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Tharisa 2016 Consolidated Annual Results
THARISA PLC
Incorporated in the Republic of Cyprus with limited liability
Registration number: HE223412
JSE share code: THA
LSE share code: THS
ISIN: CY0103562118
THARISA 2016
CONSOLIDATED ANNUAL RESULTS
Integrated
Innovation
HIGHLIGHTS
ROM MINED
UP 15.6%
4.8 Mt
(2015: 4.2 Mt)
PGM PRODUCTION
UP 12.4% (5PGE + Au)
132.6 koz
(2015: 118.0 koz)
CHROME CONCENTRATE
PRODUCTION
UP 10.8%
1.2 Mt
(2015: 1.1 Mt)
REVENUE
DOWN 11.0%
US$219.7m
(2015: US$246.8m)
OPERATING PROFIT
UP 74.5%
US$32.1m
(2015: US$18.4m)
EBITDA
UP 48.3%
US$43.0m
(2015: US$29.0m)
PROFIT BEFORE TAX
UP 129.2%
US$22.0m
(2015: US$9.6m)
HEADLINE EARNINGS
PER SHARE
UP 200.0%
US$ 6 cents
(2015: US$ 2 cents)
PROPOSED MAIDEN DISTRIBUTION TO SHAREHOLDERS OF
US$ 1 CENT PER SHARE
LEADERSHIP REVIEW
financial year-end September 2016
Executive Chairman Loucas Pouroulis, Chief Executive
Officer Phoevos Pouroulis and Chief Finance Officer
Michael Jones.
Dear Stakeholder
In compiling this report we have been guided by materiality
so that we 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 once again proven the
robustness of our low cost co-production model. We are
pleased to report that, in spite of chrome concentrate
prices reaching critically low levels in Q2, we negotiated the
challenges and have succeeded in reporting an improved
and profitable performance.
FY2016 was always set to be a watershed year for Tharisa
even though the achievement of steady state production
was impacted by safety-related stoppages in Q1, which
delayed this achievement. However, from Q2 onwards
the Tharisa Mine recorded steady state production (on an
annualised basis) and a number of record achievements
during the remainder of the year.
We mined 4.8 Mt of ore during the year, being the required
mining call rate for the nameplate capacity of our processing
plants, of which 4.7 Mt was processed through the two
plants. This resulted in above guidance PGM production
of 132.6 koz of contained PGMs and production of 1.2 Mt
of chrome concentrates. Of the chrome concentrates,
269.4 kt comprised specialty grade product on the back
of our strategic decision to increase our market share and
capture higher margins in a suppressed metallurgical grade
market.
PGM prices have remained relatively stable during the year
albeit lower than FY2015 supported by a weaker ZAR,
and we believe there is potential for a price recovery in
platinum, in particular with palladium recording a strong
recovery post the year-end to above US$700/oz.
Post the year-end we have seen a recovery in the
metallurgical grade chrome prices delivered to China on
the back of physical supply shortages with inventories
running to critically low levels, coupled with a Chinese
stimulus package initiating strong stainless steel growth
and consumption in China. Prices are currently reported at
above US$350/t CIF China.
Our full-year results demonstrates the significance of
reaching steady state production, a reduction in unit
costs, as well as operational efficiencies. Operating
profit for the year amounted to US$32.1 million
(FY2015: US$18.4 million), with a net profit after tax of
US$15.8 million (FY2015: US$6.0 million) generating HEPS
of US$ 6 cents (FY2015: US$ 2 cents).
It is the Group's policy to pay 10% of consolidated net
profit after tax as a dividend, and the directors are pleased
to announce that, subject to the necessary shareholder
and regulatory approvals, the Board has approved an
inaugural distribution to shareholders of US$ 1 cent per
share, signalling our strong intention of maintaining capital
discipline and of being a dividend-paying company.
SAFETY
Safety remains a priority at Tharisa, which achieved a
fatality-free year and, at 30 September 2016, our LTIFR per
200 000 hours worked at the mine was 0.36.
As previously reported, Q1 was interrupted by a number of
safety-related stoppages, primarily on the back of the tragic
fatality that occurred in September 2015. This impacted
our mill throughput for the quarter by approximately 15%.
We are pleased to advise that no safety-related stoppages
were incurred for the remainder of the year, highlighting
our emphasis on safety as well as our improved relationship
with the DMR inspectorate.
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. To that end it
is pleasing to report that Tharisa Minerals was awarded the
Best Safety Performance in class award at Mine Safe 2016.
OPERATIONAL OVERVIEW
A number of milestones were achieved during the financial
year including:
- 4.8 Mt reef mined, an increase of 15.6%
- 4.7 Mt milled, an increase of 5.8%
- 132.6 koz 5PGE + Au contained PGM production, up
by 12.4%
- 69.9% overall PGM recovery, an increase of 6.2%
- 1.24 Mt production of chrome concentrates, up by 10.8%
- 62.7% chrome recovery, an increase of 8.1%
- 269.4 kt specialty grade chrome production, an increase
of 138.8%
MINING
Steady state reef mining was achieved for the year under
review. The accelerated overburden stripping of the
previous two years allowed a focus on inter-burden waste
removal and an increased strike face length. It is planned
that the stripping ratio will normalise to 9.7 bcm:bcm in
FY2017 from the 7.3 bcm:bcm achieved in the current year.
