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Audited abridged financial results for the year ended 28 February 2015
METMAR LIMITED
Incorporated in the Republic of South Africa
(Registration number 1998/007269/06)
Share code: MML
ISIN code: ZAE000078747
(“Metmar” or “the Company” or “the Group”)
Audited preliminary financial results for the year ended 28 February 2015
METMAR REMAINS RESILIENT DESPITE PERSISTENT CHALLENGING COMMODITIES TRADING CONDITIONS
Highlights
• Sefateng mining operations commences
• Sefateng signs off-take agreement with Metmar for all open cast mined chrome
• Signed a 10-year manganese off-take agreement with Kalagadi
• A firm but conditional offer to purchase 100% of Metmar shares by Traxys is announced
• Cash generated by operations remain positive at R18,7 million (2014: R41,9 million)
• 15% increase in traded volumes
Corporate developments
On 30 April 2015, Metmar announced that it entered into an implementation agreement with Traxys Africa Proprietary
Limited (“Traxys”) in terms of which Traxys, a physical commodity trader and merchant in the metals and natural resources
sectors, offered to acquire all the issued ordinary shares of Metmar for a price of R1,10 per share by scheme of
arrangement. The offer of R1,10 per share (the “offer” or the “transaction”) represents a material premium to the traded
market price at the time of the announcement and relative to the time when cautionary announcements in this regard were
first published. The transaction is subject to approval of 75% of Metmar’s Shareholders present in person or by proxy and
voting at a general meeting of Metmar’s Shareholders, and Shareholders holding 52% of Metmar’s shares have already provided
written undertakings to support the transaction. The transaction is further subject to regulatory approvals as well as Metmar
suffering no material adverse change (as defined in the implementation agreement), and is expected to be concluded before
30 September 2015.
A circular to Shareholders with the details of the offer will be mailed on or about 1 June 2015 and a general meeting
of Shareholders to vote thereon is scheduled for 2 July 2015.
Traxys is a physical commodity trader and merchant in the metals and natural resources sectors. Its logistics,
marketing, distribution, supply chain management and trading activities are conducted by over 300 employees, in over
20 offices worldwide, and its annual turnover is in excess of $6 billion. Traxys is headquartered in Luxembourg. Traxys’
focus is primarily on the marketing and sourcing of base metals and concentrates, minor and alloying metals, industrial
minerals and chemicals, and materials for steel mills and foundries, and the management of all parts of the supply chain,
from producer to consumer, worldwide. It is anticipated that Traxys’ acquisition will enhance Metmar’s access to both
committed and uncommitted facilities available in a variety of major currencies.
Financial performance (See also divisional performance report hereunder)
Description 2015 2014 %
change
Volumes (tonnes) 841 352 731 429 15
Revenue (R’m) 1 951,3 2 097,4 (7)
Gross margin (%) 4,3 6,4 (33)
Trading margin (non-IFRS)^ (%) 3,8 4,7 (19)
Operating expenses (excluding impairments) (R’m) (134,8) (126,2) (7)
(LBITDA)/EBITDA (R’m) (32,6) 40,4 (181)
Impairments (R’m) (16,2) (155,4) 90
Headline loss for the year (R’m) (174,0) (47,0) (270)
Closing net cash balance (R’m) 2,8 53,3 (95)
Total assets (R’m) 1 219,3 1 570,3 (22)
Net asset value (R’m) 293,7 442,4 (34)
^Trading margin is calculated as gross margin less contract expenses (including contract finance costs) that are
not cost of sales per IFRS.
The trading conditions deteriorated further in FY2015 caused by a decline in commodity prices, reduced demand and
persistent low global economic growth. The sinter tolling and the growth of soft commodities provided diversification and
contribution to turnover reducing the adverse effect of commodity trading challenges.
Volumes increased by 15% and the US dollar/rand exchange rate weakened by 10% but these were not sufficient to counter
revenue decreases of 7% to R1,95 billion (2014: R2,09 billion). Trading margins reduced to 3,8% (2014: 4,7%) due to
decline in US dollar-based commodity prices while rand based costs increased with inflation.
Operating expenses include once-off care and maintenance costs included in the consulting expenses and increased
unrealised losses from foreign exchange differences following the weakening rand and hence increased to R134,8 million
(2014: R126,2 million).
LBITDA of R32,6 million (2014: EBITDA of R40,4 million) resulted from reduced turnover, 33% decrease in gross margins
from 6,4% to 4,3% and inflation equivalent increased operating expenses.
Net impairments which include receivables write down of R42,4 million (2014: R9,9 million), inventory write down of
R2,7 million (2014: R18,1 million), PPE write down of R0,7 million (2014: R3,6 million) and reversal of impairment in
investment in associate companies of R29,6 million (2014: impairment of R64,8 million) decreased to R16,2 million
(2014: R155,4 million). The cleanup of the investment section was completed last year and investment values have been
resilient notwithstanding declining commodity price indexes.
The overall financial performance was impacted by the following:
- Net finance costs of R64,1 million (2014: R50,9 million) increased due to high trade finance facility utilisation
driven primarily by delays in the startup of the Kalagadi tolling project.
- Fair value adjustment losses of R21,0 million (2014: gain of R18,6 million) resulted from 39% decline in the share
price of Alphamin Resources Corp.
- Loss from associate companies of R2,4 million (2014: R12,2 million) was better contained this year with care and
maintenance costs in Sefateng Chrome Mine and FPT Mineral Terminal kept to a minimum.
As a result, the loss after tax is R147,1 million (2014: R182,8 million), attributable loss for the year is
R145,9 million (2014: R162,7 million), whilst the headline loss increased to R174,1 million (2014: R47,0 million).
