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PZG
PZG
PZG - Pamodzi Gold - Unaudited Condensed Consolidated Results, Salient terms of
the proposed rights offer and withdrawal of cautionary announcement
PAMODZI GOLD
(Formerly Bema Gold South Africa (Proprietary) Limited)
(Incorporated in the Republic of South Africa)
Registration number: 2002/013039/06
Share code: PZG
ISIN: ZAE000088563
("the Company" or "PZG")
UNAUDITED CONDENSED CONSOLIDATED RESULTS FOR THE QUARTER AND NINE MONTHS ENDED
30 SEPTEMBER 2008, SALIENT TERMS OF THE PROPOSED RIGHTS OFFER AND WITHDRAWAL OF
CAUTIONARY ANNOUNCEMENT
Gold kilograms produced increased from previous quarter
R400 million funding package finalised
Visible impact of new management deployed at current operations
Safety first culture results in an improvement in safety behaviour
Delay in financing impacts results negatively
Discussions underway to restructure the current hedge exposure on the East
Rand
Income statement
Quarter Quarter
ended ended
30 September 30 June
2008 2008
(Unaudited) (Unaudited)
Continuing operations Note (R`000) (R`000)
Revenue 3 351 619 350 026
Cost of sales (527 199) (463 056)
Gross loss (175 580) (113 030)
Other income 4 706 9 384
Administration expenses (36 641) (28 886)
Foreign exchange (loss)/gain (19 123) (18 628)
Revaluation of financial derivative 90 522 (7 146)
Unwinding of rehabilitation provision (7 804) (7 577)
Finance costs (8 434) (10 326)
Finance income 2 179 1 131
Share based payment charge (1 405)
Share of (loss)/profit in associate (6)
Net loss before taxation (150 175) (176 489)
Taxation 2 849
Net loss after taxation (150 175) (173 640)
Attributable to:
Equity holders of the Company (15 0 175) (173 640)
Basic loss per share (cents) 4 (161) (186)
Diluted loss per share (cents) 4 (161) (186)
Quarter 9 months Year
ended ended ended
31 March 30 September 31 December
2008 2008 2007
(Unaudited) (Unaudited) (Audited)
Continuing operations (R`000) (R`000) (R`000)
Revenue 191 582 893 227 369 329
Cost of sales (198 555) (1 188 810) (479 670)
Gross loss (6 973) (295 583) (110 341)
Other income 6 665 20 755 18 576
Administration expenses (45 555) (111 082) (40 795)
Foreign exchange (loss)/gain (56 189) (93 940) 10 612
Revaluation of financial
derivative 2 511 85 887 (76 448)
Unwinding of rehabilitation
provision (2 170) (17 551) (4 021)
Finance costs (2 689) (21 449) (6 255)
Finance income 542 3 852 3 439
Share based payment charge (1 405) (3 210)
Share of (loss)/profit in
associate (6) 22
Net loss before taxation (103 858) (430 522) (208 421)
Taxation 2 849 (67)
Net loss after taxation (103 858) (427 673) (208 488)
Attributable to:
Equity holders of the Company (103 858) (427 673) (208 488)
Basic loss per share (cents) (166) (514) (500)
Diluted loss per share (cents) (166) (514) (500)
Balance sheet
30 September 31 December
2008 2007
(Unaudited) (Audited)
Note (R`000) (R`000)
ASSETS
Non-current assets
Property, plant and equipment 1 247 903 747 289
Tangibles/intangibles in process of
being identified 5 479 879
Intangible assets 3 823 2 737
Other investments 78 217 20 428
Investment in associate 187 194
Non-current prepayments 27 365
1 810 009 798 013
Current assets
Inventories 36 831 20 053
Trade and other receivables 56 031 28 421
Deferred stripping 2 151 3 894
Cash and cash equivalents 9 946 572
104 959 52 940
Non-current asset held for sale 2 062 11 700
Total assets 1 917 030 862 653
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 6&7 806 284 255 820
Share based payment reserve 4 615 3 210
Accumulated losses (651 387) (223 714)
Total shareholders` equity 159 512 35 316
Non-current liabilities
Derivative financial liability 9 342 166 344 094
Long-term liabilities 10 6 127 7 982
Rehabilitation provision 234 785 88 489
Post-retirement benefits liability 1 465 1 887
Deferred taxation 118 635 40 120
703 178 482 572
Current liabilities
Trade and other payables 722 058 169 270
Bank overdraft 5 808
Taxation 1 768
Derivative financial liability 9 131 090 110 290
Current portion of long-term
liabilities 10 201 192 57 629
1 054 340 344 765
Total liabilities 1 757 518 827 337
Total equity and liabilities 1 917 030 862 653
Statement of changes in equity
