TRANS HEX GROUP LIMITED - Audited summary consolidated financial statements for the year ended 31 March 2018

Release Date: 21/06/2018 11:40
Code(s): TSX
 
Wrap Text
Audited summary consolidated financial statements for the year ended 31 March 2018

TRANS HEX GROUP LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1963/007579/06
Share code: TSX
ISIN: ZAE000018552
("Trans Hex" or the "Group")


AUDITED SUMMARY CONSOLIDATED FINANCIAL STATEMENTS 
FOR THE YEAR ENDED 31 MARCH 2018


HEADLINES
Sale of the Lower Orange River ("LOR") operations
The Board of Directors of the Company approved the sale of the LOR operations on 27 March 2018. 
Consequently, the assets and liabilities relating to these operations have been presented as a 
disposal group held-for-sale in terms of IFRS 5. The results of the LOR operations for the year 
ended 31 March 2018 are presented as discontinued operations as this represents a separate major 
line of business.

Acquisition of an additional 27,2% interest in West Coast Resources (Pty) Ltd
On 1 February 2018, the Group acquired a further 27,2% equity interest in West Coast Resources (Pty) Ltd, 
thereby increasing its interest to 67,2% and obtaining control of West Coast Resources (Pty) Ltd. Up to 
this date, the 40% investment in West Coast Resources (Pty) Ltd was accounted for as an investment in 
an associate under the equity method. 

It should be noted that the consolidation of West Coast Resources (Pty) Ltd from 1 February 2018, 
and the re-presentation of the results of the LOR operations as discontinued operations, impacted the 
comparability of the results for the year ended 31 March 2018 with the results for the year ended 
31 March 2017. 

-  Group net profit from continuing operations amounted to R26,2 million (2017: loss of R65,2 million).
-  Group net loss from discontinued operations, including retrenchment costs of R99,3 million, 
   amounted to R213,0 million (2017: loss of R117,4 million).
-  Group net loss for the year amounted to R186,8 million (2017: loss of R182,6 million).
-  The Group's net cash position at the end of the year was R79,4 million (2017: R225,4 million).
-  Loss per share amounted to 175,6 cents (2017: loss of 173,5 cents) and headline loss per share 
   amounted to 216,5 cents (2017: loss of 114,6 cents).
-  Net asset value per share amounted to 218,0 cents (2017: 337,0 cents).


SUMMARY CONSOLIDATED INCOME STATEMENT
                                                                                  2018         2017
                                                                    Notes        R'000        R'000 
                  
Continuing operations                  
Sales revenue                                                                  192 542       91 068 
Cost of goods sold                                                            (172 205)    (100 285)
Gross profit/(loss)                                                             20 337       (9 217)
Share of results and impairment of associated companies                 1       38 662      (18 959)
Royalties                                                                       (1 005)        (389)
Selling and administration costs                                               (61 192)     (88 802)
Mining loss                                                                     (3 198)    (117 367)
Exploration costs                                                               (6 574)      (2 947)
Other gains - net                                                       2       45 724       18 775 
Finance income                                                                  25 020       29 222 
Finance costs                                                                  (32 981)        (591)
Profit/(loss) before income tax                                                 27 991      (72 908)
Income tax                                                                      (1 745)       7 733 
Profit/(loss) for the year from continuing operations                           26 246      (65 175)
Discontinued operations                  
Loss for the year from discontinued operations                          3     (213 033)    (117 442)
Loss for the year                                                             (186 787)    (182 617)
                  
Attributable to:                  
Continuing operations                                                           26 246      (65 175)
Owners of the parent                                                            24 777      (66 044)
Non-controlling interest                                                         1 469          869 
Discontinued operations                   
Owners of the parent                                                          (213 033)    (117 442)
                                                                              (186 787)    (182 617)
                  
Earnings/(loss) per share - basic and diluted (cents)                  
Continuing operations                                                             23,1        (62,4)
Discontinued operations                                                         (198,7)      (111,1)
Total                                                                           (175,6)      (173,5)
                  
Shares in issue adjusted for treasury shares ('000)                            115 136      105 699 
                  
Headline loss                                                           4            
Continuing operations                                                           (9 361)     (23 499)
Discontinued operations                                                       (222 781)     (97 702)
Total                                                                         (232 142)    (121 201)
                  
Headline loss per share (cents)                  
Continuing operations                                                             (8,7)       (22,2)
Discontinued operations                                                         (207,8)       (92,4)
Total                                                                           (216,5)      (114,6)
                  
Average ZAR/US$ exchange rate                                                    12,19        14,02


SUMMARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                                                                                  2018         2017
                                                                                 R'000        R'000 
Loss for the year                                                             (186 787)    (182 617)
                        
Other comprehensive profit/(loss) net of tax:                                   (4 376)       3 896
Items that will not be reclassified to profit or loss                        
Re-measurements of post-employment benefit obligations                             320            -
Before-tax amount                                                                  320            -
Tax expense                                                                          -            -
Items that may be subsequently reclassified to profit or loss                        
Translation differences on foreign subsidiaries before and after tax               232        5 108
Recycling of foreign currency translation differences on repayment of 
  long-term receivables from foreign operations                                 (4 928)      (1 212)
Total comprehensive loss for the year                                         (191 163)    (178 721)
                        
