| Fri 29 Aug 2008, 8:50 | | MVL - Mvelaphanda Resources Limited - Reviewed results for the year ended 30 |
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MVL
MVL
MVL - Mvelaphanda Resources Limited - Reviewed results for the year ended 30
June 2008
MVELAPHANDA RESOURCES LIMITED
(Registration number: 1980/001395/06
Incorporated in the Republic of South Africa
Share code: MVL
ISIN number: ZAE000050266
REVIEWED RESULTS FOR THE YEAR ENDED 30 JUNE 2008
FEATURES
- Booysendal Transaction approved
- Adjusted earnings increase to 198cps from 107cps
- Strong underlying performance from Northam
- Balance sheet robust - positioned for further growth
GROUP BALANCE SHEET AS AT 30 JUNE 2008
R`000 Notes Reviewed Restated
30 June 2008 30 June 2007
ASSETS
Non-current assets
Investment in associate companies 1,074,617 1,075,205
- Northam Platinum Limited 880,845 788,411
- Trans Hex Group Limited 193,772 78,452
Trans Hex Group Limited forward
purchased shares - 2 208 342
GFI-SA loan 3 5,080,000 5,273,000
Goodwill 75,869 75,869
Deferred taxation 4 57,170 30,473
Property, plant and equipment 483 857
non-current assets 6,288,139 6,455,404
Current assets
Inventories - 255
Accounts receivable and prepayments 63,865 5,662
Cash and cash equivalents 1,919,586 1,503,326
Total current assets 1,983,451 1,509,243
Non-current assets classified
as held for sale
Booysendal Platinum project 315,892 315,892
Listed investment
- AngloGold Ashanti Limited 382 380
- Etruscan Diamonds plc 6,665 -
Total non-current assets classified
as held for sale 322,939 316,272
TOTAL ASSETS 8,594,529 8,280,919
EQUITY AND LIABILITIES
Share capital and reserves
Total share capital and reserves 6,093,342 5,814,376
Non-current liabilities
"A" ordinary shares 700 700
Senior bank loan (GFI-SA) - 230,736
Mezzanine finance (GFI-SA) 5 & 8 - 1,622,208
Provision for employee
long-term incentive costs 6 23,733 29,620
Deferred taxation 136,445 156,120
Total non-current liabilities 4 & 8 160,878 2,039,384
Current liabilities
Accounts payable and accruals 79,522 17,283
Provision for employee
long-term incentive costs 6 173,407 107,538
Short-term portion of senior
bank loan (GFI-SA) 230,736 301,688
Short-term portion of mezzanine
finance (GFI-SA) 5 & 8 1,839,477 -
Current taxation payable 17,167 650
Total current liabilities 2,340,309 427,159
TOTAL EQUITY AND LIABILITIES 8,594,529 8,280,919
GROUP INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2008
R`000 Notes Reviewed Restated
12 months to 12 months to
30 June 2008 30 June 2007
INCOME
Earnings from associate companies 303,948 272,275
- Northam Platinum Limited 308,550 272,955
- Trans Hex Group Limited (4,602) (680)
Interest earned on GFI-SA loan 437,405 437,405
Interest earned on cash
and cash equivalents 182,849 43,383
Other income 4,054 905
Total income 928,256 753,968
OPERATING EXPENSES
Exploration and project
development costs (12,032) (67,564)
Corporate expenses (51,220) (35,421)
Share-based
incentive costs 6 (90,021) (129,060)
Finance costs (331,850) (330,346)
- Senior bank loan (GFI-SA) (48,118) (77,605)
- Mezzanine finance (GFI-SA) 5 & 8 (282,882) (252,474)
- Other (850) (267)
Total operating expenses (485,122) (562,391)
PROFIT BEFORE OTHER (EXPENSES)/INCOME 443,133 191,577
OTHER (EXPENSES)/INCOME
Impairment (write down)
/write-back (12,651) 17,312
(Loss)/gain on revaluation of
financial instruments (252,382) (2,059,272)
- GFI-SA loan (193,000) (2,127,000)
- Trans Hex Group Limited
forward purchased shares (59,382) 67,728
Costs associated with the
Afripalm transaction - (543,700)
Total other (expenses) (265,034) (2,585,660)
PROFIT/(LOSS) BEFORE TAXATION 178,100 (2,394,083)
TAXATION 7,221 295,333
- Normal (39,150) (34,093)
- Deferred 4 & 8 46,372 329,426
ATTRIBUTABLE PROFIT/(LOSS) 185,321 (2,098,750)
EARNINGS/(LOSS) PER ORDINARY SHARE (cents)
- Basic 89 (1,193)
- Headline 7 93 (1,203)
- Diluted 86 (1,193)
- Adjusted 7 198 107
ABRIDGED GROUP SEGMENTAL RESULTS FOR THE YEAR ENDED 30 JUNE 2008*
R`000 Note Reviewed Restated
12 months to 12 months to
30 June 2008 30 June 2007
Net profit/(loss)
after taxation
- Gold 8 (89,837) (1,798,780)
- Platinum 301,301 272,855
- Diamonds (71,351) 68,142
- Other 45,208 **(640,967)
ATTRIBUTABLE INCOME/(LOSS) 185,321 (2,098,750)
* A detailed segmental income statement is available on the company`s
website: www.mvelares.co.za.
