| Mon 31 Mar 2008, 7:30 | | WEZ - Wesizwe - Reviewed condensed provisional consolidated financial results |
|
WEZ
WEZ
WEZ - Wesizwe - Reviewed condensed provisional consolidated financial results
for the year ended 31 December 2007
Wesizwe Platinum Limited
(Incorporated in the Republic of South Africa)
(Registration number 2003/020161/06)
JSE code: WEZ ISIN: ZAE000075859
(the "Company" or "Wesizwe")
REVIEWED CONDENSED PROVISIONAL CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR ENDED
31 DECEMBER 2007
Highlights
* Bankable Feasibility Study (BFS) completed a year ahead of original
schedule
* Results show a Net Present Value of R9.5 billion, a Life of Mine of 35
years and a yield of 10 million ounces
* First move towards key strategic imperative of regional consolidation
around the Pilanesberg with acquisition of Africa Wide Mineral Prospecting
and Exploration (Pty) Limited`s (Africa Wide) 26% interest in the
neighbouring Western Bushveld Joint Venture (WBJV)
* Drilling results positive with 6.7% of total resource in measured category
(2006: 5.5%) and a total attributable increase of 36.9% to 10.278 million
ounces (2006: 7.504 million ounces)
* 3D geoseismic survey completed in August 2007 with results confirming the
structural integrity of thick, flat lying ore body
* Successfully raised R495.4 million through private placements with public
shareholders
* A consortium of banks has been appointed as the lead arranger for project
finance
* Application for a mining right submitted to the Department of Minerals and
Energy in July 2007
* Wesizwe Long-Term Incentive Plan implemented for key employees and
executive directors
Comment
Mike Solomon, Chief Executive Officer
"The last year has been one of enormous progress for Wesizwe. Most significantly
we have completed our BFS a year ahead of schedule. The BFS confirms that our
core asset, the Frischgewaagd-Ledig Complex of our Pilanesberg Project is
commercially viable with an Internal Rate of Return of 18%, producing an average
of 350,000 ounces PGE(4) during steady state production. We have appointed a
consortium of banks to raise the finance to construct the mine which is expected
to commence in the third quarter of 2008, with first production in 2011. This
moves the Company onto a new and very exciting stage in its development.
We continued to make good progress in our exploration activities which, this
year, concentrated on upgrading the resource inventory from Inferred to
Indicated and Indicated to Measured. Results were positive with our total
attributable resources increasing by 36.9% to 10.278 million ounces.
We have also made progress on the strategic front in seeking regional
consolidation around our Pilanesberg Project through the acquisition of Africa
Wide, which has a 26% interest in the neighbouring WBJV, in which we now play an
active role.
Wesizwe is very well placed to continue creating value for shareholders as we
move from pure exploration to development and as we become a meaningful player
in the platinum rich Western Bushveld Complex."
Bankable Feasibility Study
Wesizwe Platinum Limited completed the BFS on its core Frischgewaagd-Ledig
Complex during December 2007.
The financial results of the study confirm that the project is commercially
viable. The Net Present Value (NPV) is R 9,5 billion including mineable Inferred
Resources (R4,7 billion excluding Inferred Resources) with a real Internal Rate
of Return (IRR) at 18% (16% excluding Inferred Resources). These figures are
calculated on a base commodity price of US $1,125/oz for platinum, US $315 for
palladium, US $4,200 for rhodium and US $650 for gold converted to ZAR with a
short-term exchange rate ranging from R7.57 to R8.90 in 2012 and a long-term
exchange rate of R9.17 and real discount rate of 5%. The project has a Life of
Mine of 35 years at a monthly production rate of 230,000 tpm and producing an
average of 350,000 ounces PGE(4) per annum during steady state. It is worth
noting that the production and yield figures reflect a sizeable increase from
those estimated in the Pre-feasibility Study a year ago.
The third party reviews by independent consultants confirm that there are no
major technical risks with the proposed designs. Mining layout allows for
flexibility to overcome possible unforeseen and difficult geological conditions
or to adjust mining layouts as better geological information becomes available.
Metallurgical test work has also shown that the project is feasible and that the
proposed plant design should achieve the planned production performance.
Confirmation of the detailed metallurgical operating parameters will be obtained
once mining commences and bulk ore samples are made available for further
metallurgical test work.