Attributable to:                        
Continuing operations                                                           21 870      (61 279)
Owners of the parent                                                            20 401      (62 148)
Non-controlling interest                                                         1 469          869
Discontinued operations                        
Owners of the parent                                                          (213 033)    (117 442)
                                                                              (191 163)    (178 721)


SUMMARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                                                                                  2018         2017
                                                                    Notes        R'000        R'000 
ASSETS                  
Non-current assets                                                             772 044      316 064
Property, plant and equipment                                           5      498 669       51 439 
Investment in associates                                                6       75 458      195 822 
Investments held by environmental trust                                         70 459       65 803 
Other financial assets                                                         127 458        3 000 
                  
Current assets                                                                 172 287      364 705 
Inventories                                                             7       74 522       59 276 
Trade and other receivables                                                     18 398       80 026 
Current income tax                                                                   3            3 
Cash and cash equivalents                                                       79 364      225 400 
Assets of a disposal group classified as held-for-sale                  8       36 308            - 
Total assets                                                                   980 639      680 769 
                  
EQUITY AND LIABILITIES                  
Capital and reserves                                                           182 145      356 375 
Non-controlling interest                                                        69 654            - 
                  
Non-current liabilities                                                        338 213      119 464 
Borrowings                                                              9      111 813            - 
Deferred income tax liabilities                                                 33 943            - 
Provisions                                                             10      192 457      119 464 
                  
Current liabilities                                                            291 024      204 930 
Trade and other payables                                                        63 243      123 391 
Interest in joint ventures                                              3       69 595       81 539 
Borrowings                                                              9      158 186            - 
Liabilities of a disposal group classified as held-for-sale             8       99 603            - 
Total equity and liabilities                                                   980 639      680 769 
                  
Net asset value per share (cents)                                                  218          337


SUMMARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY         
                                                                                  2018         2017
                                                                                 R'000        R'000 
Balance at 1 April                                                             356 375      535 096 
Shares issued during the year                                                   18 402            - 
Total comprehensive loss for the year                                         (191 163)    (178 721)
Acquisition of subsidiary                                                       68 185            - 
Balance at end of year                                                         251 799      356 375


SUMMARY CONSOLIDATED STATEMENT OF CASH FLOWS                      
                                                                                  2018         2017
                                                                                 R'000        R'000 
Cash utilised in operations                                                   (226 734)    (120 788)
Movements in working capital                                                   (37 730)      12 402 
Income tax (paid)/received                                                          (3)         468 
Net cash utilised in operating activities                                     (264 467)    (107 918)
                  
Cash flows from investment activities                                           36 385      (17 306)
Property, plant and equipment                  
Proceeds from disposal                                                          15 087            - 
Replacement                                                                          -      (32 147)
Additional                                                                      (6 579)      (6 196)
Proceeds from repayment of loan to Trans Hex Angola                             20 160       18 886 
Loan to associate                                                               (8 903)     (27 010)
Dividends received                                                              10 716       11 594 
Interest received                                                                5 904       17 567 
                  
Cash flows from financing activities                                            83 992           (3)
Proceeds from borrowings                                                        95 000            - 
Repayment of borrowings                                                         (6 848)           - 
Interest paid                                                                   (4 160)          (3)
                  
Net decrease in cash and cash equivalents                                     (144 090)    (125 227)
Cash and cash equivalents at beginning of year                                 225 400      353 499 
Effects of exchange rates on cash and cash equivalents                          (1 946)      (2 872)
Cash and cash equivalents at end of year                                        79 364      225 400


NOTES TO THE SUMMARY CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
                                                                                  2018         2017
                                                                                 R'000        R'000
1.  SHARE OF RESULTS OF ASSOCIATED COMPANIES            
    Consists of the following categories:            
    Somiluana - Sociedade Mineira, S.A.                                         47 503       52 296 
    The 33% investment in Somiluana is accounted for as an investment in 
    an associate under the equity method.
                  
    West Coast Resources (Pty) Ltd             
    On 1 February 2018, West Coast Resources (Pty) Ltd became a subsidiary 
    of the Group. Up to this date, the 40% investment in West Coast Resources 
    (Pty) Ltd was accounted for as an investment in an associate under the 
    equity method. Included in the prior year results is an amount of 
    R43 million, representing the Group's share of an impairment charge 
    to mining rights after tax.            
                  
    Share of results and impairment of associate                                (8 841)     (71 255)
    Share of results of associate                                               (8 841)     (27 837)
    Impairment charge to mining rights, after tax                                    -      (43 418)
                                                                                38 662      (18 959)
                  
2.  OTHER GAINS - NET            
    Other gains - net consist of the following categories:            
    Loss on scrapping of property, plant and equipment                          (1 357)           - 
    Net foreign exchange gains                                                   4 371        8 944 
    Gain on bargain purchase with acquisition of subsidiary                     38 142            - 
    Loss on re-measurement to fair value with acquisition of subsidiary         (7 575)           - 
    Commission on third-party sale of diamonds                                  12 143        9 831 
                                                                                45 724       18 775
                  
3.  DISCONTINUED OPERATIONS            
    Angola            
    On 5 October 2011, the Angolan Ministry of Geology, Mines and Industry 
    revoked the mining rights of the Luarica and Fucauma joint ventures as 
    no mining activities had been performed at the sites for a period of 
    three years as a result of the projects being placed under care and 
    maintenance.

