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TRANS HEX GROUP LIMITED - Unaudited condensed consolidated interim financial statements for the period ended 30 September 2018

Release Date: 13/12/2018 07:05
Code(s): TSX     PDF:  
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Unaudited condensed consolidated interim
financial statements for the period ended 30 September 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"  or the "Company")


UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2018


HEADLINES
Sale of the Lower Orange River ("LOR") operations
At the General Meeting held on 3 September 2018, Trans Hex shareholders approved the sale of the LOR operations, 
effective 1 April 2018, for a cash consideration of R72 million. 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 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 period ended 30 September 2018 with the results for the period ended 30 September 2017.

-  Group net profit amounted to R52,0 million (September 2017: loss of R199,2 million).
-  Sales revenue from the South African operations increased to R136,2 million (September 2017: R40,1 million).
-  Group net loss from continuing operations amounted to R26,8 million (September 2017: loss of R2,3 million).
-  Profit from the discontinued LOR operations amounted to R77,8 million (September 2017: loss of R197,7 million), 
   directly attributable to the proceeds from its sale.
-  Equity accounting profit from Somiluana amounted to R25,9 million (September 2017: profit of R18,7 million).
-  Other gains - net amounted to R29,7 million, primarily due to the re-measurement of the West Coast Resources 
   (Pty) Ltd rehabilitation provision which resulted in a gain of R94,1 million being recognised and a loss 
   on re-measurement to fair value and finalisation of gain with acquisition of subsidiary amounting to R86,1 million.
-  The Group's net cash position at the end of the period was R42,9 million (September 2017: R41,3 million).
-  Earnings per share amounted to 37,6 cents (September 2017: loss of 188,4 cents) and headline earnings per 
   share amounted to 41,5 cents (September 2017: loss of 195,1 cents).
-  Adjusted headline loss per share amounted to 41,1 cents (September 2017: loss of 89,7 cents). The re-measurement 
   of the West Coast Resources (Pty) Ltd rehabilitation provision amounting to R94,1 million was reversed to arrive 
   at the adjusted headline earnings per share. In the previous corresponding period's figure, retrenchment costs 
   of R111,4 million at the LOR operations were added back.
-  Net asset value per share amounted to 217,8 cents (September 2017: 142,0 cents).


 CONDENSED CONSOLIDATED INCOME STATEMENT
                                                                       30/09/18       30/09/17       31/03/18 
                                                                      Unaudited      Unaudited        Audited 
                                                           Notes          R'000          R'000          R'000 
Continuing operations
Sales revenue                                                           136 209         40 130        192 542 
Cost of goods sold                                                     (173 341)       (31 151)      (172 205)
Gross (loss)/profit                                                     (37 132)         8 979         20 337 
Share of results of associated companies                     1           25 944          5 629         38 662 
Royalties                                                                  (622)          (147)        (1 005)
Selling and administration costs                                        (25 518)       (40 167)       (61 192)
Mining loss                                                             (37 328)       (25 706)        (3 198)
Exploration costs                                                        (6 709)        (2 061)        (6 574)
Other gains - net                                            2           29 659         14 867         45 724 
Finance income                                                            8 603         12 658         25 020 
Finance costs                                                           (22 798)        (2 059)       (32 981)
(Loss)/profit before income tax                                         (28 573)        (2 301)        27 991 
Income tax                                                                1 742             (1)        (1 745)
(Loss)/profit for the period from continuing operations                 (26 831)        (2 302)        26 246 
Discontinued operations
Profit/(loss) for the period from discontinued operations    3           78 781       (196 862)      (213 033)
Profit/(loss) for the period                                             51 950       (199 164)      (186 787)

Attributable to:
Continuing operations                                                   (26 831)        (2 302)        26 246 
  -  Owners of the parent                                               (35 447)        (2 302)        24 777 
  -  Non-controlling interest                                             8 616              -          1 469 
Discontinued operations
  -  Owners of the parent                                                78 781       (196 862)      (213 033)
                                                                         51 950       (199 164)      (186 787)

