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PZG
PZG
PZG - Pamodzi - Unaudited condensed consolidated results and further cautionary
PAMODZI GOLD LIMITED
Formerly Bema Gold South Africa (Proprietary) Limited)
(Incorporated in the Republic of South Africa)
Registration number: 2002/013039/06
Share code: PZG
ISIN: ZAE000088563
UNAUDITED CONDENSED CONSOLIDATED RESULTSFOR THE QUARTER AND SIX MONTHS ENDED 30
JUNE 2007 AND FURTHER CAUTIONARY ANNOUNCEMENT
HIGHLIGHTS
33 cents earnings per share for the quarter
Fatality free quarter
Safety performance improved
Progressing to become a 350 000 oz annualised gold producer early in 2008
Aiming at becoming a 1 million oz pa gold producer in 2 years
Visible impact of new management deployed at current operations
Turnaround on operations to achieve improved and consistent performance by 4th
quarter
Uranium potential on East Rand operations being investigated
INCOME STATEMENT
International Financial Reporting Quarter Quarter
Standards Basis ended ended
30 June 2007 31 March 2007
(Unaudited) (Unaudited)
Continuing operations Note (R`000) (R`000)
Revenue 3 84 652 90 714
Cost of sales (107 260) (101 131)
Gross loss (22 608) (10 417)
Other income 2 931 6 700
Administration expenses (8 223) (5 999)
Foreign exchange gain/(loss) 9 328 (15 705)
Revaluation of financial 31 445 -
derivative
Finance costs (243) (118)
Finance income 840 1 190
Share of profit in associate - -
Net profit/( loss) before 13 470 (24 349)
taxation
Taxation - -
Net profit/(loss) after taxation 13 470 (24 349)
Headline earnings/(loss) per 4 33 (59)
share (cents)
Basic earnings/(loss) per share 4 33 (59)
(cents)
Diluted earnings/(loss) per share 4 33 (59)
(cents)
International Financial Reporting 6 months 16 months
Standards Basis ended ended
30 June 2007 31 December 2006
(Unaudited) (Audited)
Continuing operations (R`000) (R`000)
Revenue 175 366 38 515
Cost of sales (208 391) (41 504)
Gross loss (33 025) (2 989)
Other income 9 631 1 102
Administration expenses (14 222) (6 539)
Foreign exchange gain/(loss) (6 377) (2 271)
Revaluation of financial 31 445 -
derivative
Finance costs (361) (2 224)
Finance income 2 030 123
Share of profit in associate - 5
Net profit/( loss) before (10 879) (12 793)
taxation
Taxation - (1 125)
Net profit/(loss) after taxation (10 879) (13 918)
Basic earnings/(loss) per share (27) (65)
(cents)
Diluted earnings/(loss) per share (27) (65)
(cents)
BALANCE SHEET
International Financial Reporting 30 June 31 December
Standards Basis 2007 2006
(Unaudited) (Audited)
Note (R`000) (R`000)
ASSETS
Non-current assets
Property, plant and equipment 570 895 546 729
Tangibles/intangibles in process of 5 100 230 100 230
being identified
Intangible assets 463 329
Other investments 19 718 18 815
691 306 666 103
Current assets
Inventories 16 458 17 151
Trade and other receivables 30 471 30 678
Deferred stripping 6 015 2 495
Cash and cash equivalents - 58 400
52 944 108 724
Non-current asset held for sale 11 700 11 700
Total assets 755 950 786 527
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 6 & 220 423 220 423
7
Accumulated losses (26 105) (15 226)
Total shareholders` equity 194 318 205 197
Non-current liabilities
Long-term liabilities 3 239 4 381
Provisions
- Close-down and restoration costs 72 814 71 346
- Post retirement medical benefits 1 723 1 723
Deferred taxation - 1 584
77 776 79 034
Current liabilities
Trade and other payables 107 572 100 388
Bank overdraft 756 3 115
Taxation 4 822 3 239
Derivative financial instruments 9 363 384 388 518
Current portion of long-term 7 322 7 036
liabilities
483 856 502 296
Total liabilities 561 632 581 330
Total equity and liabilities 755 950 786 527
STATEMENT OF CHANGES IN EQUITY for the six months ended 30 June 2007
International Financial Share Share Accumu-
Reporting Standards Basis lated
capital premium loss Total
(R`000) (R`000) (R`000) (R`000)
Balance 1 September 2005 300 9 (1 308) (999)
Cost of business combination - 220 114 - 220 114
Loss for the period - - (13 918) (13 918)
Balance at 31 December 2006 300 220 123 (15 226) 205 197