for the nine months ended 30 September 2008
Share
based
Share Share payment
capital premium reserve
(R`000) (R`000) (R`000)
Balance at 1 January 2007 300 220 123
Loss for the year
Share based payment 3 210
Shares issued 2 36 682
Share issue transaction costs (1 287)
Balance at 31 December 2007 302 255 518 3 210
Loss for the period
Share based payment 1 405
Shares issued 50 566 155
Share issue transaction costs (15 741)
Balance at 30 September 2008 352 805 932 4 615
Accumu-
lated
loss Total
(R`000) (R`000)
Balance at 1 January 2007 (15 226) 205 197
Loss for the year (208 488) (208 488)
Share based payment 3 210
Shares issued 36 684
Share issue transaction costs (1 287)
Balance at 31 December 2007 (223 714) 35 316
Loss for the period (427 673) (427 673)
Share based payment 1 405
Shares issued 566 205
Share issue transaction costs (15 741)
Balance at 30 September 2008 (651 387) 159 512
Cash flow statement
Quarter Quarter
ended ended
30 September 30 June
2008 2008
(Unaudited) (Unaudited)
Note (R`000) (R`000)
Cash flows from operating activities
Cash generated/(utilised) by operations 8 17 677 53 623
Interest received 2 179 1 131
Interest paid (8 434) (10 326)
Taxation paid
Net cash flows from operating activities 11 422 44 428
Cash flows from investing activities
Increase in other investments (1 166) (11 650)
Purchase of property, plant and equipment (31 020) (43 399)
Purchase of intangible assets (59) (851)
Proceeds from sale of assets 11 700
Investment in Orkney operations
Net cash flows from investing activities (32 245) (44 200)
Cash flows from financing activities
Increase in short-term borrowings 25 155 21 199
Decrease in long-term borrowings (2 219)
Shares issued for cash
Transaction costs paid (5 741)
Net cash flows from financing activities 25 155 13 239
Net increase/(decrease) in cash
and cash equivalents 4 332 13 467
Cash acquired with acquisitions
Cash and cash equivalents at
beginning of period 5 614 (7 853)
Cash and cash equivalents at end of period 9 946 5 614
Quarter 9 months Year
ended ended ended
31 March 30 September 31 December
2008 2008 2007
(Unaudited) (Unaudited) (Audited)
(R`000) (R`000) (R`000)
Cash flows from operating activities
Cash generated/(utilised) by
operations (11 792) 59 508 (36 553)
Interest received 542 3 852 3 439
Interest paid (2 689) (21 449) (6 255)
Taxation paid (1 768) (1 768) (3 122)
Net cash flows from operating
activities (15 707) 40 143 (42 491)
Cash flows from investing
activities
Increase in other investments (660) (13 476) (1 785)
Purchase of property, plant
and equipment (24 739) (99 158) (67 114)
Purchase of intangible assets (175) (1 085) (572)
Proceeds from sale of assets 11 700
Investment in Orkney operations (27 365)
Net cash flows from investing
activities (25 574) (102 019) (96 836)
Cash flows from financing
activities
Increase in short-term
borrowings 32 851 79 205 50 593
Decrease in long-term
borrowings (835) (3 054) (7 184)
Shares issued for cash 36 684
Transaction costs paid (5 741) (1 287)
Net cash flows from financing
activities 32 016 70 410 78 806
Net increase/(decrease) in cash
and cash equivalents (9 265) 8 534 (60 521)
Cash acquired with acquisitions 6 648 6 648
Cash and cash equivalents at
beginning of period (5 236) (5 236) 55 285
Cash and cash equivalents
at end of period (7 853) 9 946 (5 236)
Notes to the condensed consolidated financial statements for the quarter and
nine months ended 30 September 2008
1. Basis of preparation and accounting policies
The condensed consolidated financial information for the quarter and nine
months ended 30 September 2008 has been prepared in compliance with the South
African Companies Act, No 61 of 1973, as amended, the Listing Requirement of
the JSE Limited and International Accounting Standard 34, Interim Financial
Reporting. The financial statements have been prepared under the historical
cost convention, as modified by financial assets and financial liabilities
(including derivative instruments) at fair value. The accounting policies
applied in preparation of the condensed consolidated financial information are
consistent with those applied for the period ended 31 December 2007, which
comply with International Financial Reporting Standards (IFRS).
