Wrap Text
Audited Condensed Consolidated Financial Statements For The Years 28 February 2017 And 29 February 2016
Rockwell Diamonds Inc.
(A company incorporated in accordance with the laws of
British Columbia, Canada)
(Incorporation number BC0354545)
(South African registration number: 2007/031582/10)
Primary listing: TSX
Secondary listing: JSE
Share code on the JSE Limited: RDI ISIN: CA77434W2022
Share code on the TSX: RDI CUSIP Number: 77434W103
(“Rockwell” or “the Group”)
31 May 2017
Audited condensed consolidated financial statements
for the years 28 February 2017 and 29 February 2016
Consolidated statements of financial position
As at As at
28 February 29 February
Amounts in Canadian Dollars (‘000) 2017 2016
Assets
Non-current assets
Mineral property interests 15 143 23 871
Investment in associates 623 452
Property, plant and equipment 24 254 25 506
Rehabilitation deposits 1 884 2 314
Investment and deposits 136 133
Total non-current assets 42 040 52 276
Current assets
Inventories 1 381 2 100
Trade and other receivables 1 569 4 083
Cash and cash equivalents 1 730 58
Total current assets 4 680 6 241
Non-current assets held for sale 10 970 -
Total assets 57 690 58 517
Equity and liabilities
Equity
Share capital 147 472 147 472
Reserves (14 391) (13 607)
Retained loss (144 825) (130 358)
Total equity (11 744) 3 507
Liabilities
Non-current liabilities
Loans from related parties - 2 148
Loans and borrowings - 24 425
Finance lease obligation - 430
Deferred tax - 4 867
Rehabilitation obligation 2 508 7 753
Non-current portion of trade and
other payables 961 -
Total non-current liabilities 3 469 39 623
Current liabilities
Loans from related parties - 1 218
Loans and borrowings 38 852 -
Finance lease obligation 511 594
Trade and other payables 17 007 12 185
Bank overdraft 1 207 1 390
Total current liabilities 57 577 15 387
Non-current liabilities held for sale 8 388 -
Total liabilities 69 434 55 010
Total equity and liabilities 57 690 58 517
Consolidated statements of financial performance
For the For the
year ended year ended
28 February 29 February
Amounts in Canadian Dollars (‘000) 2017 2016
Sale of diamonds 26 079 37 710
Beneficiation income 4 364 9 629
Cost of sales before amortisation and
depreciation (33 944) (46 598)
Gross (loss) profit before
amortization and depreciation (3 501) 741
Amortization of mineral property
interests (977) (1 795)
Depreciation of property, plant and
equipment (3 740) (10 169)
Rehabilitation obligation recognized (3 538) (1 555)
Gross loss (11 756) (12 778)
Other income 4 028 240
General, administration and business
development expenses (5 204) (5 252)
Loss on sale of subsidiary - (1 774)
Realized foreign exchange with sale
of subsidiary - 1 276
Loss on Nelesco transaction (5 192) -
Impairments (3 587) (669)
Loss before net finance costs (21 711) (18 957)
Finance income 76 88
Foreign exchange profit (loss) on
US$ loans 4 649 (5 482)
Finance costs (3 159) (4 111)
Loss after net finance costs (20 145) (28 462)
Share of profit from equity accounted
investments 81 152
Loss before income tax recovery (20 064) (28 310)
Income tax recovery 5 597 629
Loss for the year (14 467) (27 681)
(Loss) income attributable to:
Owners of the parent (14 467) (28 282)
Non-controlling interest - 601
(14 467) (27 681)
Loss per share
Basic and diluted loss per share (cents) (26.31) (51.79)
Consolidated statements of comprehensive income
For the For the
year ended year ended
28 February 29 February
Amounts in Canadian Dollars (‘000) 2017 2016
Loss for the year (14 467) (27 681)
Other comprehensive income net of taxation
Items that are or may be reclassified
to profit or loss
Exchange differences on translating
foreign operations (784) (3 735)
Realized foreign exchange with sale
of subsidiary - (1 276)
Other comprehensive income for the
year net of taxation (784) (5 011)
Total comprehensive loss (15 251) (32 692)
Total comprehensive income attributable to:
Owners of the Group (15 251) (33 383)
Non-controlling interest - 691
Total comprehensive income for the year (15 251) (32 692)
Consolidated statements of changes in equity
Foreign
currency Share-
trans- based Total
Amounts in Canadian Share lation payment net
Dollars (‘000) capital reserve* reserve** reserves
Balance at
01 March 2015 147 435 (17 605) 9 030 (8 575)
Total comprehensive income
for the year
(Loss) income for the
year - - - -
Other comprehensive
income - (5 101) - (5 101)
Total comprehensive
income for the year - (5 101) - (5 101)
Share-based payment
expense - - 69 69
Shares issued to
employees 43 - - -
Share issue costs (6) - - -
Disposal of subsidiary - - - -
Total changes 37 (5 101) 69 (5 032)
Balance at 29 February 2016 147 472 (22 706) 9 099 (13 607)
Total comprehensive income
for the year
Loss for the year - - - -
Other comprehensive
income - (784) - (784)
Total comprehensive
income for the year - (784) - (784)
Total changes - (784) - (784)
Balance at
28 February 2017 147 472 (23 490) 9 099 (14 391)
* Currency translation differences arising on the conversion of the
results and financial position of foreign operations from their
functional currency to the Group’s presentation currency are
accumulated in the foreign currency translation reserve.