PROCESSING
The processing plants performed well throughout the year
with exceptional performance during Q4, resulting in PGM
recoveries achieving record levels of 80.6%, and chrome
recoveries nearing targeted levels at 63.5% during the quarter.
Plant throughput equated to 98% of combined nameplate
capacity despite the various enforced safety stoppages
in Q1. The primary spiral replacement programme was
successfully completed and enabled the production of
specialty grade chrome concentrates to increase to 21.7%
of total chrome concentrate production up from 10.1% the
prior year, a strategic decision taken to mitigate against the
sharp decline in metallurgical grade prices in Q1 and Q2.
Specialty grade chrome concentrates typically command
a US$30/t premium over standard metallurgical grade
chrome concentrates.
LABOUR RELATIONS
Labour relations at the Tharisa Mine remained stable, during
the year and we benefit from being in the second year of
a three-year wage agreement concluded in the second
quarter of FY2015. The agreement ensures annual salary
increases in line with South African inflation rates. The
interface between the NUM, which represents the majority
of our employees, and Tharisa Minerals is constructive and
co-operative. Our main contractor, MCC, has recognised
AMCU as the representative union at the mine. There have
been no material issues with the contractor's labour during
the financial period under review.
UTILITIES
Our relationship with our primary utility supplier, Eskom,
continues on a sound footing with no material disruptions
to electricity supply and with no impact on processing
activities during the period under review.
South Africa has experienced a major drought and as a
result water supply and sustainability was ranked as our
number one risk for our mining and processing operations
at the Tharisa Mine. In terms of our mitigation strategy
we were able to secure additional water from the nearby
Buffelspoort Dam via a temporary transfer and conversion
of our agricultural water use rights to industrial use rights.
This allocation along with our existing sources of water is
sufficient for our operations. We are pleased to report that
post-year-end typical rainfall has begun replenishing our
conventional water sources.
LOGISTICS
2016 2015 Change
Average US$/ 42 56 (25%)
transport cost tonne
per tonne
of chrome
concentrate -
CIF China basis
Chrome kt 923.1 974.8 (5%)
concentrates
shipped
The chrome concentrates destined for main ports in
China were shipped either in bulk from the Richards Bay
Dry Bulk Terminal or via containers and transported
from Johannesburg by road to Durban, from where it was
shipped. The economies of scale and in-house expertise
have ensured that our transport costs, a major cost of the
Group, remains 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 923.1 kt (2015: 974.8 kt) of chrome concentrates
was shipped by Arxo Logistics in FY2016, mostly to main
ports in China. Of this, 95% was shipped in bulk, representing
a significant increase on the prior year's bulk shipments
of 87%. 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 the revenue
authorities at Richards Bay. Arxo Logistics provided third
party logistics services during the period under review and
is planning to expand this service offering in the year ahead.
Negotiations regarding a planned public-private partnership
for an on-site railway siding at the Tharisa Mine are
continuing and final commercial terms are still to be agreed.
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 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. Our commitment to the neighbouring
communities is evidenced in all aspects of our business,
not only from our corporate social initiatives and local
economic development plans, but also underpinned by
equity ownership of the community in Tharisa Minerals.
COMMODITY MARKETS AND SALES
2016 2015 Change
PGM basket US$/oz 736 885 (16.8%)
price
PGM basket ZAR/oz 10 881 10 620 2.7%
price
42% US$/ 120 158 (24.1%)
metallurgical tonne
grade chrome
concentrate
contract price
42% ZAR/ 1 751 1 896 (8.0%)
metallurgical tonne
grade chrome
concentrate
contract price
Specialty US$/ 126 146 (13.7%)
grade chrome tonne
concentrate
price (FOB basis)
Exchange rate ZAR:US$ 14.8 12.0
PGM concentrate production continues to be sold to
Impala Platinum in terms of the off-take agreement with
a total of 132.9 koz of contained PGMs (on a 5PGE + Au
basis) being sold during the year. This is an increase of 10.8%
over the previous year's sales of 119.9 koz of contained
PGMs (on a 5PGE + Au basis).
The PGM prill split by mass is as follows:
2016 2015
Platinum 55.9% 56.2%
Palladium 16.1% 16.2%
Rhodium 9.4% 9.3%
Gold 0.2% 0.2%
Ruthenium 13.9% 13.7%
Iridium 4.5% 4.4%
Tharisa Minerals is paid a variable percentage of the market
value of the contained PGMs in terms of an agreed formula.
The PGM basket price has remained under pressure with
the average PGM basket price per ounce reducing by 16.8%
to US$736/oz (2015: US$885/oz) for the financial year.
However, Tharisa Minerals benefited from a weakening of
the ZAR relative to the US$, resulting in the ZAR basket
price increasing by approximately 2.7%.