Loss for the six months - - (10 879) (10 879)
Balance at 30 June 2007 300 220 123 (26 105) 194 318
CASH FLOW STATEMENT
International Financial Reporting Quarter Quarter
Standards Basis ended ended
30 June 31 March
2007 2007
(Unaudited) (Unaudited)
Note (R`000) (R`000)
Cash flows from operating
activities
Cash utilised by operations 8 (13 174) (10 842)
Interest received 840 1 190
Interest paid (243) (118)
Net cash flows from operating (12 577) (9 770)
activities
Cash flows from investing
activities
Increase in other investments (496) (408)
Purchase of property, plant and (16 276) (15 658)
equipment
Acquisition of Pamodzi Gold - -
Net cash flows from investing (16 772) (16 066)
activities
Cash flows from financing
activities
Increase/(decrease) in short-term 2 668 (2 382)
borrowings
Decrease in long-term borrowings (936) (206)
Net cash flows from financing 1 732 (2 588)
activities
Net (decrease)/increase in cash (27 617) (28 424)
and cash equivalents
Cash and cash equivalents at 26 861 55 285
beginning of period
Cash and cash equivalents at end (756) 26 861
of period
International Financial Reporting 6 months 16 months
Standards Basis ended ended
30 June 31 December
2007 2006
(Unaudited) (Audited)
(R`000) (R`000)
Cash flows from operating
activities
Cash utilised by operations (24 016) (4 056)
Interest received 2 030 123
Interest paid (361) (2 224)
Net cash flows from operating (22 347) (6 157)
activities
Cash flows from investing
activities
Increase in other investments (904) (448)
Purchase of property, plant and (31 934) (5 648)
equipment
Acquisition of Pamodzi Gold - 53 325
Net cash flows from investing (32 838) 47 229
activities
Cash flows from financing
activities
Increase/(decrease) in short-term 286 661
borrowings
Decrease in long-term borrowings (1 142) 13 283
Net cash flows from financing (856) 13 944
activities
Net (decrease)/increase in cash (56 041) 55 016
and cash equivalents
Cash and cash equivalents at 55 285 269
beginning of period
Cash and cash equivalents at end (756) 55 285
of period
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER AND SIX
MONTHS ENDED 30 JUNE 2007
1. Basis of preparation and accounting policies
The financial information for the quarter and six months ended 30 June 2007
has been prepared in accordance with the recognition and measurement
criteria of the International Financial Reporting Standards ("IFRS") and
its interpretations adopted by the International Accounting Standards
Board. The financial statements have been prepared under the historical
cost convention, as modified by financial assets and financial liabilities
(including derivative instruments) at fair value through profit and loss.
The accounting policies have been consistently applied to all the periods
presented, unless otherwise stated.
The comparative financial statements cover the 16 months period ended 31
December 2006, due to the fact that Pamodzi Gold West Rand (Proprietary)
Limited ("PGWR") (Previously Impafa Resources (Proprietary) Limited ) has
been identified as the acquirer for accounting purposes in accordance with
IFRS 3. The consolidated financial statements are therefore a continuation
of PGWR.
The Group prepared its financial statements under South African Statements
of Generally Accepted Accounting Practice ("SA GAAP") during previous
years. The management of the Group has decided to prepare its consolidated
financial statements in accordance with IFRS for the period ending 31
December 2006. The Group has restated information previously published
under SA GAAP to the equivalent basis under IFRS. This restatement follows
the guidelines set out in IFRS 1 - First-time Adoption of International
Financial Reporting Standards.
The Group has applied the mandatory exceptions and certain of the optional
exemptions from full retrospective application of IFRS. The adoption of
IFRS has resulted in a restatement of non-interest bearing loan, as well as
property, plant and equipment to reflect the loan and property, plant and
equipment at fair value.
