| Tue 18 Mar 2008, 12:28 | | SAH - South African Coal Mining Holdings Limited - Abridged annual results for |
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SAH
SAH
SAH - South African Coal Mining Holdings Limited - Abridged annual results for
the eighteen months ended 31 December 2007
South African Coal Mining Holdings Limited
(formerly Yomhlaba Resources Limited)
Registration number 1994/009012/06
Share code: SAH
ISIN: ZAE000102034
("SACMH" or "the company")
Abridged annual results for the eighteen months ended 31 December 2007
Highlights
- Year of restructuring and transformation:
- Acquisition of Umlabu and Ilanga coal mines
- Royal Bafokeng Capital became controlling shareholder
- Current production at 100,000 tonnes per month run of mine - achieved
ahead of schedule:
- Scheduled to reach run of mine of 1.7 million tonnes per annum in 2011
- Significantly increased resources and reserves:
- Total resources up 70% to 90 million tonnes (including 32.8 million
additional tonnes from the Sterkfontein property)
- Total saleable reserves up 88% to 18.8 million tonnes
- Focused on further operational expansion - investing in infrastructure
- Access to domestic (Eskom) and export (RBCT) markets established
- After tax profit of R 115 million :
- Coal mining and equipment rental operating profit of R20 million
generated over four months from end August 2007 to end December 2007
- Effect of restructuring and acquisitions R111 million
- Head line earnings of R4.5 million
- Results not comparable with previous period due to restructuring and
acquisitions
Karl Gribnitz, Chief Executive, said:
"SACMH is now firmly established as a profitable coal producing company.
Production is going well and we reached our target production rate ahead of
schedule. Resources and reserves have increased significantly following
publication of the independent Engineers` Report on the Umlabu Colliery in
February.
We have recently successfully negotiated an off-take agreement with Eskom in
addition to our export allocation at Richards Bay Coal Terminal. We are
investing in infrastructure to improve transport logistics and are now focused
on operational expansion. We are committed to achieve our objective of being the
premier BBBEE coal mining platform in South Africa."
Introduction
In 2007, SACMH concluded the acquisition of the Ilanga and Umlabu mines,
restructured its balance sheet and introduced Royal Bafokeng Capital as its
strategic Black Economic Empowerment partner. In line with its focus on
infrastructure development, SACMH also signed a Heads of Agreement with Fraser
Alexander in terms of which Fraser Alexander will be SACMH`s strategic services
partner, providing materials handling and beneficiation services to both current
and future SACMH projects through its "Bulk Mech" division. In addition, SACMH
has concluded a 3 year contract with Eskom to supply 1.2 million tonnes to the
Camden Power Station - underwriting the commitment of the company and its
controlling shareholder to energy generation in South Africa, and its support of
the national generator on a long term basis.
SACMH is now a fully operational, South African coal producer, delivering
production into the export market and supplying coal to Eskom.
Operational review and outlook
SACMH`s current production is sourced from the Umlabu property. Production at
the Ilanga mine has been wound down pending acquisitive negotiations with owners
of neighbouring properties. Kromkrans is at an early stage of exploration.
The Umlabu property is divided into three sections; Umlabu, Vlakfontein and
Sterkfontein. Current mining operations are taking place at Umlabu and
Vlakfontein, while Sterkfontein is still in early exploration.
The Umlabu coal deposit is located in undulating terrain in the Breyten or
greater Ermelo District of Mpumalanga. As a result of this undulating terrain,
the ore-body is generally extracted by means of open-cast operations on the
outcrop, along the contours of the terrain. The remaining ore-body is typically
accessed through the highwall by means of mechanised low seam underground mining
methods. Approximately 41% of production will ultimately be open-cast, with the
balance mined from underground.
The Umlabu deposit consists of B-seam, C-upper and C-lower coal. The C-lower
seam is typically exported after washing. The B-seam is currently sold to Eskom
after being washed, while the C-upper seam is sold to Eskom as a raw screened
product.
In February 2008, independent consultants, SRK Consulting South Africa (Pty)
Ltd, compiled an Updated Engineers` Report on Umlabu Colliery. The key findings
of the report are summarised below. The results of this report were very
encouraging and go a long way to proving the viability of this operation.