(Loss)/earnings per share - basic and diluted (cents)
  -  Continuing operations                                                (30,8)          (2,2)          23,1 
  -  Discontinued operations                                               68,4         (186,2)        (198,7)
Total                                                                      37,6         (188,4)        (175,6)

Shares in issue adjusted for treasury shares ('000)                     115 136        105 699        115 136 

Headline earnings/(loss)                                     4
  -  Continuing operations                                               46 700         (4 604)        (9 361)
  -  Discontinued operations                                                990       (201 570)      (222 781)
Total                                                                    47 690       (206 174)      (232 142)

Headline earnings/(loss) per share (cents)
  -  Continuing operations                                                 40,6           (4,4)          (8,7)
  -  Discontinued operations                                                0,9         (190,7)        (207,8)
Total                                                                      41,5         (195,1)        (216,5)

Average ZAR/US$ exchange rate                                             13,27          12,98          12,19 


CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                                                                       30/09/18       30/09/17       31/03/18 
                                                                      Unaudited      Unaudited        Audited 
                                                                          R'000          R'000          R'000 
Profit/(loss) for the period                                             51 950       (199 164)      (186 787)

Other comprehensive loss net of tax:                                    (10 896)        (7 381)        (4 376)

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   (7 159)         (5 079)          232 
  Recycling of foreign currency translation differences on repayment 
  of long-term receivables from foreign operations                       (3 737)         (2 302)       (4 928)

Total comprehensive income/(loss) for the period                         41 054        (206 545)     (191 163)

Attributable to:
Continuing operations                                                   (37 727)         (9 683)       21 870 
  -  Owners of the parent                                               (46 343)         (9 683)       20 401 
  -  Non-controlling interest                                             8 616               -         1 469 
Discontinued operations
  -  Owners of the parent                                                78 781        (196 862)     (213 033)
                                                                         41 054        (206 545)     (191 163)


CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                                                                       30/09/18       30/09/17       31/03/18 
                                                                      Unaudited      Unaudited        Audited 
                                                           Notes          R'000          R'000          R'000 
ASSETS
Non-current assets                                                      593 261        362 691        772 044 
Property, plant and equipment                                5          339 553         49 881        498 669 
Investment in associates                                     6           98 953        241 709         75 458 
Investments held by environmental trust                                  72 787         68 101         70 459 
Other financial assets                                                   81 968          3 000        127 458 

Current assets                                                          164 695        201 613        172 287 
Inventories                                                  7           68 348         94 652         74 522 
Trade and other receivables                                              53 408         65 645         18 398 
Current income tax                                                            4              5              3 
Cash and cash equivalents                                                42 935         41 311         79 364 

Assets of a disposal group classified as held-for-sale       8                -              -         36 308 

Total assets                                                            757 956        564 304        980 639 

EQUITY AND LIABILITIES
Capital and reserves                                                    214 583        149 830        182 145 
Non-controlling interest                                                 36 265              -         69 654 

Non-current liabilities                                                 254 728         134 220        338 213 
Borrowings                                                   9           94 391              -        111 813 
Deferred income tax liabilities                                               -              -         33 943 
Provisions                                                  10          160 337        134 220        192 457 

Current liabilities                                                     252 380        280 254        291 024 
Trade and other payables                                                 74 992        166 735         63 243 
Interest in joint ventures                                   3           82 250         81 519         69 595 
Borrowings                                                   9           95 138         32 000        158 186 

Liabilities of a disposal group classified 
as held-for-sale                                             8                -              -         99 603 

Total equity and liabilities                                            757 956        564 304        980 639 

Net asset value per share (cents)                                           218            142            218 


CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
                                                                       30/09/18       30/09/17       31/03/18 
                                                                      Unaudited      Unaudited        Audited 
                                                                          R'000          R'000          R'000 
Balance at 1 April                                                      251 799        356 375        356 375 
Shares issued during the period                                               -              -         18 402 
Total comprehensive income/(loss) for the period                         41 054       (206 545)      (191 163)
Acquisition of subsidiary                                               (42 005)             -         68 185 
Balance at end of period                                                250 848        149 830        251 799 