    The prescription of unclaimed debts of R2,3 million (2017: R28,9 million) 
    is included below.            
                  
    Angolan joint ventures            
    Balance at beginning of year                                                81 539      120 650 
    Share of profit                                                             (2 314)     (28 912) 
    Foreign exchange profits                                                    (9 630)     (10 199) 
    Closing balance at end of year                                              69 595       81 539 
                  
    Profit for the year                                                          2 314       28 912
                  
    Lower Orange River operations            
    In line with the Company's strategy of responsibly managing the 
    Lower Orange River ("LOR") operations in the final years of their viable 
    economic life cycles, these operations were gradually downscaled. 
    Production was finally halted on 31 October 2017 following the successful 
    conclusion of a formal consultation process with the National Union of 
    Mineworkers.            
                  
    The results of these operations were as follows:            
    Revenue                                                                    205 874      449 115 
    Cost of goods sold                                                        (426 109)    (531 370)
    Gross loss                                                                (220 235)     (82 255)
    Royalties                                                                   (1 029)      (2 280)
    Mining loss                                                               (221 264)     (84 535)
    Other gains - net                                                            9 748            - 
    Finance costs                                                               (3 831)      (4 800)
    Impairment of assets*                                                            -      (27 417)
    Loss before income tax                                                    (215 347)    (116 752)
    Income tax                                                                       -      (29 602)
    Loss for the year                                                         (215 347)    (146 354)
    Total                                                                     (213 033)    (117 442)
                  
      * During the previous year, the recoverable amount of the mining areas, 
        each considered a separate cash-generating unit ("CGU"), was 
        calculated based on value-in-use calculations. The impairment loss 
        was limited to the fair value less costs to sell of the individual 
        assets comprising these CGUs.            


4.  RECONCILIATION OF HEADLINE EARNINGS            
    Continuing operations            
    Profit/(loss) for the year                                                  24 777      (66 044)
    Gain on bargain purchase with acquisition of subsidiary                    (38 142)           - 
    Loss on re-measurement to fair value with acquisition of subsidiary          7 575            - 
    Loss on sale of assets                                                       1 357            - 
    Foreign currency translation differences on repayment of long-term 
      receivables from foreign operations recycled to profit or loss            (4 928)      (1 212)
    Taxation impact                                                                  -          339 
    Impairment of assets acquired by associate                                       -       43 418 
    Headline loss                                                               (9 361)     (23 499)
                  
    Discontinued operations             
    Loss for the year                                                         (213 033)    (117 442)
    Profit on sale of assets                                                    (9 748)           - 
    Impairment of assets                                                             -       27 417 
    Taxation impact                                                                  -       (7 677)
    Headline earnings                                                         (222 781)     (97 702)


5.  PROPERTY, PLANT AND EQUIPMENT                        
    On 1 February 2018, the Group acquired a further 27,2% of the equity and voting interest in 
    West Coast Resources (Pty) Ltd, thereby increasing its interest to 67,2%. Furthermore, 
    the LOR operations were classified as discontinued operations.

    Reconciliation of carrying value at the beginning and end of the year:
                                                                                Mining
                                                    Land and       Mining    plant and
                                                   buildings       rights    equipment        Total
                                                       R'000        R'000        R'000        R'000 
    2018                        
    Opening balance                                    2 981            -       48 458       51 439 
    Additions                                            568            -        6 011        6 579 
    Acquired as part of a business combination        41 117      313 455      153 022      507 594 
    Classified as held-for-sale                            -            -      (33 064)     (33 064)
    Transfers                                            392            -         (392)           - 
    Disposals                                              -            -       (6 697)      (6 697)
    Depreciation charge                                 (503)      (7 994)     (18 685)     (27 182)
    Closing balance                                   44 555      305 461      148 653      498 669 
                              
    2017                        
    Opening balance                                    8 115            -       74 840       82 955 
    Additions                                            453            -       37 890       38 343 
    Impairment of assets                                   -            -      (27 417)     (27 417)
    Exchange rate differences                              -            -           (2)          (2)
    Depreciation charge                               (5 587)           -      (36 853)     (42 440)
    Closing balance                                    2 981            -       48 458       51 439


                                                                                  2018         2017
                                                                                 R'000        R'000
6.  INVESTMENT IN ASSOCIATES            
    Loan to associate: Somiluana - Sociedade Mineira, S.A.                       7 945       29 840 
    Balance at beginning of year                                                29 840       52 912 
    Repayment of loan amount                                                   (20 159)     (18 886)
    Foreign exchange (profits)/losses                                           (1 736)      (4 186)
                  
    The loan to Somiluana represents a portion of the exploration costs 
    previously incurred by the Group which is recoverable from the mining 
    company. In terms of the Somiluana mining contract, the Group has a 
    contractual right to be reimbursed for the exploration costs incurred 
    and as at 31 March 2018, the loan outstanding by Somiluana amounted 
    to US$20,1 million. During the 2011 financial year, an amount of 
    US$10,5 million was recognised as a loan receivable by the Group. 
    This represented the recoverable amount of the loan receivable from 
    Somiluana when the entity was formed on 12 May 2010. 