** Includes costs associated with the Afripalm Transaction.
GROUP STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2008
R`000 Note Total
Restated balance at 30 June 2006 8 6,129,537
Attributable loss for the year (2,098,750)
Equity compensation reserve 268,067
Net proceeds from shares issued 1,182,767
Share-based discount to Afripalm 2 -
ordinary shares 328,000
Equity accounted portion of share-based
payments of associates 2,503
Equity accounted portion of foreign
currency translation reserve 1,183
Equity accounted portion of fair
value adjustment on available-for-sale
financial assets 34
Unrealised profit on revaluation of
listed investments 359
Unclaimed dividends forfeited 1,376
"A" ordinary shares reclassified
as non-current liabilities (700)
Restated balance at 30 June 2007 8 5,814,376
Attributable profit for the year 185,321
Equity compensation reserve 4,086
Net proceeds from shares issued 84,871
Equity accounted portion of share-based
payments of associates 3,782
Equity accounted portion of foreign currency
translation reserve (749)
Equity accounted portion of fair value adjustment
on available-for-sale financial assets 5,351
Unrealised profit on revaluation of listed investments (3,696)
Balance at 30 June 2008 6,093,342
GROUP CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2008
R`000 Reviewed Restated
12 months to 12 months to
30 June 2008 30 June 2007
CASH FLOWS FROM OPERATING ACTIVITIES
Cash utilised in operations (85,548) (67,868)
Cancellation of management contract - (20,000)
Interest received 620,255 480,788
Finance costs (114,582) (141,027)
Taxation paid (mainly GFI-SA) (22,633) (34,091)
Net cash generated by
operating activities 397,492 217,802
CASH FLOWS FROM INVESTING ACTIVITIES
Dividends received from associated
companies 220,994 212,404
- Northam Platinum Limited 219,888 212,127
- Trans Hex Group Limited 1,106 277
Dividends received from non-strategic
investments 4 10
Repayment of Booysendal liability - (20,000)
Acquisition of furniture, fittings
and office equipment (181) (271)
Cash received from the disposal of
Tirisano Mine 12,500 16
Cash received from the disposal of
non-strategic investments 2,268 3,171
Net cash generated by investing
activities 235,585 195,330
CASH FLOWS FROM FINANCING ACTIVITIES
Capital repayment in respect of
senior bank loan (GFI-SA) (301,688) (277,201)
Net proceeds from shares issued 84,871 1,182,767
Upfront consideration received -
options issued to Afripalm 2 - 10,000
Net cash (utilised in)/generated
by financing activities (216,817) 915,566
Net increase in cash and cash
Equivalents 416,260 1,328,698
Cash and cash equivalents at
beginning of the year 1,503,326 174,628
CASH AND CASH EQUIVALENTS AT
END OF THE YEAR 1,919,586 1,503,326
NOTES
FOR THE YEAR ENDED 30 JUNE 2008
1. Basis of preparation
These condensed consolidated financial statements have been prepared
on the historical costs basis, except for financial instruments that
are fair valued, in accordance with the Group`s accounting policies
which are consistent with those adopted in the financial year ended
30 June 2007 and which are compliant with International Financial
Reporting Standards ("IFRS"), IAS 34: "Interim Financial Reporting",
the South African Companies Act, 1973, as amended, and the JSE
Listings Requirements.
