| Mon 31 Mar 2008, 16:04 | | SAL - Sallies - Audited consolidated results for the six months |
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SAL
SAL
SAL - Sallies - Audited consolidated results for the six months
ended 31 December 2007
SALLIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1903/001879/06)
JSE share code: SAL & ISIN: ZAE000022588
("Sallies" or "the company" or "the group")
AUDITED CONSOLIDATED RESULTS
FOR THE SIX MONTHS ENDED 31 DECEMBER 2007
Consolidated income statement
Six months Six months Year
ended ended ended
31 Dec 07 31 Dec 06 % 30 Jun 07
R`000 Audited Reviewed Change Audited
Revenue - mining 72 876 52 164 40 109 315
Cost of sales (75 857) (55 728) 36 (118 187)
Loss from mining
activities (2 981) (3 564) (16) (8 872)
Less: Depreciation (7 500) (4 950) 52 (11 184)
Amortisation of mineral
rights (1 073) (1 233) (13) (2 564)
Operating loss from
mining (11 554) (9 747) 19 (22 620)
Profit on disposal of PPE - 5 (100) 583
Administrative expenses (13 344) (9 555) 40 (20 639)
Investment income 10 58 (83) 282
Finance costs (2 476) (1 486) 67 (6 480)
Net foreign exchange
gains/(losses) 1 733 1 692 2 1 639
Net loss before taxation (25 631) (19 033) 35 (47 235)
Taxation (deferred) - - - 5 600
Net loss for period (25 631) (19 033) 35 (41 635)
Issued shares (`000) 631 181 499 668 26 506 264
Weighted average shares
issued (`000) 630 502 459 629 37 494 968
Weighted average shares
issued for diluted earnings
per share (`000) 634 053 507 875 25 499 430
RECONCILIATION OF EARNINGS
Net loss attributable to
ordinary shareholders
for basic earnings
per share (25 631) (19 033) 35 (41 635)
Profit on disposal of
assets (net of tax) - (3) (100) (414)
Net loss attributable
to ordinary
shareholders for headline
earnings per share (25 631) (19 036) 35 (42 049)
LOSS PER SHARE (cents)
Basic
- undiluted (cents) (4,1) (4,1) - (8,4)
- diluted (cents) (4,0) (3,7) 8,1 (8,3)
Headline
- undiluted (cents) (4,1) (4,1) - (8,5)
- diluted (cents) (4,0) (3,7) 8,1 (8,4)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Accumu-
Capital lated
R`000 reserves loss Total
Balance at 30 June 2006 176 409 (88 553) 87 856
Movement in capital reserves 34 423 - 34 423
Loss for period - (41 635) (41 635)
Balance at 30 June 2007 210 832 (130 188) 80 644
Movement in capital reserves 72 359 - 72 359
Loss for period - (25 631) (25 631)
Balance at 31 December 2007 283 191 (155 819) 127 372
CONSOLIDATED BALANCE SHEET
31 Dec 07 31 Dec 06 30 Jun 07
R`000 Audited Reviewed Audited
ASSETS
Non-current assets 149 940 144 814 153 449
Property, plant and equipment 139 765 134 086 143 274
Goodwill 10 175 10 175 10 175
Restricted investment - 553 -
Current assets 54 265 25 138 49 556
Inventories 31 485 16 491 33 921
Accounts receivable 16 543 5 768 12 239
Taxation pre-paid 2 789 2 858 2 789
Cash and cash equivalents 3 448 21 607
Total assets 204 205 169 952 203 005
EQUITY AND LIABILITIES
Capital and reserves 127 372 101 061 80 644
Share capital and premium 282 467 207 923 210 108
Other reserves 724 724 724
Accumulated loss (155 819) (107 586) (130 188)
Non-current liabilities 23 824 17 647 28 899
Long-term loan 8 643 7 945 13 943
Provision for environmental
rehabilitation 15 181 4 102 14 956
Deferred taxation - 5 600 -
Current liabilities 53 009 51 244 93 462
Accounts payable 24 674 26 543 30 850
Short-term loan 21 726 - 26 936
Bank overdraft - 13 173 29 461
Provisions 266 5 380 587
Taxation - - -
Current portion of long-term
liabilities 6 343 6 148 5 628
Total equity and liabilities 204 205 169 952 203 005
Net asset value per share (cents) 20,2 20,2 15,9
CONSOLIDATED CASH FLOW STATEMENT
Six months Six months Year
ended ended ended
31 Dec 07 31 Dec 06 30 Jun 07
R`000 Audited Reviewed Audited
Net cash inflows/(outflows) from
operating activities (24 483) (40 432) (75 633)
Cash generated/(utilised) by
operations (22 017) (39 004) (69 435)
Interest paid (2 476) (1 486) (6 480)
Taxation paid - - -
Investment income 10 58 282
Net cash inflows/(outflows) from
investing activities (5 064) (68 325) (83 945)
Net additions to mine plant,
equipment and buildings (5 064) (68 330) (84 528)
Proceeds from disposals of plant
and equipment - 5 583
Net cash inflows/(outflows) from
financing activities 61 849 35 545 70 664
Long-term loans raised/(repaid) (5 300) 3 307 9 305
Short-term facility raised/(repaid) (5 210) - 26 936
Rights issue (net of costs) 72 359 32 238 34 423
Net (decrease)/increase in cash
and cash equivalents 32 302 (73 212) (88 914)
Cash and cash equivalents at
beginning of period (28 854) 60 060 60 060
Cash and cash equivalents at end of
period 3 448 (13 152) (28 854)
Directorate and Management
The senior management team appointed during October 2007 is energetically
confronting the core challenges facing your company. I expect visible financial
progress resulting from improved management effectiveness to be evident during
the second half of F2008.