The net asset value decreased by 34% to 109,8 cents per share (2014: 165,5 cents per share) largely due to after tax
losses attained.
Total trade finance facilities available, including both general and ring-fenced facilities, decreased to R752 million
(2014: R928 million).
Divisional performance and prospects
The Group comprises two reportable segments which are trading and investments.
Trading
The trading activities are made up of core trading and Kalagadi tolling project.
Key area 2015 2014 %
change
Core trading
Revenue (R’m) 1 580,9 2 052,6 (23)
Gross margin (%) 4,7 5,9 (20)
EBITDA (R’m) 19,0 81,7 (77)
(Loss)/profit after tax (R’m) (15,8) 50,3 (131)
Discontinued operations
(Loss)/profit after tax (R’m) - (22,0) 100
Kalagadi tolling project
Revenue (R’m) 350,5 7,2 4 768
Gross margin (%) 0,8 5,6 (86)
(LBITDA)/EBITDA (R’m) (9,8) 0,3 (3 367)
Loss after tax (R’m) (38,0) (15,5) 145
Core trading
Core trading volumes were 10% down and combined with low commodity prices turnover decreased by 23% to R1,6 billion.
Gross margins reduced by 20% to 4,7% (2014: 5,9%) leading EBITDA of R19,0 million (2014: R81,7 million). As a result,
core trading made a loss after tax of R15,8 million (profit after tax of R50,3 million).
Kalagadi tolling project
During the year 186 811 tonnes of sinter were delivered to customers both in South Africa and internationally which
yielded R350,5 million (2014: R7,2 million). The gross margin achieved of 0,8% (2014: 5,6%) was caused by reducing
manganese prices, high fines generation resulting in further discounts on the manganese price as well as inefficient and
expensive logistics solutions. These issues, other than manganese prices, have been resolved in that a rail siding at the
mine has been completed, and successful pot tests done to improve the material strength recommended blending of the
manganese ore input.
Operating costs are R12,5 million dominated by foreign exchange differences amounting to R5,8 million. Interest
expense is R28,2 million. All of the above contribute to a loss after tax of R38 million (2014: R15,5 million).
Investments
Description 2015 2014 %
R’m R’m change
Revenue 42,6 234,0 (82)
(LBITDA)/EBITDA (59,5) 49,6 (220)
Loss after tax (81,0) (140,2) (42)
Revenue of R42,6 million (2014: R234,0 million) includes the sale of alumina slag sales, increased sales of recycled
plastic material and sales of carbon products. No Group sale of coke breeze took place this year as the Kalagadi sinter plant
was not operating as had originally been anticipated.
Gross margin is negative due to coke breeze credit notes that relate to coke breeze sales made in the 2014 financial
year. This anomaly is resolved at Group level through the consolidation process. The Investments division achieved LBITDA
of R59,5 million (2014: EBITDA of R49,6 million). Loss after taxation reduced to R81,0 million (2014: R140,2 million).
Each investment was assessed in detail, and upon conclusion of this review, it was considered appropriate to reverse
FY2014 impairment of Sefateng Chrome Mine by R29,6 million following its awarded mining rights and concluded off-take
agreement. Other than this there were no other impairments of investments. The investment portfolio is currently valued at
R323,1 million (2014: R339,3 million) following disposal of non-core assets.
Investment name 2015 2015 2014 2014
R’m R’m R’m R’m
Alphamin Resources Corp 20,6 - 37,6 -
Afarak Group Plc - - 28,4 -
Kalahari Resources Proprietary Limited 192,9 - 192,9 -
Disclosed as financial assets 213,5 258,9
FPT Mineral Terminal Limitada 5,4 - 3,5 -
Sefateng Chrome Mine Proprietary Limited - Investment 56,2 - 28,8 -
Disclosed as investments in associates 61,6 32,3
Sefateng Chrome Mine Proprietary Limited - Intangibles 5,9 - 5,9 -
Steelpoort Chrome Mine Proprietary Limited 33,0 - 33,0 -
Disclosed as intangibles 38,9 38,9
Pering Base Metals Proprietary Limited 1,0 - 1,0 -
Property, plant and equipment 0,0 - 0,1 -
SA Metals Equity Proprietary Limited 8,0 - 8,0 -
Other 0,1 - 0,1 -
Disclosed as non-current assets held-for-sale 9,1 9,2
Total investments 323,1 339,3
Directorate and Company Secretary
The following changes to Metmar’s board of directors took effect during the year under review:
- Mr Greg Lotis resigned, due to ill health, from Metmar as an executive director with effect from 28 February 2015
after serving more than 20 years with the Group.
- Adv Kgomotso Moroka resigned as an independent non-executive director with effect from 24 October 2014.
- Rob Still was appointed as an independent non-executive director and as Chairman of the board on 1 May 2014.
Outlook
While the commodity prices were on a free fall in FY2015 demand for commodities also decreased. Chinese GDP growth
figures continue to be forecast at a 7% range which does not bode well for a global economy that has been driven by Chinese
commodities’ appetite in the last decade. The US and European economies are starting to show signs of recovery but
these economies are either self-sufficient or have optionality of securing commodities at even lower prices.
The financial year 2015 was filled with scandals of fraud, disappearance of product in China port of discharge and
increased suspicion of presenting same invoice to more than one. These unfortunate occurrences have led to nervousness by
major local and international banks while those that remain with appetite for commodities have significantly reviewed
their pricing structures to match their risk appetite. The restriction of trade finance coupled with low commodity prices
is likely to result in a complete structural overhaul, not without further casualties, potentially reshaping commodities
trading space in the next 18 to 36 months.