Funding and going concern
As neither Wesizwe nor the group is as yet a cash generating entity, its
exploration programme up to BFS has been funded by equity. The construction
phase of the project is expected to be funded by way of a combination of equity
and debt finance. Following the completion of the BFS on the Pilanesberg
Project, a consortium of South African banks has now been mandated to arrange
this finance. The banks (Deutsche Securities (SA) (Proprietary) Limited, ABSA
Capital, a division of ABSA Bank Limited, and the Development Bank of Southern
Africa Limited) will provide a project debt and equity package, and will assist
with the equity offering for the equity portion of the financing. The directors
and management of Wesizwe will determine the appropriate debt equity ratio for
the project finance. The total capital cost of the project will be
approximately R5,6 billion.
There are 28,611,128 shares currently under the control of the directors. The
directors anticipate continued market support in light of the support provided
by investors to date, the very satisfactory liquidity in the trading of the
Company`s shares and the favourable results of the BFS.
The directors are of the opinion that current cash resources amounting to R247.5
million, as well as the potential cash that can be derived from the issue of the
28,611,128 shares under the control of the directors, and the finance package
currently being arranged, gives the Group and Company sufficient cash and
financing resources to comfortably fund its activities for the next 12 months.
Mineral resource estimates
The total Inferred mineral resources at the time of listing in 2005 totalled
63.608 million tons at an average grade of 5.09 g/t of 4E (comprising platinum,
palladium, rhodium and gold), amounting to 10.417 million ounces (moz), of which
6.463 moz were attributable to Wesizwe.
The most recent resource estimates calculated for December 2007 show that 6.7%
of the total resources can now be classified as Measured and 48.4% as Indicated
based on contained PGE(4) ounces.
Wesizwe`s total resource base is 13.491 million ounces of which 10.278 million
ounces are attributable to Wesizwe. This is an increase of 36.9% in
attributable ounces from the December 2006 results of 7.504 million ounces.
Total resource tonnage has increased by 9.9% from 73.704 million tons to 81
million tons in December 2007.
Financial review
Wesizwe Platinum Limited is a public company incorporated in the Republic of
South Africa and its ordinary shares are listed on the Johannesburg Stock
Exchange under the symbol "WEZ".
As a platinum group metals mining exploration and development focused entity,
Wesizwe did not earn any revenue from exploration activities during the year
under review and is not forecasting any revenue from exploration activities
until a mine is brought into production on the core Frischgewaagd-Ledig Complex
of the Company`s Pilanesberg Project.
Capital expenditure for the year included: Intangible exploration and
evaluation expenses capitalised of R102.1 million (2006: R38.5 million); long-
lead items of plant and equipment (i.e. winders) R28.8 million (2006: Nil);
tangible exploration and evaluation assets (engineering and drawings) R43.5
million (2006: Nil); and other property, plant and equipment items R6.9 million
(2006: R0.6 million).
The Group made a net loss for the year of R90.8 million (compared to a loss of
R19.5 million for 2006) comprising administration expenses of R108.7 million,
which includes depreciation of R0.4 million, share based payment expenses of
R62.2 million, bonus for past services rendered of R18.0 million and other
administrative overheads of R28.1 million, offset by net finance income of R17.9
million.
The R62.2 million share-based payment expense comprised:
* IFRS 2 adjustment for a specific issue for cash of 30 million shares valued
at R54.3 million to Vunani Capital (Pty) Ltd.
* Issue of 832,379 shares under the long-term incentive plan as award to
employees valued at R7.9 million.
Included in the R18.0 million bonus expense is an end of contract performance
bonus of R14.7 million awarded to the Chief Executive Officer MH Solomon, in
terms of his original contract signed in October 2004. MH Solomon has agreed to
spread the payment of this bonus over the three year period of his renewed
contract in order to minimise negative impact on cash flow for the company.
The increase in the loss for the year and capital expenditure primarily reflects
the acceleration of the company`s very aggressive exploration programme of the
core asset, the Frischgewaagd-Ledig Complex. This has resulted in a significant
upgrading of the Company`s resource inventory during the financial year, the
completion of the 3D geoseismic survey and the completion of the BFS, all of
which were high expenditure items.