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                                                       30/09/18       30/09/17       31/03/18 
                                                                      Unaudited      Unaudited        Audited 
                                                                          R'000          R'000          R'000 
Cash utilised in operations                                             (40 263)      (211 971)      (226 734)
Movements in working capital                                            (17 087)        22 347        (37 730)
Income tax paid                                                               -              -             (3)
Net cash utilised in operating activities                               (57 350)      (189 624)      (264 467)

Cash flows from investment activities                                   119 645        (26 073)        36 385 
Property, plant and equipment
  -  Proceeds from disposal                                               2 264          4 708         15 087 
  -  Replacement                                                         (4 059)        (2 943)             - 
  -  Additional                                                         (10 000)        (1 839)        (6 579)
Proceeds from repayment of loan to associate                             15 328              -         20 160 
Proceeds from the disposal of discontinued operations                    50 000              -              - 
Loan to associate                                                             -        (39 228)        (8 903)
Proceeds from other financial assets                                     50 000              -              - 
Dividends received                                                        9 837          4 347         10 716 
Interest received                                                         6 275          8 882          5 904 

Cash flows from financing activities                                   (100 066)        31 955         83 992 
Proceeds from borrowings                                                 40 000         32 000         95 000 
Repayment of borrowings                                                (132 964)             -         (6 848)
Interest paid                                                            (7 102)           (45)        (4 160)

Net decrease in cash and cash equivalents                               (37 771)      (183 742)      (144 090)
Cash and cash equivalents at beginning of period                         79 364        225 400        225 400 
Effects of exchange rates on cash and cash equivalents                    1 342           (347)        (1 946)
Cash and cash equivalents at end of period                               42 935         41 311         79 364 


NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
                                                                       30/09/18       30/09/17       31/03/18 
                                                                      Unaudited      Unaudited        Audited 
                                                                          R'000          R'000          R'000 
1.  SHARE OF RESULTS OF ASSOCIATED COMPANIES

    Consists of the following categories:            
      -  Somiluana - Sociedade Mineira, S.A.                             25 944         18 743         47 503 

         The 33% investment in Somiluana is accounted for as an 
         investment in an associate under the equity method. 

      -  West Coast Resources (Pty) Ltd                                       -        (13 114)        (8 841)

         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.

                                                                         25 944          5 629         38 662 

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                                      13 513          7 446          4 371 
      -  Provisional gain on bargain purchase with acquisition of 
         subsidiary                                                           -              -         38 142
      -  Finalisation of gain on bargain purchase with acquisition 
         of subsidiary (adjustment)                                     (34 833)             -              -
      -  Loss on re-measurement to fair value with acquisition 
         of subsidiary                                                  (51 225)             -         (7 575)
      -  Re-measurement of rehabilitation provision                      94 064              -              - 
      -  Commission on third-party sale of diamonds                       1 623          7 421         12 143 
      -  Reversal of exploration costs previously expensed                6 343              -              - 
      -  Profit on sale of assets                                           174              -              - 
                                                                         29 659         14 867         45 724 

3.  DISCONTINUED OPERATIONS            

    Consists of the following categories:

      -  Angolan joint ventures

         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 R1,0 million 
         (30/09/17: R0,9 million; 31/03/18: R2,3 million) is 
         included below.

         Balance at beginning of period                                  69 595         81 539         81 539 
         Share of profit                                                   (990)          (868)        (2 314)
         Foreign exchange loss/(profit)                                  12 754            848         (9 630)
         Closing balance at end of period                                82 250         81 519         69 595 

         Profit for the period                                              990            868          2 314 

      -  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.

         At the General Meeting held on 3 September 2018, Trans Hex 
         shareholders approved the sale of the LOR operations, effective 
         1 April 2018, for a cash consideration of R72 million.  