** Equity settled share-based payment transactions are accumulated
in the share-based payment reserve.
Total
equity
attribu-
table to
equity Non-
holders control-
Amounts in Canadian Retained of the ling Total
Dollars (‘000) loss Group interest equity
Balance at
01 March 2015 (102 076) 36 784 (2 369) 34 415
Total comprehensive
income for the year
(Loss) income for
the year (28 282) (28 282) 601 (27 681)
Other comprehensive
income - (5 101) 90 (5 011)
Total comprehensive
income for the year (28 282) (33 383) 691 (32 692)
Share-based payment
expense - 69 - 69
Shares issued to
employees - 43 - 43
Share issue costs - (6) - (6)
Disposal of
subsidiary - - 1 678 1 678
Total changes (28 282) (33 277) 2 369 (30 908)
Balance at
29 February 2016 (130 358) 3 507 - 3 507
Total comprehensive
income for the year
Loss for the year (14 467) (14 467) - (14 467)
Other comprehensive
income - (784) - (784)
Total comprehensive
income for the year (14 467) (15 251) - (15 251)
Total changes (14 467) (15 251) - (15 251)
Balance at
28 February 2017 (144 825) (11 744) - (11 744)
Consolidated statements of cash flows
For the For the
year ended year ended
28 February 29 February
Amounts in Canadian Dollars (‘000) 2017 2016
Cash flows from operating activities
Cash receipts from customers 29 767 43 607
Cash paid to suppliers and employees (33 296) (47 555)
Cash used in operations (3 529) (3 948)
Finance income 76 88
Finance costs (1 011) (374)
Tax paid - 37
Net cash outflow from operating
activities (4 464) (4 197)
Cash flows from investing activities
Purchase of property, plant and
equipment (6 164) (2 057)
Proceeds from sale of property, plant
and equipment 2 138 131
Purchase of mineral property interests (22) (9)
Acquisition of subsidiary - (1 708)
Proceeds from sale of subsidiary - 2 098
Advances on deferred consideration from
sale of subsidiary - 1 312
Advances from related party loans
(investing) - 1 511
Decrease in investments and deposits 19 -
Increase in investments and deposits - (198)
Decrease in rehabilitation deposits - 1 810
Increase in rehabilitation deposits (1 040) -
Net cash (outflow) inflow from
investing activities (5 069) 2 890
Cash flows from financing activities
Share issue costs - (6)
Advances from loans and borrowings 12 195 -
Repayment of finance lease obligations (717) (783)
Advances from related party loan
(financing) - 188
Net cash inflow (outflow) from
financing activities 11 478 (601)
Net movement in cash and cash
equivalents for the year 1 945 (1 908)
Cash and cash equivalents at the
beginning of the year (1 332) 576
Effect of exchange rate movement on
cash balances (90) -
Total cash and cash equivalents at end
of the year 523 (1 332)
1. GOING CONCERN
The Group experienced a loss of $14.5 million (29 February 2016:
$27.7 million) for the year ended 28 February 2017 and its current
liabilities exceed its current assets by $52.9 million (2016: $9.1
million).
