| Wed 10 Sep 2008, 7:30 | | SAL - Sallies - Annual financial statements for the year ended 30 June 2008 |
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SAL
SAL
SAL - Sallies - Annual financial statements for the year ended 30 June 2008
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")
REVIEWED CONSOLIDATED RESULTS
FOR THE YEAR ENDED 30 JUNE 2008
HIGHLIGHTS
Higher volumes and prices achieved
R29 mio turnaround in operating results
Buffalo implementing re-engineering strategy
New order mining rights at Witkop notarised
Honeywell claim reduced and counterclaim increased
Successful overhaul of financial reporting
Bottom line distorted by abnormal charges
CONSOLIDATED INCOME STATEMENT
Year ended Year ended
30 Jun 08 30 Jun 07 %
R`000 Reviewed Audited change
Revenue - mining 168 117 109 315 54
Net foreign exchange gains 4 794 1 639 192
Cost of sales (147 549) (118 187) (25)
Profit/(loss) from mining 25 362 (7 233) 451
activities
Less: Depreciation (15 501) (11 184) (39)
Amortisation of mineral rights (2 023) (2 564) 21
Operating profit/(loss) from 7 838 (20 981) 137
mining
Profit on disposal of property, (323) 583 (155)
plant and equipment
Administrative expenses (24 912) (20 639) (21)
Finance costs (10 009) (6 198) (61)
Interest on convertible (1 359) -
debentures
Share based payments (10 466) -
Net loss before taxation (39 231) (47 235) 17
Taxation - 5 600 100
Net loss for period (39 231) (41 635) 6
Issued shares (`000) 634 981 547 8761 16
Weighted average shares issued 631 264 536 5801 18
(`000)
Weighted average shares issued 661 798 499 430 33
for diluted loss per share
(`000)
RECONCILIATION OF losses
Net loss attributable to (39 231) (41 635) 6
ordinary shareholders for basic
earnings per share
Loss/(profit) on disposal of 323 (414) 179
assets (net of tax)
Investment property revaluation (3 167) - -
Reversal of impairment (2 205) - -
Net headline loss attributable (44 280) (42 049) (5)
to ordinary shareholders
LOSS PER SHARE
Loss per share (cents) (6,2) (7,8)1 21
Diluted loss per share (cents) (6,1) (7,7)1 21
Headline loss per share (cents) (7,0) (7,8)1 10
Diluted headline loss per share (6,9) (7,8)1 12
(cents)
1 In compliance with IAS 33 the number of shares have increased by 41 612 330
shares deemed to be bonus shares arising from a rights offer in July 2007.
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Year ended Year ended
30 Jun 08 30 Jun 07
R`000 Reviewed Audited
Net cash inflows/(outflows) from (33 724) (75 633)
operating activities
Cash generated/(utilised) by (22 387) (69 435)
operations
Finance costs (11 368) (6 480)
Interest income 31 282
Net cash inflows/(outflows) from (26 131) (83 945)
investing activities
Net additions to mine plant, equipment (28 185) (84 528)
and buildings
Sanlam policy payments (600) -
Proceeds from disposals of plant and 2 654 583
equipment
Net cash inflows/(outflows) from 114 089 70 664
financing activities
Finance lease obligations (7 020) 9 305
Loans from shareholders (26 936) 26 936
Convertible debentures 59 140 -
Portion of debentures deemed to be 17 960 -
equity
Proceeds from share issues 70 945 34 423
Net decrease/(increase) in cash and 54 234 (88 914)
cash equivalents
Cash and cash equivalents at beginning (28 854) 60 060
of period
Cash and cash equivalents at end of 25 380 (28 854)
period
CONSOLIDATED BALANCE SHEET
30 Jun 08 31 Dec 07 30 Jun 07
R`000 Reviewed Audited Audited
ASSETS
Non-current assets 161 804 149 940 153 449
Goodwill 10 175 10 175 10 175
Property, plant and equipment 149 994 139 765 143 274
Restricted investment 1 635 - -
Current assets 92 561 54 265 49 556
Inventories 46 390 31 485 33 921
Other financial asset 498 - -
Accounts receivable 17 504 16 543 12 239
Taxation pre-paid 2 789 2 789 2 789
Cash and cash equivalents 25 380 3 448 607
Total assets 254 365 204 205 203 005
EQUITY AND LIABILITIES
Capital and reserves 140 785 127 372 80 644
Share capital and premium 281 053 282 467 210 108
Portion of convertible 17 960 - -
debentures deemed to be equity
Share-based payment reserve 11 191 724 724
Accumulated loss (169 419) (155 819) (130 188)