         The results of these operations were as follows:

         Revenue                                                              -        109 599        205 874 
         Cost of goods sold                                                   -       (309 573)      (426 109)
         Gross loss                                                           -       (199 974)      (220 235)
         Royalties                                                            -           (548)        (1 029)
         Mining loss                                                          -       (200 522)      (221 264)
         Other gains - net                                               77 791          4 708          9 748 
         Finance costs                                                        -         (1 916)        (3 831)
         Loss before income tax                                               -       (197 730)      (215 347)
         Income tax                                                           -              -              - 
         Profit/(loss) for the period                                    77 791       (197 730)      (215 347)

         Total                                                           78 781       (196 862)      (213 033)

4.  RECONCILIATION OF HEADLINE EARNINGS

    Continuing operations
    (Loss)/profit for the period                                        (35 447)        (2 302)        24 777 
      -  Provisional gain on bargain purchase with acquisition of 
         subsidiary                                                           -              -        (38 142)
      -  Finalisation of gain on bargain purchase with acquisition 
         of subsidiary (adjustment)                                      34 833              -              -
      -  Loss on re-measurement to fair value with acquisition 
         of subsidiary                                                   51 225              -          7 575 
      -  (Profit)/loss on sale of assets                                   (174)             -          1 357 
      -  Foreign currency translation differences on repayment 
         of long-term receivables from foreign operations 
         recycled to profit or loss                                      (3 737)        (2 302)        (4 928)
    Headline earnings/(loss)                                             46 700         (4 604)        (9 361)

    Discontinued operations 
    Profit/(loss) for the period                                         78 781       (196 862)      (213 033)
      -  Profit on sale of assets                                       (77 791)        (4 708)        (9 748)
    Headline earnings/(loss)                                                990       (201 570)      (222 781)

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 period:

                                                                                Mining
                                                    Land and       Mining    plant and
                                                   buildings       rights    equipment        Total 
                                                       R'000        R'000        R'000        R'000 
    30/09/18 unaudited
    Opening balance                                   44 555      305 461      148 653      498 669 
    Additions                                              -       10 000        4 059       14 059 
    Business combination (adjustment)                 26 483     (186 747)           -     (160 264)   
    Disposals                                            (16)           -       (1 384)      (1 400)
    Depreciation charge (change in estimate)               -        5 041            -        5 041
    Depreciation charge                                 (385)      (4 227)     (11 940)     (16 552) 
    Closing balance                                   70 637      129 528      139 388      339 553 

    30/09/17 unaudited
    Opening balance                                    2 981            -       48 458       51 439 
    Additions                                              -            -        4 782        4 782 
    Disposals                                              -            -          (50)         (50)
    Depreciation charge                                 (179)           -       (6 111)      (6 290)
    Closing balance                                    2 802            -       47 079       49 881 

    31/03/18 audited
    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 

                                                                       30/09/18       30/09/17       31/03/18 
                                                                      Unaudited      Unaudited        Audited 
                                                                          R'000          R'000          R'000 
6.  INVESTMENT IN ASSOCIATES            
    
      -  Loan to associate: Somiluana - Sociedade Mineira, S.A.               -         30 159          7 945 
         Balance at beginning of period                                   7 945         29 840         29 840 
         Repayment of loan amount                                        (8 985)             -        (20 159)
         Foreign exchange profit/(loss)                                   1 013            319         (1 736)

         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 30 September 2018, 
         the loan outstanding by Somiluana amounted to 
         US$19,0 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. 

         The recognised portion of the loan receivable by the 
         Group has been repaid. Repayments received in excess 
         of the recognised amount amounted to US$0,4 million 
         and has been disclosed under Other gains in the 
         Income Statement.

      -  Investment in associate: Somiluana - Sociedade Mineira, S.A.    98 953         54 042         67 513 
         Balance at beginning of period                                  67 513         38 820         38 820 
         Share of results of associated company                          25 944         18 743         47 503 
         Dividends paid                                                  (9 837)        (4 347)       (10 716)
         Foreign exchange differences                                    15 333            826         (8 094)

         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                    -         71 487              - 
         Balance at beginning of period                                       -         28 677              - 
         Loan advances during the period                                      -         39 228              - 
         Capitalised interest                                                 -          3 582              - 

      -  Investment in associate: West Coast Resources (Pty) Ltd              -         86 021              - 
         Balance at beginning of period                                       -         98 485              - 
         Share of results of associated company                               -        (13 114)             - 
         Capitalised interest                                                 -            650              - 

         On 1 February 2018, the Group increased its interest in 
         West Coast Resources (Pty) Ltd to 67,2%. Therefore effective 
         1 February 2018 the results of West Coast Resources (Pty) Ltd 
         have been consolidated and no current period and year numbers 
         are disclosed under the Investments in Associates Note.

