WESIZWE PLATINUM LIMITED - Abridged Group Financial Statements and Notice of Annual General Meeting

Release Date: 29/03/2018 17:00
Code(s): WEZ
 
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Abridged Group Financial Statements and Notice of Annual General Meeting

WESIZWE PLATINUM LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2003/020161/06)
JSE code: WEZ ISIN: ZAE000075859
("the company" or "Wesizwe")

ABRIDGED GROUP FINANCIAL STATEMENTS AND NOTICE OF ANNUAL GENERAL MEETING

HIGHLIGHTS
– Main shaft has been commissioned.
– All winder licenses have been granted by the Department of Mineral
  Resources.
– Holing between main shaft and service shaft on all levels were
  completed.
– Connection of the ramp between levels 77 and 81 were completed.
– The level 77 level skip feed conveyer was constructed and
  commissioned.
– A tail-end loading conveyer was commissioned enabling material from 81
  and 77 levels to be loaded into skips.
– Total flat development achieved for 2017 being 1 217m.
– Cash on hand as of 31 December 2017 is R388 million.
– Implemented community SLP programs per requirements of the mining
  license amounting to a total investment of R54 million of which R42
  million was spent on bulk civil and electrical infrastructure for the
  housing project.
– Implemented various Human Resources Development Programs as required
  by the Mining Charter, Investment of R19 million was incurred.
– Achieved zero fatalities and the Lost Time Injury Frequency rate for
  the period was 0.54.
– Services projects are on schedule.
     - The 132/33kV power lines has been commissioned with power now
       being supplied through the permanent Eskom infrastructure from
       Ngwedi substation.
     - Bakubung Platinum Mines has two transformers powered-up to 132kV
       which are currently supplying the mine. Capacitor banks for power
       filtration were also commissioned and are operational.

NOTICE OF ANNUAL GENERAL MEETING

Shareholders are hereby advised that the integrated annual report was
released today, which incorporates the notice of annual general meeting
to be held at Holiday Inn Sandton, 123 Rivonia Road, Sandton,
Johannesburg on Friday, 4 May 2018 at 09h00. The integrated report will
also be available on the company’s website at www.wesizwe.com. The date
on which shareholders must be recorded as such in the share register for
purposes of being entitled to attend and vote at this meeting is
Thursday, 26 April 2018 with the last day to trade being Monday, 23
April 2018.

ABRIDGED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 December 2017

                                                    2017       2016
                                    Notes          R’000      R’000
ASSETS
Property, plant and equipment         5        7 454 753   6 389 880
Intangible asset                                   1 709       3 601
Available-for-sale financial
                                      6           10 564    510 900
asset
Restricted cash                       7           45 844      78 657
Non-current assets                             7 512 870   6 983 038

Other receivables                                 51 244      56 723
Taxation                              9              293           -
Restricted cash                       7           27 000      84 000
Cash and cash equivalents                        388 170     455 452
Current assets                                   466 707     596 175
Total assets                                   7 979 577   7 579 213

EQUITY AND LIABILITIES
Stated capital                        8        3 425 544   3 425 544
Accumulated loss                               (412 621)   (318 419)
Capital and reserves                           3 012 923   3 107 125

Deferred tax liability                9          379 867     302 135
Interest-bearing borrowings           14       4 426 426   3 996 061
Mine closure and environmental
                                      10          58 691      53 889
rehabilitation obligation
Cash-settled share-based payment
                                                   3 623       5 946
liability
Non-current liabilities                        4 868 607   4 358 031

Interest-bearing borrowings           13               -             -
Trade and other payables                          98 047     112   499
Taxation                              9                -       1   558
Current liabilities                               98 047     114   057
Total equity and liabilities                   7 979 577   7 579   213

ABRIDGED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
for the year ended 31 December 2017