On 13 September 2007, Wesizwe acquired all the issued share capital of Africa
Wide for R611 million (including capitalised expenses of R10 million). The
purchase price was settled by issue of 57.4 million new Wesizwe shares on 13
September 2007.
Africa Wide owns 26% of the WBJV with Anglo Platinum Limited and Platinum Group
Metals owning 37% each.
The underlying investment in WBJV is equity accounted for as an associate.
Share capital
The number of issued ordinary shares in the company at 31 December 2007 was
554,829,167 (2006: 399,239,152). In common with many exploration companies, the
company raises finance for its exploration and evaluation activities in discrete
tranches. During 2007, the company issued a total of 155,590,015 shares,
57,421,643 Wesizwe shares were used to settle the acquisition of Africa Wide and
the balance of 98,168,372 shares were issued for cash by way of private
placements with arms length accredited institutional investors at a 30 day
Volume Weighted Average (VWAP) price less 10% discount.
The authorised share capital was increased by special resolution of shareholders
taken on 16 August 2007 from 500,000,000 ordinary par value shares of 0,001
cents each to 1,000,000,000 ordinary par value shares of 0,001 cents each.
Subsequent events
On 13 March 2008, in addition to the 832,372 shares awarded under the Long-Term
Incentive Plan mentioned above, the company awarded a bonus equivalent to
399,999 shares for past services rendered payable in three annual instalments
commencing 31 October 2008.
Prospects
Wesizwe`s core project has developed according to plans and is now a full year
ahead of schedule. The original project`s ounce targets have been doubled, as
the Company continued to deliver significant value for its investors.
With the BFS completed and capital construction scheduled to commence later this
year, Wesizwe can now use the underlying value created to further advance the
project through its stated strategy of mergers and acquisitions.
We have every confidence that we will continue to create value for all investors
as we gear up towards becoming a fully fledged PGM player on the western limb of
the Bushveld Complex.
FINANCIAL RESULTS
REVIEWED CONDENSED GROUP PROVISIONAL RESULTS FOR THE YEAR ENDED 31 DECEMBER
Consolidated balance sheet at 31 December
Note 2007 2006
Reviewed Audited
R R
ASSETS
Non-current assets 950,172,154 109,148,112
Property, plant and 36,207,362 559,591
equipment
Tangible exploration and 43,453,367 -
evaluation assets
Intangible exploration and 6 210,226,022 108,152,139
evaluation assets
Environmental deposits - 436,382 436,382
restricted cash
Investment in associate 7 659,849,021 -
Current assets 285,409,053 63,965,412
Other receivables 37,911,283 3,797,428
Cash and cash equivalents 247,497,770 60,167,984
TOTAL ASSETS 1,235,581,207 173,113,524
Equity and liabilities
Capital and reserves 1,200 162 414 145,357, 627
Share capital 5,548 3,992
Share premium 1,285,034,693 201,624,098
Share based payment reserve 62,929,355 730,000
Accumulated loss (147,807,182) (57,000,463)
Non-current liabilities 11,825,280 -
Long-term liability 8 11,825,280 -
Current liabilities 23,593,513 27,755,897
Trade and other payables 23,593,513 9,352,644
Current portion of interest - 18,403,253
bearing borrowings
TOTAL EQUITY AND LIABILITIES 1,235,581,207 173,113,524
Consolidated income statement
for the year ended 31 December
2007 2006
Reviewed Audited
R R
Revenue - -
Administration (108,720,5 (20,939,1
expenditure 25) 01)
Loss on sale of non- - (470)
current assets
Loss from operations (108,720,5 (20,939,5
25) 71)
Net finance income 17,913,806 1,437,389
Loss before taxation (90,806,71 (19,502,1
9) 82)
Taxation - -
Loss for the year (90,806,71 (19,502,1
9) 82)
Basic loss per share (19.17) (5.29)
(cents)
Consolidated statement of changes in equity
Share Share Share- Accumula Total
capital premium based ted loss
payment
reserve
R R R R R
Balance at 31 3,564 102,029, 730,000 (37,498, 65,264,8
December 2005 602 281) 85
Ordinary shares 428 102,393, - - 102,393,
issued 232 660
Share issue - (2,798,7 - - (2,798,7
expenses written 36) 36)
off
Loss for the year - - - (19,502, (19,502,
182) 182)
Balance at 31 3,992 201,624, 730,000 (57,000, 145,357,
December 2006 098 463) 627
Ordinary shares 1,556 1,097,22 - - 1,097,22
issued 3,981 5,537
Share issue - (13,813, - - (13,813,
