| Thu 5 Jul 2007, 16:38 | | AFG - Afgem - Preliminary Consolidated Annual Resu |
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AFG
AFG
AFG - Afgem - Preliminary Consolidated Annual Results for the year ended 31
March 2007
Afgem Limited
(Incorporated in the Republic of South Africa)
(Registration number 1998/007292/06)
JSE code: AFG ISIN: ZAE000067757
("Afgem" or "the Company")
Preliminary Consolidated Annual Results for the year ended 31 March 2007
Corporate Developments
Shareholders are referred to the announcement on 4 June 2007 whereby Afgem
signed a sale agreement for the sale of its interest in Simolotse Mine (Pty)
Ltd ("Simolotse") and Afgem Diamonds (Pty) Ltd ("Afgem Diamonds") to Meepo
Investment Corporation (Pty) Ltd ("Meepo")("Meepo transaction"). In terms of
the agreement Afgem received R2 million in cash on 31 May 2007 from Meepo. The
consideration in respect of the Meepo transaction is a cash amount of R5.3
million and Euro 2.1 million to be settled through the issue of 4.1 million
Meepo A class shares to be issued at the Rand equivalent of 50 Euro cents per
share.
Accordingly, Afgem is in the process of preparing a circular to shareholders to
approve the sale of Simolotse and Afgem Diamonds as per the JSE Limited`s
Listing Requirements and the Securities Regulation Panel`s Code.
To date irrevocable letters of consent has been received from 54% of all Afgem
shareholders indicating that they will vote in favour of the Meepo transaction
at the forthcoming shareholders meeting.
As announced on 14 June 2007, the Company was served with court papers wherein
Rex Mining Corporation Limited ("RMCL") and Rex Diamond Mining Corporation
("RDMC") (collectively "Rex") have made an application to the High Court of
South Africa (Witwatersrand Local Division) for a liquidation order to be
granted for the winding up of Afgem.
Afgem has lodged a notice of intending to oppose the application of Rex and
will lodge an opposing affidavit on Thursday, 5 July 2007. The opposition is
based on the balance sheet of Afgem at 31 March 2007 indicating that the
Company`s assets in fact substantially exceed its liabilities by R45 million
and its current assets exceed its current liabilities by R2.5 million.
Operational Developments
The Simolotse Mine never fully recovered from the extensive flooding of the
underground workings in January 2006. Although mining operations resumed in
February 2006, limited clean up work is still required at the No2 Shaft before
full scale mining can resume. Flood water drains were constructed at the No2
Shaft and low concrete walls were built around the shaft to prevent a similar
event occurring again.
Underground mining ceased at the end of March 2006 in order to preserve the
remaining cash and management was forced to lock out employees at the end of
April 2006. The mine was placed on care and maintenance while the re-treatment
of coarse tailings commenced on a one shift per day basis in order to
supplement cash flow. The exercise also allowed a recovered grade for run of
mine ore to be determined if a tertiary crusher was installed in the plant. The
plant was stopped at the end of February 2007 after 13,591 tons were treated at
a yield of 5.66 carats per hundred tons (cpht).
This gave a more realistic total recovered grade of the ore of approximately 25
cpht recovered from the underground workings.
Subsequent to terminating the re-treatment process, Simolotse has continued to
pump water from underground workings, thereby ensuring a rapid re-opening when
required.
Snowden Mining Industry Consultants (Snowden) was appointed to assess the
Simolotse Mine (previously Loxton Exploration Diamond Mine) Mineral Resource
using the guidelines of the South African Code for reporting of Mineral
resources and Mineral reserves, effective March 2000 (the SAMREC Code).
Mineral Resource Statement
Following Snowden`s assessment of the kimberlite fissure continuity and the
conclusion that it is likely to persist unchanged in respect of its width and
diamond grade for the next 150m vertical depth, Snowden has classified the
resource estimate in accordance with the guidelines of the SAMREC (2000) Code
for the reporting of Mineral resources and Mineral reserves (Table 1).
The classification reflects a reduction in confidence in the estimate down-dip
from the lowest current working level as follows:
- Indicated resources: two levels (60m) below the base of the current working
levels where fissure width data is available and in Snowden`s opinion where
thedeposit is known to a reasonable level of confidence.
- Inferred resources: three levels (90m) below the indicated resources
(or below the deepest workings where fissure width data is not available) and
in Snowden`s opinion the deposit is known to a low level of confidence.