7.  INVENTORIES            

    Diamonds                                                             52 708         88 680         61 622 
    Consumables                                                          15 640          5 972         12 900 
                                                                         68 348         94 652         74 522 

    The carrying value of diamond inventories included above, 
    carried at net realisable value, amounted to R23,3 million 
    (30/09/17: R59,9 million; 31/03/18: R4,1 million). 

    Cost of inventories included in cost of goods sold amounted 
    to R185,6 million (30/09/17: R25,5 million; 31/03/18: R163 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, in the results for the year ended 
    31 March 2018, the assets and liabilities relating to these 
    operations have been presented as a disposal group held-for-sale. 
    The results are presented as discontinued operations as this 
    represents a separate major line of business. At the General 
    Meeting held on 3 September 2018, Trans Hex shareholders 
    approved the sale of the LOR operations, effective 
    1 April 2018, for a cash consideration of R72 million.

    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                                                -              -         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 
    installments, 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.                                    128 756              -        146 178 
    Less: Portion of loan repayable within one year, included in 
    current liabilities                                                 (34 365)             -        (34 365)
                                                                         94 391              -        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 capital 
    amount available under the facility is R148 000 000 with 
    R128 000 000 still available for utilisation.                        60 773         32 000        123 821 
    Portion of non-current liabilities repayable within one year, 
    included in current liabilities                                      34 365              -         34 365 
                                                                         95 138         32 000        158 186 

10. PROVISIONS            

    Provision for post-employment medical benefits                        11 017         11 446         11 017 
    Provision for long-service awards                                     3 016         13 917          3 016 
    Provision for guarantee liabilities                                  58 200              -              - 
    Provision for rehabilitation liabilities                             88 104        108 857        178 424 
                                                                        160 337        134 220        192 457 

11. BUSINESS COMBINATIONS            
    
    The opening balance sheet of West Coast Resources (Pty) Ltd 
    has been fully consolidated within the Group as of 1 February 2018. 
    Accordingly, a provisional valuation of identifiable assets 
    acquired and liabilities assumed was made as at 31 March 2018 
    upon the conclusion of the 2018 annual financial statements.

    The following table summarises the movements in identifiable 
    assets acquired and liabilities assumed from the provisional 
    valuation allocations to the final valuations:

                                                                     01/02/2018                    01/02/2018
                                                                  Disclosure as                 Disclosure as 
                                                                    at 30/03/18     Adjustment    at 30/09/18
                                                                          R'000          R'000          R'000
    Total assets                                                        744 180       (160 264)       583 916 
    Property, plant and equipment                                       194 139         26 483        220 622 
    Mining rights                                                       313 455       (186 747)       126 708 
    Other financial assets                                              123 016              -        123 016 
    Inventories                                                         107 829              -        107 829 
    Trade and other receivables                                           5 603              -          5 603 
    Cash and cash equivalents                                               138              -            138 

    Total liabilities                                                   536 300        (32 201)       504 099 
    Provisions                                                          166 890              -        166 890 
    Deferred income tax liabilities                                      32 201        (32 201)             - 
    Borrowings                                                          202 934              -        202 934 
    Trade and other payables                                            134 275              -        134 275 

    Total identifiable net assets                                       207 880       (128 063)        79 817  

    Net asset value purchased (67,2%)                                   139 695        (86 058)        53 637  
    Fair value of consideration transferred                             (18 402)             -        (18 402)
    Previously held equity (40,0%)                                      (83 151)       (51 224)       (31 927)
    Gain on bargain purchase                                             38 142        (34 834)         3 308  

    Provisional gain on bargain purchase at the end of March 2018

    The net assets provisional fair value disclosed at the end 
    of the 2018 financial year amounted to R207,8 million and 
    took into account:

      -  Intangible assets of R313,5 million for the mining rights;
      -  Tangible assets of R194,1 million;
      -  Inventories of R107,8 million;
      -  Trade receivable of R5,6 million and trade payables of 
         R134,3 million;
      -  Other financial assets of R123,0 million;
      -  Net deferred tax liabilities of R32,2 million;
      -  Provisions of R166,9 million; and
      -  Financial net debt of R202,9 million.