Chrome concentrate sales totalled 1.2 Mt, 272.7 kt of which
were higher value-add specialty chemical and foundry
grade chrome concentrates with the bulk of the sales being
metallurgical grade chrome concentrate. The average
price for metallurgical grade chrome concentrate on a CIF
main ports China basis reduced in US$ terms to US$120/
tonne. China remains the main market for metallurgical
chrome concentrate. The agency agreement with Noble
for 50 ktpm metallurgical grade chrome concentrate
continues.
Chemical and foundry grade chrome concentrates
produced by Arxo Metals continued to be sold to Rand York
Minerals in terms of an off-take agreement, and chemical
grade chrome concentrates produced by Tharisa Minerals.
Rand York Minerals and Arxo Resources have agreed to
the joint marketing of the chemical grade concentrate sold
by Tharisa Minerals.
FINANCIAL OVERVIEW
The segmental contribution to revenue and gross profit from PGM and chrome concentrates is summarised below:
2016 2015
US$ million PGM Chrome Total PGM Chrome Total
Revenue 81.5 138.1 219.6 83.1 163.7 246.8
Cost of sales 57.3 107.8 165.1 63.9 139.8 203.7
- Cost of sales excluding 57.1 64.7 121.8 63.7 80.8 144.5
selling costs
- Selling costs 0.2 43.1 43.3 0.2 59.0 59.2
Gross profit contribution 24.2 30.3 54.5 19.2 23.9 43.1
Gross profit margin 29.7% 21.9% 24.8% 23.1% 14.6% 17.5%
Sales volumes 132.9 koz 1 196.2 kt 119.9 koz 1 124.4 kt
(Shared costs continue to be allocated on an equal basis to the respective reporting segments)
Group revenue totalled US$219.6 million, a decrease
of 11.0% relative to the previous year. The decrease in
revenue is attributable to a decrease in the commodity
prices for both PGMs and chrome concentrates with the
basket price for PGMs reducing by 16.8% per ounce and
the metallurgical grade chrome concentrate price on a
CIF main ports China basis reducing by 24.1% per tonne
over the comparable period. The reduction in revenue was
mitigated by the increase in PGM and chrome concentrate
volumes sold.
The Group's gross profit margin of 24.8% compared
favourably to the comparable period's gross profit margin
of 17.5%.
The PGM segment gross margin of 29.7% was higher than
the previous year, notwithstanding the sales revenue being
negatively impacted by reduced PGM prices. The gross
margin improved with a reduction in the overall unit cost
of production as annualised steady state production was
achieved and recoveries improved. The cost base for PGMs
is predominantly in US$ and the weakening of the ZAR
relative to the US$ impacted favourably on the PGM sector
gross margin.
The chrome segment gross margin of 21.9% was higher
than the year before with contributing factors including
competitively priced freight rates for bulk shipments
of chrome concentrates, reduction in the unit cost of
production as steady state production on an annualised
basis was achieved and the benefits on the cost base of a
weakening ZAR relative to the US$.
Gross margins also benefited following the modification of
the Voyager Plant spiral circuits and increased production
of chemical grade chrome concentrates which are a higher
value specialty product.
After accounting for administrative expenses of
US$22.8 million (a reduction of 8.1% over the comparable
period), the Group achieved an operating profit of
US$32.1 million.
EBITDA amounted to US$43.0 million (2015:
US$29.0 million).
Finance costs (totalling US$10.2 million) principally related
to the senior debt facility secured by Tharisa Minerals for
the construction of the Voyager Plant.
Notwithstanding the depressed commodity prices during
the financial year, the Group recorded a substantial
improvement in profitability, generating a profit before tax
of US$22.0 million compared to the comparable period of
US$9.6 million.
The tax charge amounted to US$6.2 million, an effective
charge of 28.1%, due primarily to disallowable charges being
incurred within the Group's activities, including in relation
to inter-group preference share funding.
Foreign currency translation differences for foreign
operations, arising where the Company has funded the
underlying subsidiaries with US$ denominated funding
and the reporting currency of the underlying subsidiary
is not in US$, amounted to a favourable US$4.2 million
against the prior year's charge of US$39.4 million. The
average exchange rate for the main operating subsidiary
(which reports in ZAR) weakened from ZAR11.98 in
FY2015 to ZAR14.79 in the current reporting period.
Basic and diluted profit per share for the year amounted to
US$ 5 cents (2015: US$ 2 cents) with headline earnings per
share of US$ 6 cents (2015: US$ 2 cents).
The major capex for achieving steady state production
has been incurred with the current capex spend focussed
on stay in business capex and optimisation initiatives
to improve recoveries of both PGMs and chrome
concentrates. Additions to property, plant and equipment
for the period amounted to US$12.3 million, including an
amount of US$2.4 million relating to the capitalisation of
deferred stripping. The depreciation charge amounted to
US$10.2 million (2015: US$10.3 million).
In terms of the Group's Share Award Plan, during the
financial year the Company issued 1 089 685 new ordinary
shares ranking pari passu with the existing issued ordinary
shares following the vesting of conditional awards.