    To date, US$9,8 million has been paid back and as at 31 March 2018, 
    the recognised portion of the loan receivable by the Group amounted 
    to US$0,7 million, translated to R7,9 million.            
                  
    Investment in associate: Somiluana - Sociedade Mineira, S.A.                67 513       38 820 
    Balance at beginning of year                                                38 820            - 
    Share of results of associated company                                      47 503       52 296 
    Dividends paid                                                             (10 716)     (11 594)
    Foreign exchange differences                                                (8 094)      (1 882)
                  
    The 33% investment in Somiluana is accounted for as an investment in 
    an associate under the equity method.            
                  
    Loan to associate: West Coast Resources (Pty) Ltd                                -       28 677 
    Balance at beginning of year                                                     -            - 
    Loan advances during the year                                                    -       27 010 
    Capitalised interest                                                             -        1 667 
                  
    Investment in associate: West Coast Resources (Pty) Ltd                          -       98 485 
    Balance at beginning of year                                                     -      166 865 
    Share of results of associated company                                           -      (71 255)
    Capitalised interest                                                             -        2 875 
                  
    On 1 February 2018, the Group increased its interest in West Coast 
    Resources (Pty) Ltd to 67,2%. At year-end the results of West Coast 
    Resources (Pty) Ltd have  therefore been consolidated and no current 
    year numbers are disclosed under the Investments in Associates Note.            
                                                                                75 458      195 822


7.  INVENTORIES            
    Diamonds                                                                    61 622       55 068 
    Consumables                                                                 12 900        4 208 
                                                                                74 522       59 276 
                  
    The carrying value of diamond inventories included above, carried at 
    net realisable value, amounted to R4 081 444 (2017: R33 167 323). 

    Cost of inventories included in cost of goods sold amounted to 
    R163 million (2017: R90 million).            
       
           
8.  ASSETS AND LIABILITIES OF A DISPOSAL GROUP HELD-FOR-SALE            
    The Board of Directors of the Company approved the sale of the 
    LOR operations on 27 March 2018 for a total consideration of R72 million. 
    Consequently, the assets and liabilities relating to these operations 
    have been presented as a disposal group held-for-sale. The results for 
    the year ended are presented as discontinued operations as this 
    represents a separate major line of business.

    Assets of a disposal group classified as held-for-sale:            
    Property, plant and equipment                                               33 064            - 
    Consumables                                                                  3 244            - 
                                                                                36 308            - 
                  
    Liabilities of a disposal group classified as held-for-sale:            
    Rehabilitation liabilities - LOR operations                                 99 603            - 
                
  
9.  BORROWINGS            
    Non-current            
    Loan secured by a second mortgage bond to the value of R38 775 000 
    over certain immovable properties and a general notarial bond over 
    certain movable assets to the value of R173 383 700. The loan carries 
    interest at the prime overdraft rate plus 0,4% compounded monthly and 
    is repayable in 66 monthly instalments, the first of which was paid on 
    1 September 2016. The total amount, inclusive of capitalised interest, 
    available under this loan is R189 010 000.                                 146 178            - 

    Less: Portion of loan repayable within one year, included in current 
          liabilities                                                          (34 365)           - 
                                                                               111 813            - 
                  
    Current            
    Revolving loan facilities secured by a special notarial bond to the 
    value of R264 000 000 over certain movable assets, cession of 
    certain book debts, shares and claims. The loans carry interest at 
    the rate of 2% per month. The total amount available under the 
    facility is R148 000 000.                                                  123 821            - 

    Portion of non-current liabilities repayable within one year, 
    included in current liabilities                                             34 365            - 
                                                                               158 186            -


10. PROVISIONS            
    Provision for post-employment medical benefits                              11 017       11 071 
    Provision for long-service awards                                            3 016       13 917 
    Provision for rehabilitation liabilities                                   178 424       94 476 
                                                                               192 457      119 464 
        
          
11. BUSINESS COMBINATIONS            
    On 1 February 2018, the Group acquired a further 27,2% of the equity 
    and voting interest in West Coast Resources (Pty) Ltd, thereby increasing 
    its interest to 67,2%. The purchase consideration was discharged by the 
    issue of 9 436 838 ordinary shares of no par value for a total 
    consideration of R18,4 million, based on the ruling market price on 
    that day of R1,95 per share.

    The fair value exercise over the opening balance sheet of West Coast 
    Resources (Pty) Ltd remains provisional at 31 March 2018 as permitted 
    by IFRS 3 as the fair value of the acquired assets and liabilities is 
    still being finalised. This is expected to be finalised during the next 
    year.

    The following table summarises the provisional purchase price allocation 
    for the acquisition, and the amounts of the assets acquired and 
    liabilities assumed recognised at the acquisition date. 