    Consequently, the resulting provisional gain on a bargain purchase 
    amounted to R38,1 million (difference between the total 
    consideration of R18,4 million plus the R83,2 million fair value 
    on acquisition and net assets provisional fair value of R139,7 million).

    During the six-month measurement period, the fair values of the 
    identifiable assets acquired and liabilities assumed were further 
    refined (see column "Adjustments" in the table above and the 
    related notes below).

    These adjustments reduced the provisional gain on a bargain 
    purchase by R34,8 million and increased the loss on re-measurement 
    to fair value with acquisition of subsidiary by R51,2 million and are 
    explained below:

      1. The revaluation of the tangible assets (R67,6 million) and 
         mining rights (R126,7 million) based on conditions existing 
         at acquisition date.
      2. The reduction in net deferred tax liabilities amounting to 
         R32,2 million results from (a) the reversal of net deferred tax assets 
         due to management's evaluation of taxable profits to operations 
         (R12,7 million), and (b) deferred tax liabilities related to 
         temporary differences resulting from other adjustments (R44,9 million).

                                                                       30/09/18       30/09/17       31/03/18 
                                                                      Unaudited      Unaudited        Audited 
                                                                          R'000          R'000          R'000 
12. CAPITAL COMMITMENTS            
    (including amounts authorised, but not yet contracted)               22 196             26         12 247 
                  
    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 
    Period ended 30/09/18
    Carats sold                                          66 130          -     66 130          -          -          - 
                                          
                                                          R'000      R'000      R'000      R'000      R'000      R'000 
    Revenue                                             136 209          -    136 209          -          -          - 
    Cost of goods sold                                 (173 341)         -   (173 341)         -          -          - 
    Gross loss                                          (37 132)         -    (37 132)         -          -          - 
    Share of results of associated companies                  -     25 944     25 944          -          -          - 
    Royalties                                              (622)         -       (622)         -          -          - 
    Selling and administration costs                    (20 876)    (4 642)   (25 518)         -          -          - 
    Mining (loss)/profit                                (58 630)    21 302    (37 328)         -          -          - 
    Exploration costs                                    (6 709)         -     (6 709)         -          -          - 
    Other gains - net                                    24 290      5 369     29 659     77 791          -     77 791 
    Profit for the period from discontinued operations        -          -          -          -        990        990 
    Finance income                                        8 603          -      8 603          -          -          - 
    Finance costs                                       (22 798)         -    (22 798)         -          -          - 
    (Loss)/profit before income tax                     (55 244)    26 671    (28 573)    77 791        990     78 781 

    Depreciation included in the above                  (11 511)         -    (11 511)         -          -          - 
    Net assets/(liabilities)                            183 900    149 198    333 098          -    (82 250)   (82 250)
    Capital expenditure                                  14 059          -     14 059          -          -          - 
    Net asset value per share (cents)                       159        130        289          -        (71)       (71)

                                                                  CONTINUING                    DISCONTINUED          
                                                          South                              South
                                                         Africa     Angola      Total     Africa     Angola      Total 
    Period ended 30/09/17                                    
    Carats sold                                           4 427          -      4 427      9 602          -      9 602 