2. Trans Hex Group Limited forward purchased shares
This represented the fair value of 16 million Trans Hex Group Limited
forward purchased shares that were delivered on 5 March 2008. The
fair value was based on the market price of Trans Hex Group Limited
shares as at 30 June 2007 net of the contingent liability at that
date, of R18 million on 30 June 2007 relating to the debenture
coupon.
3. GFI-SA loan
R`000 Reviewed Audited
30 June 2007 30 June 2007
Loan advanced to GFI-SA 4,139,000 4,139,000
Unrealised fair value adjustment
at end of the period 941,000 1,134,000
GFI-SA loan at fair value 5,080,000 5,273,000
The value of this investment is sensitive to the Gold Fields share
price.
The fair valuation of this investment takes into account the closing
value of the Gold Fields shares at year end and the difference
between the present value of the future interest payments from GFI-SA
until March 2009 and the present value of the estimated future
dividends foregone over the same period.
The decrease in the value of the GFI-SA loan to R5.1 billion from
R5.3 billion (30 June 2007) is primarily attributable to the decrease
in the Gold Fields share price from R109.40 (as at 30 June 2007) to
R99.50 (as at 30 Jun 2008). The number of Gold Fields shares
attributable to the Group was fixed at 50 million (30 June 2007:
computed at 47.4 million).
4. Deferred tax
The deferred tax provision mainly relates to the fair value
adjustment on the GFI-SA loan. The deferred tax asset relates to the
provision for employee long-term incentive costs.
5. Mezzanine finance
R`000 Reviewed Restated
30 June 2008 30 June 2007
Loan advanced to Mvela Gold 1,086,000 1,086,000
Net interest capitalised at
beginning of the period 536,208 351,773
Net interest capitalised during
the period 217,269 184,435
Mezzanine finance 1,839,477 1,622,208
The mezzanine finance was advanced to Mvela Gold in March 2004
through a special purpose vehicle company (SPV), on a back-to-back
arrangement (the same arrangements which are applicable to the SPV
are applicable to Mvela Gold) and all costs incurred by SPV is fully
recoverable from Mvela Gold. The Mezzanine finance is repayable in
March 2009. Refer to note 8 on the prior year adjustment.
6. Share-based payment costs
The provision for employee incentive costs relates to share
appreciation rights that could potentially be exercised any time in
the ten years from grant date. These cash-settled share
appreciation rights are valued at the fair value of the rights at
each balance sheet date, with any changes in fair value recognised in
profit and loss over the vesting period of the rights. Equity-settled
share options are valued at grant date, and the cost is spread
equally over the vesting period of the options. The resulting credit
is accounted for in shareholders` equity.
7. Earnings/(Loss) per ordinary share are calculated as follows:
Reviewed Restated
30 June 2008 30 June 2007
(a) Headline earnings/(loss)
per share (cents) 93 (1,203)
R`000
Attributable profit/(loss) 185,321 (2,098,750)
Profit on sale of assets (3,881) -
Impairment write-downs 12,651 (17,312)
Headline earning/(loss) 194,091 (2,116,062)
Weighted average number of shares
in issue 209,167,285 175,866,989
(b) Adjusted headline earnings per
share (cents) 198 107
R`000
Attributable profit/(loss) 185,321 (2,098,750)
"Other expenses" per income statement 265,033 2,585,660
Taxation relating to "other
(income)/expenses" (36,323) (298,594)
Adjusted headline earnings 414,031 188,316
Weighted average number of shares
in issue 209,167,285 175,866,989
8. Prior year adjustment
The mezzanine finance was advanced to Mvela Gold by a special purpose
vehicle company (SPV), on a back-to-back arrangement (the same
arrangements which are applicable to the SPV are applicable to Mvela
Gold) and all costs incurred by SPV is fully recoverable from Mvela
Gold.
During the period under review it was identified that certain costs
incurred by the SPV were not recovered from Mvela Gold. These costs
have now been accrued for in full and the prior year results were
restated where applicable. The impact was as follows:
Income statement
Reviewed Restated
30 June 2008 30 June 2007
R`000
- Increase in finance costs
- Mezzanine finance (GFI-SA) (11,609) (10,111)
- Decrease in normal tax 3,366 -
- Increase/(decrease) in
deferred taxation - 2,933
Net increase in attributable loss (8,243) (7,178)
LOSS PER ORDINARY SHARE (cents)
- Basic (4) (4)
- Headline (4) (4)
- Diluted (4) (4)
- Adjusted (4) (4)
Balance sheet Reviewed Reviewed
30 June 2008 30 June 2007
R`000
Increase/(decrease) in
non-current liabilities
- Mezzanine finance (GFI-SA) 40,266 28,657
- Deferred taxation - (8,311)
Decrease in current liabilities
- Current taxation liabilities (11,678) -
9. Post balance sheet events
Northam Platinum Limited declared a final dividend of 185 cents
per share which will be paid in September 2008. This translates to a
cash inflow of R417.8 million for the Mvela Resources Group.