                                                    2017          2016
                                       Notes       R’000         R’000
Operations
Administration expenses                        (346 192)      (214 179)
Project-related expenses capitalised             335 974        193 519
Loss on scrapping of property, plant
                                                     (5)       (1 497)
and equipment
Profit on disposal of property,
                                                   1 803              -
plant and equipment
Net operating costs                              (8 420)      (22 157)

Impairment of available-for-sale
financial asset reclassified from              (500 336)      (117 100)
other comprehensive income

Financial income
Finance income                                    48 859         76 493
Finance expense                                (249 127)      (208 692)
Foreign exchange gain                            460 990        535 373
Finance costs capitalised                        232 955        190 332
Net finance income                               493 677        593 506
Profit/(loss) before tax                        (15 079)        454 249
Income tax (expense)                            (79 123)      (151 565)
Profit/(loss) for the year                      (94 202)        302 684
Other comprehensive income
Items that are or may be
reclassified to profit or loss
Loss on fair value movements of
                                               (500 336)      (117 100)
available-for-sale asset
Tax on other comprehensive income                 56 613        11 463
Reclassification of available-for-
sale financial asset to profit or                500 336       117 100
loss
Related tax                                     (56 613)      (11 463)
Total other comprehensive loss                         -             -
Total comprehensive income for the
                                                (94 202)       302 684
year
Profit/(loss) per share
Basic and diluted earnings/(loss)
                                                  (5.79)         18.59
per share cents

ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2017


                                      Stated/     (Accumu      Total
                                        Share       lated
                                      Capital       loss)
                                        R’000       R’000       R’000
Balance at 1 January 2016           3 425 544   (621 103)   2 804 441
Total comprehensive income for
the year
Profit for the year                         -     302 684     302 684
Balance at 31 December 2016         3 425 544   (318 419)   3 107 125
Total comprehensive loss for
the year
Loss for the year                           -    (94 202)    (94 202)
Balance at 31 December 2017         3 425 544   (412 621)   3 012 923

ABRIDGED CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2017
                                                       2017       2016
                                        Note          R’000      R’000
Cash flows from operating activities
Cash receipts from customers                              -          -
Cash paid to suppliers and employees                 19 143    (8 915)
Cash generated from /(utilised in)
                                                     19 143    (8 915)
operations
Finance income received                             39 300      72 682
Finance cost paid                                    (377)    (17 267)
Taxation paid                                      (3 245)     (5 636)
Taxation received                                        3       4 916
Cash generated from operating
                                                     54 824     45 780
activities

Cash flows from investing activities
Acquisition of property, plant and
equipment as a result of increase in            (1 101 882)   (975 200)
operations
Net cash outflow from investing
                                                (1 101 882)   (975 200)
activities

Cash flows from financing activities
Interest-bearing borrowings raised                 891 769            -
Net cash inflow from financing
                                                   891 769            -
activities

Net decrease in cash and cash
                                                 (155 289)    (929 420)
equivalents
Cash at beginning of year                          615 368    1 544 778
Cash at end of year                                460 079      615 368

Cash at end of year comprises:
Cash balances                                      388 170     455 452
Less: interest accrued                               (935)     (2 741)
Cash and cash equivalents                          387 235     452 711
Restricted cash                           7         72 844     162 657
Cash at end of year                                460 079     615 368

ABRIDGED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2017

 1. Reporting entity
    Wesizwe is a company domiciled in the Republic of South Africa. The
    abridged consolidated financial statements for the year ended 31
    December 2017 comprise the company and its subsidiaries (together
    referred to as the “group”). The audited consolidated financial
    statements of the group for the year ended 31 December 2017 will be
    available at www.wesizwe.com.

 2. Statement of compliance
    These abridged consolidated financial statements (“abridged
    report”) are prepared in accordance with the framework concepts and
    the recognition and measurement principles of International
    Financial Reporting Standards (“IFRS”), the presentation and
    disclosure requirements of IAS 34 Interim Financial Reporting, the
    Companies Act of South Africa and the SAICA Financial Reporting
    Guides as issued by the Accounting Practices Committee and
    Financial Reporting Pronouncements as issued by Financial Reporting
    Standards Council.

