                625                (85)

                                                                      CONTINUING                            DISCONTINUED
    Period ended 30 September 2015                 South Africa              Angola               Total              Angola
    Carats sold                                          22 629                  -              22 629                   - 
                                                          R'000               R'000               R'000               R'000
    Revenue                                             268 660                  –            268 660                  – 
    Cost of goods sold                                 (293 320)                  –           (293 320)                  – 
    Gross (loss)                                        (24 660)                  –            (24 660)                  – 
    Share of results of associated companies             (8 799)              7 095             (1 704)                  – 
    Royalties                                            (1 335)                  –             (1 335)                  – 
    Selling and administration costs                    (42 125)             (5 625)            (47 750)                  – 
    Mining (loss)                                       (76 919)              1 470             (75 449)                  – 
    Exploration costs                                    (1 139)                  –             (1 139)                  – 
    Other gains – net                                    11 674                (84)             11 590                  – 
    Profit for the period from discontinued 
    operations                                                –                  –                  –             11 244
    Finance income                                       12 115                  –             12 115                  – 
    Finance costs                                        (2 338)                  –             (2 338)                  – 
    Impairment of assets                                      –                  –                  –                  – 
    (Loss)/profit before income tax                     (56 607)              1 386            (55 221)             11 244
    
    Depreciation included in the above                  (35 125)                 (7)            (35 132)                  – 
    Net assets/(liabilities)                            645 802             87 931            733 733           (126 006)
    Capital expenditure                                  27 149                  –             27 149                  – 
    Net asset value per share (cents)                       611                 83                694               (119)

                                                                          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)

    During the previous financial 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 previous year, this resulted in the loss for Angola being (31/03/16: R7 533 701; 30/09/15: R3 823 453) 
    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.
    
    Revenue from transactions with certain customers can amount to 10% or more of total revenue. During the period under 
    review such individual customers were responsible for aggregate sales of R74,5 million (31/03/16: Rnil; 
    30/09/15: R35,7 million).
    
12. Mineral resources and mineral reserves

    The Independent Expert Report: Valuation of Mineral Assets, as compiled by Snowden Mining Industry Consultants (Pty) 
    Limited and published on the Company website on 23 September 2016 as part of the Combined Offer Circular distributed to 
    shareholders on 23 September 2016, is substantially in line with the Company's Mineral Resources and Reserves Statement 
    dated 31 December 2015. The only respect in which the Snowden Report, dated 31 July 2016, differs materially from 
    the Company's Mineral Resources and Reserves Statement is that it reports a 43% reduction in the carats and gravel 
    volume for Baken Mine's probable reserves due to the ongoing depletion of the reserve through production activities 
    and as a result of changes in economic factors. 

    An updated Mineral Resources and Reserves Statement will be published in the 2017 Integrated Annual Report.

13. Contingent liabilities

    There have been no material changes to contingent liabilities previously reported in the 2016 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 condensed consolidated interim financial statements are prepared in accordance with International Financial 
    Reporting Standards, (IAS) 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the 
    Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council. 
    The accounting policies applied in the preparation of these interim financial statements are in terms of 
    International Financial Reporting Standards and are consistent with those applied in 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).

    
OVERVIEW

In this commentary, results are compared with the first six months of the 2016 financial year (in brackets).

Sales revenue from the South African operations increased by 2,5% in Rand terms from R268,7 million to R275,3 million. 
The average US$ diamond price increased by 10,4%, mainly as a result of firmer global prices and increased demand. 
Sales were positively affected by a 15,4% weakening of the Rand against the US$, partly offset by a 19,6% decline 
in carats sold.

South African production decreased by 20,6% to 18 997 carats (September 2015: 23 940 carats) in line with a new 
operating model which was introduced at the Lower Orange River operations in February 2016 in order to extend 
the viable life-of-mine of these operations for as long as possible. These changes have resulted in reduced 
overburden stripping and less gravel mined. 

The cost of goods sold decreased to R261,4 million (September 2015: R293,3 million), mainly due to lower labour, 
fuel and maintenance costs, as well as depreciation. 

Gross profit for the South African operations amounted to R13,9 million (September 2015: loss of R24,7 million). 

The South African operations showed a loss before tax of R13,4 million (September 2015: loss of R56,6 million). 

At West Coast Resources, in which Trans Hex holds a 40% stake, production amounted to 37 153 carats 
(September 2015: 4 821 carats). Sales amounted to R78,4 million at an average price of US$176 per carat 
(September 2015: sales of R7,2 million at an average price of US$170 per carat). The 40% equity accounted loss for 
the period amounted to R9,0 million (September 2015: loss of R8,8 million).