On 20 August 2008 the previously announced transaction whereby the
Group acquired:
- Anglo Platinum Limited`s ("Anglo Platinum") interest in the
Booysendal exploration, mining and beneficiation project ("Booysendal
Platinum Project");
- Anglo Platinum`s 22.2% interest in Northam Platinum Limited
("Northam") for a total cash consideration of R4 billion;
- the exchange for the Booysendal Platinum Project to Northam in
exchange for 121 million new Northam shares; and
- the issue of 3,579,000 new Mvela Resources shares to a subsidiary
of Afripalm Resources (Pty) Ltd.
was concluded resulting in the Mvela Resources Group owning 62.8% of
Northam subsequent to the year-end.
10. Audit Review opinion
These financial results have been reviewed by the Group`s auditors,
PricewaterhouseCoopers Inc., and their unqualified review opinion is
available for inspection at the company`s registered office.
COMMENTARY
FOR THE YEAR FOR THE YEAR ENDED 30 JUNE 2008D
Corporate activity
The Booysendal Transaction which was announced in September 2007,
represented another step change in the evolution and fortunes of the
company. While the Transaction could not be completed before year end
as envisaged, all the conditions precedent have subsequently been met
and Mvela Resources has gained a controlling 62.8% share in
Northam, taking it a step closer to being an operating mining
company.
Booysendal is a world class resource and one that can now be
optimally developed for the benefit of Northam and Mvela Resources
shareholders. The sheer size and scale of Booysendal lends itself to
more than one mine and additional opportunities to realise value lie
beyond the greenfields mine in the north eastern portion of the
property, currently the subject of a bankable feasibility study being
undertaken by Northam.
The investment in Northam, following the Booysendal Transaction,
comprises over 80% of the intrinsic value of Mvela Resources, where
previously the Gold Fields investment made up over 60% of the
intrinsic value, and clearly the future of the company is closely
aligned with the prospects for Northam. From an investment
perspective, Northam offers a number of unique characteristics:
- an operating mine, highly leveraged to metal prices and the rand;
- a sizable development project, strategically positioned on the fast
developing eastern limb of the Bushveld Complex;
- cash flow from the current mine and an ungeared balance sheet with
which to fund growth;
- human capital in the form of a labour force and management team
with unique expertise in mining one of the deepest and most complex
ore bodies in the industry; and
- proven processing technology and control of the production pipeline
from stope face to market - minimising value leakage and presenting
an opportunity to scale up the business.
Income Statement
The Booysendal Transaction was not concluded at the end of the
financial year. The next reporting period will require consolidation
of the Northam results and the financial statements of Mvela
Resources for the year ending 30 June 2009, will be significantly
different.
Continued volatility in Gold Fields` share price was again the key
driver of earnings in FY2008, making like-on-like comparisons very
difficult. Despite Gold Fields` share price falling further, the 9%
decline in the year ended 30 June 2008 was less that the 32% drop
during the previous financial year, which resulted in a lower R193
million adjustment to the fair value of the Gold Fields investment.
This compares with a negative R2,127 million fair value adjustment in
the year ended 30 June 2007. The R544 million costs that resulted
from the Afripalm Transaction in the year ended 30 June 2007 was not
repeated and as a result, total other expenses were significantly
lower at R265 million compared with R2,586 million in the previous
financial year.
A 13% increase in attributable earnings from Northam as a result of
its stronger financial performance and a significant increase in
interest earned, primarily on the proceeds from the share issue to
Afripalm Resources, from R43 million in FY2007 to R183 million in
FY2008, resulted in basic earnings per share of 89 cents in FY2008,
after reporting a loss of 1,193 cents in FY2007.