Competent Updated Percentage
persons` report engineers` change
(June 07) report (January
08)
Peak ROM (1) 1.2Mt 1.7Mt 45%
production rate
Total GTIS (2) 26.3Mt 56.7Mt 115%
resource
(measured and
indicated)
Total GTIS 27.0Mt 33.5Mt 24%
resource
(inferred) (3)
ROM reserve 12.6Mt 25.7Mt 104%
Saleable 10.0Mt 18.8Mt 88%
reserve
1. ROM - run of mine
2. GTIS - gross tonnes in situ
3. Includes 32.8Mt from Sterkfontein, which was not classified and taken into
in the June 07 CPR
According to SRK Consulting, the total coal resource estimate for Umlabu is
approximately 90 million tonnes (33 million tonnes of which is an inferred
resource estimate for Sterkfontein). Based on the current mine plan, this
translates to a run of mine reserve of 26 million tonnes and saleable reserves
of 19 million tonnes. Of these saleable reserves, 55% is export quality and 41%
is earmarked for consumption by Eskom. The remainder is destined for the
domestic market.
Umlabu is currently producing at a run of mine production rate of 100,000 tonnes
per month and is scheduled to reach a full run of mine production rate in 2011
of 1.7 million tonnes per annum. The Umlabu processing plant is currently
washing at a rate of between 40,000 and 50,000 tonnes per month and, with minor
modifications, is expected to sustain a rate of 50,000 tonnes per month. The
scheduled full run of mine production rate of 1.7 million tonnes per annum
translates into a plant feed of approximately 136,000 tonnes per month. An
additional processing facility will therefore be commissioned in 2008 at an
estimated cost of R 30m in order to provide the required additional production
capacity.
The current plant yields are approximately 58% and 56% for the B-seam and C-
lower seams respectively. Modifications to the existing plant, combined with the
commissioning of a new processing plant, are expected to result in an increase
of average yields to 60%.
Coal produced at Umlabu is currently road hauled to Camden power station or to
Blinkpan siding for export through Richards Bay Coal Terminal. Once the New
Voorslag siding is commissioned, all export production will be railed from this
siding which should enhance the logistical processes as well as the operating
margin of the company. Construction is planned to commence in the second quarter
of 2008, with completion expected by the end of August 2008.
Short and long term contracts have been concluded with Transnet Freight Rail,
Richards Bay Coal Terminal Operations and Mhlatuze Bay Administrators for
logistical movement of production.
Major capital expenditure is planned to alleviate logistical risk and
streamlining of product movement. Capital expenditure is forecast to be high in
the next four years peaking at R88.7 million in 2009, thereafter dropping
sharply. Infrastructure development is expected to total R133 million, with
processing estimated at R48 million out of a total capital expenditure of
approximately R 205 million over four years.
Market review
The final coal product is currently being sold at an average of the API 4 RBCT
index price and contractual prices the company negotiated subsequent to the
restructuring. The price of coal has been buoyant and market projections
indicate that the demand for coal will remain strong for the next 12 to 24
months.
Financial review
The company has changed its year end from 30 June to 31 December in order to
align itself with its major shareholder - Royal Bafokeng Capital. Accordingly,
the financial period being reported on covers the period from 1 July 2006 to 31
December 2007.
Due to the extent of the restructuring referred to in the introduction,
shareholders are reminded that the audited annual results presented cannot be
compared with the financial results of the company for previous periods.
Investors are referred to the circular to shareholders dated 8 June 2007 where
the financial results of Ilanga Coal Mines (Pty) Limited and Umlabu Colliery
(Pty) Limited for the 12 months ended 28 February 2007 are presented in
Appendices 6 and 7.
Subsequent to the implementation of the acquisitions of Ilanga and Umlabu in
August 2007, the company has successfully negotiated the startup phase for its
mining operations, sales operations, as well as the equipment leasing
operations. Both the coal mining and equipment rental divisions were profitable
during the period and it is expected that they will continue to reflect positive
results in the next 12 months.
The operating profit (before taxation) reflects the activities of:
- The coal mining division R 15,990,000
- The equipment rental division R 4,026,000.