The working capital deficiency was principally caused by the
closure of two of the Company’s operations due to weak geology,
the contractual debt repayments through an acquisition debt sweep
structure which proved unaffordable, the underperformance of Remhoogte,
Holsloot Complex (RHC) to plan in terms of grade, price and volumes,
and the late delivery and construction of the new Wouterspan (WSP)
plant, now six months behind schedule as well as the effects of
litigation and damages suffered. These outcomes used working capital
financing and further strained liquidity, due in part to reduced
revenues and cash flows.
The directors have considered the ability of the Group to
continue as a going concern and note there to be a number of factors,
strategies, and assumptions which may have an impact on the going
concern assumption. Relevant facts and uncertainties as at
28 February 2017, are as follows:
– The new wet plant at WSP with four lines started commissioning
during Q4 2017 and is scheduled for completion in Q2, 2018;
– Certain shareholders have advanced further funds in the amount of
USD $8M, and certain assets were sold for proceeds of $4.3M and a
significant transfer of liabilities and 84 employees. Subsequent
to year end the shareholders made additional advances and the
repayment date of loans was agreed to be October 2018;
– Group prepared forecasts, in its life of mine plan, reflecting
these elements and strategic impacts indicate that the Group should
be cash flow positive in mid fiscal 2018;
– Creditors of three of the Company’s significant subsidiaries filed
for business rescue under the provisions of the South African
restructuring regime. As part of this process, the commercial
dispute with the Company’s prior contractor and their attempts to
enforce liquidation on three subsidiaries have been suspended.
These subsidiaries are now working to complete commissioning and
ramp up, protected from further litigation during such process.
Accordingly, it is the Company’s judgment that the going concern
principle remains appropriate for these financial statements subject
to two uncertainties. The Company believes that key to this assessment
is the view that the two remaining material risks, namely successful
conclusion of the business rescue process and dismissal of liquidation
proceedings, and the timely and effective and timely commissioning of
Wouterspan, are significant uncertainties. Failure of either material
risk to be mitigated effectively, or the lack of receipt of further
capital to fund such an impact, may cause this assessment to change.
Therefore, based on the business plans, strategies and assumptions
outlined above, the directors believe that the going concern assumption
remains an appropriate basis for the preparation of these financial
statements. At present a material uncertainty exists which may cast a
significant doubt on the Group's ability to continue as a going concern
and discharge its liabilities in the normal course of business. Should
the going concern assumption not remain appropriate, adjustments may
have to be made and such adjustments could be material.
2. NON-CURRENT ASSETS AND LIABILITIES HELD FOR SALE
On 22 December 2016 the Company announced that it had entered into a
purchase and sale agreement with Nelesco 318 Proprietary Limited for
certain mining rights, land, plant and equipment and the assumption
of certain rehabilitation obligations for a cash consideration of
ZAR 45 million ($ 4.3 million), which included the transfer of
84 employees, including successor employer obligations. This
transaction included the transfer of the issued share capital of
the subsidiary Pioneer Minerals Proprietary Limited.
Payment was structured in three tranches of which ZAR 20 million
($ 1.9 million) was received during January 2017 settling the plant
and equipment disposed of, the second receipt is ZAR 15 million
($ 1.4 million) and is due on transfer of the Saxendrift land in
the name of Nelesco 318 Proprietary Limited, the balance of
ZAR 10.0 million ($ 0.95 million) is due upon the completion and
consent of certain contracts, the Section 11 transfer approval and
execution by the Department of Mineral Resources as well as the
Takeover Regulation Panel of South Africa.
The assets, transferred which are subject to regulatory approval and
execution indicated above, with their corresponding rehabilitation
obligations will only transfer on legal transfer of ownership land,
are disclosed as assets and liabilities held for sale.
At February 2017 the disposal group was stated at the impaired
carrying amount being the lower of carrying amount or fair value
less costs to sell.