Adjusted earnings per share, which exclude the non-cash revaluation
of the Gold Fields investment and other non-cash expenses and
represents a more accurate reflection of Mvela Resources` operating
performance, continued to increase, gaining 85% to 198 cents in
FY2008 from 107 cents in FY2007. This continues the positive trend in
FY2006, where adjusted earnings per share rose from 44 cents.
Other items which differed year-on-year included:
- exploration and project development costs decreased by R55 million
to R12 million. This is largely due to the expiry of the African
exploration joint venture with GFL Mining Services Limited in 2007;
- corporate share-based incentive costs comprise share appreciation
rights of management and staff and are valued at each balance sheet
date in line with IFRS 2: "Share-based payments"; and
- a further R46 million reversal of the deferred tax liability raised
in previous years (at the capital gains tax (CGT) rate of 14%) was
made due to the lower fair value of the Gold Fields investment at
year end.
Balance Sheet
The most notable movements in the balance sheet relate primarily to
the Gold Fields investment and include:
- decrease in the value of the GFI-SA loan which fell by R193 million
to R5,080 million as a result fair value adjustments
following the decline in the Gold Fields` share price during the year
(as discussed in the Income Statement section
above);
- a R27 million decrease in the deferred tax liability as a result of
the fair value adjustment; and
- the classification of the entire remaining Senior Bank Loan and
Mezzanine Finance liability under Current Liabilities, as a result of
the Gold Fields Transaction maturing on 17 March 2009.
The company cash position of R1,919 million at year end will be
reduced by about R1,550 million following the completion of the
Booysendal Transaction. This will be partly offset by Northam`s
declared year end dividend of 185 cents per share which will result
in Mvela Resources receiving approximately R417.8 million in
September 2008.
Prospects
The credit crunch and financial market turmoil catalysed by the sub-
prime crisis in the US in mid-2007, has impacted on the outlook for
global growth and hence demand for commodities. The latter half or
the previous financial year and early part of the current year, have
been notable for the swiftness and extent of the pull back in
commodity prices and hence, the share prices of mining stocks.
Despite the pullback in metal prices, Northam remains strongly cash
generative, and with its ungeared balance sheet is well positioned to
fund the Booysendal Project following the bankable feasibility study
due for completion in mid-2009. Mvela Resources too is in a sound
financial position, with the maturing of the Gold Fields transaction
in March 2009, providing it with a number of financing options.
The platinum sector, which remains our key short term focus, again
offers growth opportunities:
- Eskom`s lack of capacity continues to constrain new project
development in South Africa and add to the risk of mining projects;
- many of the junior companies will require funding for their
projects, which will remain a challenge in this environment where banks are
loathe to lend money for risky, long lead time projects and
equity investors have shied away from junior mining companies;
- capital and operating costs have risen sharply adding to the
financing problems and for BEE shareholders in particular, the
ability to fund a pro rata portion of the project capex without
significant dilution will be difficult; and
- the producing companies are cash rich and continue to generate
robust cash flows and with the recent pull back in the ratings of the
listed mining shares, the sector will be looking interesting for
acquisitive companies again.
Mvela Resources will continue to look for value accretive growth
opportunities, not only in platinum, but in other sectors in the
commodities space and increasingly with a focus in expansion beyond
the borders of South Africa. We remain confident that the longer term
fundamentals for most commodity market remain sound, driven by a
continued growth in China and the other BRIC countries and that the
current market pull back is a short-term break in a longer term bull
market.
For and on behalf of the board
PL Zim PC Pienaar
Chairman Chief Executive Officer
Directors
Sponsor
JP Morgan Equities
29 August 2008
Johannesburg
Full details of our results are available at: www.mvelares.co.za
Contact Details
James Wellsted
Investor Relations Officer
Tel: +27 (11) 325 5323
Fax: +27 (11) 325 5324
email: james@mvelares.co.za
Directors
PL Zim (Chairman) BR van Rooyen*
PC Pienaar* (CEO) ME Beckett (British)*** Z Mtshotshisa**
NS Ntsaluba* (FD) P M Buthelezi TMG Sexwale
SW Mofokeng* CK Chabedi*** MJ Willcox
R Moonsamy MSMM Xayiya
(* Executive Directors)
(**Alternate to TMG Sexwale)
(***Independent)
Transfer Secretaries
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70 Marshall Street
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Johannesburg, 2001
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P O Box 413420,
Craighall, 2024
Date: 29/08/2008 08:50:01 Produced by the JSE SENS Department.
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