Table 1: Mineral resource for the Simolotse Mine, below existing workings
Resource Area Fissure Density
Class (m2) Width (t/m3)
(cm)
Indicated 106,000 53 2.65
Inferred 243,000 50 2.65
Total 349,000
Resource Kimberlite Grade
Class tonnes* (cpht)
Indicated 119,000 85
Inferred 258,000 85
Total 377,000 85
* Tonnes includes a reduction of 20% for geological loss
A density of 2.65 t/m3 has been applied to the kimberlite. Snowden considers
this average in situ bulk density as a reasonable value for estimating the
kimberlite tonnage at Simolotse Mine.
A 20% geological loss was applied to account for non-recovery from very thin
ground and/or areas where the en echelon fissures may not fully overlap.
Snowden considers this to be a reasonable geological loss factor for this style
of deposit.
Snowden (2007) estimated a diamond grade of 85cpht (bottom screen size of 2mm)
and a value of US$200 per carat for Simolotse Mine. Snowden considers this
value to be conservative. These estimations were based on production
information and diamond sales by Afgem in 2006 and 2007, the most recent sale
of which resulted in a revenue of US$220 per carat.
The total mineral resource to a depth of up to 150m from the existing working
areas is estimated by Snowden as 0.38 million tonnes of kimberlite fissure at a
grade of 85cpht. These resources are as at 22 June 2007.
The attached checklist of assessment and reporting criteria summarises both the
classification according to the SAMREC Code guidelines and Snowden`s assessment
and comment on the resource estimates.
CHECK LIST OF ASSESSMENT AND REPORTING CRITERIA
Drilling techniques No drilling information available.
Logging Restricted to measurements of fissure
width.
Drill sample recovery No drilling information available.
Sampling methods Mining.
Sub-sampling techniques and Measurements of fissure width recorded
sample preparation irregularly along the fissure.
Quality of assay data and Not applicable.
laboratory tests
Verification of sampling and None. Diamond grade based on production
assaying data from Simolotse Mine.
Location of data points Snowden was provided with kimberlite
fissure and stope width data points
plotted on a long-section and spatially
referenced monthly average survey
measurements.
Data density and distribution Spatial distribution of kimberlite fissure
and stope width data is irregular and
there are between 3 and 44 measurements
per mining block (100 m strike by
approximately 30 m vertical). This level
of data density is sufficient to define
geological continuity for a mineral
resource estimate for this style of
diamond deposit.
Database integrity Snowden has not reviewed the integrity of
the database. Data is stored as points
plotted on
long-sections and as monthly averages in
production spreadsheets.
Geological interpretation Geological interpretation is based on
exposures of the kimberlite fissure in the
underground workings.
Dimensions Strike length of 2,700 m and average width
of approximately 50 cm exposed in
underground workings. Mining to a depth of
530 m at Simolotse Mine. Kimberlite
fissure depth extrapolated
to a depth 150 m below current workings.
Estimation techniques Kimberlite fissure width estimated using
averaging into mining blocks of 100 m
strike by approximately 30 m vertically.
Classification The resources were classified into
indicated and inferred categories taking
into account available stope width
measurements and their vertical proximity
to the estimated blocks as well as
knowledge of the grade from production
history.
Tonnage factors (in situ bulk In situ bulk density of 2.65 t/m 3 applied
densities) to kimberlite. Snowden believes this
density to be appropriate based on
experience with similar deposits.
Audits and reviews No database review or audit has been
completed by Snowden and Snowden cannot
vouch for the integrity of the database.
Snowden has visited Simolotse Mine and
inspected the fissure exposed in the
underground workings.
Estimation and reporting of Diamonds
Indicator minerals Not applicable as the presence of
diamonds has been established by mining
activities.
Source of diamonds Diamonds are sourced from a near vertical
kimberlite fissure.
Sample collection Underground mining at approximately 3,500
tonnes per month over 13 months, March
2005 to March 2006.
Sample treatment Production recovery plant not reviewed by
Snowden. Afgem has advised Snowden that
the bottom screen size is 2 mm.
Sample grade A diamond grade of 85 cpht has been
estimated from production data. This may
be conservative as there have been reports
of theft in the earlier operations.
Grade estimation for The diamond grade of the fissure has been
reporting of Mineral estimated based on historical ROM
Resources production and ore dilution information
from Simolotse Mine. Snowden believes
there is a reasonable level of
confidence in the fissure grade.