Assets and liabilities
Assets held for sale
Mineral property interests being Remhoogte, Holsloot
and Saxendrift 10 083
Rehabilitation deposits 1 129
11 212
Liabilities held for sale
Provision for rehabilitation relating to Remhoogte,
Holsloot and Saxendrift (8 388)
(8 388)
Net non-current assets held for sale 2 824
Outstanding consideration (2 582)
Net loss on remeasurement of fair value less cost to sell 242
Loss realized on sale of plant and equipment 4 950
Net loss on Nelesco transaction 5 192
3. LOANS AND BORROWINGS
As at As at
28 February 29 February
Amounts in Canadian Dollars (‘000) 2017 2016
Held at amortized cost
Credit facilities 38 852 24 425
Non-current liabilities
At amortized cost - 24 425
Current liabilities
At amortized cost 38 852 -
Bridging loans, to fund the Bondeo acquisition, were obtained from
Diacore (via Ascot Diamonds Proprietary Limited) ($20.4 million)
and Emerald Holdings Limited ($1.8 million) in order to meet the
transaction financing requirements for the acquisition of
Bondeo 140 cc.
The initial term of the two loans were for a period of three months
(“First Period”), extendable for a further month if the Company
called a shareholder meeting to approve any required amendments to
the loan; Interest was payable at Libor plus a margin of 15% per
annum for the first period of three months. There were no broker’s
or similar fees associated with these two transactions.
The Company renegotiated these loans during Q2 2016, and upon
shareholders’ approval on 23 September 2015, two new loans commencing
on 1 October 2015, were issued, each with the following terms:
- A term of 24 months from 1 October 2015.
- Interest payable every 6 months at US - 6 month Libor rate plus
a margin of 15%.
- To be repaid through a sweep mechanism linked to sales revenues
(currently up to 7.5% on diamond sales and up to 50% on beneficiation
income). paid prorata to Diacore and Emerald in proportion to the
ratio of the original two loan principal balances.
- The issue of three year share warrants to Ascot
(18,863,402) and Emerald (2,351,838) at a strike price of 20 cents
per share.
During the year, the Company also arranged for further financing in
the amount of USD $8M on the same terms and conditions as the loans
noted above. Diacore committed to advance a further USD$4M, and Emerald
and an unrelated investor committed to advance a further USD$2M each.
As at the year end USD$6.3M were received and with USD$1.7M still
outstanding.
The total loan amounts are secured by a first security charge over
movable assets and cession of shares in subsidiary companies.
4. LOSS PER SHARE
For the For the
year ended year ended
28 February 29 February
Amounts in Canadian Dollars (‘000) 2017 2016
Basic and diluted loss per share
Cents per share (26.31) (51.79)
Basic loss per share was calculated based on a weighted average number
of common shares of 54 983 244 (2016: 54 610 498).
Reconciliation of loss for the year to
basic loss
Loss for the year (14 467) (27 681)
Adjusted for:
Loss attributable to non-controlling
interest - (601)
Basic loss attributable to owners of
the Group (14 467) (28 282)
At 28 February 2017 and 29 February 2016 the impact of share-based
payment options and warrants were excluded from the weighted
average number of shares, for the purpose of the diluted loss per
share calculation, as the effect would have been anti-dilutive.
Basic and diluted headline loss per share
Cents per share (12.78) (49.03)
Reconciliation between basic loss and
headline loss
Basic loss attributable to owners of
the Group (14 467) (28 282)
Adjusted for:
Loss on disposal of property, plant
and equipment and mineral properties - 340
Impairment of mineral property interests 1 693 -
Impairment of property, plant and
equipment 554 669
Loss on Nelesco transaction 5 192 -
Loss on sale of subsidiary - 1 774
Realized foreign exchange with sale of
subsidiary - (1 276)
Non-controlling interest portion of
above adjustments - -
Headline loss attributable to owners
of the Group (7 028) (26 775)
None of the adjustments to headline loss had any tax impact.
The basic and diluted headline loss per share disclosure is provided
based on the listing requirements of the Johannesburg Stock Exchange
(Group’s secondary listing). The disclosure of basic and diluted
headline loss per share is provided in accordance with Circular 2/2013
as issued by the South African Institute of Chartered Accountants.
Headline loss represents the basic loss attributable to the owners of
the Group excluding certain re-measurements.
At 28 February 2017 and 29 February 2016 the impact of share-based payment
options and warrants were excluded from the weighted average number of
shares, for the purpose of the diluted headline loss per share calculation,
as the effect would have been anti-dilutive.