     These abridged financial statements have been extracted from the
     complete set of financial statements, but is itself not audited, on
     which the auditors, KPMG Inc, have expressed an unqualified audit
     opinion. A copy of the auditor’s report is available for inspection
     at the company’s registered office.

     The financial statements have been prepared under the supervision
     of the Finance Director, Mr. Feng Tao.

     The directors of Wesizwe take full responsibility for the
     preparation of the abridged report and that the financial
     information has been correctly extracted from the underlying
     audited annual financial statements.

 3. Accounting policies
    The accounting policies used to prepare this report are in terms of
    IFRS and are consistent with those used in the previous annual
    financial statements.

 4. Estimates
    The preparation of the year-end financial information requires
    management to make judgements, estimates and assumptions that
    affect the application of accounting policies and the reported
    amounts of assets and liabilities, as well as income and expense.
    Actual results may differ from these estimates.

     Except as described below, in preparing the condensed consolidated
     year-end financial information, the significant judgements made by
     management in applying the Group’s accounting policies and the key
     sources of estimation are consistent with those that applied to the
     consolidated financial statements for the year ended 31 December
     2016.

     During the year management reassessed its estimate in respect of
     the available-for-sale financial asset (note 6).

5. Property, plant and equipment

                                         Mine
                                       Assets        Other          Total
                                        R'000        R'000          R'000
   Balance at 1 January 2016        5 328 375       66 648    5   395 023
   Additions                          975 445       28 227    1   003 672
   Disposals                                -         (17)           (17)
   Depreciation                             -      (8 798)        (8 798)
   Balance at 1 January 2017        6 303 820       86 060    6   389 880
   Additions                          978 070       96 444    1   074 514
   Disposals                                -          (4)            (4)
   Depreciation                          (11)      (9 626)        (9 637)
   Balance at 31 December 2017      7 281 879      172 874    7   454 753

6. Available-for-sale financial asset

                                                     2017             2016
                                                    R’000            R’000
   Opening Balance                                510 900          628 000
   Loss included in OCI – fair value
                                                (500 336)         (117 100)
   adjustment
   Closing Balance                                 10 564          510 900

   The group currently holds 17.1% of Maseve Investments 11 (Pty) Ltd
   (“Maseve”). The available-for-sale financial asset is classified as
   a level 2 fair value as the fair value is determined on inputs not
   based on observable market data. The fair value of the unlisted
   equity securities as at 31 December 2016 is based on the discounted
   cash flows method. The valuation model considers the present value
   of estimated future cash flows, discounted using a risk-adjusted
   discount rate. The investment in Maseve as at 31 December 2017 has
   been valued at US$855,000 being the value that Wesizwe may receive
   for its 17.1% investment in Maseve. The proposed sale by Platinum
   Group Metals of its 82.9% shareholding in Maseve to Royal Bafokeng
   Platinum Limited has been used as comparable transaction to
   determine the fair value.

   The significant unobservable inputs are:
                                                       2016
   US$ exchange rate   (ZAR) up to 2021         13.10–14.21
   US$ exchange rate   (ZAR) long-term                14.64
   Pt price (US$/oz)   up to 2021                 978–1 236
   Pt price (US$/oz)   long-term                      1 326
   Pd price (US$/oz)   up to 2021                  711– 930
   Pd price (US$/oz)   long-term                        981
   Rh price (US$/oz)   up to 2021                  767– 898
   Rh price (US$/oz)   long-term                      1 227
   Au price (US$/oz)   up to 2021               1 234-1 226
   Au price (US$/oz) long-term                        1 309
   Pre-tax discount rate(%)(Real)                     13.30