Value estimation No diamond valuation has been undertaken
by Snowden, although revenues of up to
US$340 per ct were reported by Afgem from
sales in 2006 and 2007. Form, shape, size
and colour not quantified by Snowden.
Security and integrity Security and integrity of sampling and
production results not reviewed by Snowden
although there are reports of diamond
theft in the earlier operations.
Classification Stone frequency to stone size not reviewed
or classified by Snowden.
M Noppe of Snowden undertook the estimation processes for Simolotse Mine. M
Noppe is a Competent Person, being a Fellow of the AusIMM with more than five
years relevant experience in resource estimation.
The Department of Minerals and Energy has granted a new order Prospecting Right
for the Bokang Mine. Management is actively assessing how to turn this valuable
asset to account.
Loan agreement
In August 2004, Afgem entered into an agreement with RMCL to lend RMCL R5
million. To date R3.5 million of this loan has been repaid to Afgem. The loan
was interest free and repayable on five days notice. RMCL was placed on terms
to repay the outstanding balance of the loan on 24 November 2005 and from that
date interest has accrued on the loan.
RMCL, by not repaying the loan on demand on 29 November 2005 is in breach of
the said agreement. Afgem obtained a judgement for R1.5 million of the amount
owing plus interest thereon in 2006 and RMCL has appealed the decision. Afgem
is expediting the hearing of the application for leave to appeal. Should the
appeal decision be in Afgem`s favour, RMCL will be obliged to pay Afgem R1.5
million plus interest thereon from November 2005. Afgem has security from RMCL
to cover this debt owing to Afgem.
Financial results
Operating costs include a R14.4 million provision for a non performing
subsidiary loan, the R3.2 million increase in the National Union of Mineworker
("NUM") claim in the accounts of Simolotse, a R2.4 million loss on the disposal
of surplus assets in Simolotse, director fees of R1.1 million, legal fees of
R0.7 million and consulting fees of R600 000.
Ordinary shares in issue increased by 23.6 million further to a fund raising in
August 2006. The issued ordinary share capital currently is 257,622,321.
Short term loans receivable relate predominantly to monies owed by RMCL to
Afgem, including the R2 million (R1.5 million plus interest) judgement obtained
against RMCL. R3 million of trade and other payables relate to the Section 311
scheme proposed in 2005 by Afgem between the creditors of the mining assets
acquired from RMCL and RDMC and RMCL`s creditors.
A settlement agreement was reached with NUM for the full and final settlement
of the long standing labour dispute at the Simolotse Mine. Payment of R4
million is payable by 15 December 2007.
In the event of the Meepo transaction becoming unconditional, R7 million of
creditors will be assumed by Meepo in respect of Simolotse and R1,1 million
assumed by Meepo in respect of Afgem Diamonds. Afgem has funding to facilitate
its day to day operations and creditors are being paid from the cash resources.
Annual Financial Statements
Statement of compliance and basis of preparation
The consolidated annual financial statements have been prepared in accordance
with International Financial Reporting Standards and its interpretations
adopted by the International Accounting Standards Board. The consolidated
annual financial statements for the twelve months ended 31 March 2007 have not
been audited yet.
Income statements
for the year ended 31 March 2007
Group
Audited
Twelve Twelve
months months
ended ended
31 March 31 March
2007 2006
R R
Revenue 962,168 7,081,391
Cost of sales (1,139,545) (14,456,759)
Gross loss (177,377) (7,375,368)
Management fees received - 3,000,000
Other income 419,698 992,290
Operating expenses (26,926,725) (13,008,867)
Operating loss (26,684,404) (16,391,945)
Net interest received 34,519 411,964
Loss before tax (26,649,885) (15,979,981)
Income tax refund 2,547 7,134,927
Loss for the year (26,647,338) (8,845,054)
Attributable to:
Equity holders of the parent (26,647,338) (8,845,054)
Weigted average number of
248,095,849 210,992,038
shares in issue
Basic loss per share (cents) (10.74) (4.19)
Diluted loss per share (cents) (8.25) (3.29)