expenses written 386) 386)
off
Share-based payment - - 62,199,3 - 62,199,3
expenses 55 55
Loss for the year - - - (90,806, (90,806,
719) 719)
Balance at 31 5,548 1,285,03 62,929,3 (147,807 1,200,16
December 2007 4,693 55 ,182) 2,414
Consolidated cash flow statement
for the year ended 31 December
Not 2007 2006
e
Reviewed Audited
R R
Cash flows utilised by
operating activities
Cash flows utilised by 5 (54,172, (16,103,9
operations 364) 04)
Finance cost (5,990) (875,688)
Net cash outflow utilised by (54,178, (16,979,5
operating activities 354) 92)
Cash flows utilised by
investing activities
Acquisition of property, plant
and equipment as a result of (36,044, (399,784)
development activities 285)
Acquisition of tangible
exploration and evaluation (43,453, -
assets as a result of 367)
increasing operations
Expenditure on intangible (102,073 (38,514,5
exploration and evaluation ,883) 21 )
assets
Increase in environment - (90,000)
deposits
Increase in investment in (58,070, -
associate 202)
Proceeds on disposal of
property, plant and equipment - 5,884
Investment income 17,919,7 2,313,077
96
Net cash outflow to investing (221,721 (
activities ,941) 36,685,34
4)
Cash flows from financing
activities
Proceeds from shares issued
481,633, 99,594,92
332 4
(Decrease)/increase in interest
bearing borrowings (18,403, 90,646
253)
Net cash inflow from financing
activities 463,230, 99,685,57
079 0
Net increase in cash and cash
equivalents 187,329, 46,020,63
784 1
Cash and cash equivalents at 60,167,9 14,147,35
the beginning of the year 84 3
Cash and cash equivalents at
the end of the year 247,497, 60,167,98
770 4
NOTES TO THE REVIEWED CONDENSED GROUP PROVISIONAL RESULTS FOR THE YEAR ENDED 31
DECEMBER 2007
1. Basis of preparation and accounting policies
The financial information for the year ended 31 December 2007 has been
prepared on the historical cost basis, except for share based payments and
financial investments which are carried at fair values, and is in accordance
with the recognition and measurement criteria of the International Financial
Reporting Standards and its Interpretations adopted by the International
Accounting Standards Board and the disclosure requirements of IAS 34. The
accounting policies have been applied consistently throughout the Group and are
consistent with those for the financial year ended 31 December 2006.
2. Capital commitments and contingent liabilities
There are no capital commitments as at 31 December 2007 (2006: R35,4
million for 3D geoseismic survey).
Refer note 7 for contingent liabilities at 31 December 2007.
3. Income statement
The basic loss per share and headline loss per share for the financial year 2007
was 19.17 cents (2006: 5.29 cents) calculated on a weighted number of shares of
473,594,544 (2006: 368,754,699) and a loss for the year of R90 806 719 (2006:
R19 502 182).
The weighted number of shares for the purpose of calculating diluted earnings
per share is 474,930,523 (2006: 368,754,699). The increase in shares is as a
result of the 832,879 shares to be issued in terms of the long-term incentive
plan. This increased shares has an anti-dilutive effect and thus the diluted
earnings per share is calculated at 19,17 cents, not taking into account these
shares.
4. Other notes
There were no dividends paid or declared during the year.
No segmental report has been prepared as the Company is conducting only
exploration activities in one geological location, which represents only one
business activity.
5. Cash flow statement
Reconciliation of net loss for the year to cash utilised by operations
2007 2006
Reviewed Audited
R R
Loss for the year (108,720,525) (20,939,571)
Adjustment for:
Share based payments 62,199,355 -
Impairment of mineral - 606,544
rights
Depreciation - property, 396,513 166,928
plant and equipment
Loss on disposal of - 470
equipment
Movement in long term 11,825,280 -
liability - staff bonuses
Operating loss before (34,299,377) (20,165,629)
working capital changes
Changes in working capital (19,872,987) 4,061,725
(Increase)/decrease in (34,113,856) 356,580
other receivables
Increase in trade and other 14,240,869 3,705,145
payables
Cash utilised by operations (54,172,364) (16,103,904)
6. Intangible exploration and evaluation assets
Intangible exploration and evaluation assets comprise capitalised
exploration and evaluation expenditure on the Pilanesberg Project.