The effects of the restructuring and the acquisitions of Ilanga and Umlabu are
set out below and are included in the income statement for the period ended 31
December 2007:
- Gain on debt restructure R 30,762,000
- Gain at acquisition R 105,248,000 (Umlabu mine)
- Impairment of goodwill (R 24,407,000) (Ilanga mine)
As discussed in the operational review above, SRK Consulting reviewed the
Competent Persons Report issued in June 2007. Their Updated Engineers` Report,
with a cut-off and effective date of 31 December 2007, was used to revalue the
mineral rights. The report resulted in a material revaluation primarily due to
the classification of additional resources, the formulation of a more detailed
mine plan based on actual performance by SACMH, and higher coal price
projections. This revaluation is reflected in the revaluation reserve in the
balance sheet for 31 December 2007 set out below.
Prospects
SACMH is now firmly established as a successful operator with a substantially
improved resource and reserve statement, access to domestic and export markets,
a motivated and experienced management team and a clear strategy centred on both
organic and acquisitive growth. As the only JSE-listed entity providing
investors with exposure to coal as a single commodity, the current international
coal price and a supply price to Eskom, the board is of the view that SACMH
provides an exciting and compelling investment opportunity.
FINANCIAL STATEMENTS
GROUP BALANCE SHEETS Audited as at Audited as at
31 Dec 2007 30 June 2006
R`000 R`000
ASSETS
NON-CURRENT ASSETS 976,070 13,850
Property, plant and equipment 135,440 13,850
Intangible assets 840,630 -
CURRENT ASSETS 21,858 10,017
Inventories 7,891 -
Trade and other receivables 12,387 1,024
Cash and cash equivalents 1,580 8,993
TOTAL ASSETS 997,928 23,867
EQUITY AND LIABILITIES
CAPITAL AND RESERVES 523,221 (23,868)
Issued Capital 124,473 18,562
Retained income/(loss) 72,819 (42,430)
Revaluation reserve 325,928 -
NON-CURRENT LIABILITIES 407,782 44,900
Interest bearing liabilities 117,275 9,388
Non interest bearing 1,500 -
liabilities
Shareholders loans - 35,512
Non-current provisions 35,444 -
Deferred taxation 253,562 -
CURRENT LIABILITIES 66,925 2,835
Trade and other payables 38,639 2,429
Current portion of non-current 23,297 406
liabilities
Bank overdraft 4,989 -
TOTAL EQUITY AND LIABILITIES 997,928 23,867
Number of shares in issue 411,810 * 60,000
(`000)
Net asset value per share 127 (40)
(cents)
Tangible net asset value per (77) (40)
share (cents)
* The number of issued ordinary shares has been adjusted
retrospectively as a result of the consolidation of shares in
the current period
GROUP INCOME STATEMENT Audited Audited
18 months 12 months ended
ended 30 June 2006
31 Dec 2007 R`000
R`000
Revenue 88,060 -
Cost of sales (53,161) -
Gross profit 34,899 -
Other income 2,514 146
Gain on debt restructure 30,762 -
Gain at acquisitions 105,248 -
Impairment of goodwill (24,407) -
Impairment of trade (989) -
receivables
Operating expenses (17,397) (4,337)
Operating profit/(loss) 130,630 (4,191)
Investment income 490 568
Finance costs (7,247) (95)
Profit/(loss) before taxation 123,873 (3,718)
Income tax expense (8,730) -
Profit/(loss) after taxation 115,143 (3,718)
Loss from discontinued - (7,500)
operations
Net profit/(loss) for the 115,143 (11,218)
period
Attributable to
equity holders of the parent 115,143 (11,218)
Minority interest - -
Number of ordinary shares in 411,810 60,000
issue (`000)
Weighted average number of 137,524 60,000
ordinary shares
in issue (`000)
Attributable earnings per
ordinary share (cents)
From continuing operations
Basic 84 (19)
Dilutive - -
From continuing and
discontinuing operations
Basic 84 (19)
Dilutive - -
Reconciliation between
earnings and headline
earnings
Basic earnings per share 84 (19)
(cents)
Impairment per share (cents) 18 13
Profit on debt restructure and (99) -
