| Thu 25 Sep 2008, 12:16 | | SAH - South African Coal Mining Holdings - Interim Results For The Six Months |
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SAH
SAH
SAH - South African Coal Mining Holdings - Interim Results For The Six Months
Ended 30 June 2008 And Cautionary Announcement
South African Coal Mining Holdings Limited
(Incorporated in the Republic of South Africa)
Registration number 1994/009012/06
Share code: SAH
ISIN code: ZAE0000102034
("SACMH" or "the company")
INTERIM RESULTS
for the six months ended 30 June 2008 and cautionary announcement
HIGHLIGHTS
* First six months of new Umlabu mine (Ilanga closed)
* New Chief Operating Officer appointed
* Fraser Alexander Strategic Partnership implemented
* Average production 80 000 t per month run of mine
8 Earnings affected by beneficiation plant, set up delays and higher costs,
particularly diesel, steel and blasting
* Infrastructure upgrade at Umlabu commenced
* R106,5 million equity raised to fund upgrades
* Results not comparable with prior reporting periods due to restructuring and
acquisitions
Karl Gribnitz, Chief Executive, said:
"We remain on track to increase our run of mine production to 150,000tpm by 2011
from the current 80 000tpm. We are making a major investment in the Umlabu mine
both in skills and equipment to not only facilitate this increased production
but also to realise greater efficiencies in our operations. The below budget
plant yields during the start up time have been addressed and we are already
seeing a significant improvement. We expect a much better performance in the
second half."
CONDENSED CONSOLIDATED BALANCE SHEET
Reviewed Audited *Restated
as at as at as at
30 June 31 December 30 June
2008 2007 2007
R`000 R`000 R`000
Assets
Non-current assets 989 571 976 070 928 141
Property, plant and equipment 148 128 135 440 87 511
Intangible assets - mineral 841 082 840 630 840 630
rights
Deferred tax asset 361 - -
Current assets 33 394 21 858 38 762
Inventories 18 745 7 891 2 784
Trade and other receivables 11 672 12 387 23 426
Cash and cash equivalents 2 977 1 580 12 552
Total assets 1 022 965 997 928 966 903
Equity and liabilities
Capital and reserves 550 540 523 220 517 223
Issued capital 124 473 124 473 86 562
Reserves 352 640 325 928 361 890
Retained earnings 73 427 72 819 68 771
Non-current liabilities 413 944 407 781 393 626
Interest bearing liabilities 125 428 117 275 108 000
Non-interest bearing liabilities - 1 500 1 500
Non-current provisions 35 668 35 444 35 444
Deferred taxation 252 848 253 562 248 682
Current liabilities 58 481 66 927 56 054
Trade and other payables 36 417 38 640 54 054
Current portion of non-current 22 064 23 297 2 000
liabilities
Bank overdraft - 4 990 -
Total equity and liabilities 1 022 965 997 928 966 903
Number of shares in issue (`000) 411 810 411 810 400 000
Net asset value per share (cents) 133,69 127,05 129,31
Tangible net asset value per (70,55) (77,08) (80,85)
share (cents)
* The June 2007 figures have been restated to reflect the final results of the
acquisitions of Ilanga and Umlabu in terms of IFRS 3 - Business Combinations.