Non-current liabilities 87 880 23 824 28 899
Long-term loan 7 957 8 643 13 943
Provision for environmental 20 783 15 181 14 956
rehabilitation
Convertible debentures 59 140 - -
Current liabilities 25 700 53 009 93 462
Accounts payable 21 105 24 674 30 850
Short-term loan - 21 726 26 936
Bank overdraft - - 29 461
Provisions - 266 587
Current portion of long-term 4 595 6 343 5 628
liabilities
Total equity and liabilities 254 365 204 205 203 005
Current asset/liability ratio 3,6 1,0 0,5
Net asset value per share 22,2 20,2 15,9
(cents)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Portion of
convertible
debentures
Share Share deemed to
R`000 capital premium be equity
Balance at 30 June 2006 450 175 235 -
Share placement 43 29 958 -
Options exercised 13 4 409 -
Loss for the year - - -
Balance 30 June 2007 506 209 602 -
Rights issue 126 74 827 -
Options exercised 3 1 079 -
Share and debenture issue - (5 090) -
expenses written off
Portion of convertible - - 17 960
debentures deemed to be equity
Options granted - - -
Loss for the year - - -
Balance 30 June 2008 635 280 418 17 960
Share-
based Accumu-
payment lated
R`000 reserve loss Total
Balance at 30 June 2006 724 (88 553) 87 856
Share placement - - 30 001
Options exercised - - 4 422
Loss for the year - (41 635) (41 635)
Balance 30 June 2007 724 (130 188) 80 644
Rights issue - - 74 953
Options exercised - - 1 082
Share and debenture issue - - (5 090)
expenses written off
Portion of convertible - - 17 960
debentures deemed to be equity
Options granted 10 467 - 10 467
Loss for the year - (39 231) (39 231)
Balance 30 June 2008 11 191 (169 419) 140 785
COMMENTARY
DIRECTORATE
It is with deep and heartfelt regret that I report the tragic death of Dr
Vincent Msibi on Saturday, 12 July 2008. Vincent served on the Sallies board
since 30 June 2006. Our sincere condolences have been passed on to his family
and friends and I hereby record the contributions he made to the affairs of the
company. He will be sorely missed by all.
It is my privilege, on behalf of all stakeholders, to welcome Dr FJP (Fred)
Roux, as non-executive chairman, with effect from 1 July 2008.
ANALYSIS OF RESULTS
The consolidated loss before taxation for F2008 was R39,2 mio (F2007: loss R47,2
mio). Of this, R25,6 mio was incurred during H1 F2008 and R13,6 mio, inclusive
of R10,5 mio share-based payments, was incurred during H2 F2008. The H2 F2008
loss of R13,6 mio compares with a H2 F2007 loss of R28,2 mio. Witkop made an
operating profit from mining during H2 F2008, and Buffalo reduced its operating
loss from mining from R8,2 mio during H1 F2008 to R1,9 mio during H2 F2008.
The group is bearing an onerous legacy of legal costs, mainly pertaining to the
Honeywell Dispute, and of heavy finance costs arising from fundraising.
The operating results for mining turned around by R28,8 mio, from a loss of
R21,0 mio in F2007 to a profit of R7,8 mio in F2008. The loss before tax and
before the share based payments for the year was R28,8 mio (R47,2 mio in F2007),
made up of a loss of R25,6 mio for H1 F2008 and a loss of R3,1 mio for H2 F2008.
On this basis a small profit was made in Q4 F2008.
Composition of results
R`000 H1 F2008 H2 F2008 F2008
Witkop (3 337) 16 455 13 118
Buffalo (8 217) (1 857) (10 074)
Forex gains 1 733 3 061 4 794
Operating profit/(loss) from (9 821) 17 659 7 838
mining
Legal fees (1 593) (2 268) (3 861)
Other administration expenses (11 751) (9 623) (21 374)
Finance costs (2 466) (8 902) (11 368)
Headline loss (25 631) (3 134) (28 765)
Share based payments 0 (10 466) (10 466)
Net loss (25 631) (13 600) (39 231)
MARKETING
Our contract commitments for C2007, at the punitive price levels written into
these agreements, were discharged in full during July 2008. As recorded in the
announcement of the audited results to December 2007, sharply higher prices were
achieved for the balance of C2008 mostly at Witkop. Due to the declining volumes
of high quality acid grade material available from China, which dominates this
market, it is possible that prices for C2009 will be higher than those achieved
in C2008.