2. Business combination and consolidation
Bema Gold South Africa (Proprietary) Limited ("Bema SA") concluded an
agreement on 9 October 2006 with Pamodzi Resources (Proprietary) Limited
("PR"), Middelvlei Gold Investments (Proprietary) Limited ("MGI") and Bema
Gold Corporation, whereby MGI exchanged its wholly owned subsidiary, PGWR
to the value of R208 million in exchange for 103 new shares to be issued in
Bema SA. The agreement furthermore entitled PR to subscribe for a further
44 shares at a subscription price of R75 million ("the transaction").
PGWR was identified as the accounting acquirer. The transaction was
therefore accounted as a reverse acquisition ("the reverse acquisition").
PGWR held more than half of the voting rights (50,17%).
As a result of the reverse acquisition, the comparative income statement
for the 16 months ended 31 December 2006 is the consolidated income
statement of PGWR for the total 16 months consolidated with the operational
results of the legal parent company, Pamodzi Gold Limited and its
subsidiaries, for the period 11 to 31 December 2006.
As disclosed under the heading "Tangibles/intangibles in the process of
being identified", the accounting of the business combination that was
effected during the period ended 31 December 2006 was determined only
provisionally, due to the fact that the acquisition date was on 11 December
2006.
3. Revenue
Quarter Quarter 6 months 16 months
ended ended ended ended
30 June 31 March 30 June 31 December
2007 2007 2007 2006
(Unaudited) (Unaudited) (Unaudited) (Audited)
(R`000) (R`000) (R`000) (R`000)
Gold sales at 104 223 111 467 215 690 42 292
spot
Hedge loss (19 724) (20 876) (40 600) (3 777)
Silver sales 153 123 276 -
Revenue 84 652 90 714 175 366 38 515
4. Profit/(loss)
per share for
loss attributable
to the
equity holders
during the period
Profit/(loss) 13 470 (24 349) (10 879) (13 918)
attributable to
equity holders of
the company
(R`000)
Weighted average 41 020 000 41 020 000 41 020 000 21 419 425
number of shares
Headline, Basic 33 (59) (27) (65)
and diluted
earnings/(loss)
per share (cents)
5. Tangibles/intangibles in the process of being identified
Following the reverse acquisition accounted for the period ended 31
December 2006 no purchase price allocation has been performed at date of
this report. This will be performed before the next year end. No goodwill
or negative goodwill has been recorded for the period ending 31 December
2006, 31 March 2007 or 30 June 2007. Currently the difference between cost
of the combination and carrying amounts of assets and liabilities has been
recorded as "Tangibles/intangibles in the process of being identified".
The following is a summary of the assets and liabilities acquired by PGWR:
(R`000)
Property. plant and equipment 546 548
Intangible assets 329
Investment in associate 172
Other investments 18 195
Trade and other receivables 24 821
Inventories 17 151
Cash and cash equivalents 56 440
Long-term liability (4 678)
Post-retirement liability (1 723)
Rehabilitation provision (70 318)
Trade creditors (65 750)
Accruals and provisions (30 091)
Derivative financial instruments (388 518)
Bank overdraft (3 115)
Taxation (3 239)
Total 96 213
6. Share capital and premium
As a result of the business combination being accounted for as a reverse
acquisition, the amount recognised as issued equity instruments in these
condensed consolidated financial statements is the issued share capital
(R300 000) of the legal subsidiary (PGWR) immediately before the business
combination.
The cost of the business combination has been shown under share premium in
the condensed consolidated financial statements as determined under IFRS 3,
Appendix B and can be summarised as follows:
The share premium comprises the following: (R`000)
Vending Middelvlei (fair value) 142 000
Cash subscription 75 000
Merger expenses 3 123
Total 220 123
Total share capital and share premium amounts to R220 423 000.