Headline loss per share (cents) (10.74) (7.38)
Company
Audited
Twelve Twelve
months months
ended ended
31 March 31 March
2007 2006
R R
Revenue - -
Cost of sales - -
Gross loss - -
Management fees received - 3,000,000
Other income - -
Operating expenses (18,994,917) (17,175,203)
Operating loss (18,994,917) (14,175,203)
Net interest received 140,069 267,408
Loss before tax (18,854,848) (13,907,795)
Income tax refund - 7,134,927
Loss for the year (18,854,848) (6,772,868)
Attributable to:
Equity holders of the parent
Weigted average number of
shares in issue
Basic loss per share (cents)
Diluted loss per share (cents)
Headline loss per share (cents)
Balance sheets
at 31 March 2007
Group
31 March 31 March
2007 2006
R R
Assets
Non-current assets
Property, plant and equipment 34,976,225 39,919,941
Intangible assets 33,802,594 50,573,654
Interest in subsidiaries - -
Loans to Group companies - -
Total non-current assets 68,778,819 90,493,595
Current assets
Inventories - 230,009
Short-term loans receivable 6,909,236 7,241,849
Trade and other receivables 1,607,222 1,878,072
Cash and cash equivalents 637,636 1,178,821
Total current assets 9,154,094 10,528,751
Total assets 77,932,913 101,022,346
Equity
Ordinary share capital 2,576 2,340
Preferrence share capital 723 723
Share premium 43,413,796 37,737,033
Share options outstanding - 82,828
(Accumulated loss)/retained earnings (8,262,016) 18,385,322
Total equity 35,155,079 56,208,246
Non-current liabilities
Interest-bearing borrowings 451,385 966,091
Non interest-bearing borrowings 1,237,787 -
Environmental rehabilitation provision 14,815,750 15,698,750
Provision for purchase of investment 12,601,979 17,975,073
Total non-current liabilities 29,106,901 34,639,914
Current liabilities
Interest-bearing borrowings 576,564 491,937
Short-term loans payable 647,419 25,704
Trade and other payables 8,446,950 8,856,545
Provision for NUM claim 4,000,000 800,000
Total current liabilities 13,670,933 10,174,186
Total equity and liabilities 77,932,913 101,022,346
Company
31 March 31 March
2007 2006
R R
Assets
Non-current assets
Property, plant and equipment - -
Intangible assets - -
Interest in subsidiaries 37,702,079 45,475,173
Loans to Group companies 18,685,932 27,880,987
Total non-current assets 56,388,011 73,356,160
Current assets
Inventories - -
Short-term loans receivable 6,909,236 7,073,847
Trade and other receivables 46,616 56,228
Cash and cash equivalents 18,252 102,894
Total current assets 6,974,104 7,232,969
Total assets 63,362,115 80,589,129
Equity
Ordinary share capital 2,576 2,340
Preferrence share capital 723 723
Share premium 43,413,796 37,737,033
Share options outstanding - 52,313
(Accumulated loss)/retained earnings 1,602,660 20,457,508
Total equity 45,019,755 58,249,917
Non-current liabilities
Interest-bearing borrowings - -
Non interest-bearing borrowings 1,237,787 -
Environmental rehabilitation provision - -
Provision for purchase of investment 12,601,979 17,975,073
Total non-current liabilities 13,839,766 17,975,073
Current liabilities
Interest-bearing borrowings - -
Short-term loans payable 647,419 25,704
Trade and other payables 3,855,175 4,338,435
Provision for NUM claim - -
Total current liabilities 4,502,594 4,364,139
Total equity and liabilities 63,362,115 80,589,129
Statements of changes in equity
for the year ended 31 March 2007
Ordinary Preference
share capital share capital Share premium
R R R
Group
Balance at 1 April 2005 1,438 - 1,622,673
Shares issued 902 723 36,114,360
Share based payments - - -
Loss for the year - - -
Balance at 1 April 2006 2,340 723 37,737,033
Shares issued 236 - 5,676,763
Share based payments - - -
Loss for the year - - -
Balance at 31 March 2007 2,576 723 43,413,796
Company
Balance at 1 April 2005 1,438 - 1,622,673
Shares issued 902 723 36,114,360
Share based payments - - -
Loss for the year - - -
Balance at 1 April 2006 2,340 723 37,737,033
Shares issued 236 - 5,676,763
Share based payments - - -
Loss for the year - - -
Balance at 31 March 2007 2,576 723 43,413,796
Share Retained earnings
Options / (accumulated Total
outstanding loss) equity
R R R
Group
Balance at 1 April 2005 - 27,230,376 28,854,487
Shares issued - - 36,115,985
Share based payments 82,828 - 82,828
Loss for the year - (8,845,054) (8,845,054)