    Recognised amounts of identifiable assets acquired and liabilities 
    assumed at book value:            
    Total assets                                                               744 180            - 
    Property, plant and equipment                                              194 139            - 
    Mining rights                                                              313 455            -
    Other financial assets                                                     123 016            - 
    Inventories                                                                107 829            - 
    Trade and other receivables                                                  5 603            - 
    Cash and cash equivalents                                                      138            - 
                  
    Total liabilities                                                          536 300            - 
    Provisions                                                                 166 890            - 
    Deferred income tax liabilities                                             32 201            - 
    Borrowings                                                                 202 934            - 
    Trade and other payables                                                   134 275            - 
    Total identifiable net assets                                              207 880            -

    Net asset value purchased (67,2%)                                          139 695            - 
    Fair value of consideration transferred                                    (18 402)           - 
    Previously held equity                                                     (83 151)           -
    Provisional gain on bargain purchase                                        38 142            - 
                  
    The provisional gain on business combination arises due to the decrease 
    in the Company share price from the agreed consideration share price 
    of R4,14 to the closing date share price of R1,95.

    Acquisition-related costs were charged to administrative expenses in 
    the consolidated income statement of the Group.                              1 017            -
                  
    From the date of acquisition, West Coast Resources (Pty) Ltd contributed 
    R123 million of revenue and a profit after tax of R4 million to the net 
    profit of the Group. If the business combination had taken place at the 
    beginning of the year, revenue from continuing operations would have been 
    R372 million and the net loss after tax of the Group would have been 
    R231 million.            
         
         
12. CAPITAL COMMITMENTS            
    (including amounts authorised, but not yet contracted)                      12 247       36 291
                  
    These commitments will be financed from the Group's own resources or with borrowed funds.


13. FAIR VALUE ESTIMATION
    Items carried at fair value are classified according to the fair value hierarchy, by valuation 
    method. The different levels have been defined as follows: 
    -  Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).
    -  Inputs other than quoted prices included within Level 1 that are observable for the asset or 
       liability, either directly (that is, as prices) or indirectly (that is, derived from prices) 
       (Level 2).
    -  Inputs for the asset or liability that are not based on observable market data (that is, 
       unobservable inputs) (Level 3).

    Financial assets are classified as Level 1 according to the fair value hierarchy. Investments 
    held by the environmental trust are the only financial assets carried at fair value. However, 
    this fund consists primarily of cash and cash equivalents with the largest driver of the growth 
    in the trust fund being attributable to interest received.

    The nominal value less impairment provisions of trade receivables, cash and cash equivalents, 
    trade payables, other financial assets and borrowings are assumed to approximate their fair values. 
    The fair value of financial liabilities for disclosure purposes is estimated by discounting the 
    future contractual cash flows at the current market interest rate that is available for the 
    Group for similar financial instruments.


14. SEGMENT INFORMATION                                    
    Operating segments                                    
                                                                              CONTINUING                         DISCONTINUED            
                                                                    South                                South
                                                                   Africa       Angola        Total     Africa     Angola      Total
                                          
    2018                                    
    Carats sold                                                    78 185            -       78 185     16 698          -     16 698 
                                          
                                                                    R'000        R'000        R'000      R'000      R'000      R'000 
                                          
    Revenue                                                       192 542            -      192 542    205 874          -    205 874 
    Cost of goods sold                                           (172 205)           -     (172 205)  (426 109)         -   (426 109)
    Gross profit/(loss)                                            20 337            -       20 337   (220 235)         -   (220 235)
    Share of results and impairment of associated companies        (8 841)      47 503       38 662          -          -          - 
    Royalties                                                      (1 005)           -       (1 005)    (1 029)         -     (1 029)
    Selling and administration costs                              (50 007)     (11 185)     (61 192)         -          -          - 
    Mining (loss)/profit                                          (39 516)      36 318       (3 198)  (221 264)         -   (221 264)
    Exploration costs                                              (6 574)           -       (6 574)         -          -          - 
    Other gains/(losses) - net                                     47 466       (1 742)      45 724      9 748          -      9 748 
    Profit for the year from discontinued operations                    -            -            -          -      2 314      2 314 
    Finance income                                                 25 020            -       25 020          -          -          - 
    Finance costs                                                 (32 981)           -      (32 981)    (3 831)         -     (3 831)
    Impairment of assets                                                -            -            -          -          -          - 
    (Loss)/profit before income tax                                (6 585)      34 576       27 991   (215 347)     2 314   (213 033)
                                          
    Depreciation included in the above                            (16 319)          (3)     (16 322)   (10 860)         -    (10 860)
    Net assets/(liabilities)                                      302 742       81 947      384 689    (63 295)   (69 595)  (132 890)
    Capital expenditure                                             2 111            -        2 111      4 468          -      4 468 
    Net asset value per share (cents)                                 262           71          333        (55)       (60)      (115)
                                 

                                                                              CONTINUING                         DISCONTINUED            
                                                                    South                                South
                                                                   Africa       Angola        Total     Africa     Angola      Total
    2017                                    
    Carats sold                                                    10 304            -       10 304     29 883          -     29 883 
                                          