5. GUARANTEES AND CONTINGENCIES
1. Standard Bank Limited and Standard General Insurance Limited issued
guarantees in favour of the Department of Minerals and Energy on behalf
of HC van Wyk Diamonds Limited and Saxendrift Mine Proprietary Limited
to:
2017 2016
ZAR ZAR
Department of Minerals and Energy (for
rehabilitation obligations and mining
rights)) 23.8m 26.3m
Electricity Provider Eskom (for utility
services) 5.3m 5.4m
$ $
Department of Minerals and Energy (for
rehabilitation obligations and mining rights) 2.4m 2.3m
Electricity Provider Eskom (for utility services) 0.5m 0.5m
The guarantees issued by Standard General Insurance Limited is secured
by a Main Pledge and Deed of Cession issued by Rockwell Diamonds RSA
Proprietary Limited and Saxendrift Mine Proprietary Limited respectively
under which it indemnifies the Insurer against all or any claims or loss
demands, liability, costs or any other expenses of whatsoever nature
which the Insurance Company may incur by reason of it having furnished
such guarantees, undertaking of suretyships.
2. Rockwell Diamonds Incorporated, and its wholly owned subsidiaries
N9C Resources Incorporated and N10C Resources Incorporated provided
guarantees as Guarantor to Ascot Diamonds Proprietary Limited for
the obligations of Rockwell Diamonds Proprietary Limited as principal
borrower for the Amended and Restated Credit Agreement and senior secured
credit facility through which the acquisition of the Steyn Transaction
was funded.
In terms of this agreement the following securities and collateral are
held by Ascot Diamonds Proprietary Limited, a member of the Diacore Group
of companies pledge and cession: (which is subject to an inter creditor
agreement with Emerald and DRC).
- Share certificates representing Rockwell Diamonds Incorporated holding
of 23% in HC van Wyk Diamonds Limited.
- Share certificates representing Rockwell Resources RSA Proprietary
Limited’s holding of 77% in HC van Wyk Diamonds Limited.
- Share certificates representing Rockwell Resources RSA proprietary
Limited’s holding of 100% in Saxendrift Mine Proprietary Limited.
- Share certificate representing Rockwell Resources RSA Proprietary
Limited’s (as nominee for Saxendrift Mine Proprietary Limited) holding
of 100% in Pioneer Minerals Proprietary Limited.
- Share certificate representing Rockwell Resources RSA Proprietary
Limited’s holding of 20% in Flawless Diamond Trading House Proprietary
Limited.
- Special Notarial Covering Bond over the mining fleet (EMV) owned by
Saxendrift Mine Proprietary Limited and utilised at Remhoogte (Pioneer
Minerals Proprietary Limited) to a value of ZAR90 million ($7.7 million).
- Notarial Covering Bond over plant and equipment owned by Saxendrift
Mine Proprietary Limited and utilised at Remhoogte (Pioneer Minerals
Proprietary Limited) to a value of ZAR27 million ($2.3 million).
- First mortgages over the five townhouses, with a net book value of
$0.3 million, owned by Rockwell Diamonds RSA Proprietary Limited, situated
in Douglas, Northern Cape Province.
- First mortgage over the residential and office property, with a net
book value of $0.7 million, owned by HC van Wyk Diamonds Limited, situated
in Barkly West, Northern Cape Province.
- Pledge on debtors outstanding at any time owing to Saxendrift Mine
Proprietary Limited.
- Cession of the positive bank balances of HC van Wyk Diamonds Limited
and Saxendrift Mine Proprietary Limited.
3. Banking facility
Rockwell Resources RSA Proprietary Limited and HC van Wyk Diamonds Limited
provided collateral to Standard Bank Limited to the overdraft facility,
which at 28 February 2017 was ZAR12 million ($1.2 million).