CONDENSED CONSOLIDATED INCOME STATEMENT
Reviewed Audited *Restated
6 months 18 months 6 months
ended ended ended
30 June 31 December 30 June
2008 2007 2007
R`000 R`000 R`000
Revenue 65 938 88 060 -
Cost of sales (49 625) (53 161) -
Gross profit 16 313 34 899 -
Other income - 2 514 -
Gains and losses on debt 1 600 110 614 114 609
restructure and acquisitions
Operating expenses (6 063) (17 397) (2 390)
Operating profit 11 850 130 630 112 219
Investment income 121 490 167
Finance costs (11 725) (7 247) -
Profit before taxation 246 123 873 112 386
Taxation 361 (8 730) -
Profit after taxation 607 115 143 112 386
Attributable to:
Equity holders of the parent 607 115 143 112 386
Earnings per share
Number of ordinary shares in 411 810 411 810 400 000
issue (`000)
Weighted average number of 411 810 137 524 400 000
ordinary shares in issue (`000)
Basic (cents per share) 0,15 83,73 28,10
Diluted (cents per share) 0,15 83,73 28,10
Reconciliation between earnings
and headline earnings per share
Basic (cents per share) 0,15 83,73 28,10
Impairment per share (cents) - 17,75 -
Profit on debt restructure and (0,39) (98,90) (28,65)
acquisitions (cents)
Tax effect - - -
Headline basic and dilutive (0,24) 2,58 (0,55)
(loss)/earnings per share
* The June 2007 figures have been restated to reflect the final results of the
acquisitions of Ilanga and Umlabu in terms of IFRS 3 - Business Combinations.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Revalua-
Share Share tion
capital premium reserve
R`000 R`000 R`000
Balance at 1 July 2005 6 000 12 562 -
Net loss for the period
Balance 1 July 2006 6 000 12 562 -
Net loss for the period
Balance at 1 January 2007 6 000 12 562 -
Issue of ordinary shares 34 000 34 000
Convertible instruments
Gain on revaluation of mineral 325 890
rights
Restated net profit for the period
Net profit as previously reported - - -
IFRS 3 adjustment - - -
Balance at 1 July 2007 40 000 46 562 325 890
Issue of ordinary shares 1 181 36 730
Gain on revaluation of property, 145
plant and equipment
Transfer on revaluation reserve (107)
realised
Net loss for the period
Balance at 1 January 2008 41 181 83 292 325 928
Proceeds from rights issue
Rights issue costs
Net profit for the period
Balance at 30 June 2008 41 181 83 292 325 928
Other Retained
reserves earnings Total
R`000 R`000 R`000
Balance at 1 July 2005 - (31 212) (12 650)
Net loss for the period (11 219) (11 219)
Balance 1 July 2006 - (42 431) (23 869)
Net loss for the period (1 184) (1 184)
Balance at 1 January 2007 - (43 615) (25 053)
Issue of ordinary shares 68 000
Convertible instruments 36 000 36 000
Gain on revaluation of mineral 325 890
rights
Restated net profit for the period 112 386 112 386
Net profit as previously reported - 131 202 131 202
IFRS 3 adjustment - (18 816) (18 816)
Balance at 1 July 2007 36 000 68 771 517 223
Issue of ordinary shares (36 000) - 1 911
Gain on revaluation of property, 145
plant and equipment
Transfer on revaluation reserve 107 -
realised
Net loss for the period 3 941 3 941
Balance at 1 January 2008 - 72 819 523 220
Proceeds from rights issue 28 525 28 525
Rights issue costs (1 813) (1 813)
Net profit for the period 607 607
Balance at 30 June 2008 26 712 73 427 550 540
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Reviewed Audited *Restated
6 months 18 months 6 months
ended ended ended
30 June 31 December 30 June
2008 2007 2007
R`000 R`000 R`000
Cash flows from operating
activities
Receipts from customers 61 168 85 156 -
Payments to suppliers and (46 379) (62 011) (2 760)
employees
Movement in working capital (11 994) 39 848 7 143
Cash generated from operations 2 795 62 993 4 383
Interest and finance costs paid (11 725) (7 247) -
Net cash (used in)/generated by (8 930) 55 746 4 383
operations
Cash flows from investing
activities
Acquisition of subsidiaries - (124 783) (166 831)
Interest received 121 490 -
Payments for property, plant and (30 101) (51 137) -
equipment
Proceeds from disposal of 11 932 - -
property, plant and equipment
Net cash used in investing (18 048) (175 430) (166 831)
activities
Cash flows from financing
activities
Proceeds from issue of equity - - 68 000
shares
Proceeds from rights issue 28 525 - -
Rights issue costs (1 813) - -
Raising of borrowings 6 653 107 282 99 488
Net cash generated by investing 33 365 107 282 167 488
activities
Net increase/(decrease) in cash 6 387 (12 402) 5 040
and cash equivalents
Cash and cash equivalents at (3 410) 8 992 7 512
beginning of period