My dual role as Chairman and CEO, whilst unacceptable, is in the interests of
stability during this turbulent era in the company`s history. These roles
should be separated by January 2009.
Jeremy Woods, who joined the board on 16 February 2007, did not seek re-election
at the AGM of 27 February 2008 due to his re-location to London. He has agreed
to make himself available to us to advise on investor relations issues, which is
his field of specific competence, and I thank him on your behalf for the
valuable contributions he made during his year of service.
Summary
Sallies made a net loss before taxation of R26 million for HI F2008 (R19
million for HI F2007). Of this, R15,0 million was attributable to Witkop and
R11,0 million to Buffalo. The approval formalities of the fully underwritten
rights offer described in the F2007 annual financial statements were completed
during Q3 F2008 and the R75 million of new funds should be available during May
2008.
Future profits at Sallies are highly geared to the rand price achieved for
fluorspar sales; higher product volumes at Witkop; and successful
implementation of the Buffalo re-engineering recommendations.
Marketing
I am pleased to report that all of Witkop`s expected production for C2008,
except the C2007 carry overs, has been sold on contract at prices well above
USD 200 per dry metric tonne (DMT). Negotiations for the delivery of Witkop
material in C2009 are in progress.
Beyond April 2008, when existing supply commitments entered into at
uneconomical prices have been honoured, there are as yet no contracts in place
for Buffalo, although enquiries for this material are being processed. One of
the challenges for the team re-engineering the Buffalo project is to reduce the
levels of phosphates and other by-products in its fluorspar with the objective
of reducing the price discount on this material.
Operations
I am pleased to record that no fatalities or disabling injuries occurred during
H1 F2008. As at 31 December 2007, the accumulated fatality free shifts for
Witkop and Buffalo were 6 624 and 1 308 respectively.
Reserve and resource calculations have been updated for Witkop and estimates of
mineral resources and reserves for both operations are set out below:
Witkop Fluorspar Mine
Mineral resources and reserves for the Witkop Fluorspar Mine have been compiled
by Engelbertus Jansen MSc, South Africa`s leading fluorspar geologist and a
registered geological scientist with SACNASP (registration number 400073/02)
and are summarised below. These have been defined according to the guidelines
of the SAMREC code.
Summary of Mineral Resources at 31 December 2007
CaF2
Tonnage (t) (%)
Inferred resources 22 400 000 13,0
Indicated resources 29 000 000 14,1
Measured resources 18 900 000 15,4
Summary of Mineral Reserves at 31 December 2007
CaF2
Tonnage (t) (%)
Probable reserves 1 100 000 29,3
Proved reserves 22 250 000 12,4
Note: Mineral Resources are reported exclusive of Mineral Reserves.
Buffalo Fluorspar Mine
At Buffalo Fluorspar Mine, mining of Tailings Dumps 1 to 4 is substantially
complete. Until the necessary metallurgical, mechanical and electric al re
-engineering design and construction to process Dumps 5 and 6 is completed
early in F2009, mechanical selective mining of the Mill Hill tailings dam and
the residue of Tailings Dams 1 to 4 will be utilised as plant feed.
Since no mining of Tailings Dumps 5 and 6 have taken place, the figures shown
below have been extracted from the Competent Person`s Report of RSG Global
dated August 2006.
Summary of Mineral Reserves at August 2006
CaF2
Tonnage (t) (%)
Probable reserves 5,668 000 7,32
We continue to pursue new order mining rights at both properties.
Production levels at Witkop improved from 47 277 wet metric tonnes (WMT) in H1
F2007 to 56 599 WMT in H1 F2008. We continue to target over 13 000 WMT per
month by July 2008. Production levels at Buffalo improved from 7 592 WMT in H1
F2007 to 10 874 in H1 F2008.
The future at Buffalo depends on the recommendations from our metallurgical and
engineering consultants on a revised strategy. Shareholders will recall from
the Independent Competent Person`s Report dated August 2006, by RSG Global,
that the resource estimate for dumps 5 and 6 was 5,7 million tonnes at an
average grade of 7,32% CaF2. The intention was to hydraulically mine dumps 5
and 6 into a 350tph (215 000tpm) concentrator at the dump site and increase
plant capacity from 40tph to 90tph at a capital cost of R12,3 million in 2006
terms. Recoveries of 70% were assumed for a project life of less than 30
months. Rehabilitation and closure costs were estimated at R8,45 million. The
initial recommendations by the re-engineering consultants appointed during
November 2007 were made early in March 2008. These envisage a significantly
lower capital investment than tabled above, no concentrator at the dump site,
and hydraulically mining dumps 5 and 6 at a rate of 100,000tpm directly into
the existing plant. Estimated recoveries are about 50%. Project life would be
about 60 months. This strategy is financially attractive provided two important
issues can be successfully resolved.