Trading companies likely to survive are those that will continue to secure unrestricted access to funding facilities,
have solid sustainable access to sources of product, return to a stable financial performance and can squeeze further
margins from oversupplied freight providers.
Given operational Sefateng Chrome Mine business as well as the sinter tolling restart, Metmar is budgeting to return to a
stable financial performance year in 2015/16. Following a bumpy 2015 that culminated in certain banks withdrawing their
facilities, Metmar has partially replaced some of these facilities and went on to secure an offer from a large
international commodities trading player, Traxys, which is likely to provide the required financial backing through its more
than $2 billion committed facilities. The Traxys deal is subject to, among other conditions, Shareholder and regulatory
approvals which Metmar is confident that it will secure prior to the 30 September 2015 long stop date.
Dividend
Given that we incurred a loss in the current year, no dividend will be declared nor paid.
Annual general meeting and annual financial statements
The Company’s annual general meeting of Shareholders will be held at Metmar’s registered office at 25 Culross Road,
Corner Main and Culross Road, Bryanston, no later than 2 July 2015. A separate notice convening the meeting will be posted
to the Shareholders on Monday, 1 June 2015.
The record date for purposes of determining which Shareholders of the Company are entitled to participate in and vote at the
annual general meeting is Friday, 26 June 2015.
The full audited financial statements will be available on the Company's website from Monday, 1 June 2015.
AUDITED CONDENSED GROUP STATEMENTS OF FINANCIAL POSITION AT
Note 28 February 28 February
2015 2014
R’000 R’000
Assets
Non-current assets
Property, plant and equipment 2 83 887 82 463
Goodwill 3 9 330 9 330
Intangible assets 3 38 892 38 892
Investments in associates 4 61 578 32 316
Financial assets 5 213 526 230 521
Deferred taxation 26 306 23 238
433 519 416 760
Current assets
Inventories 429 662 547 832
Trade and receivables 318 288 507 973
Financial assets 5 - 28 436
Current tax receivable 3 484 2 314
Derivative financial instruments 1 899 4 568
Cash and cash equivalents 23 408 53 275
776 741 1 144 398
Non-current assets held-for-sale 6 9 080 9 180
Total assets 1 219 340 1 570 338
Equity and liabilities
Share capital 160 005 160 005
Reserves 126 135 126 888
Retained income 82 985 222 786
369 125 509 679
Non-controlling interest (75 413) (67 330)
293 712 442 349
Non-current liabilities
Financial liabilities 7 47 143 2 759
Instalment sale agreement 226 -
Deferred taxation 27 798 26 206
75 167 28 965
Current liabilities
Financial liabilities 7 2 625 55 645
Trade and other payables 232 162 176 310
Current tax payable 11 334 5 947
Instalment sale agreement 103 -
Trade finance facilities 8 577 215 854 717
Bank overdrafts 20 623 6
844 062 1 092 625
Non-current liabilities and disposal groups held-for-sale 6 6 399 6 399
Total liabilities 925 628 1 127 989
Total equity and liabilities 1 219 340 1 570 338
Net asset value per share (cents) 109,88 165,48
Net tangible asset value per share (cents) 91,84 147,44
Number of shares in issue 267 306 552 267 306 552
AUDITED CONDENSED GROUP STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED
Note 28 February 28 February
2015 2014
R’000 R’000
Continuing operations
Revenue 1 951 260 2 097 435
Cost of sales (1 866 433) (1 962 293)
Gross profit 84 827 135 142
Other income 9 584 20 748
Operating expenses 9 (134 815) (126 241)
Fair value movements on forward exchange contracts 1 899 4 568
Operating (loss)/profit (38 505) 34 217
Finance costs 11 (74 924) (64 337)
Finance income 11 10 873 13 417
Net impairments (excluding discontinued operations) 10 (16 220) (155 372)
Fair value adjustments on listed investments (20 995) 18 606
Loss from equity accounted investments (2 384) (12 245)
Loss before taxation (142 155) (165 714)
Taxation 12 (4 904) 4 936
Loss from continuing operations (147 059) (160 778)
Discontinued operations
Loss before taxation - (23 460)
Taxation - 1 461
(Loss)/profit from discontinued operations 13 - (21 999)
Total
Loss before taxation (142 155) (189 174)
Taxation (4 904) 6 397
Loss for the year (147 059) (182 777)
Other comprehensive (loss)/income
Movements on revaluations of financial assets - (31 932)
Movement in foreign currency reserves (1 650) 6 509
Total comprehensive loss (148 709) (208 200)
Loss for the year attributable to:
Equity holders of the Group (145 853) (162 729)
Non-controlling interests (1 206) (20 048)
Total loss for the year (147 059) (182 777)
Loss for the year attributable to:
Equity holders of the Group
Loss for the year from continuing operations (145 853) (140 730)
Loss for the year from discontinued operations - (21 999)
Loss for the year attributable to equity holders of the Group (145 853) (162 729)
Total comprehensive loss attributable to:
Equity holders of the Group (146 678) (182 776)
Non-controlling interests (2 031) (25 424)
(148 709) (208 200)
Loss per share
Basic and diluted (cents) 15 (54,6) (60,9)
- Continuing operations (54,6) (52,7)
- Discontinued operations - (8,2)
Headline/diluted headline (cents) 15 (65,1) (17,6)
AUDITED CONDENSED GROUP STATEMENTS OF CHANGES IN EQUITY
Foreign Re-
Share Share currency valuation
capital premium reserve reserve
R’000 R’000 R’000 R’000
Balance at 1 March 2013 5319 154 686 1 191 22 055
Loss for the year
Total comprehensive loss for the year - 4 012 (24 059)
Transfer of reserves to equity - - 78 396
Movement in shareholders’ loans - - -
Purchase of non-controlling interest in subsidiary - - -
Balance at 28 February 2014 5 319 154 686 5 203 76 392
Loss for the year