4. Black Economic Empowerment Transaction
The South African Mining Charter of 2004 requires participation of
Black Economic Empowerment entities in mining projects. On 24 September2015
shareholders approved the sale to Siyancuma Capital (Pty) Ltd. (“Siyancuma”)
of 30% of the shares of certain of its subsidiaries holding various mining
rights, namely Saxendrift Mine (Pty) Ltd. and HC Van Wyk Diamonds Ltd. to
Siyancuma (the “BEE Transaction”). Mr. Richard Mhlontlo (Group HR/Industrial
Relations Manager for Rockwell RSA at the time) and Mr. Oupa Sekhukhune are
currently the ultimate shareholders in Siyancuma, each holding 50% of the
shares of Siyancuma. In due course, a trust established for the benefit of
Rockwell RSA employees will acquire 30% of the shares in Siyancuma from
Messrs. Mhlontlo and Sekhukhune. Pursuant to the BEE Agreement, the aggregate
consideration payable by Siyancuma to Rockwell RSA is a minimum of
ZAR67.7 million ($5.8 million), payable over 10 years. At the date of
signature of these financial statements the conditions precedent to this
transaction were not concluded and no cash has been received. These
agreements lapsed on 28 February 2017. The Company is in ongoing
discussions with Siyancuma.
5. C-Rock Mining Limited ("CML")
HC van Wyk Diamonds Limited is in dispute with CML, a contractor
previously used for contract mining and to construct the WPC plant. In
aggregate the claims amount to $20 million. The Company disputes all
these claims and is preparing counter claims for the damages incurred.
6. SEGMENTAL INFORMATION
The Group has two reportable operating segments, as described below and a
corporate office. For each of the divisions the Group executive committee
(chief operating decision making body) reviews internally managed reports
on a monthly basis. The following describes the operations in each of the
Group’s reportable segments:
– Northern Cape operation is associated with the mining of palaeo channels
and rooikoppie gravels and the recovery of high value and larger carat size
diamonds; and
– Corporate represents the corporate management and administrative function
of the Group.
All reportable segments are located in the same geographical jurisdiction.
Information regarding the results of each of the reportable segments is
included below.
Northern
For the year ended 28 February 2017 Cape Corporate Total
Property, plant and equipment 24 254 - 24 254
Mineral property interests 15 143 - 15 143
Total assets 57 599 91 57 690
Total liabilities (69 213) (221) (69 434)
External revenue (30 443) - (30 443)
Other material non-cash items
- Depreciation on property, plant
and equipment 3 740 - 3 740
- Amortization on mineral property
interests 977 - 977
- Rehabilitation obligation
recognised 3 538 - 3 538
- Impairment of property, plant and
equipment 209 - 209
- Impairment of receivables 950 - 950
- Write down mine supplies 232 - 232
- Share of profit from equity
accounted investment - (81) (81)
Finance income (76) - (76)
Finance costs 1 140 2 019 3 159
Taxation - (5 597) (5 597)
Loss for the year 12 204 2 263 14 467
For the year ended Northern North Corpo- Recon-
29 February 2016 Cape West rate ciling Total
Property, plant and
equipment 25 164 - 342 - 25 506
Mineral property
interests 23 871 - - - 23 871
Total assets 56 394 - 4 504 (2 081) 58 817
Total liabilities (25 523) - (27 406) (2 081) (55 010)
External revenue (46 274) (1 065) - - (47 339)
Other material non-
cash items
- Depreciation on
property, plant and
equipment 10 167 - 2 - 10 169
- Amortization on
mineral property
interests 1 795 568 - - 2 363
- Rehabilitation
obligation (revised)
recognised 1 555 1 406 - - 2 961
-Impairment of property,
plant and
equipment 669 - - - 669
-Write down of mine
supplies 208 - - - 208
- Impairment of 247 - - - 247
receivables
-Impairment of
sundry receivables - - - - -
- Share of profit from
equity accounted
investment - - (152) - (152)
Finance income 76 10 2 - 88
Finance cost 486 32 3 593 - 4 111
Taxation (629) - - - (629)
Loss for the year 18 350 4 027 5 304 - 27 681
7. SUBSEQUENT EVENTS
a.) Business rescue
In November 2016, an interim liquidation application was brought by
CML against three subsidiaries of the Company,
which resulted in a provisional winding-up order being issued by the High
Court of South Africa, Northern Cape division on 23 March 2017. This order
made in respect of the Company’s subsidiaries, Rockwell Resources RSA (Pty)
Ltd (Rockwell RSA), HC van Wyk Diamonds Ltd (HC van Wyk) and Saxendrift Mine
(Pty) Ltd (Saxendrift), but not the Company.