The total debt amounted to US$67.1 million, resulting in
a debt-to-total-equity ratio of 33.2%. Offsetting the debt
service reserve account amount of US$9.8 million, resulted
in a pro forma debt-to-equity ratio of 28.4%. The long-term
targeted debt to equity ratio is 15%. Off-setting the debt
service reserve account and the cash and cash equivalent
of US$15.8 million results in a net debt-to-total-equity ratio
of 20.5%.
The principal debt is a senior debt facility raised to
fund the expansion of the mining footprint and the
construction of the Voyager Plant. The amount outstanding
at 30 September 2016 amounted to US$36.5 million
(the facility is a ZAR denominated facility). Subsequent
to the financial year-end, on 14 November 2016, project
completion as defined in the senior debt facility terms was
achieved. As a result the interest rate reduces by 140 basis
points and the guarantee provided by the Company
falls away.
The Group discounted certain letters of credit with
financial institutions. This discounting is with recourse.
At 30 September 2016, this short-term debt amounted to
US$23.0 million.
The Group generated net cash from operations of
US$22.2 million (2015: US$41.4 million). Cash on hand
amounted to US$15.8 million. In addition, the Group held
US$9.8 million in a debt service reserve account.
It is Company policy to pay an annual dividend of 10% of
consolidated net profit after tax. No dividend was declared
in respect of the financial year ended 30 September 2015
due to the volatility of commodity prices post the financial
year-end. It is therefore proposed to declare a distribution of
approximately 10% of the cumulative consolidated net profit
after tax for the financial year ended 30 September 2015 and
September 2016. To comply with Cypriot Companies Law,
which precludes dividends being paid unless past losses have
been recouped, the distribution, which has been approved
by the Board, will, subject to shareholder approval and the
necessary court approvals, be made by way of a return of
share premium to shareholders (a capital reduction) in the
amount of US$ 1 cent per share. The necessary resolution
will be proposed at the upcoming Annual General Meeting
of the Company.
OUTLOOK
With the considerable recovery in chrome concentrate
prices underpinned by demand the margins from our
chrome business are robust. Our free cash flow for FY2017
and EBITDA margins should grow considerably, supported
by solid operational performance and a more favourable
commodity outlook. While the PGM basket price in US$
seems suppressed with the weaker South African currency
we still maintain healthy margins and are geared to benefit
from a recovery in this market. We look to additional
optimisation within our stay in business capex, with the high
energy flotation conversion in the Genesis plant boosting
PGM recoveries within this plant, as well as the secondary
spiral replacement programme underway potentially
unlocking further chrome units.
Reaching steady state on an annualised basis in the year
under review has set the business up to benefit from
incremental improvements in feed grade, recoveries
and more buoyant commodity markets. The production
outlook for FY2017 remains at 147.4 koz of PGMs and
1.3 Mt of chrome concentrates, of which 300 kt will be
specialty grade chrome concentrates.
The management team is positive about the prospects
for the year ahead and believe that it will be the definitive
year where the economies of scale will be demonstrated
through reduced unit costs and increasing operating
margins and material profits.
We thank our Board, management, employees, customers,
suppliers and partners who have assisted the Company
during this profitable year.
CONDENSED
CONSOLIDATED
FINANCIAL STATEMENTS
30 September 2016
Preparation
of condensed
consolidated financial
statements
The condensed consolidated financial statements for the
year ended 30 September 2016 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 consolidated
financial statements should be read together with the full
audited financial statements and full audit report.
These condensed consolidated financial 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.
The consolidated financial statements have been reported
on without qualification by KPMG Limited.
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 28 November 2016.