                                                          R'000      R'000      R'000      R'000      R'000      R'000 
    Revenue                                              40 130          -     40 130    109 599          -    109 599 
    Cost of goods sold                                  (31 151)         -    (31 151)  (309 573)         -   (309 573)
    Gross profit/(loss)                                   8 979          -      8 979   (199 974)         -   (199 974)
    Share of results of associated companies            (13 114)    18 743      5 629          -          -          - 
    Royalties                                              (147)         -       (147)      (548)         -       (548)
    Selling and administration costs                    (32 923)    (7 244)   (40 167)         -          -          - 
    Mining (loss)/profit                                (37 205)    11 499    (25 706)  (200 522)         -   (200 522)
    Exploration costs                                    (2 061)         -     (2 061)         -          -          - 
    Other gains/(losses) - net                           14 982       (115)    14 867      4 708          -      4 708 
    Profit for the period from discontinued operations        -          -          -          -        868        868 
    Finance income                                       12 658          -     12 658          -          -          - 
    Finance costs                                        (2 059)         -     (2 059)    (1 916)         -     (1 916)
    (Loss)/profit before income tax                     (13 685)    11 384     (2 301)  (197 730)       868   (196 862)

    Depreciation included in the above                     (893)         -       (893)    (5 396)         -     (5 396)
    Net assets/(liabilities)                            176 182    137 075    313 257    (81 908)   (81 519)  (163 427)
    Capital expenditure                                     314          -        314      4 468          -      4 468 
    Net asset value per share (cents)                       166        130        296        (77)       (77)      (154)

                                                                  CONTINUING                    DISCONTINUED        
                                                          South                              South
                                                         Africa     Angola      Total     Africa     Angola      Total 
    Year ended 31/03/18
    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 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)
    (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)
                                              
    Revenue from transactions with certain customers can amount to 10% or more of total revenue. 
    During the period under review, five individual customers were responsible for aggregate 
    sales in excess of 10% of revenue. Such individual customers were responsible for aggregate 
    sales of R91,0 million (30/09/17: R71,3 million; 31/03/18: Rnil).

15. CONTINGENT LIABILITIES

    There have been no material changes to contingent liabilities previously reported in the 
    2018 Integrated Annual Report.

16. EVENTS AFTER THE REPORTING PERIOD

    No events which may have a material effect on the Group occurred between the reporting date 
    and the issuing of this announcement.

17. ACCOUNTING POLICIES

    The condensed consolidated interim financial statements are prepared in accordance with 
    International Financial Reporting Standards, (IAS) 34 Interim Financial Reporting, the SAICA 
    Financial Reporting Guides as issued by the Accounting Practices Committee and Financial 
    Pronouncements as issued by the Financial Reporting Standards Council. The accounting policies 
    applied in the preparation of these interim financial statements are in terms of International 
    Financial Reporting Standards and are consistent with those applied in the previous consolidated 
    annual financial statements, with the exception of the adoption of the amendments to IFRS 9: 
    Financial instruments and IFRS 15: Revenue from Contracts with Customers. The implementation 
    of these interpretations and amendments had no impact on the results of either the current or 
    prior periods.

18. PREPARATION OF FINANCIAL STATEMENTS

    The preparation of the condensed consolidated financial statements was supervised by the Financial 
    Director, IP Hestermann CA(SA). The condensed consolidated financial statements have not been reviewed 
    or audited by the Company's external auditor.


OVERVIEW
In this commentary, results are compared with the first six months of the 2018 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 
economic life cycles, these operations were gradually downscaled and finally halted on 31 October 2017. 
These operations are disclosed as discontinued operations. The LOR operations were sold effective 
1 April 2018 at a profit of R77,8 million.

Sales revenue from continuing operations amounted to R136,2 million (September 2017: R40,1 million). 

South African production reduced to 55 950 carats (September 2017: 76 261 carats, including West Coast 
Resources' production), mainly due to West Coast Resources (Pty) Ltd producing less carats and the closure 
of the LOR operations. 

The cost of goods sold increased to R173,3 million (September 2017: R31,1 million), mainly as a result of 
West Coast Resources (Pty) Ltd becoming a subsidiary of the Group on 1 February 2018.

Gross loss amounted to R37,1 million (September 2017: gross profit of R9,0 million). 