7. Acquisition of Africa Wide
On 13 September 2007 the Group acquired a 100% interest in Africa Wide for
R611 million (including capitalised expenses of R10 million). The purchase
consideration was settled by issuing 57,421,643 new Wesizwe Platinum Limited
shares. The primary asset of Africa Wide is a 26% shareholding in the WBJV.
The other parties in the WBJV are Anglo Platinum Limited holding 37% and
Platinum Group Metals Limited holding 37%. The effective date of the
transaction was 13 September 2007. Since acquisition, Africa Wide has only
incurred exploration and evaluation expenditure, which has been capitalised in
accordance with the Group`s accounting policy.
Notwithstanding the 100% acquisition of Africa Wide, the underlying
investment in WBJV is accounted for as an investment in associate, using the
equity method of accounting.
The assets and liabilities of Africa Wide and the fair values attributed to
these at acquisition date are as follows:
Book value on Fair value Total
acquisition adjustment
Intangible assets - 42 407 033 766 219 073 808 626 106
mineral rights
Trade and other payables (44 907 033) - (44 907 033)
Equalisation contingent - (128 870 577) (128 870 577)
liability*
Trade and other 2 500 000 - 2 500 000
receivables
Total assets acquired - 637 348 496 637 348 496
Deferred tax liability (234 501 571)
Goodwill 209 149 237
Consideration at 611 996 162
acquisition date
Subsequent expenditure 47 852 859
capitalised
Total investment in 849 021
associate
*Once a bankable feasibility study for the WBJV has been completed the
respective deemed capital contribution of each party will be credited based on
their contribution of measured, indicated and inferred PGM ounces from the
contributed properties comprising the WBJV, determined in accordance with the
SAMREC code. The three partners will either make equalisation payments or
receive equalisation receipts from other partners so that the percentage holding
interest among the three parties in the WBJV remains 37% Anglo Platinum Limited,
37% Platinum Group Metals Limited, 26% Africa Wide. Management estimated that
the equalisation liability, which represents equalising cash payment to be paid
by Africa Wide to the other WBJV partner(s) in future, was R128,8 million as at
the effective date of the transaction.
8. Other long-term liabilities
Long-term liabilities relate to deferred bonus commitments of R5.91 million
in 2009 and R5.91 million in 2010.
9. Independent auditors` review report
KPMG Inc., the company`s independent auditor, has reviewed the provisional
financial statements contained in this provisional report and has expressed an
unmodified conclusion on the provisional financial statements. Their review
report is available inspection at the company`s registered office.
10. Directorate
On 18 December 2007 Mrs TE Skweyiya resigned as chairman of the board and
Mr RG Rainey was appointed as acting chairman on 19 December 2007.
Disclaimer: Forward looking statements
Certain statements included in this report constitute "forward looking
statements" that are not profit forecasts or estimates in any way as defined by
JSE Listing Requirements. Such forward looking statements involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of Wesizwe, or of the platinum mining
industry, to be materially different from future results, performance or
achievements expressed or implied by those forward looking statements. Wesizwe
is subject to the effect of changes in platinum group metals prices, currency
and the risks involved in mining operations.
Signed on behalf of the board
RG Rainey MH Solomon
Acting Chairman Chief Executive Officer
Johannesburg
31 March 2008
Sponsors: Investec Bank Limited
Directors: RG RaineySquared (Acting Chairman), MH Solomon (Chief
Executive Officer),
WM EksteenSquared, L Maloney (Mrs), ME Monnakgotla,
DJ Phologane, JC Williams
( Non-executive Squared Independent non-executive)
Company secretary: Routledge Modise Attorneys
Registered office: Unit 13, Second Floor, 3 Melrose Boulevard, Melrose
Arch.
Financial Advisors: Qinisele Resources (Pty) Limited
Investor relations enquiries to: College Hill
Fred Cornet
Tel + 27 11 447 3030
Wesizwe Platinum Limited: Tel + 27 11 994 4600
Web site: http://www.wesizwe.com
Date: 31/03/2008 07:30:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