The Company’s subsidiaries attended again before the High Court in South Africa,
Northern Cape division on 18 May 2017 in respect of creditors’ applications to
place the three subsidiaries into business rescue. In order to grant the
applications, the court needed to be satisfied that the prospects for success
were sufficiently reasonable that the provisional liquidation order should be
permanently suspended, and all other legal matters be stayed, to allow the
subsidiaries the ability to return to commercial health. In accepting the
applications, the court accepted the Company’s contention that there is a
reasonable prospect of rescuing the subsidiaries and that it has a sound
business plan to restore them to long-term profitability.
The Company itself is not in business rescue and is not involved in any
insolvency arrangement in Canada either.
The business rescue practitioners are Metis Strategy Advisors, who have been
appointed by the Court on an interim basis, subject to ratification by
creditors in the short term.
Business rescue is similar to Canadian work out arrangements, although a major
distinction in South Africa is that final commercial decisions are made by the
practitioners in consultation with the existing management of the entity, and
not by the Court which is the practice in Canada. The board of directors of
the subsidiaries will remain in place and will continue to direct the affairs
of the three subsidiaries, subject to final concurrence of the business
rescue practitioners. The Company’s three subsidiaries will need a court
order to exit business rescue, and to do so, the business rescue practitioners
will have to be satisfied that the business is sound enough to meet
obligations as they fall due for the subsequent six months after exit.
The effect of the order is that the joint business rescue practitioners now
oversee the affairs of the subsidiaries, by working alongside the directors
and management to right the businesses of the subsidiaries, and implement
the business rescue plan to restore future commercial success. The immediate
effect is that all claims against the three subsidiaries are stayed, and the
liquidation process is suspended, such that the commissioning and ramp up can
continue on a protected basis. The Company’s subsidiaries will also continue
to pursue all of its current criminal and civil claims against a former employee
as well as CML and certain individuals involved in the business of CML.
b.) Financial presentation under business rescue
In addition, the Company is evaluating the extent to which the
relationship with the business rescue practitioners is such that the
degree of control required for consolidation of the three subsidiaries
in the Company’s financial statements remains in place, or whether fair
presentation under IFRS would require the Company to deconsolidate the
subsidiaries in South Africa.
c.) TSXV application
An application is being prepared for listing on the Toronto Venture
Exchange (TSXV) and, pending approval, concurrent delisting
from the TSX.
Management is not aware of any other matter or circumstance arising since the
end of the financial year requiring amendment to the amounts and disclosures
included in these financial statements.
Corporate information
Registered office – South Africa:
Level 1, Wilds View, Isle of Houghton, Corner Carse O’Gowrie and
Boundary Roads, Houghton Estate, Johannesburg 2198
PO Box 3011, Houghton 2041, South Africa
Telephone: +27 11 484 0830 Facsimile: +27 86 262 2838
Corporate address – Canada:
2900–550 Burrard Street, Vancouver, British Columbia, Canada V6C 0A3
Telephone: +1 604 631 3131 Facsimile: +1 604 631 3232
Toll Free: 1 866 635 3131
JSE sponsor: PSG Capital
First Floor, Building 8 Inanda Greens Business Park, 54 Wierda Road West,
Wierda Valley, Sandton 2196
International broker: Northland Capital Partners Limited 60 Gresham
Street, London, EC2V 7BB United Kingdom
Auditors: KPMG Inc Chartered Accountants
KPMG Crescent, 85 Empire Road, Parktown 2193, South Africa
Transfer agents - South Africa:
Computershare Investor Services Proprietary Limited
(Registration number 2004/0036471/07)
Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196
Transfer agents - Canada: Computershare Investor Services Inc.
3rd Floor, 510 Burrard Street, Vancouver, British Columbia,
Canada V6C 3B9
Lawyers - South Africa: Brink Falcon Hume Inc Attorneys
Second Floor, 8 Melville Road, Illovo, Sandton 2196, South Africa
Lawyers - Canada: Fasken Martineau DuMoulin LLP
333 Bay Street, Suite 2400, Bay Adelaide Centre, Toronto, Ontario,
Canada, M5H 2T6
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