                                                                    R'000        R'000        R'000      R'000      R'000      R'000 
                                          
    Revenue                                                        91 068            -       91 068    449 115          -    449 115 
    Cost of goods sold                                           (100 285)           -     (100 285)  (531 370)         -   (531 370)
    Gross loss                                                     (9 217)           -       (9 217)   (82 255)         -    (82 255)
    Share of results and impairment of associated companies       (71 254)      52 295      (18 959)         -          -          - 
    Royalties                                                        (389)           -         (389)    (2 280)         -     (2 280)
    Selling and administration costs                              (68 520)     (20 282)     (88 802)         -          -          - 
    Mining (loss)/profit                                         (149 380)      32 013     (117 367)   (84 535)         -    (84 535)
    Exploration costs                                              (2 947)           -       (2 947)         -          -          - 
    Other gains/(losses) - net                                     19 046         (271)      18 775          -          -          - 
    Profit for the year from discontinued operations                    -            -            -          -     28 912     28 912
    Finance income                                                 29 133           89       29 222          -          -          - 
    Finance costs                                                    (591)           -         (591)    (4 800)         -     (4 800)
    Impairment of assets                                                -            -            -    (27 417)         -    (27 417)
    (Loss)/profit before income tax                              (104 739)      31 831      (72 908)  (116 752)    28 912    (87 840)
                                          
    Depreciation included in the above                             (1 796)          (5)      (1 801)   (40 639)         -    (40 639)
    Net assets/(liabilities)                                      388 763       85 438      474 201    (36 287)   (81 539)  (117 826)
    Capital expenditure                                               880            -          880     37 463          -     37 463 
    Net asset value per share (cents)                                 367           81          448        (34)       (77)      (111)
                                          
    Revenue from transactions with certain customers can amount to 10% or more of total revenue. 
    During the year under review no individual customer was responsible for aggregate sales in 
    excess of 10% of revenue (2017: R82,3 million).                                    


15. CONTINGENT LIABILITIES
    The Group is subject to claims which arise in the ordinary course of business. The Group has 
    provided performance guarantees to banks and other third parties amounting to R8 million 
    (2017: R135 million).
      

16. EVENTS AFTER THE REPORTING PERIOD
    Post year-end, Trans Hex Operations (Pty) Ltd ("THO"), a wholly owned subsidiary of Trans Hex, 
    entered into an agreement with Lower Orange River Diamonds (Pty) Ltd ("LOR Diamonds"), in terms 
    of which THO has agreed to, inter alia, dispose of the business conducted by THO, as a going 
    concern, relating to and in connection with the exploration, prospecting, mining for, recovery, 
    treatment, production and disposal of diamonds in respect of the LOR operations, consisting of 
    certain assets, liabilities and the transfer of employees; and cede and transfer the mining right 
    associated with the LOR operations, to LOR Diamonds, for a total cash consideration of R72 million.

    Details of the above transaction were released on SENS on 18 April 2018 and are available on 
    Trans Hex's website at www.transhex.co.za. The transaction is subject to, inter alia, 
    shareholder approval and a circular containing the full details thereof is expected to be 
    distributed to shareholders by 3 August 2018.
      

17. ACCOUNTING POLICIES
    The summary consolidated financial statements are prepared in accordance with the JSE Limited 
    Listings Requirements ("Listings Requirements") for preliminary reports and the requirements 
    of the Companies Act, No. 71 of 2008, applicable to summary financial statements. The Listings 
    Requirements require preliminary reports to be prepared in accordance with the framework 
    concepts; the measurement and recognition requirements of International Financial Reporting 
    Standards ("IFRS"); the SAICA Financial Reporting Guides as issued by the Accounting Practices 
    Committee; Financial Pronouncements as issued by the Financial Reporting Standards Council; 
    and to also, as a minimum, contain the information required by IAS 34, "Interim Financial 
    Reporting". 

    The accounting policies applied in the preparation of the consolidated financial statements from 
    which the summary consolidated financial statements were derived are in terms of IFRS and are 
    consistent with those accounting policies applied in the preparation of the previous consolidated 
    annual financial statements.
   
   
18. PREPARATION OF FINANCIAL STATEMENTS
    The preparation of the summary consolidated financial statements was supervised by the 
    Financial Director, IP Hestermann CA(SA).
    
  
19. REPORT OF INDEPENDENT AUDITOR
    These summary consolidated financial statements for the year ended 31 March 2018 have been 
    audited by PricewaterhouseCoopers Inc., who expressed an unmodified opinion thereon. The auditor 
    also expressed an unmodified opinion on the annual financial statements from which these summary 
    consolidated financial statements were derived. 

    A copy of the Auditor's Report on the summary consolidated financial statements and of the 
    Auditor's Report on the annual consolidated financial statements are available for inspection 
    at the Group's registered office, together with the financial statements identified in the 
    respective Auditor's Reports.

    The Auditor's Report does not necessarily report on all of the information contained in this 
    announcement. Shareholders are therefore advised that in order to obtain a full understanding 
    of the nature of the auditor's engagement, they should obtain a copy of the Auditor's Report 
    together with the accompanying financial information from Trans Hex's registered office.


OVERVIEW
In this commentary, results are compared with the 12 months of the 2017 financial year (in brackets).
    
On 1 February 2018, West Coast Resources (Pty) Ltd became a subsidiary of the Group. Up to this date, 
the 40% investment in West Coast Resources (Pty) Ltd was accounted for as an investment in an 
associate under the equity method. 

In line with the Company's strategy of responsibly managing the LOR operations in the final years of 
their viable economic life cycles, these operations were gradually downscaled. Production was finally 
halted on 31 October 2017 following the successful conclusion of a formal consultation process with 
the National Union of Mineworkers. These operations are disclosed as discontinued operations. 

Sales revenue from continuing operations amounted to R192,5 million compared to R91,1 million during 
the previous corresponding period.