7. Share capital - Pamodzi Gold Limited (legal parent)
Authorised
1 billion shares of 0,1 cent per share
Issued at 30 June 2007, 31 March 2007 and 31 December 2006
41 020 000 shares of 0,1 cent per share
No shares were issued during the six months under review
8. Cash utilised by operations
Quarter ended Quarter ended
30 June 2007 31 March 2007
(Unaudited) (Unaudited)
(R`000) (R`000)
Net loss before taxation 13 470 (24 349)
Adjusted for merger costs capitalised - -
13 470 (24 349)
Adjustments for:
Amortisation 7 633 -
Interest paid 243 118
Interest received (840) (1 190)
Revaluation of financial derivative (31 445) -
Foreign exchange (gain)/loss (9 328) 15 705
Operating loss before working capital (20 267) (9 716)
changes
Working capital changes 7 093 (1 126)
(Increase)/decrease in receivables (5 318) 5 525
and prepayments
Increase in deferred stripping (3 520) -
Increase/(decrease) in trade and 16 473 (7 887)
other payables
(Increase)/decrease in inventories (542) 1 236
(13 174) (10 842)
6 months 16 months
ended ended
30 June 2007 31 December
2006
(Unaudited) (Audited)
(R`000) (R`000)
Net loss before taxation (10 879) (12 793)
Adjusted for merger costs capitalised - (9)
(10 879) (12 803)
Adjustments for:
Amortisation 7 633 1 054
Interest paid 361 2 224
Interest received (2 030) (123)
Revaluation of financial derivative (31 445) -
Foreign exchange (gain)/loss 6 377 -
Operating loss before working capital (29 983) (9 647)
changes
Working capital changes 5 967 5 591
(Increase)/decrease in receivables 207 (1 742)
and prepayments
Increase in deferred stripping (3 520) (2 495)
Increase/(decrease) in trade and 8 586 9 828
other payables
(Increase)/decrease in inventories 694 -
(24 016) (4 056)
9. Derivative financial instruments
The Group`s revenues are sensitive to the ZAR/US$ exchange rates as all the
revenue are generated by gold sales, denominated in US$. Historically, the
Group entered into forward sales to establish a ZAR/US$ exchange rate in
advance for the sale of the future gold production.
As at 30 June 2007 151 500 (31/3/2007 - 160 500) ounces were outstanding on
the US$ Contingent Forwards. The gold contingent forwards revalued at 30
June 2007 amounted to R 363 million (31/3/2007 - R404 million).
Effect of derivative financial instrument on earnings
Quarter Quarter 6 months
ended ended ended
30 June 2007 31 March 30 June 2007
2007
(Unaudited) (Unaudited) (Unaudited)
(R`000) (R`000) (R`000)
Hedge loss (Cash) (19 724) (20 876) (40 600)
Revaluation of derivatives 31 445 - 31 445
Foreign exchange 9 328 (15 705) (6 377)
(gain)/loss on derivatives
Adjusted profit/(loss) 21 049 (36 581) (15 532)
excluding hedging and
derivatives attributable
to equity holders of the
company
Weighted average number of 41 020 000 41 020 000 41 020 000
shares
Effect of hedging and 51,31 (89,18) (37,86)
derivatives on basic and
diluted (loss)/earnings
per share (cents)
Basic and diluted 32,84 (59,36) (26,52)
earnings/(loss) per share
(cents)
Basic and diluted (18,47) 29,82 11,34
earnings/(loss) per share
excluding hedging and
derivatives (cents)
10. Dividends
No dividends have been declared or paid since the incorporation of the
Company. The Company anticipates that, for the foreseeable future, earnings
generated by Pamodzi Gold and its subsidiaries will not be distributed to
shareholders as dividends but will be retained for the development of the
Company and its subsidiaries. The Directors will consider an appropriate
dividend policy at an appropriate point in time.
COMMMENTARY
1. Operational overview for the quarter ended 30 June 2007
The West Rand operations performed better than expected in terms of gold
production. This was due to the higher than expected black reef grades
mined. The second opencast pit was brought into production and exploration
drilling on the Witwatersrand reefs is continuing. For the quarter, these
operations produced 93,52 kilograms (3 007 ounces) of gold from 29 435 tons
milled at a recovered grade of 3,18g/t. Total cash operating cost amounted
to R97 252 per kilogram ($428/oz) and revenue received of R150 930 per
kilogram.