Total comprehensive loss for the year - (826) -
Transfer of reserves to equity - - -
Movement in shareholders’ loans - - -
Purchase of non-controlling interest in subsidiary - - -
Balance at 28 February 2015 5 319 154 686 4 377 76 392
AUDITED CONDENSED GROUP STATEMENTS OF CHANGES IN EQUITY (continued)
Share- Acquisition Non-
holders’ of shares Retained controlling Total
loans in subsidiary earnings interests equity
R’000 R’000 R’000 R’000
Balance at 1 March 2013 72 885 (27 547) 463 911 (48 098) 644 402
Loss for the year (162 729) (20 048) (182 777)
Total comprehensive loss for the year - - - (5 376) (25 423)
Transfer of reserves to equity - - (78 396) - -
Movement in shareholders’ loans 6 147 - - - 6 147
Purchase of non-controlling interest in subsidiary - (6 192) - 6 192 -
Balance at 28 February 2014 79 032 (33 739) 222 786 (67 330) 442 349
Loss for the year (145 853) (1 206) (147 059)
Total comprehensive loss for the year - - - (824) (1 650)
Transfer of reserves to equity - - 6 052 (6 052) -
Movement in shareholders’ loans 72 - - - 72
Purchase of non-controlling interest in subsidiary - - - - -
Balance at 28 February 2015 79 104 (33 739) 82 985 (75 412) 293 712
AUDITED CONDENSED GROUP CASH FLOW STATEMENTS FOR THE YEAR ENDED
Note 28 February 28 February
2015 2014
R’000 R’000
Cash flows (used in)/generated from operating activities
Cash generated from operations 16 18 700 41 883
Finance income 11 10 873 13 417
Finance costs 11 (74 924) (64 337)
Discontinued operations - 5 763
Taxation paid (3 392) (10 373)
Net cash used in operating activities (48 743) (13 647)
Purchase of property, plant equipment (12 026) (477)
Proceeds from sale of property, plant and equipment 2 919 7 298
Business combinations 14 - (1 327)
Disposal of business 13 - 66 537
Sale of financial assets 14 943 -
Loans advanced to associates (2 010) (19 581)
Purchase of derivatives - (6 078)
Realisation of derivatives 2 669 -
Net cash flows generated from investing activities 8 505 65 953
Repayment from financial liabilities 37 350 -
Repayment of financial liabilities (45 986) (48 839)
Increase/(decrease) in instalment sale agreements 329 (5 937)
Increase in shareholders’ loans 71 -
Net cash used in financing activities (10 246) (74 357)
Total cash outflow for the year (50 484) (22 051)
Overdraft cancelled following discontinued operation 13 - 94 606
Cash flow from business combinations 14 - 456
Cash and cash equivalents/(net overdraft) at the beginning of the year 53 269 (19 742)
Cash and cash equivalents at the end of the year 2 785 53 269
NOTES TO THE AUDITED CONDENSED GROUP FINANCIAL RESULTS
1. Basis of preparation
The audited condensed financial results have been prepared in accordance with IAS 34 - Interim Financial
Reporting to comply with the International Financial Reporting Standards (IFRS), the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements
(FRPs) as issued by the Financial Reporting Standards Council (FRSC), the 2008 South African Companies
Act and the JSE Listings Requirements. These audited abridged financial statements were prepared under
the supervision Mr SMS Nkosi, the Chief Financial Officer of Metmar Limited.
All accounting policies applied by the Group in the preparation of these abridged financial statements
are consistent with those applied by the Group in its consolidated financial statements for the year
ended 28 February 2014.
The Group has adopted the following new standards:
IAS 36 - Recoverable Amount Disclosures for Non-Financial Assets
IAS 32 - Offsetting Financial Assets and Financial Liabilities
IAS 39 - Novation of Derivatives and Continuation of Hedge Accounting
The impact of the above amendments is not material to the Group.
1.1 Audit report
The directors take full responsibility for the preparation of these consolidated condensed preliminary financial statements.
They have been prepared under the supervision of Sizwe Nkosi CA (SA). These consolidated condensed preliminary financial
statements for the year ended 28 February 2015 have been audited by Ernst & Young Inc., the Group’s auditors,
who expressed an unmodified opinion with an emphasis of matter thereon.
The auditor also expressed an unmodified opinion on the annual financial statements from which these consolidated
condensed preliminary financial statements were derived.
The auditor’s report contained the following Emphasis of Matter paragraph:
Without qualifying our opinion we draw your attention to the Going Concern Note of the summary consolidated
financial statements which indicates that the group has incurred losses after tax of R147million (2014: R183 million),
for the financial year, ending the year in a net current liability position of R67 million.
The group needs to secure replacement funding to continue the financing of its working capital and to finance future trade
deals as a result of certain Trade Financiers announcing their intention to reduce facilities and in some cases exit completely.
The note also indicates that these conditions, along with other matters, indicate the existence of a material uncertainty which
may cast significant doubt on the company’s ability to continue as a going concern.
The audit report, dated 28 May 2015, is available for inspection at the registered offices of the Group. The auditor’s
reports does not necessarily cover all of the information contained in this announcement. Shareholders
are therefore advised that in order to obtain full understanding of the nature of the auditor’s
work they should obtain a copy of that report together with the accompanying financial information
from the registered office of the Company. Any reference to the future financial performance included
in this announcement has not been reviewed or reported on by the Group’s independent auditors.