The cost of goods sold increased to R172,2 million compared to R100,3 million during the 2017 financial year.

Gross profit amounted to R20,3 million compared to a gross loss of R9,2 million during the 
corresponding period. 

Share of results from associated companies amounted to R38,7 million (2017: loss of R19,0 million), 
to which Somiluana contributed a profit of R47,5 million and West Coast Resources (Pty) Ltd a loss 
of R8,8 million.

Selling and administration costs reduced to R61,2 million (2017: R88,8 million).

Loss before tax from the South African continuing operations amounted to R6,6 million (2017: loss 
of R104,7 million).

Profit from the Angolan continuing operations amounted to R34,6 million (2017: profit of R31,8 million), 
consisting of Somiluana's equity-accounted profit of R47,5 million less Angolan head office costs 
of R12,9 million. 

The Group reports an after-tax profit for the year from continuing operations of R26,2 million 
(2017: loss of R65,2 million). 

Loss from the discontinued operations amounted to R213,0 million (2017: R117,4 million), consisting 
of profit from the Luarica and Fucauma operations of R2,3 million (2017: profit of R28,9 million) 
less loss from the LOR operations of R215,3 million (2017: loss of R146,4 million). 

The Group therefore reports a loss for the year of R186,8 million (2017: loss of R182,6 million).

Cash and cash equivalents at the end of the year amounted to R79,4 million (2017: R225,4 million). 

MINERAL RESOURCES AND MINERAL RESERVES
The total carats in reserve at Baken Mine decreased by 99,8%, or 73 965 carats, year-on-year, 
mainly as a result of financial factors, including an unfavourable ZAR/US$ exchange rate, lower diamond 
prices and an increase in operating unit cost. The total carat resource also decreased by 6,0%, 
primarily due to depletion through mining activities. Indicated resources decreased by 8,1% and 
inferred resources by 4,6%, i.e. a decrease of 44 081 carats in total.

The total carat resource at Bloeddrif Mine decreased by 0,2%, or 447 carats, due to depletion 
through mining.

The total carat resource at West Coast Resources (Pty) Ltd decreased by 3,2%, primarily due to 
depletion through mining activities. The indicated and inferred diamond resource carats decreased 
by 8,9% and 1,4% respectively, i.e. a decrease of 166 174 carats in total.

Total carats in reserve at Somiluana Mine decreased by 11,2% due to depletion through mining 
activities and a 10% decrease in diamond prices. Indicated resources decreased by 1,3%. New resource 
blocks were delineated during the 2017/18 resource review, based on an increased confidence of the 
geological model and grades based on actual mining.

The Competent Person for Trans Hex, Mr SBE Damons, has reviewed and approved the information 
contained in this announcement as it pertains to mineral resources and mineral reserves. Mr Damons 
is an employee of Trans Hex and serves as the Company's Mineral Resource Manager.

OPERATING PERFORMANCE
Detailed project information (unaudited)                                                
                                                 2018                                              2017                  
                                                            Average price                                       Average price
                                                     Average    per carat                                Average    per carat 
                           Average       Carats       carats     achieved      Average       Carats       carats     achieved
                             grade*    produced    per stone         (US$)       grade*    produced    per stone         (US$)
                                                
South Africa                                                
West Coast Resources         27,84      173 920         0,23          153        14,47       80 506         0,27          166
                                                
Baken                         2,43       13 944         1,17          946         2,19       24 024         1,29        1 015
Bloeddrif                     2,60          620         1,52          877         0,62        2 641         2,07        1 892
Shallow Water                    -        9 012         0,24          431            -        9 867         0,30          596
                                                
Angola                                                
Somiluana                    44,78      136 402         0,66          504        46,38      137 219         0,64          500
                                                
* Note: 
  1. Calculated per 100 cubic metres for South Africa and Angola, and per 100 tons for West Coast Resources (Pty) Ltd.
  2. Average grade in South Africa is calculated excluding shallow water production.

West Coast Resources operations 
On 1 February 2018, the Group increased its interest in West Coast Resources (Pty) Ltd to 67,2%. 

Operational and infrastructure improvements are continuing in order to further expand the 
operational footprint.

During the period, production amounted to 173 920 carats compared to 80 506 carats in 2017. 

Sales amounted to R302,5 million at an average price of US$153 per carat (2017: sales of 
R172,1 million at an average price of US$166 per carat). 

The average grade increased by 92,4% to 27,84 carats/100 tons compared to 14,47 carats/100 tons in 
2017 due to process improvements allowing for greater gravel control and higher than estimated grades 
achieved. The average stone size amounted to 0,23 carats per stone (2017: 0,27 carats per stone).

Lower Orange River operations 
In line with the Company's strategy to responsibly manage these ageing assets in the final years of 
their economic life cycles, operations at Bloeddrif and Baken ceased during the period under review 
and the mines were placed under care and maintenance in May 2017 and October 2017 respectively.

Angolan operations 
Production at Somiluana Mine, in which Trans Hex holds a 33% stake, amounted to 136 402 carats 
(2017: 137 219 carats). Total sales amounted to US$66,3 million at an average price of US$504 per 
carat (2017: sales of US$69,7 million at an average price of US$500 per carat). Repayments of 
US$1,6 million (2017: US$1,3 million) were made to Trans Hex against the outstanding investment 
amount and the Group received US$825 000 (2017: US$825 000) in dividends.