CONDENSED CONSOLIDATED STATEMENT OF PROFIT
OR LOSS AND OTHER COMPREHENSIVE INCOME
for the year ended 30 September 2016
2016 2015
Notes US$'000 US$'000
Revenue 4 219 653 246 782
Cost of sales 4 (165 177) (203 692)
Gross profit 54 476 43 090
Other income 438 42
Administrative expenses 5 (22 775) (24 777)
Results from operating activities 32 139 18 355
Finance income 770 1 185
Finance costs (11 815) (11 855)
Changes in fair value of financial assets at fair value through profit or loss 503 (25)
Changes in fair value of financial liabilities at fair value through
profit or loss 368 1 972
Net finance costs (10 174) (8 723)
Profit before tax 21 965 9 632
Tax 6 (6 172) (3 617)
Profit for the year 15 793 6 015
Other comprehensive income
Items that may be classified subsequently to profit or loss:
Foreign currency translation differences for foreign operations, net of tax 4 212 (39 399)
Other comprehensive income, net of tax 4 212 (39 399)
Total comprehensive income for the year 20 005 (33 384)
Profit for the year attributable to:
Owners of the company 13 809 4 623
Non-controlling interest 1 984 1 392
15 793 6 015
Total comprehensive income for the year attributable to:
Owners of the company 17 103 (24 721)
Non-controlling interest 2 902 (8 663)
20 005 (33 384)
Earnings per share
Basic and diluted earnings per share (US$ cent) 7 5 2
CONDENSED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
as at 30 September 2016
2016 2015
Notes US$'000 US$'000
Assets
Non-current assets
Property, plant and equipment 8 220 534 214 518
Goodwill 883 919
Long-term deposits 9 9 846 10 656
Other financial assets 10 2 585 1 636
Deferred tax assets 11 1 397 1 954
Total non-current assets 235 245 229 683
Current assets
Inventories 12 15 767 8 951
Trade and other receivables 51 184 37 979
Other financial assets 10 1 176 55
Current taxation 134 144
Cash and cash equivalents 13 15 826 24 265
Total current assets 84 087 71 394
Total assets 319 332 301 077
EQUITTY AND LIABILITIES
Share capital 14 257 256
Share premium 14 456 181 452 512
Other reserve 47 245 47 245
Foreign currency translation reserve (73 411) (76 705)
Revenue reserve (193 521) (206 566)
Equity attributable to owners of the Company 236 751 216 742
Non-controlling interests 14 (34 892) (37 794)
Total equity 201 859 178 948
Non-current liabilities
Provisions 4 607 4 088
Borrowings 15 24 008 36 329
Deferred tax liabilities 11 5 275 13
Total non-current liabilities 33 890 40 430
Current liabilities
Borrowings 15 38 408 33 692
Other financial liabilities - 388
Current taxation 54 98
Trade and other payables 45 121 47 521
Total current liabilities 83 583 81 699
Total liabilities 117 473 122 129
Total equity and liabilities 319 332 301 077
The consolidated financial statements were authorised for issue by the Board of Directors on 28 November 2016.
Phoevos Pouroulis Michael Jones
Director Director
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 September 2016
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 interest equity
Note US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
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 - - - - 4 623 4 623 1 392 6 015
Other comprehensive income:
Foreign currency translation differences - - - (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
Contributions by and distributions to owners:
Reclassification of non-controlling interest 14 - - - - 3 079 3 079 (3 079) -
Equity-settled share-based payments 14 - - - - 2 317 2 317 - 2 317
Issue of ordinary shares 14 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
Total comprehensive income for the year
Profit for the year - - - - 13 809 13 809 1 984 15 793
Other comprehensive income:
Foreign currency translation differences - - - 3 294 - 3 294 918 4 212
Total comprehensive income for the year - - - 3 294 13 809 17 103 2 902 20 005
Transactions with owners of the Company
Contributions by and distributions to owners:
Equity-settled share-based payments 14 - - - - (1 045) (1 045) - (1 045)
Issue of ordinary shares 14 1 3 669 - - 281 3 951 - 3 951
Contributions by owners of the Company 1 3 669 - - (764) 2 906 - 2 906
Total transactions with owners of the Company 1 3 669 - - (764) 2 906 - 2 906
Balance at 30 September 2016 257 456 181 47 245 (73 411) (193 521) 236 751 (34 892) 201 859
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 September 2016
2016 2015
Notes US$'000 US$'000
Cash flows from operating activities
Profit for the year 15 793 6 015
Adjustments for:
Depreciation of property, plant and equipment 8 10 167 10 256
Loss on disposal of property, plant and equipment 5 584 -
Impairment losses on property, plant and equipment - 3
Impairment losses on goodwill 51 63
Impairment losses on inventory 12 15 217
Impairment losses on other financial assets 12 27
Changes in fair value of financial assets at fair value (503) 25
through profit or loss
Changes in fair value of financial liabilities at fair value (368) (1 972)
through profit or loss
Interest income (770) (777)
Interest expense 10 287 11 754
Tax 6 6 172 3 617
Equity-settled share-based payments 2 542 3 157
43 982 32 385
Changes in:
Inventories (4 634) 5 811
Trade and other receivables (12 657) (5 464)
Trade and other payables (4 100) 10 296
Provisions 71 (777)
Cash from operations 22 662 42 251
Income tax paid (472) (847)
Net cash flows from operating activities 22 190 41 404
Cash flows from investing activities
Interest received 892 669
Additions to property, plant and equipment 8 (12 307) (24 591)
Proceeds from disposal of property, plant and equipment 124 3
(Additions)/refunds of other financial assets (700) 2 702
Net cash flows used in investing activities (11 991) (21 217)
Cash flows from financing activities
Refund of long-term deposits 1 369 2 367
Proceeds from bank credit and other facility borrowings 1 648 7 523
Net proceeds under obligations under new loan 2 310 146
Repayment of secured bank borrowings and loan to third party (19 166) (27 267)
Interest paid (4 371) (1 134)
Net cash flows used in financing activities (18 210) (18 365)
Net (decrease)/increase in cash and cash equivalents (8 011) 1 822
Cash and cash equivalents at the beginning of the year 24 265 19 629
Effect of exchange rate fluctuations on cash held (428) 2 814
Cash and cash equivalents at the end of the year 13 15 826 24 265
Notes to the condensed consolidated financial statements
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 2016 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
STATEMENT OF COMPLIANCE
These condensed consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards ("IFRS"), International Accounting Standards, IAS34 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 2015. 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 28 November 2016.