28 February 28 February
2015 2014
R’000 R’000
2. Property, plant and equipment
Buildings 53 287 55 482
Computer equipment and software 1 135 1 722
Furniture and fixtures 2 219 2 252
Land 12 209 12 209
Other 1 116 1 210
Plant and machinery 13 921 9 588
83 887 82 463
2.1 Acquisitions during the year
Buildings 94 54 965
Computer equipment and software 395 1 901
Furniture and fixtures 449 861
Land - 11 200
Motor vehicles 371 -
Other 79 388
Plant and machinery 10 638 38
12 026 69 353
2.2 Disposals during the year
Computer equipment and software (18) (286)
Other - (567)
Plant and machinery (3 909) (1 274)
(3 927) (2 127)
The Company does not have any material identifiable commitments to
property, plant and equipment.
Additions amounting to R12.0 million occurred during the current financial year. This was
offset by disposals of R4 million, depreciation of R6 million and impairments of R0.8 million.
28 February 28 February
2015 2014
R’000 R’000
3. Goodwill and intangibles
Goodwill 9 330 9 330
- SNF International - Division of Metmar Trading Proprietary Limited 8 137 8 137
- Arengo 203 Proprietary Limited 1 193 1 193
Intangibles - Marketing and management contracts 38 892 38 892
48 222 48 222
In accordance with accounting standards, the Group annually tests the carrying value of goodwill for
impairment. In the current year the review was undertaken on a value-in-use basis, assessing whether
the carrying value of goodwill was supported by the net present value of future cash flows derived
from the relevant assets relating SNF International and Arengo 203 Proprietary Limited.
The intangibles were subjected to impairment testing performed by an independent valuer, Anoop Ninan
of Mazars. The impairment testing used the income approach which uses discounted cash flow techniques
to determine the fair value. The average pre-tax rate used was 12.54%. There was no impairment necessary.
4. Investments in associates
Investments Share Loans to Reversals/ Investments
at beginning of loss associates (Impairments) at end
2015 - R'000
FPT Mineral Terminal Limitada (registered in Mozambique) 3 517 (120) 2 010 - 5 407
Sefateng Chrome Mine Proprietary Limited 28 799 (2 264) - 29 636 56 171
32 316 (2 384) 2 010 29 636 61 578
Investments Share Loans to Reversals/ Investments
at beginning of loss associates (Impairments) at end
2015 - R'000
FPT Mineral Terminal Limitada (registered in Mozambique) 1 468 (2 758) 4 807 - 3 517
Sefateng Chrome Mine Proprietary Limited 61 851 (1 435) 3 157 (34 774) 28 799
Kivu Resources Limited 26 476 (8 052) 11 617 (30 041) 0
89 795 (12 245) 19 581 (64 815) 32 316
The FPT Mineral Terminal project is not yet operational and therefore was valued at cost.
The Sefateng Chrome Mine project was assessed for impairment and its value was calculated using the income
approach which used discounted cash flow techniques to determine net present value. No write-down was
necessary but a reversal of impairment was processed following the award of the mining right and
signing of the off-take agreement during the year.
5. Financial assets
Kalahari Resources Proprietary Limited 192 900 192 900
Alphamin Resources Corp (Canada) 20 626 37 621
Afarak Group Plc (Finland) - 28 436
213 526 258 957
Investment in Alaphmin Resources is a level 1 fair value measurement since its fair value is determined
from quoted prices in an active Toronto Stock Exchange.
The Kalahari Resources investment is seen as a level 3 fair value measurement as its value has been
determined using the income approach which use discounted cash flow techniques to determine the fair value.
Investment in Afarak Group was disposed of during the current financial period.
6. Non-current assets held-for-sale
Pering Base Metals Proprietary Limited 1 000 1 000
Property, plant and equipment - 100
SA Metals Equity Proprietary Limited 8 000 8 000
Other assets 80 80
Total assets 9 080 9 180
The non-current assets held-for-sale are non-core and the Company took a decision to
dispose of them.
Non-current liabilities held-for-sale
Financial liabilities 2 707 2 707
Trade and other payables 3 692 3 692
6 399 6 399
7. Financial liabilities
Non-current 47 143 2 759
Current 2 625 55 645
49 768 58 404
8. Trade finance facilities
Absa Bank Limited 17 098 19 106
China Construction Bank Corporation 439 995 754 956
Nedbank Limited 34 266 20 510
Standard Bank of South Africa Limited 42 256 60 145
Standard Chartered Bank Limited 43 600 -
577 215 854 717
The facilities comprise of transactional trade and commodity finance facilities and are secured by certain inventories,
trade and other receivables and letters of credit. These facilities are charged a variable interest rate.
9. Operating expenses
Operating expenses for the year are stated after accounting for:
Consulting and professional fees 7 220 6 514
Professional fees - FPT Mineral Terminal Limitada 4 131 -
Employee costs 56 739 56 638
Legal fees 2 666 2 721
Operating lease charges 1 449 7 820
Repairs and maintenance 2 291 2 011
Depreciation and amortisation 5 923 6 217
Audit fees and other consulting 2 505 2 737
Bank charges 1 641 4 055
Computer expenses 2 432 1 874
Insurance 2 427 2 383
Travel and entertainment 3 821 4 051
Unrealised loss on foreign exchange 11 466 6 342
Other 30 104 22 878
134 815 126 241
10. Net impairments and write offs
Impairment of property, plant and equipment 752 3 574
Impairment of non-current assets held-for-sale - 3 900
Impairment of intangible assets - 55 100
Reversal of impairment of investments in associates (29 636) 64 815
(28 884) 127 389
Write downs
Write down of inventories 2 726 18 097
Write down of other receivables 42 378 9 886
45 104 27 983
Net impairments and write downs 16 220 155 372
Reversal of impairment of investments in associates follows the award of mining right and signing of
off-take agreement by Sefateng Chrome Mine Proprietary Limited.