Operations during the year focused exclusively on diamond-bearing calonda formation gravels and 66% 
of production originated from the Nzagi Valley, 28% from the Landamona Valley, 2% from the Lulau area 
and the balance from test blocks as well as Liziria and Terrace formation.

Somiluana Mine is still pursuing an aggressive drilling programme in order to identify new resources 
in calonda formation gravels, as well as terraces and floodplains.

During the year under review, Somiluana Mine purchased mining equipment and started to implement 
other projects geared towards accelerating drilling programmes of identified target areas and 
increasing its gravel treatment and diamond recovery capacities. A second drill rig was acquired 
and commissioned in February 2018.

OUTLOOK 
West Coast Resources operations
Prospecting will continue to target high-priority areas that may identify additional resources for mining. 

Mining activities will remain focused on the Langklip area and on other sections of the Koingnaas area.

Production for the 2019 financial year is expected to be in the order of 240 000 carats, compared to 
2018 financial year actual production of 173 920 carats.

Shallow water operations
Production from the Shallow water operations for the 2019 financial year is expected to be in the order 
of 10 000 carats, compared to 2018 financial year actual production of 9 012 carats.

Lower Orange River operations 
Post financial year-end, THO, a wholly owned subsidiary of Trans Hex, entered into an agreement with 
LOR Diamonds, in terms of which THO has agreed to, inter alia, dispose of the business conducted by 
THO, as a going concern, relating to and in connection with the exploration, prospecting, mining for, 
recovery, treatment, production and disposal of diamonds in respect of the LOR operations, consisting 
of certain assets, liabilities and the transfer of employees; and cede and transfer the mining right 
associated with the LOR operations, to LOR Diamonds, for a total cash consideration of R72 million. 

Details of the above transaction were released on SENS on 18 April 2018 and are available on Trans Hex's 
website at www.transhex.co.za. The transaction is subject to, inter alia, shareholder approval and a 
circular containing the full details thereof is expected to be distributed to shareholders by 3 August 2018.

Angolan operations
During the 2019 financial year, mining operations will continue on the east bank of the Luana River at Nzagi, 
in the south-west at Lulau, and at other areas currently being evaluated.

Production results and geological work through drilling and bulk sampling indicate that carat production 
for the 2019 financial year is expected to be in the order of 145 000 carats.

Market
Towards the middle of the 2017 calendar year, a shortage of stock in Indian factories spurred market strength. 
Trading slowed down towards the end of the calendar year, but rebounded at the start of 2018, highlighted 
by strong premiums in the secondary market. 

Following positive sales for diamond jewellery during the United States of America's holiday season, 
the need for the industry to restock led to strong rough prices overall, a trend that is set to continue 
as the market remains solid in the short term.

New business
The Group is actively evaluating potential new diamond properties and pursuing opportunities to expand 
its diamond-marketing activities.

DIVIDEND
The Board has resolved not to declare a final dividend.

CHANGES TO THE BOARD OF DIRECTORS
Mr Marco Wentzel was appointed as Non-executive Chairman of the Board, effective 1 April 2017.

Mr Athol Rhoda was appointed as an Independent Non-executive Director and Chairman of the Audit and 
Risk Committee and the Human Resources and Social & Ethics Committee, effective 8 May 2017.

Messrs Wentzel, Viljoen and George were appointed as members of the Audit and Risk Committee and the 
Human Resources and Social & Ethics Committee, effective 8 May 2017.

Mr James Gurney was appointed as an Alternate Director to Mr Wentzel, effective 12 June 2017.

The designation of Mr Quinton George changed from Non-executive Director to Independent Non-executive 
Director, effective 18 July 2017.

Mr Albertus Marais was appointed as an Alternate Director to Mr George, effective 21 August 2017.

Mr Greg van Heerden resigned as Company Secretary, effective 31 January 2018. 

Statucor (Pty) Ltd, an independent governance advisory firm, was appointed Company Secretary, 
effective 1 February 2018. 

Mr George resigned as an Independent Non-executive Director, effective 1 March 2018.

Mr Marais was appointed as a Non-executive Director, effective 1 March 2018.

The designation of Mr Marais changed from Non-executive Director to Independent Non-executive 
Director, effective 27 March 2018. 

Mr Marais was appointed as a member of the Audit and Risk Committee and the Human Resources and 
Social & Ethics Committee, effective 27 March 2018.

By order of the Board


MVZ Wentzel         L Delport
Chairman            Chief Executive Officer 

Parow
21 June 2018


REGISTERED OFFICE
405 Voortrekker Road, Parow 7500 
PO Box 723, Parow 7499

JSE SPONSOR
One Capital

TRANSFER SECRETARIES
Computershare Investor Services (Pty) Ltd

COMPANY SECRETARY
Statucor (Pty) Ltd

DIRECTORATE
MVZ Wentzel (Chairman), AG Rhoda, PG Viljoen, AJ Marais, JL Gurney (Alternate), 
L Delport (Chief Executive Officer), IP Hestermann (Financial Director)

www.transhex.co.za


Date: 21/06/2018 11:40:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

Email this JSE Sens Item to a Friend.

Share This Story