Other gains - net amounted to R29,7 million, primarily due to the re-measurement of the West Coast Resources 
(Pty) Ltd rehabilitation provision which resulted in a gain of R94,1 million being recognised and a loss on 
re-measurement to fair value and finalisation of gain with acquisition of subsidiary amounting to R86,1 million  
(September 2017: R14,9 million).

Loss before tax from the South African continuing operations amounted to R55,2 million (September 2017: 
loss of R13,7 million).

Profit from the Angolan continuing operations amounted to R26,7 million (September 2017: profit of R11,4 million), 
consisting of Somiluana's equity accounted profit of R25,9 million and repayment in excess of the recognised 
loan amount of R6,3 million, less Angolan head office costs of R5,5 million.

After-tax loss for the period from continuing operations amounted to R26,8 million (September 2017: 
loss of R2,3 million). 

Profit from the discontinued operations amounted to R78,8 million (September 2017: loss of R196,9 million), 
consisting of profit from the Luarica and Fucauma operations of R1,0 million (September 2017: 
Profit of R0,9 million) and profit from the discontinued LOR operations of R77,8 million (September 2017: 
loss of R197,7 million), directly attributable to the proceeds from its sale. 

The Group therefore reports a profit for the period of R52,0 million (September 2017: loss of R199,2 million).

Cash and cash equivalents at the end of the period amounted to R42,9 million (September 2017: R41,3 million). 


MINERAL RESOURCES AND MINERAL RESERVES
No adjustments have been made to the statement of mineral resources and mineral reserves as contained in the 
2018 Integrated Annual Report. Reconciliation of production data takes place annually and an updated mineral 
resources and reserves statement will be published in the 2019 Integrated Annual Report.


OPERATING PERFORMANCE
Detailed project information (unaudited)                                                
                                   Period ended 30/09/18                               Period ended 30/09/17                  
                                                        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     17,26       51 681         0,24          135        20,41       60 344         0,24          156
                                            
Baken                        -            -            -            -         2,15       10 904         1,18          879
Bloeddrif                    -            -            -            -         2,60          620         1,52          877
Shallow Water                -        4 269         0,20          343            -        4 393         0,25          502
                                            
Angola                                            
Somiluana                33,03       66 064         0,62          520        48,89       67 083         0,65          531
                                                
* 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 
During the period, production at West Coast Resources (Pty) Ltd, in which the Company holds a 67,2% stake, amounted to 
51 681 carats compared to 60 344 carats in September 2017. 

Sales amounted to R110,3 million at an average price of US$135 per carat (September 2017: sales of R118,5 million 
at an average price of US$156 per carat). 

The average grade decreased by 15,4% to 17,26 carats/100 tons compared to 20,41 carats/100 tons in September 2017 
due to lower than expected grades achieved in targeted channel blocks. The average stone size amounted 
to 0,24 carats per stone (September 2017: 0,24 carats per stone).

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

Lower Orange River operations 
At the General Meeting held on 3 September 2018, Trans Hex shareholders approved the sale of the LOR operations, 
effective 1 April 2018.

Angolan operations 
Production at Somiluana Mine, in which Trans Hex holds a 33% stake, amounted to 66 064 carats (September 2017: 
67 083 carats). Total sales amounted to US$35,8 million at an average price of US$520 per carat (September 2017: 
sales of US$27,7 million at an average price of US$531 per carat). The Group received US$660 000 (September 2017: 
US$330 000) in dividends and a US$1,15 million repayment on the loan account.

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


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 140 000 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.

Angolan operations
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 133 000 carats, compared to 2018 financial year 
actual production of 136 402 carats.

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 an interim dividend.


CHANGES TO THE BOARD OF Directors
Mr James Gurney resigned as Alternate Director, effective 26 November 2018.


By order of the Board


MVZ Wentzel         L Delport
Chairman            Chief Executive Officer 

Parow
13 December 2018


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

JSE SPONSOR
One Capital Sponsor Services (Pty) Ltd

TRANSFER SECRETARIES
Computershare Investor Services (Pty) Ltd

COMPANY SECRETARY
Statucor (Pty) Ltd

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

www.transhex.co.za

Date: 13/12/2018 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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