In Angola, production at Somiluana Mine, in which Trans Hex holds a 33% stake, increased significantly to 91 033 carats 
(September 2015: 67 981 carats) due to a 50,3% increase in average grade, partly offset by a 10,9% decrease in gravel 
treated. Total sales amounted to US$32,5 million at an average price of US$477 per carat (September 2015: sales of 
US$20,2 million at an average price of US$300 per carat). Repayments of US$250 000 (September 2015: US$ 750 000) were 
made to Trans Hex against the outstanding investment amount and the Group received US$330 000 (September 2015: US$ nil) 
in dividends.

Profit from the Angolan continuing operations amounted to R21,6 million (September 2015: profit of R1,4 million), 
consisting of Somiluana’s equity accounted profit of R34,2 million less Angolan head office costs of R12,6 million. 

The Group reports an after-tax profit for the period from continuing operations of R8,9 million 
(September 2015: loss of R43,8 million). 

Profit from the discontinued Luarica and Fucauma operations amounted to R23,6 million (September 2015: R11,2 million).

The Group therefore reports a profit for the period of R32,5 million (September 2015: loss of R32,5 million).

Cash and cash equivalents at the end of the reporting period amounted to R322,4 million (September 2015: R347,5 million). 


OPERATING PERFORMANCE

Detailed project information

                             Period ended 30 September 2016                  Period ended 30 September 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                  2,30      13 108        1,34       1 043        1,11      18 566        1,37         923
 - Bloeddrif              0,51       1 111        2,51       2 196        0,85       2 340        2,02       1 462
 - Shallow  water            –       4 778        0,30         585           –       3 033        0,33         479
Total South Africa        1,80      18 997        0,73       1 028        1,07      23 940        0,99         932

West Coast Resources     34,47      37 153        0,28         176      297,46       4 821        0,38         170

Angola
 - Somiluana             57,50      91 033        0,63         477       38,26      67 981        0,56         300
 
Note: Average grade in South Africa is calculated excluding shallow water production.

Lower Orange River operations 

Stripping of overburden in the main channel at Baken continued during the period. The average grade increased 
significantly from 1,11 carats/100 m3 in September 2015 to 2,30 carats/100 m3 in September 2016 mainly due to the 
re-evaluation of ore accounting policies that resulted in positive grade adjustments. The average price of Baken 
stones increased in line with the firmer market from US$923 per carat in September 2015 to US$1 043 per carat in 
September 2016.

Results at Bloeddrif Mine were again negatively affected by the stripping of lower grade suspended gravel which 
resulted in a decrease in average grade from 0,85 carats/100 m3 in September 2015 to 0,51 carats/100 m3 in 
September 2016 and in carats produced from 2 340 carats in September 2015 to 1 111 carats in September 2016. 
The lower grade suspended gravel was mined to gain access to higher grade basal gravel which will be mined and 
treated in the second half of the 2017 financial year. 

West Coast Resources operations

Plant construction and improvements are continuing in order to further expand the operational footprint.

During the period, mining activities produced 36 003 carats at an average grade of 33,48 carats/100 m3. In addition, 
the final recovery plant treated final recovery tailings and produced 1 150 carats (September 2015: 4 821 carats). 

Angolan operations

During the period, operations at Somiluana Mine remained focused on higher grade areas which have resulted in a 
substantial increase in carat production and revenue.


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 carats.

West Coast Resources operations

Ongoing drilling and prospecting will continue to target high priority areas that may identify additional 
resources for mining. 

Stripping operations have commenced in the Langklip area, which is projected to yield gravel by November 2016. 
Mining activities will remain focused here, as well as on other sections of the Koingnaas area.

Production for the 2017 financial year is expected to be in the order of 80 000 carats, compared to 2016 actual 
production of 24 930 carats.

Angolan operations

Mining operations at Somiluana Mine will continue on the east bank of the Luana River and prospecting activities 
will remain focused on new areas to the north-east, directing operations to areas of interest.

Self-funded new equipment purchases are planned in order to increase the Mine’s production footprint. The equipment 
will enable the economical mining of lower grade areas.

Production results and geological work through drilling and bulk sampling indicate that carat production for the 
2017 financial year will surpass the 99 500 carats achieved in 2016.

Market

The second half of the 2016 calendar year started with a decline in demand, but the market recovered well in 
September 2016 in both trading and manufacturing sectors. The US is currently entering its year-end holiday period, 
further boosting polished sales.

Rough demand is expected to remain firm during the remainder of the financial year.


DIVIDEND

The Board has resolved not to declare an interim dividend.


COMBINED OFFER CIRCULAR

Shareholders are reminded that the Company is currently in an Offer period as announced on SENS on Friday, 
23 September 2016. A Combined Offer Circular was sent to shareholders on Friday, 23 September 2016 and the Offer 
closes at 12:00 on Friday, 25 November 2016.

All announcements and documents relating to the Offer are available on the Company's website at www.transhex.co.za. 



By order of the Board

BR van Rooyen                           L Delport
Chairman                                Chief Executive Officer 

Parow
31 October 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: 02/11/2016 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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