The property, plant and equipment impaired follows the closure of operations in Zimbabwe.
Other receivables write down relate to a long outstanding tantalite claim as well as write
down of a loan receivable following liquidation of a logistics supplier who had been provided
with the loan to purchase open top containers used to move Metmar material.
Inventory write down of R2.7 million relates to old and unsaleable stock at the plastics recycling plant.
11. Finance costs
Trading contracts 18 697 22 978
Bank overdrafts 11 084 7 457
Financing effect on purchases and trade and other payables 45 288 33 500
Other (145) 402
74 924 64 337
Finance income
Bank balances 6 346 1 657
Financing effect on sales and trade receivables 2 952 10 083
Interest on loan account 1 575 1 677
10 873 13 417
12. Taxation
Normal taxation 7 609 19 403
Deferred taxation (2 705) (24 339)
4 904 (4 936)
13. Discontinued operations
Loss/(profit) on discontinued operation
Revenue - 182 268
Expenses - (176 877)
Net profit before tax - 5 391
Taxation - (1 651)
Net profit after tax - 3 740
Profit on sale of discontinued operation - 19 170
Goodwill and intangibles amortisation and impairment - (44 909)
- Goodwill impairment - (36 906)
- Intangibles impairment - (10 156)
- Intangibles amortisation - (959)
- Less taxation - 3 112
- (21 999)
Proceeds from discontinued operations and sale of subsidiary
Cash received - 66 537
- Discontinued operation - 53 747
- Sale of a subsidiary - 12 790
Overdraft cancelled - 94 606
- 161 143
In the previous year the West African Group Division was discontinued following a
management buyout for R53,7 million.
In addition, Metmar sold 24 Sloane Street Properties Proprietary Limited, a company which owned
previous Metmar headquarters property, for R12,8 million.
14. Business combinations
Property, plant and equipment - 68 306
Trade and other receivables - 1 404
Cash and cash equivalents - 456
Financial liabilities - (65 348)
Trade and other payables - (4 618)
Total identifiable assets - 200
Non-controlling interest - (67)
Goodwill - 1 194
- 1 327
In the previous year, Metmar acquired 66,7% of issued shares and claims in Arengo 203 Proprietary Limited.
Arengo owns 100% of the property where Metmar is headquartered.
15. Reconciliation of headline loss
Loss for the year (145,853) (162 729)
Adjustments for:
Gain on disposal of 24 Sloane Street Properties Proprietary Limited (net of taxation) - (7 892)
Gain on disposal of West African Group Division - (19 170)
Write off of goodwill following discontinued operations - 36 906
Write off of intangible assets (net of taxation and noncontrolling interest) - 32 504
(Reversal of)/impairment of associates (29 636) 64 815
Impairment of property, plant and equipment 752 3 574
Impairment of non-current assets held-for-sale - 3 900
Loss on sale of property, plant and equipment 1 003 1 521
Taxation effect on loss on sale of property, plant and equipment (281) (415)
Headline loss (174 015) (46 986)
Headline loss per share (cents) (65,1) (17,6)
- Attributable loss per share (cents) (54,6) (60,9)
Weighted average number of shares in issue 267 306 552 267 306 552
16. Cash generated from/(utilised in) operations
Loss before taxation (142 155) (165 714)
Adjustments for:
- Other non-cash items 9 310 10 858
- Fair value adjustments on listed shares 20 995 (18 606)
- Realised loss on sale of Afarak Group Plc shares 9 492 -
- Net impairments 16 220 155 372
- Net finance costs 64 051 50 920
Changes in working capital:
- Inventories 115 404 (233 395)
- Trade and other receivables 147 033 (144 757)
- Trade and other payables 55 852 1 947
- Trade finance facilities (277 502) 385 258
18 700 41 883
17. Fair value information
Fair value hierarchy
The table below analyses assets and liabilities carried at fair value. The different levels are defined
as follows:
Level 1: Quoted unadjusted prices in active markets for identical assets or liabilities that the Group
can assess at measurement date.
Level 2: Inputs other than quoted prices included in level 1 that are observable for the asset or liability
either directly or indirectly.
Level 3: Unobservable inputs for the asset or liability.
There has been no transfers between the fair value levels during the reporting period.
Categories and levels of financial instruments in the Group
Level 1
Assets
Financial assets designated at fair value through profit and loss
Derivative financial instruments 1 899 4 568
Listed shares 20 626 66 057
Total 22 525 70 625
The fair values for these contracts have been estimated using relevant market data.
Level 2
Liabilities
Financial liabilities at fair value through profit and loss
Mortgage bonds 47 143 2 759
Total 47 143 2 759
The fair value of these loans have been estimated using discounted cash flows and relevant interest rates.
The carrying values of these financial liabilities approximates its fair value.
All these financial liabilities are market related and are at an arms length with reputable counter parties.
Level 3
Investments in financial assets at fair value
Investment in Kalahari Resources Proprietary Limited 192 900 192 900
Kalahari Resources Proprietary Limited was valued using a financial model based on the establishment of the mine and
sinter plant detailing the timing and extent of cash flows to be generated from the project. The model used was consistent
with the expected life of the mine being 22 years and the valuation contained was on the Income Approach which is based
on net present value("NPV") derived using discounted cash flows ("DCF") technique applied to the pre-tax pre-finance cash
flows, using a discount rate of 18.3% after taking into account an inflation rate of 6.6%. A 10% increase in inflation rate to
7.26% will result in a 4% increase in the value of the investment while a 10% decrease to 5.94% will result in a 3% decline
in the value of the investment. A 10% increase in the discount rate applied to 20.13% will result in a 9% decline in the value
of the investment while a 10% decrease to 16.47% will result in an 11% increase in the value of the investment. The most
important driver to the DCF is the Rand-equivalent commodity price assumption while other assumptions included
production rates and the estimated life of mine, metallurgical recoveries, operating costs and capital expenditure
requirements. The NPV of the Kalagadi Manganese Project based on the Kalagadi model was calculated and due to this
valuation it was subsequently revalued to its fair value as at 28 February 2015.