Sensitivity analysis on the fair value of the investment in Maseve:
                                                    2016
                                               R’million
       10% increase in the US$ exchange
                                                   233.8
       rate
       10% decrease in the US$ exchange
                                                 (235.8)
       rate
       10% increase in the platinum price          147.7
       10% decrease in the platinum price        (148.0)

7. Restricted cash

                                                           2017       2016
                                                          R'000      R'000
      Non-Current
      Department of Mineral Resources —
                                                          1 016      1 016
      Rehabilitation obligation
      Eskom — Connection guarantees                      44 828     77 641
      Aveng Mining Limited — Performance payment
                                                              -           -
      guarantee
                                                         45 844     78 657
      Current
      Department of Mineral Resources —
                                                         27 000     27 000
      Rehabilitation obligation
      Aveng Mining Limited — Performance payment
                                                              -     57 000
      guarantee
                                                         27 000     27 000
      Total                                              72 844    162 657

8. Stated capital

                                                           2017       2016
                                                          R'000      R'000
      Authorised
      2 000 000 000 no par value ordinary shares              -           -

      Issued
      1 627 827 058 no par value ordinary shares      3 425 544   3 425 544

9. Taxation

9.1    Income tax receivable
                                                           2017       2016
                                                          R'000      R'000
      Balance at the beginning of the year                1 558    (4 916)
      Profit or loss charge                               1 391      7 193
      Taxation paid                                     (3 245)    (5 635)
      Taxation refund received                                3      4 916
                                                                     1 558
      Balance at the end of the year                      (293)

9.2    Deferred tax

                                                          2017        2016
                                                         R'000       R'000
      Deferred tax liability
      Balance at the beginning of the year             302 135     157 763
      Current year charges                              77 732     144 372
      Unredeemed exploration expenditure
      Property, plant and equipment                    274 138      272 819
      Available-for-sale financial asset              (56 613)     (11 463)
      Unredeemed mining capex                        (138 449)    (106 549)
      Provisions                                       (1 344)     (10 435)
      Balance at the end of the year                   379 867      302 135

10.Mine closure and environmental rehabilitation obligation
   This long-term obligation reflects the net present value of
   closure, restoration and environmental rehabilitation (which
   include the dismantling and demolition of infrastructure, removal
   of residual materials and remediation of disturbed areas) cost. The
   annual changes can be ascribed to additional disturbances caused
   during the year and changes in the escalation and discount
   rates. This estimate is based on the current cost estimate and
   escalated to the future planned closure date and then discounted at
   an appropriate rate. The current estimates are based on
   environmental plans in accordance with current technology,
   environmental and regulatory requirements and the measurements of
   an independent professional surveyor. The discount rate is based on
   a pre-tax risk-free rate available in the current market.

      At the time of establishing the provision, a corresponding asset is
      recognised that will be depreciated over the future life of the
      asset to which it relates. The provision is re-assessed on an
      annual basis for changes in cost estimates, discount rates and
      useful lives.

      As required by the Department of Mineral Resources a deposit of
      R28.0 million (2016: R27.0 million) is held with a financial
      institution. The deposit has been guaranteed to the Department of
      Mineral Resources for the mine closure and environmental
      rehabilitation.

11.Segment reporting
   No segment reporting has been included as the group is conducting
   activities in one geological location which represents only one
   business activity.

   An operating segment is a component of the group that engages in
   business activities from which it may earn revenues and incur
   expenses, including revenues and expenses that relate to
   transactions with any of the group’s other companies. The operating
   results for the group as a whole are reviewed regularly by the
   group’s CEO to make decisions about resources to be allocated and
   to assess its performance.

12.Subsequent events
   No other material events have occurred after the reporting period
   and up to the date of this report that required further disclosure
   in these financial results.