acquisitions (cents)
Headline earnings per share 3 (6)
(cents)
GROUP STATEMENT Share Share Revaluat`n Accumulated Total
OF CHANGES IN capital premium reserve profit/loss R`000
EQUITY R`000 R`000 R`000 R`000
Balance at 1 6,000 12,562 - (31,212) (12,650)
July 2005
Net (11,218) (11,218)
profit/(loss)
for the period
Balance at 1 6,000 12,562 (42,430) (23,868)
July 2006
Issue of new 34,000 34,000 68,000
shares
Loans converted 1,181 36,730 37,911
to share
capital
Revaluation of 146 146
property, plant
and equipment
Transfer on (108) 108
revaluation
reserve
realised
Revaluation of 325,890 325,890
mineral rights
Net 115,141 115,141
profit/(loss)
for the period
Balance at 31 41,181 83,292 325,928 72,819 523,220
December 2007
GROUP CASH FLOW STATEMENT Audited Audited
18 months 12 months
ended ended
31 Dec 2007 30 June 2006
R`000 R`000
Cash flows from operating
activities
Cash receipts from customers 85,156 -
Cash paid to suppliers and (22,163) (3,749)
employees
Cash flow from operations 62,993 (3,749)
Interest and finance charges paid (7,247) (95)
NET CASH FROM OPERATING 55,746 (3,844)
ACTIVITIES
Cash flows used in investing
activities
Acquisition through business (124,783) -
combination
Purchase of property, plant and (51,137) -
equipment
Interest received 490 568
NET CASH USED IN INVESTING (175,430) 568
ACTIVITIES
Cash flows from financing
activities
Raising/(repayment) of long-term 107,282 (793)
liabilities
NET CASH FROM FINANCING 107,282 (793)
ACTIVITIES
Net increase/(decrease) in cash
and cash equivalents (12,403) (4,069)
Cash and cash equivalents at 8,993 13,062
beginning of period/year
CASH AND CASH EQUIVALENTS AT END (3,410) 8,993
OF PERIOD/YEAR
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
The principal accounting policies applied in the preparation of these financial
statements have been applied consistently to all the years presented, unless
otherwise stated.
Basis of preparation
These financial statements have been prepared in conformity with International
Financial Reporting Standards on the historic cost basis except in the case of
financial instruments which are measured using the fair value and amortised cost
models and certain classes of Property, Plant and Equipment and Mineral Rights
which have been measured using the revaluation model.
The preparation of financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of policies and reported amounts in the financial statements. The
areas involving a higher degree of judgement or complexity, or areas where
assumptions or estimates are significant to the financial statements, are
disclosed in the notes.
Appointment of Company Secretary
Further to the announcement of 25 June 2007, with effect from 14 March 2008,
Sylvan CSI (Pty) Limited, was appointed as Company Secretary to SACMH.
Annual general meeting
Notice is hereby given that the annual general meeting of SACMH shareholders
will be held at the offices of Royal Bafokeng Holdings, 17 Fricker Rd, Illovo,
Johannesburg on Wednesday 30 April 2008 at 10:00. The notice of the annual
general meeting, together with the annual report containing the annual financial
statements of SACMH for the period ended 31 December 2007, will be issued on or
before 31 March 2008.
For and on behalf of the board
Mirkwood
18 March 2008
TV Mokgatlha KJ Gribnitz
Chairman Chief executive officer
Executive Directors: KJ Gribnitz, P Swanepoel
Non Executive Directors: TV Mokgatlha, LM Ndala, WN Gardyne
Registered office : Mirkwood Estate, Plot 26, Klipkop JR 396
Transfer Secretaries: Computershare Investor Services 2004 (Pty) Ltd
Sponsor: QuestCo Sponsors (Pty) Ltd
Enquiries:
Karl Gribnitz, CEO, SACMH: 011 748 2800
Melanie Steyn, Group Executive, SACMH: 011 748 2800
Nicholas Williams, College Hill: 011 447 3030
Date: 18/03/2008 12:28:01 Produced by the JSE SENS Department.
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