1. The required maximum power demand can be secured from Eskom.
2. That monazite, phosphates and other by-products can be cost effectively
removed.
Shareholders will be kept informed of project progress.
FINANCIAL EFFECTS OF THE RIGHTS OFFER
The table below sets out the pro forma financial effects of the rights offer
based on Sallies` audited interim results for the six months ended 31 December
2007. These financial effects are the responsibility of the directors of
Sallies and they have been prepared for illustrative purposes only, in order to
provide information about the financial position and results of Sallies
assuming that the rights offer had been implemented on 1 July 2007 (results) or
31 December 2007 (net asset value). Due to its nature, the pro forma financial
information may not give a fair reflection of Sallies` financial position,
changes in equity, results of operations or cash flows subsequent to the rights
offer.
Before the After the Percentage
Unaudited rights offer1 rights offer change
Basic loss per share (cents)
- undiluted (4,1) (4,1)2 -
- diluted (4,0) (3,3)2 17,5
Headline loss per share
(cents)
- undiluted (4,1) (4,1)2 -
- diluted (4,0) (3,3)2 17,5
Net asset value per share (cents) 20,2 19,83 (2,0)
Tangible net asset value per
share (cents) 17,1 17,331,2
Weighted average number of shares
in issue (`000) 630 502 630 502 -
Diluted weighted average number of
shares in issue (`000) 634 053 785 536 23,9
Notes:
1. "Before the rights offer" financial information has been extracted from the
audited interim results of Sallies for the six months ended 31 December 2007.
2. The "After the rights offer" loss per share figures assume that all
convertible debentures will be converted into ordinary shares on maturity and
that there will be no cash payment and no default conversion before maturity.
Full conversion will result in the issuing of a further 151 483 358 ordinary
shares.
3. The "After the rights offer" net asset value assumes that R27 426 000 of the
net proceeds of the rights offer is notionally apportioned to equity to
reflect the hybrid nature of the convertible debenture.
Honeywell
The arbitration process on the dispute between Honeywell, Sallies and Witkop
continues to run its course.
Exploration
We continue to pursue an exploration licence for a significant, high grade
fluorspar deposit.
Outlook
Significant progress has been made since October 2007. Rand prices being
achieved by Witkop will rapidly turn Witkop`s fortunes around from Q4 F2008.
Provided current volumes being achieved at Witkop can be further improved and
the Honeywell litigation is resolved fairly, management will establish a
foundation for building a mining business.
If the two remaining real technical challenges at Buffalo can be overcome and
the exploration licence referred to above is secured, the outlook for Sallies
will improve significantly.
Financial reporting
The financial record keeping and reporting has been transformed under the
guidance of the group financial manager.
The directors requested an audit of the interim results for the six months
ended 31 December 2007 despite the fact that this is not a statutory
requirement. The financial management team was complimented on the improvement
in the financial record keeping by our auditors.
The monthly management accounts now provide much improved financial information
on a more timeous basis.
NOTES
Basis of preparation
The interim report is prepared in accordance with International Financial
Reporting Standards (IFRS) and IAS 34 Interim Financial Reporting. The interim
results incorporate accounting policies that are consistent with those used in
preparing the financial results for the year ended 30 June 2007.
The interim results have been audited by the company`s auditors and their
unmodified audit re port is available for inspection at the company`s
registered office.
By order of the board
Tom Dale
Chairman and CEO
Zeerust
31 March 2008
Directors: Tom Dale (Chairman and CEO), Johann Blersch (Commercial Director),
Barney Esterhuizen, Dr Vincent Msibi (alternate: Jurgen Kogl)
Registered office: Witkop Fluorspar Mine, Farm Wintershoek, Zeerust, 2865
(Private Bag X1315, Zeerust, 2865)
Auditors: BDO Spencer Steward (Jhb) Incorporated
BDO House, 13 Wellington Road, Parktown, 2193
(Private Bag X1315, Zeerust, 2865)
Transfer secretaries: Computershare Investor Services (Proprietary) Limited
(Registration number 2004/003647/07), 70 Marshall Street, Johannesburg, 2001
(PO Box X50500, Houghton, 2041)
Sponsor: Bridge Capital Advisors (Pty) Limited, 2nd Floor, 27 Fricker Road,
Illovo Boulevard, Illovo, 2196
SALLIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1903/001879/06)
JSE share code: SAL & ISIN: ZAE000022588
("Sallies" or "the company" or "the group")
Date: 31/03/2008 16:04:18 Produced by the JSE SENS Department.
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