13.Interest-bearing borrowings
                                                    2017       2016
                                                   R’000      R’000
   Non-current
   Opening balance                             3 996 061 4 548 772
   China Development Bank – drawdown             891 770         -
   Interest accrual                              244 319   207 080
   China Development Bank – interest
                                               (244 689)   (224 343)
   repayment
   Realised foreign exchange loss                  8 879      11 439
   Unrealised foreign exchange gain            (469 914)   (546 887)
   Closing balance                             4 426 426   3 996 061

   The group has a secured US$650 million loan of which US$367.3
   million was drawn down at year end (2016: US$300 million). The
   interest rate on the facility is determined six monthly in advance
   as the six-month LIBOR rate plus 3.5%. The term of the loan is 15
   years and no capital repayments are due during the first six years.
   Repayments in semi-annual instalments over the last nine years of
   the facility commence at an amount equal 0.077% of the outstanding
   balance at the end of the sixth year, after which every instalment
   increase until the second last payment amounts to 8.5% of the
   initial outstanding amount. The last instalment repays the total
   balance. A facility fee amounting to 0.5% of the unutilized balance
   is payable annually. The interest expense is payable bi-annually.
   The interest expense and facility fee is included in the effective
   interest rate calculation.

14.Headline earnings per share

   The basis of calculation of headline earnings and diluted headline
   earnings per share is:
                                                   2017           2016
                                                      R               R
   (Loss)/profit attributable to
   ordinary shareholders (rand)            (94 202 401)    302 683 874
   Loss on scrapping of property, plant
   and equipment                                  4 650      1 497 534
   Profit on disposal of property, plant
   and equipment                            (1 802 567)               -
   Reclassification of gains or losses
   upon impairment of available-for-sale
   financial asset                          500 336 381    117 100 000
   Total tax effects of adjustments        (56 109 339)   (11 882 182)
   Headline earnings                        348 226 724    409 399 226
   Weighted average number of ordinary
   shares in issue (shares)               1 627 827 058   1 627 827 058
   Headline earnings and diluted
   headline earnings per share (cents)            21.39          25.15

15.Capital Commitments

  Capital commitments for the next 12 months amounts to
  R355.9 million (2016: R397.5 million).

16.Mineral Resources and Reserves

  There were no changes to the mineral resources and reserves for the
  year ended 31 December 2017.

17.Dividends

  No dividends were declared for the year ended 31 December 2017.

18.Prospects

  The Bakubung project remains on target both in terms of full
  planned concentrate production output and project construction
  costs budget. The updated feasibility study of the Bakubung project
  was tested by the auditors for an impairment assessment and still
  continues to yield very encouraging results.

19.Changes to the Board of Directors

  Mr. Jianke Gao has resigned from his position as chief executive
  officer and acting financial director with effect from 14 February
  2017. Mr. Zhimin Li was appointed to the board as the chief
  executive officer and acting financial director on 15 February
  2017. Mr. Kenny Mokoka has resigned from his position as non-
  executive director with effect from 01 May 2017. Mr. Feng Tao was
  appointed to the board as financial director on 1 July 2017.
  Mr. Dexin Chen has resigned from his position as non-executive
  director and deputy chairman with effect from 28 August 2017. Mr
  Fugui Qiao has been appointed to the board as non-executive
  director on 22 September 2017. Ms Xiaoyin Zhou has resigned from
  the board with effect from 30 January 2018. Mr Sun Pingan and Mr
  Indresen Pillay has been appointed to the board as non-executive
  directors with effect from 01 February 2018.

By order of the board:

Dawn Mokhobo (Chairman)         Zhimin Li (Chief Executive Officer)

Sponsors: PSG Capital Proprietary Limited

Directors: DNM Mokhobo (Chairman)*, Z Li (Chief Executive Officer)#,
F Tao (Finance Director)#, LV Ngculu*, TV Mabuza*, S Pingan*#, P
Li*#, F Qiao*#, I Pillay*
*Non-Executive #Chinese
Company secretary: V Mhlongo

Registered address: Wesizwe House, Devcon Park, 9 Autumn Road Rivonia
Ext 3, 2128, South Africa
www.wesizwe.com

29 March 2018
Johannesburg

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