18. Segment report
In identifying its operating segments, management follows the procedure of distinguishing investment
in resource-based operations from the trading activities of the Group.
The Group has accordingly used the following factors to identify reportable segments worldwide which
are Investments and Trading and their activities are:
- Investments segment invests through taking equity and providing project loan funding in mining and
logistics projects in order to secure product off-take and logistics infrastructure. Investments earns
interest and dividends but also does limited trading especially in Zimbabwe through a company registered
there for trading purposes.
- Trading segment includes commodities trading activities of the Group through spot deals and off-take
agreements signed from Investments' investee companies and any other off-takes.
As a commodities trader and financial and logistics facilitator, Metmar is focused on developing assets
and revenue related to the trading and production of a diverse range of bulk commodities.
There have been no aggregation of the two segments identified as:
- investments; and
- trading.
The Chief Operating Decision Maker (CODM) evaluates the performance of the Group’s segments based on
earnings before interest, taxation, depreciation and amortisation.
Included in the management reports reviewed by the CODM are summaries of depreciation and amortisation
expense related to each of the segments, even though these amounts are not allocated within the segment
results reported.
No allocations of interest or taxation are made and only entity-wide amounts for these items are reported
to the CODM.
Each of these operating segments is managed separately as each of these service lines requires different
processes and other resources as well as marketing approaches. All inter-segment transfers are carried out
at arm’s length prices.
The measurement policies the Group uses for the segment reporting under IFRS 8 are the same as those used
in its annual financial statements, except that:
- post-employment benefit expenses;
- expenses relating to share-based payments;
- research costs relating to new business activities; and
- cost of sales
are not included in arriving at the operating profit of the operating segments in prior periods. The
measurement methods used to determine reported segment profit or loss included allocations of the amounts
described above.
Management currently identifies the Group’s two activities as operating segments. These operating segments
are monitored as strategic decisions are made on the basis of segment operating results.
28 February 2015
Segment report - Group Trading Invest- Adjust- Total
activities ment ments R’000
R’000 activities and
R’000 elimi-
nations
R’000
Revenues - external customers
Segment revenues 1 931 442 42 597 (22 779) 1 951 260
Net finance costs (43 200) (12 038) (8 813) (64 051)
Depreciation and amortisation of non-financial assets (692) (2 505) (2 726) (5 923)
1 887 550 28 054 (34 318) 1 881 286
Segment revenues
Total segment revenues 1 931 442 42 597 (22 779) 1 951 260
Other income 1 900 5 615 2 069 9 584
1 933 342 48 212 (20 710) 1 960 844
Earnings before interest, tax, depreciation and amortisation (EBITDA)
Operating profit/(loss) 8 521 (62 043) 15 017 (38 505)
Depreciation 692 2 505 2 726 5 923
9 213 (59 538) 17 743 (32 582)
Segment profit or loss
Segment operating
profit/(loss) 8 521 (62 043) 15 017 (38 505)
Impairments (31 311) 15 651 (560) (16 220)
Fair value adjustments - (20 995) - (20 995)
Net finance costs (43 200) (12 038) (8 813) (64 051)
Loss from equity accounted investment - (2 384) - (2 384)
(Loss)/profit before taxation (65 990) (81 809) 5 644 (142 155)
Taxation 12 208 715 (17 827) (4 904)
(53 782) (81 094) (12 183) (147 059)
Discontinued operations - - - -
(Loss)/profit for the year (53 782) (81 094) (12 183) (147 059)
Segment assets 1 061 147 496 449 (338 256) 1 219 340
Segment liabilities 747 737 782 602 (604 711) 925 628
28 February 2014
Segment report - Group (continued) Trading Invest- Adjust- Total
activities ment ments R’000
R’000 activities and
R’000 elimi-
nations
R’000
Revenues - external customers
Segment revenues 2 059 801 234 001 (196 367) 2 097 435
Net finance costs (31 114) (15 025) (4 781) (50 920)
Depreciation and amortisation of non-financial assets (1 303) (3 468) (1 446) (6 217)
2 027 384 215 508 (202 594) 2 040 298
Segment revenues
Total segment revenues 2 059 801 234 001 (196 367) 2 097 435
Other income 8 212 14 318 (1 782) 20 748
2 068 013 248 319 (198 149) 2 118 183
Earnings before interest, tax, depreciation and amortisation (EBITDA)
Operating profit/(loss) 80 737 46 172 (92 692) 34 217
Depreciation 1 303 3 468 1 446 6 217
82 040 49 640 (91 246) 40 434
Segment profit or loss
Segment operating
profit/(loss) 80 737 46 172 (92 692) 34 217
Impairments (7 944) (145 486) (1 942) (155 372)
Fair value adjustments 8 792 (28 918) 38 732 18 606
Net finance costs (31 114) (15 025) (4 781) (50 920)
Loss from equity accounted investment - (12 245) - (12 245)
(Loss)/profit before taxation 50 471 (155 502) (60 683) (165 714)
Taxation (15 682) 15 346 5 272 4 936
34 789 (140 156) (55 411) (160 778)
Discontinued operations (21 575) - (424) (21 999)
(Loss)/profit for the year 13 214 (140 156) (55 835) (182 777)
Segment assets 1 346 655 488 251 (264 568) 1 570 338
Segment liabilities 979 661 685 520 (537 192) 1 127 989
19. Going concern
The Company continues to face tough industry and economic conditions characterised by the following:
reduced commodity prices, dwindling demand for commodities and, as a result, insolvency events and fraud
by industry peers in the past few months.