The East Rand operational results were worse than expected in terms of gold
output mainly due to the shortage of mineable face length and labour
strikes. During April and May various sporadic contract labour stoppages
and an unprotected contract labour stoppage on three of the major producing
shafts for 10 days resulted in a loss of 90 kilograms (13%) of gold
production for the quarter. All labour issues were resolved in June. In
April all underground development was ceased as a result of sub-standard
conditions and 635 metres (36%) of planned development for the quarter was
affected. Development was systematically reassessed and in June all planned
development ends have been restarted. 636 metres (53%) of the on-reef
development achieved in June returned as pay metres. Capital has been
deployed to increase development to ensure availability of sufficient
mineable face length. For the quarter these operations produced 580,84
kilograms (18 674 ounces) of gold from 406 011 tons milled at a recovered
grade of 1.43g/t. Total cash operating cost amounted to R155 865 per
kilogram ($686/oz) and revenue received before accounting for the hedge
loss amounted to R150 669 per kilogram. The hedge loss amounted to R35 194
per kilogram. Capital expenditure amounted to R16.3 million for the
quarter.
2. Third quarter production target
West East Total Actual Variance
Rand Rand 3rd Q 2nd Q %
2007 2007
Kg gold produced 110 675 785 674 +16,5
Oz gold produced 3 537 21 701 25 238 21 681
Tons milled 36 000 425 000 461 000 435 446 +5,9
Recovered grade 3,06 1,59 1,70 1,55 +9,7
Operating expenses 123 991 135 982 113 438 147 736 -9,0
- R/Kg
- $/oz (ZAR/$7,00) 1$550,93 $604,24 $597,32 $650 -8,1
(ZAR/$7,07)
Underground 1 200 1 200 829 +44,8
development metres
- on reef
1 650 1 650 1 219 +35,4
- off reef
Overburden 330 000 330 000 336 339 -1,9
stripping - m3
The figures shown above have not been audited or reviewed by the auditors of the
Company.
3. Update on the purchase of the Orkney Assets from Harmony and further
cautionary announcement
On 24 April 2007, Pamodzi Gold announced the purchase of the Orkney Mining
Assets (Shafts 1 to 7) from Harmony Gold Mining Company Limited
("Harmony").
The transaction is progressing and as at the date of this announcement Pamodzi
Gold has completed the following :
- Competition Commission Approval was granted on 1 August 2007
- Technical, legal and environmental due diligences have been completed
- Competent Persons Report in process of final completion and ready for
submission to the JSE before end August 2007
- Purchase agreement in final draft form.
The following conditions are outstanding:
- Audited financial information on Orkney assets until 30 June 2007
- JSE approval
- Shareholder approval
- Approval in terms of section 11 of the MPRDA transferring the mining rights
from Harmony to Pamodzi Gold
Pamodzi Gold is expected to take over these operations as from 1 October 2007.
The Orkney assets are expected to produce about 150 000oz per annum and have an
expected eight year life of mine.
Shareholders are advised to continue to exercise caution when dealing in their
Pamodzi Gold shares until a further announcement is made.
4. Quarterly presentation
Additional information on the operational overview and the Orkney
acquisition can be obtained from the quarterly presentation made to
shareholders and other interested parties available on the Pamodzi Gold
website.
Signed on behalf of the board
NA Ntsele MJ Schermers
Chairman Chief Financial Officer
Bedfordview
7 August 2007
Sponsors
Rand Merchant Bank (A division of FirstRand Bank Limited)
Directors
NA Ntsele 1 (Chairman)
KM Steenkamp 1 (Deputy Chairman),
JJ du Plooy 1
JG Proust 1 (Canadian)
SP Radebe 2
MB Mokgata 2
MI Mthenjane 2
PW Steenkamp (Chief Executive Officer)
AJ Murdoch Eaton (Chief Operating Officer) (Zimbabwean)
MJ Schermers (Chief Financial Officer)(1 Non-executive 2 Independent Non-
Executive)
Company Secretary
GM Chemaly
Registered office
AMR Office Park, Building 3
Concorde Road East
Bedfordview
WWW.PAMODZIGOLD.CO.ZA
Date: 07/08/2007 11:00:02 Produced by the JSE SENS Department.
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