USE OF ESTIMATES AND ADJUSTMENTS
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 2015.
GOING CONCERN
After making enquiries which include reviews of current cash resources, forecasts and budgets, timing of cash flows,
borrowing facilities and sensitivity analyses and considering the associated uncertainties to the Group's operations, the
Directors have a reasonable expectation that the Group has adequate financial resources to continue in operational
existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the
consolidated financial statements and the condensed consolidated financial statements.
NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS
As from 1 October 2015, 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 2015. The Board of Directors is currently evaluating the impact of these
on the Group.
- IFRS 15 Revenue from Contracts with Customers (effective for annual periods beginning on or after 1 January 2018).
- IFRS 16 Leases (effective for annual periods beginning on or after 1 January 2019).
- Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses (effective for annual periods
beginning on or after 1 January 2017).
- Amendments to IAS 7: Disclosure Initiatives (effective for annual periods beginning on or after 1 January 2017).
- IFRS 9 Financial Instruments (effective for annual periods beginning on or after 1 January 2018).
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 2015.
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
US$'000 US$'000 US$'000
2016
Revenue 81 514 138 139 219 653
Cost of sales
Cost of sales excluding selling costs (57 135) (64 710) (121 845)
Selling costs (218) (43 114) (43 332)
(57 353) (107 824) (165 177)
Gross profit 24 161 30 315 54 476
2015
Revenue 83 053 163 729 246 782
Cost of sales
Cost of sales excluding selling costs (63 674) (80 834) (144 508)
Selling costs (193) (58 991) (59 184)
(63 867) (139 825) (203 692)
Gross profit 19 186 23 904 43 090
The overhead costs relating to the manufacturing of the PGM and the chrome concentrates are allocated to the relevant
operating segments based on the relative sales value per product on an ex-works basis. The allocated percentage for
PGM concentrate and chrome concentrates accounted for this financial year is 50% for each segment which is consistent
with the prior year allocation.
GEOGRAPHICAL INFORMATION
The following table sets out information about the geographical location of:
(i) the Group's revenue from external customers; and
(ii) the Group's property, plant and equipment and goodwill ("specified non-current assets").
The geographical location analysis of revenue from external customers is based on the country of establishment
of each customer. The geographical location of the specified non-current assets is based on the physical location of
the asset in the case of property, plant and equipment and the location of the operation to which they are allocated in
the case of goodwill.
(i) Revenue from external customers
2016 2015
US$'000 US$'000
China 37 392 65 432
South Africa 110 698 95 038
Singapore 13 670 7 927
Hong Kong 55 045 55 175
South Korea 1 523 10 673
Other countries 1 325 12 537
219 653 246 782
Revenue represents the sales value of goods supplied to customers, net of value-added tax. The following table
summarises sales to customers with whom transactions have individually exceeded 10% of the Group's revenues.
2016 2015
Segment US$'000 Segment US$'000
Customer 1 PGM 81 514 PGM 82 856
Customer 2 Chrome 29 146 - -
Customer 3 Chrome 28 094 - -
2016 2015
US$'000 US$'000
(ii) Specified non-current assets
South Africa 221 457 215 430
Cyprus 3 5
China - 2
221 460 215 437
2016 2015
US$'000 US$'000
5. ADMINISTRATIVE EXPENSES
Directors and staff costs
Non-executive directors 499 504
Executive directors 1 267 1 396
Key management 930 1 000
Employees: salaries 5 337 6 401
bonuses 619 454
pension fund and medical aid contributions 2 073 2 259
10 725 12 014
Audit - external audit services 384 488
Consulting 1 737 2 207
Corporate and social investment 108 309
Depreciation 320 255
Discount facility and related fees 457 366
Equity-settled share-based payment expense 2 542 3 157
Listing fees 942 -
Health and safety 236 167
Impairment losses 63 3
Insurance 781 856
Legal and professional 186 414
Loss on disposal of property, plant and equipment 584 -
Rent and utilities 697 867
Security 930 608
Telecommunications and IT related costs 645 581
Training 465 420
Travelling and accommodation 285 580
Sundry expenses 688 1 485
22 775 24 777
2016 2015
US$'000 US$'000
6. TAX
Corporate income tax for the year
Cyprus 309 240
South Africa 128 143
Special contribution for defence in Cyprus 4 3
Deferred tax
Originating and reversal of temporary differences 5 731 3 231
Tax charge 6 172 3 617
7. EARNINGS PER SHARE
BASIC AND DILUTED EARNINGS PER SHARE
The calculation of basic and diluted earnings per share has been based on the following profit attributable to the ordinary
shareholders of the Company and the weighted average number of ordinary shares outstanding.
2016 2015
Profit for the year attributable to ordinary shareholders (US$'000) 13 809 4 623
Weighted average number of ordinary shares at 30 September ('000) 256 178 255 076
Basic and diluted earnings per share (US$ cents) 5 2
LTIP and SARS awards were excluded from the diluted weighted average number of ordinary shares calculation because
their effect would have been anti-dilutive.