Cash and cash equivalents at end 2 977 (3 410) 12 552
of period
PRIOR PERIOD ADJUSTMENTS
As previously
reported 30 June
30 June IFRS 3 2007
2007 adjustments Restated
R`000 R`000 R`000
Balance sheet
Non-current assets 428 878 499 263 928 141
Current assets 38 305 457 38 762
Capital and reserves (210 148) (307 075) (517 223)
Non-current liabilities (222 512) (171 114) (393 626)
Current liabilities (34 523) (21 531) (56 054)
Income statement
Profit on debt restructure 30 762 - 30 762
Profit on acquisitions 125 338 (17 084) 108 254
Impairment on acquisitions (22 675) (1 732) (24 407)
Nett profit for the period 131 202 (18 816) 112 386
Impact on earnings per share 32,80 (4,7) 28,10
Headline earnings per share (0,55) - (0,55)
SEGMENT REPORT
Coal Equipment
sales rental Consolidated
R`000 R`000 R`000
30 June 2008
Total revenue 52 220 13 718 65 938
Operating profit 7 518 4 332 11 850
Net finance charges (11 604)
Profit before tax 246
Assets 979 311 43 654 1 022 965
Liabilities 431 593 40 832 472 425
Capital expenditure 12 837 17 264 30 101
Depreciation 1 647 3 382 5 029
Non-cash items 1 600 - 1 600
31 December 2007
Total revenue 74 429 13 631 88 060
Other gains and losses 110 614 - 110 614
Operating profit 126 604 4 026 130 630
Net finance charges - - (6 757)
Assets 942 396 55 533 997 928
Liabilities 435 575 39 133 474 708
Capital expenditure 83 813 41 003 124 816
Depreciation 721 2 408 3 129
Non-cash items 110 614 - 110 614
30 June 2007
Total revenue - - -
Other gains and losses 114 609 - 114 609
Operating profit 112 219 - 112 219
Net finance charges - - 167
Assets 966 903 966 903
Liabilities 449 680 449 680
Capital expenditure 73 680 - 73 680
Non-cash items 114 609 - 114 609
Introduction
SACMH is a South African based coal mining and exploration holding company
controlled by Royal Bafokeng Capital which is a broad-based black economic
empowered entity. Its subsidiaries are involved in the business of coal
production, exploration and marketing.
Operational overview
The new Umlabu mine was in start up phase during the period under review and is
now in a `stable state`, producing 80 000 tons run of mine ("ROM") per month.
The mine broke even for the six months ended 30 June 2008.
Total tons mined and processed were below budget as a result of heavy rains in
January and February, which affected the open cast mining and the beneficiation
plant, as well as delays in plant set up and optimisation and operational
management problems at the time. Total ROM production for the period was 486kt,
with 260kt beneficiated and the remainder stockpiled. Yield averaged 35%.
The following initiatives were agreed in May 2008 to improve Umlabu`s
performance:
- the replacement of the material handling and beneficiation plant contractor;
- the appointment of a new Chief Operating Officer;
- the upgrade of the existing beneficiation plant and the approval of the
construction of a new beneficiation plant;
- a full review of the mine plan and optimisation of underground and open cast
operations; and
the commissioning of a new siding and related infrastructure at the Umlabu mine.
Fraser Alexander was accordingly appointed as the material handling and
beneficiation contractor on 1 June 2008 and a new Chief Operating Officer, Peet
Kotze, was also appointed.
Under the guidance of the new Chief Operating Officer, uneconomical mining
operations, ineffective beneficiation methods and processes were ceased and cost
reduction strategies were implemented. Various refinements have been made to the
beneficiation plant and further modifications are planned which should be
completed in the next 60 to 90 days. A marked plant process improvement has
already been reported with product yields now averaging 45%. Further capex is
planned to beneficiate `fines` which will further improve yields.
The Group is confident that these changes will result in a marked improvement in
the performance of the Umlabu mine.
The Group has started construction on the R67 million Umlabu siding (previously
called New Voorslag), which will dramatically reduce the cost of road haulage
and railage. In addition, a conveyor belt from the plant to the siding is
planned and will further reduce costs of bulk materials handling and movement.
Sales
The 65kt tonnage sold through RBCT during the period was below expectations as
it was affected not only by production levels but also by by the lack of
availability of trains. A further 20kt was sold into Free on Rail contracts
during the period.