OPERATIONS
I am pleased to record that no fatal accidents occurred during this review
period. Cumulative fatality free shifts at 30 June 2008 were 7 172 at Witkop and
1 854 at Buffalo. Witkop`s last fatal accident was in November 2001 and Buffalo
has had no fatal accidents since restarting in August 2006. The DIFR for F2008
were 3,63 for Witkop and 0,82 for Buffalo. The rate at Witkop is well above the
target and receiving appropriate management attention.
Production of all grades from Witkop for F2008 at 118 137 WMT, was 17 221 WMT or
17% higher than for F2007. Acid grade production from Buffalo for F2008 at 25
720 WMT, was 8 795 WMT or 52% higher than for F2007. The moisture content of
Buffalo material has been too high since it restarted in August 2006. This
challenge was overcome during the current reporting period.
HONEYWELL SUPPLY AGREEMENT DISPUTE
Honeywell has submitted an alternative claim in the sum of USD4 514 457 plus
interest and costs, to the original claim against the company in the sum of USD6
847 305 plus interest and costs.
The company is opposing Honeywell`s claim and has submitted a claim against
Honeywell in the sum of USD3 830 273 plus interest and costs.
The final hearing in the matter will take place before the Arbitral Tribunal on
27 October 2008. It is possible that the final decision of the Arbitral Tribunal
will be delivered early in 2009.
EXPLORATION
We continue to pursue rights to a significant, high grade, fluorspar deposit.
MINERAL RESOURCES AND RESERVES
There have been no material changes to the resources and reserves as disclosed
in the Sallies Interim Report for the six months ended 31 December 2007. A full
review is in progress and will be published in the annual financial statements.
OUTLOOK
Witkop became profitable for the first time in over five years during the
current review period. Future profits are highly geared to rand fluorspar
prices, production volumes, quality control, deliveries and cost control.
We believe that we can improve the effectiveness of our power usage to the
degree that implementation of the Buffalo re-engineering recommendations can
proceed. Eskom has increased its contracted maximum demand to Buffalo from the
previous 1.20 mVA to 1.85 mVA, which is the level Buffalo has utilised since re-
opening. In order to implement the original recommendations of its consultants,
Buffalo would require 3.00 mVA, a level for which it has applied and is being
considered by Eskom. In the interim, Buffalo will implement the project to re-
treat dumps 5 and 6, incorporating engineering alternatives which consume less
power and use power more effectively. Calculations on opex and capex levels and
the production build-up are still in progress.
We continue to address the issue of monazite and its associated contaminants at
Buffalo.
RIGHTS OFFER
A rights offer of 151 483 358 unsubordinated unsecured convertible debentures
was made on 12 May 2008. The gross proceeds from the rights offer amounted to
R75 741 679 and the expenses pertaining thereto were R2 475 109.
SHARE OPTIONS
37 537 548 equity settled share options vesting over a period of 16 months were
granted to the executive directors in February 2008. As a consequence of the
offer of convertible debentures in May 2008, they now also have options over 9
009 011 convertible debentures.
MODIFIED REVIEW OPINION
The preliminary review report for the year ended 30 June 2008 has been reviewed
by the group`s auditors, BDO Spencer Steward, and their modified review opinion
is available for inspection at the registered office of the company. They have
drawn attention to the disclosure made by the directors regarding the continuing
Honeywell arbitration.
ACCOUNTING POLICIES
The consolidated condensed financial statements have been prepared in accordance
with International Financial Reporting Standards, IAS 34: Interim Reporting, the
Companies Act and the JSE Listings Requirements. The principal accounting
policies used in the preparation of these consolidated, condensed financial
statements are consistent with those applied in the annual financial statements
for the year ended 30 June 2007.
DIVIDENDS
No dividend has been declared for the year under review.
By order of the Board
Tom Dale
CEO
Zeerust
10 September 2008
Directors:
Fred Roux* (Chairman), Tom Dale (CEO), Johann Blersch (Commercial Director),
Barney Esterhuizen*, Jurgen Kogl* * Non-Executive
Registered Office:
Witkop Fluorspar Mine, Farm Wintershoek, Zeerust, 2865
(Private Bag X1315, Zeerust, 2865)
Auditors:
BDO Spencer Steward
BDO Place, 457 Rodericks Road, Lynnwood, Pretoria, 0081
(PO Box 95436, Waterkloof, Pretoria, 0145)
Transfer Secretaries:
Computershare Investor Services (Proprietary) Limited
(Registration number 2004/003647/07)
70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Sponsor:
Bridge Capital Advisors (Pty) Limited
2nd Floor, 27 Fricker Road, Illovo Boulevard, Illovo, 2196
Date: 10/09/2008 07:30:04 Produced by the JSE SENS Department.
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