As a result, trade financiers have responded with risk aversion towards financing new or maintaining
existing structured trade finance and further have reduced facilities, communicated the intention of
terminating finance in an orderly manner and have made drawdown terms more onerous. While their response
is not unexpected, given the commodities fraud at the port of discharge in China as well as the liquidation
of some of Metmar’s competitors in South Africa, it has left Metmar with liquidity challenges that contributed
to the operational losses of the 2015 financial year. In the last three financial years, the Group has made
the following losses and total cash outflows:
28 February 28 February 28 February
2015 2014 2013
R’000 R’000 R’000
Loss for the year per the statements of profit or loss and other
comprehensive income 147 059 182 777 111 549
Headline loss 174 015 46 986 80 634
Total cash outflow per the statements of cash flows 50 484 22 051 59 290
Further, the Group has a net current liability position of R67 million.
On the trade finance front, China Construction Bank (“CCB”) withdrew the $30 million facility it provided
while Nedbank Capital is in the process of restructuring its $30 million facility into a bilateral loan.
CCB is expecting either full repayment of outstanding balances by 30 September or conversion of the outstanding
balance to a corporate loan repayable through the sinter tolling cash flow proceeds within 12 months. CCB’s
curtailment of the facility is not the result of Metmar’s financial position. It is understood that CCB is
exiting structured trade finance market globally following its losses resulting from the fraud in China. Further,
it is understood that it is exiting its operations from the South African financial services space as a result
of its corporate strategy.
The following factors are considered in potential mitigation of the above risks:
Internal forecasts, which form the basis of the Company’s budget, as prepared and approved by management for the
2016 financial year, indicate that the Company will return to profitability and that the net current liability
position will be resolved. The major contributions to profits are expected to be from the consummation of the
Kalagadi tolling agreement, successful execution of the Sefateng Chrome Mine off-take agreement and coal off-take
agreements. These are in addition to the existing trading businesses that continue to contribute positive margins.
It is, however, difficult to determine with certainty the exact consummation date of the tolling activity, timing
of cash flows, future demand and commodity prices which may cause trading losses that currently cannot be predicted.
Management has partially replaced the CCB facility by signing a facility with Standard Chartered Bank amounting to
$15 million which is fully operational. Further, the Metmar Group received final approval of a $15 million trade
finance facility from First Bank of Nigeria (UK) (“FBN”) to fund the Sefateng Chrome Mine off-take, subject documents
being accepted for the purpose of its financial intelligence compliance review. Management is positive that the CCB
facility will be replaced by these and other potential sources of finance and is proactively managing this process,
but cannot with certainty determine the successful outcome of the refinancing.
The conditional offer made by Traxys on 30 April 2015 to acquire the entire issued share capital of Metmar
Limited is expected to increase the level of confidence by trade financiers to maintain and extend funding to the
Metmar Group for trading and financing facilities. Management is positive that the takeover transaction has a high
likelihood to be completed successfully. The offer, however, is subject to conditions such as Shareholder and
regulatory approvals, the non-occurrence of material adverse change events and fulfilling certain conditions within
certain deadlines. The completion of the transaction is expected at latest 30 September 2015 after which management
expects that Metmar will have access to financial support and facilities that are available to the Traxys Group.
This potential source of financial support is highly likely, but its success cannot at this time be determined with
certainty.
The above conditions give rise to material uncertainties which may cast significant doubt about the Company’s
ability to continue as a going concern and therefore that it may be unable to realise its assets and discharge
its liabilities in the normal course of business. The Board remains reasonably confident that it will successfully
manage the material uncertainties that exist. As such, the financial statements have been prepared on the basis of
accounting policies applicable to a going concern. This basis presumes that funds will be available to fund future
operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments
will occur in the ordinary course of business.
20. Corporate governance
The Metmar Group complies with the Code of Good Corporate Practice and Conduct published in the King III
report on Corporate Governance.
21. Post-balance sheet events
On 30 April 2015, the Company announced a conditional offer by Traxys to acquire 100% of Metmar
shares listed on the JSE. This deal is subject to shareholder and regulatory approval expected to conclude
before 30 September 2015.
22. Related party transactions
During the period, the Company and its subsidiaries in the ordinary course of business, entered into
various transactions with their associates. These transactions were subject to terms that are no less
favourable than those arranged with third parties.
R Still
Non-Executive Chairman
28 May 2015
Administration
Name and Company registration number
Metmar Limited
1998/007269/06
Directorate
RG Still# (Chairman)
L Matteucci#
DJ Ellwood (Chief Executive Officer)
PP Boshoff
D Earp#
D Mashile-Nkosi*
SMS Nkosi (Chief Financial Officer)
TI Borman*
# Independent non-executive
* Non-executive
Company Secretary and registered office
Anlia Swart
25 Culross Road, Cnr Main Road
Bryanston
Sandton, 2191
PO Box 98549
Sloane Park, 2152
Share transfer secretaries
Computershare Investor Services Proprietary Limited
Ground Floor
70 Marshall Street
Johannesburg, 2001
PO Box 61051
Marshalltown, 2107
Auditors
Ernst & Young Inc.
Registered auditors
102 Rivonia Road
Sandton, 2146
Sponsor
Nedbank
135 Rivonia Campus
Rivonia Road
Sandown
Sandton, 2196
PO Box 1144
Johannesburg, 2000
www.metmar.co.za
Date: 29/05/2015 07:10:00 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
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