Off-take from Eskom has not yet commenced, as all parties agreed to a trial
period during which technical testing of the product would be conducted.
Financial overview
Sales were lower than expected for the reasons set out above. The average
realised price was also lower than the average spot price for the period of
US116/t due to SACMH`s obligation to deliver into outstanding contracts on both
FOB and FOR bases. These contracts have now been fulfilled, and SACMH will now
be more directly exposed to spot prices for its beneficiated product.
The gross profit margin was negatively affected by lower volumes, lower
beneficiation yields during toll washing and delays in the configuration of the
beneficiation plant. The increase in diesel prices, steel and explosive costs
resulted in an increase in the mining costs for the period.
The comparatives for June 2007 were restated in compliance with IFRS 3,
resulting in fair value adjustments for the acquisitions of Ilanga and Umlabu
that were already reported (and audited) in the December 2007 Annual Financial
Statements. This was as a result of the CPR report being finalised subsequent to
year end.
Infrastructure upgrade
The infrastructure upgrade programme is expected to result in an increase in ROM
production capacity from 95ktpm to 150ktpm, of which 40ktpm is planned to be
sold to Eskom, with the balance of 110ktpm (60ktpm finished products) processed
in-house through the upgraded plant facility for the export market. This
programme will also result in substantially enhanced operational efficiencies
and cost savings. The company is currently at advanced stages of raising further
funding to complete the infrastructure upgrade.
Exploration
A full exploration programme is being rolled out on the Sterkfontein Prospecting
Right and the Kromkrans Prospecting Right areas. Findings of this programme will
be made available as soon as results are known.
Outlook
The current market price of USD138/t FOB should improve the profitability of
SACMH as the company closes out its current contract obligations. The new
management, investment in infrastructure and improved mining plans are also
expected to result in a significant increase in volumes and reduced mining cost
per ton.
Management is confident that a significant improvement in performance can be
expected in the second half of the year.
Cautionary announcement
Shareholders are advised that the company has entered into negotiations which,
if successfully concluded, may have a material effect on the price of the
company`s securities. Accordingly, shareholders are advised to exercise caution
when trading in SACMH securities until such time as a full announcement can be
made.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
Basis of reporting
These interim financial statements have been prepared in accordance with the
measurement and recognition criteria of International Financial Reporting
Standards ("IFRS"), and its interpretations adopted by the International
Accounting Standards Board ("IASB"), the preparation and disclosure requirements
of IAS 34 (Interim Financial Reporting), the Listings Requirements of the JSE
Limited and Schedule 4 of the South African Companies Act. The accounting
policies and methods of computation applied in these condensed financial
statements are consistent with those used in the preparation of the financial
statements for the period ended 31 December 2007.
Events after the balance sheet date
On 21 July 2008, SACMH announced a rights offer and a general issue of shares
for cash at an issue price of 400 cents per share. The company raised R106,5
million through this capital raising process. The Group is actively seeking
optimal and realistic acquisition opportunities, both brown and greenfields.
Contingencies
The summons against Ingwe Collieries instituted by the subsidiaries of SACMH
(Jigmining No 1 (Pty) Limited and Jigmining No 3 (Pty) Limited) proceeded to
mediation.
Related parties
Mkhulu Resources (Pty) Limited no longer qualifies as a related party with
effect from 1 June 2008.
Capital commitments
Capital commitments as at 1 June 2008 relating to the capital upgrade programme
were R70,2 million.
Review opinion
The interim financial information relating to the six months ended 30 June 2008
has been reviewed by Deloitte & Touche, whose unmodified review report is
available for inspection at the company`s registered office.
For and on behalf of the board
TV Mokgatlha KJ Gribnitz
Chairman Chief executive officer
Mirkwood
25 September 2008
Executive directors: KJ Gribnitz, P Kotze, M Steyn
Non-executive directors: TV Mokgatlha, WN Gardyne, V Lickfold, LM Ndala
Registered office: Mirkwood Estate, Plot 26, Klipkop JR 396
Transfer secretaries: Computershare Investor Services (Pty) Limited
Sponsor: QuestCo Sponsors (Pty) Limited
Auditors: Deloitte & Touche
Date: 25/09/2008 12:16:01 Produced by the JSE SENS Department.
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