Balance at 1 April 2006 82,828 18,385,322 56,208,246
Shares issued - - 5,676,999
Share based payments (82,828) - (82,828)
Loss for the year - (26,647,338) (26,647,338)
Balance at 31 March 2007 - (8,262,016) 35,155,079
Company
Balance at 1 April 2005 - 27,230,376 28,854,487
Shares issued - - 36,115,985
Share based payments 52,313 - 52,313
Loss for the year - (6,772,868) (6,772,868)
Balance at 1 April 2006 52,313 20,457,508 58,249,917
Shares issued - - 5,676,999
Share based payments (52,313) - (52,313)
Loss for the year - (18,854,848) (18,854,848)
Balance at 31 March 2007 - 1,602,660 45,019,755
Cash flow statements
for the year ended 31 March 2007
Group
Twelve Twelve
months months
ended ended
31 March 31 March
2007 2006
R R
Cash (utilised in)/generated by operations (9,411,739) (7,955,587)
Net financing income 34,519 411,964
Taxation refunded - 1,228,896
Net cash utilised in/(generated by)
operations (9,377,220) (6,314,727)
Net acquisition of subsidiaries - -
Proceeds on sale of property, plant and
equipment 2,280,000 -
Acquisition of property, plant and
equipment - (1,767,548)
Net cash from investing activities 2,280,000 (1,767,548)
Proceeds from the issue of share capital 5,676,999 11,115,985
Movement in loans to subsidiaries - -
Decrease in interest bearing borrowings (430,079) -
Increase in non interest bearing borrowings 1,237,787 -
Decrease in short terms loans receivable 332,613 -
Increase in long-term loans - 354,326
Increase in/(repayment of) short-term loans 621,715 (5,706,218)
Decrease in environmental rehabilitation
fund (883,000) (9,750)
Net cash from financing activities 6,556,035 5,754,343
Net decrease in cash and cash equivalents (541,185) (2,327,932)
Cash and cash equivalents at beginning of
year 1,178,821 3,114,434
Cash and cash equivalents acquired - 392,319
Cash and cash equivalents at end of year 637,636 1,178,821
Company
Twelve Twelve
months months
ended ended
31 March 31 March
2007 2006
R R
Cash (utilised in)/generated by operations (2,300,381) 3,121,282
Net financing income 140,069 267,408
Taxation refunded - 1,316,011
Net cash utilised in/(generated by)
operations (2,160,312) 4,704,701
Net acquisition of subsidiaries - (2,500,000)
Proceeds on sale of property, plant and
equipment - -
Acquisition of property, plant and
equipment - -
Net cash from investing activities - (2,500,000)
Proceeds from the issue of share capital 5,676,999 11,115,985
Movement in loans to subsidiaries (5,241,442) (17,973,127)
Decrease in interest bearing borrowings - -
Increase in non interest bearing borrowings 1,237,787 -
Decrease in short terms loans receivable (219,389) -
Increase in long-term loans 9,120,000
Increase in/(repayment of) short-term loans 621,715 (7,715,788)
Decrease in environmental rehabilitation
fund - -
Net cash from financing activities 2,075,670 (5,452,930)
Net decrease in cash and cash equivalents (84,642) (3,248,229)
Cash and cash equivalents at beginning of
year 102,894 3,351,123
Cash and cash equivalents acquired - -
Cash and cash equivalents at end of year 18,252 102,894
The calculation of headline earnings per share at 31 March 2007 was based on a
headline loss of R26,647,338 (headline loss of R15,1574,563 - 31 March 2006)
and a weighted average number of ordinary shares outstanding during the period
ended 31 March 2007 of 248,095,849 (210,992,038 - 31 March 2006), calculated as
follows:
Group Group
31 March 2007 31 March 2006
R R
Reconciliation of loss to headline loss
Loss attributable to ordinary shareholders (26,647,338) (8,845,054)
Adjusted for:
Impairment of intangible assets - 405,418
Reversal of taxation charge from prior periods - (1,316,011)
Taxation effect on profit on sale of
tanzanite business - (5,818,916)
Headline loss (26,647,338) (15,574,563)
Weighted average number of ordinary shares
Effect of ordinary shares in issue at
beginning of year 233,968,155 143,797,717
Effect of shares issued on 25 June 2005 - 47,933,332
Effect of shares issued on 18 July 2005 - 19,260,989
Effect of shares issued on 25 August 2006 14,127,694 -
248,095,849 210,992,038
For and on behalf of the board
MR Summers
Director
Melrose Arch
5 July 2007
Sponsor
Sansara Financial Services (Pty) Limited
Date: 05/07/2007 16:38:31 Produced by the JSE SENS Department.