HEADLINE AND DILUTED HEADLINE EARNINGS PER SHARE
The calculation of headline and diluted headline earnings per share has been based on the following headline earnings
attributable to the ordinary shareholders and the weighted average number of ordinary shares outstanding.
2016 2015
Headline earnings for the year attributable to ordinary shareholders
(US$'000) 14 281 4 688
Weighted average number of ordinary shares at 30 September ('000) 256 178 255 076
Headline and diluted headline earnings per share (US$ cents) 6 2
RECONCILIATION OF PROFIT TO HEADLINE EARNINGS
30 September 2016 30 September 2015
Gross Net Gross Net
Profit attributable to ordinary shareholders 13 809 4 623
Adjustments:
Impairment losses on goodwill 51 51 63 63
Loss on disposal of property, plant and
equipment 584 421 - -
Impairment losses on property, plant and
equipment - - 3 2
Headline earnings 14 281 4 688
2016 2015
US$'000 US$'000
8. PROPERTY, PLANT AND EQUIPMENT
Total cost 266 368 243 931
Total accumulated depreciation (45 834) (29 413)
Net book value 220 534 214 518
Reconciliation of net book value
Opening net book value 214 518 253 356
Additions 12 307 24 591
Disposals (708) (7)
Depreciation (10 167) (10 256)
Exchange adjustment on translation 4 584 (53 166)
Closing net book value 220 534 214 518
Deferred stripping additions of US$2.4 million (30 September 2015: US$15.2 million) are included in mining assets and
infrastructure.
During the year the Group acquired equipment under a finance lease. The leased equipment secures lease obligations.
At 30 September 2016 the carrying amount of the leased equipment was equal to the cost as the equipment was not
yet fully operational.
During the current year, the estimated economically recoverable proved and probable mineral reserve was reassessed
which gave rise to a change in accounting estimate. The remaining reserve that management had previously assessed
was 112.2 Mt and at 31 December 2015 was assessed to be 106.4 Mt. As a result, the expected useful life of the
plant decreased. The effect of the change on the actual depreciation expense, included in cost of sales, is an additional
US$0.3 million.
CAPITAL COMMITMENTS
At 30 September 2016, the Group's capital commitments for contracts to purchase property, plant and equipment
amounted to US$1.8 million (30 September 2015: US$1.4 million).
SECURITIES
At 30 September 2016, an amount of US$200.8 million (30 September 2015: US$196.4 million) of the carrying amount of
the Group's tangible property, plant and equipment was pledged as security against secured bank borrowings.
2016 2015
US$'000 US$'000
9. LONG-TERM DEPOSITS
Long-term deposits 9 846 10 656
The long-term deposits represent restricted cash which is designated as a "debt service reserve account" as required by
the terms of the Common Terms Agreement for the senior debt facility of Tharisa Minerals Proprietary Limited.
2016 2015
Fair value hierarchy US$'000 US$'000
10. OTHER FINANCIAL ASSETS
Non-current assets:
Investments in cash funds and income funds Level 2 2 585 1 632
Interest rate caps Level 2 - 4
2 585 1 636
Current assets:
Investments at fair value through profit or loss Level 1 42 55
Forward exchange contracts Level 2 656 -
Discount facility Level 2 478 -
1 176 55
FORWARD EXCHANGE CONTRACTS
The Group entered into a number of forward exchange contracts to hedge certain aspects of the foreign exchange risk
associated to the conversion of the US$ to the ZAR. The net exposure of these contracts is US$11.6 million with various
expiries no later than on or before 30 December 2016.
2016 2015
US$'000 US$'000
11. DEFERRED TAX
Deferred tax assets 1 397 1 954
Deferred tax liabilities (5 275) (13)
Net deferred tax (liability)/asset (3 878) 1 941
Deferred tax assets and deferred tax liabilities are not offset unless the Group has a legally enforceable right to offset
such assets and liabilities.
The estimates used to assess the recoverability of recognised deferred tax assets include a forecast of the future taxable
income and future cash flow projections based on a three year period. The Group did not have tax losses and temporary
differences for which deferred tax was not recognised.
2016 2015
US$'000 US$'000
12. INVENTORIES
Finished products 6 116 4 283
Ore stockpile 4 729 1 257
Work in progress - 195
Consumables 4 937 3 306
15 782 9 041
Impairment of consumables (15) (90)
Total carrying amount 15 767 8 951
Inventories are stated at the lower of cost or net realisable value. The Group impaired certain consumables and spares as
the operational use became doubtful with no anticipated recoverable amount or value in use. The impaired consumables
are equally allocated to the operating segments reported. There were no write downs to net realisable value during the
year (30 September 2015: US$0.1 million).
Inventories are subject to a general notarial bond in favour of the lenders of the senior debt facility.
13. CASH AND CASH EQUIVALENTS
2016 2015
US$'000 US$'000
Bank balances 15 490 24 005
Short-term bank deposits 336 260
15 826 24 265
As at 30 September 2016 an amount of US$1.6 million (30 September 2015: US$1.6 million) was provided as security for
certain credit facilities and bank guarantees of the Group. A credit facility available to the Group at 30 September 2015
was not extended during the year and secured cash of US$2.5 million was consequently released.
30 September 2016 30 September 2015
Number Number
of shares of shares
'000 US$'000 '000 US$'000
14. SHARE CAPITAL AND
RESERVES
SHARE CAPITAL
Authorised - ordinary shares
of US$0.001 each
As at 30 September 10 000 000 10 000 10 000 000 10 000
Authorised - convertible
redeemable preference shares
of US$1 each
As at 30 September 1 051 1 1 051 1
Issued and fully paid
Ordinary shares
Balance at the beginning of the year 255 892 256 254 781 255
Allotments during the year 1 090 1 1 111 1
Balance at the end of the year 256 982 257 255 892 256
Allotments during the year were in respect of the award of 1 089 685 (30 September 2015: 1 111 240) ordinary shares
granted in terms of the Share Award Scheme.
SHARE PREMIUM
During the years ended 30 September 2016 and 30 September 2015, the increases in the share premium account
related to the issue and allotment of ordinary shares granted in terms of the Share Award Schemes.
NON-CONTROLLING INTERESTS
During the year ended 30 September 2015, the Company reassessed its interpretation and application of IFRS 10:
Consolidated Financial Statements. Consequently the treatment of intergroup funding transactions on a consolidated
level and the impact of these transactions on the non-controlling interests were reconsidered. This resulted in a
reclassification from non-controlling interest to the revenue reserves.
2016 2015
US$'000 US$'000
15. BORROWINGS
Non-current
Secured bank borrowings 22 103 36 329
Finance leases 246 -
Deferred supplier 1 659 -
24 008 36 329
Current
Secured bank borrowings 14 443 14 346
Finance leases 677 -
Bank credit and other facilities 23 012 17 298
Guardrisk loan 169 164
Loan payable to related party 107 1 884
38 408 33 692
FINANCE LEASES
During the year the Group acquired equipment of ZAR22.9 million under a finance lease. The leased equipment
secures lease obligations. The lease term was 24 months and the average effective borrowing rate was South African
prime rate plus 3% pa. The interest rate was fixed at the contract date. No arrangements have been entered into for
contingent rent.
2016 2015
US$'000 US$'000
Minimum lease payments due:
Within one year 760 -
Two to five years 253 -
1 013 -
Less future finance charges (90) -
Present value of minimum lease payments due 923 -
Present value of minimum lease payments due:
Within one year 677 -
Two to five years 246 -
923 -
DEFERRED SUPPLIER
The balance relates to a trade payable of which payment has been deferred. The amount payable is unsecured, bears
interest at the South African prime rate and is repayable in 12-monthly instalments commencing on 30 October 2017.
2016 2015
US$'000 US$'000
16. FINANCIAL INSTRUMENTS
Financial assets - carrying amount
Loans and receivables 46 104 34 351
Long-term deposits 9 846 10 656
Cash and cash equivalents 15 826 24 265
Financial instruments at fair value through profit or loss 3 761 1 691
75 537 70 963
Financial liabilities - carrying amount
Borrowings 62 416 70 021
Trade payables 35 513 31 915
Discount facility - 388
Income received in advance 3 102 8 348
Other payables 4 703 5 679
105 734 116 351
The Board of Directors considers that the fair values of financial assets and liabilities approximate their carrying values
at each reporting date.
2016 2015
US$'000 US$'000
17. RELATED PARTY TRANSACTIONS
Key management compensation
Non-executive directors' remuneration 499 504
Executive directors' remuneration 1 267 1 396
Other key management remuneration 930 1 000
2 696 2 900
18. CONTINGENT LIABILITIES
There is no litigation, current or pending, which is considered likely to have a material adverse effect on the Group.
19. EVENTS AFTER THE REPORTING PERIOD
On 14 November 2016, Tharisa Minerals Proprietary Limited achieved project completion in respect of the ZAR1 billion
senior debt finance facility. As a result of project completion, the facility's interest rate will reduce from JIBAR plus 4.9%
pa to JIBAR plus 3.4% pa. The project completion achievement does not have any impact on the consolidated financial
position as at 30 September 2016.
Subject to the necessary shareholder and regulatory approvals, the Board of Directors has approved a distribution to
shareholders of US$ 1 cent per share.
The Board of Directors are 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 have been declared during the year (30 September 2015: 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 29 November 2016. For any questions regarding the results, please contact our Investor
Relations Manager, Sherilee Lakmidas at slakmidas@tharisa.com.
Further details about the distribution to shareholders will be announced in due course via SENS/RNS.
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)
Antonios Djakouris (Independent non-executive director)
Omar Marwan Kamal (Non-executive director)
Brian Chi Ming Cheng (Non-executive director)
Carol Bell (Independent non-executive director)
Joanna Ka Ki 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
JSE 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
JOINT BROKERS
Peel Hunt LLP
Moor House
120 London Wall
London EC2Y 5ET
United Kingdom
BMO Capital Markets Limited
95 Queen Victoria Street
London EC4V 4HG
United Kingdom
www.tharisa.com
Date: 29/11/2016 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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