The preliminary condensed consolidated financial results do not include all the
information and disclosures required in the annual financial statements, and
should be read in conjunction with the Group`s annual financial statements as
at 31 December 2007. The Group has applied all new standards and these had no
major impact other than disclosure which will be included in the annual
financial statements.
2. Business combinations
President Steyn acquisition 26 February 2008:
Pamodzi Gold and Thistle Mining Incorporated have finalised the formal
transaction agreements ("President Steyn transaction agreements") in terms of
which Pamodzi Gold acquired the entire issued ordinary share capital of and all
claims on loan account against President Steyn Gold Mine (Free State) (Pty)
Limited for R214 million.
The President Steyn acquisition consideration was settled on 25 February 2008
by Pamodzi Gold as follows:
the issuing of 9 084 066 (nine million eighty four thousand and sixty six)
Pamodzi Gold Shares to Thistle and 683 491 (six hundred and eighty three
thousand four hundred and ninety one) Pamodzi Gold shares to Mindserv
(Proprietary) Limited ("President Steyn consideration shares");
the issuing of 9 259 927 (nine million two hundred and fifty nine thousand
and nine hundred and twenty seven) Pamodzi Gold shares to Clidet No 776
(Proprietary) Limited ("Clidet 776") in terms of a loan agreement between,
inter alia, Pamodzi Resources and Thistle; and
A cash settlement of R3,5 million to Mindserv.
Pamodzi Gold assumed full control of the President Steyn business on 26
February 2008.
Orkney acquisition 27 February 2008:
The Company has reached an agreement with Harmony Gold Limited ("Harmony")
regarding the acquisition of Harmony`s Orkney Assets shafts 1 to 7 as a going
concern ("the Orkney business").
The purchase consideration for the Orkney business is R376 million (three
hundred and seventy six million) and was settled by Pamodzi Gold through the
issue of 30 000 000 (thirty million) Pamodzi Gold shares to Harmony ("Orkney
consideration shares") on 27 February 2008. Pamodzi Gold assumed full control
of the Orkney business on this date.
In terms of the Orkney transaction agreements, Harmony shall not be entitled to
dispose of the Orkney consideration shares for a period of twelve months after
the effective date of the Orkney transaction. Should Harmony wish to reduce its
exposure to Pamodzi Gold, it may approach Pamodzi Gold and request it to place
the Orkney consideration shares on their behalf.
As disclosed under the heading "Tangibles/intangibles in the process of being
identified", the accounting of the business combination that was effected
during the periods under review, has only been provisionally determined. This
process will be completed by year-end.
3. Revenue
Quarter Quarter Quarter
ended ended ended
30 September 30 June 31 March
2008 2008 2008
(Unaudited) (Unaudited) (Unaudited)
(R`000) (R`000) (R`000)
Gold sales at spot 392 540 400 420 233 713
Realised hedge loss (41 916) (51 070) (42 575)
Silver sales 995 676 444
Revenue 351 619 350 026 191 582
9 months Year
ended ended
30 September 31 December
2008 2007
(Unaudited) (Audited)
(R`000) (R`000)
Gold sales at spot 1 026 673 470 707
Realised hedge loss (135 561) (102 081)
Silver sales 2 115 703
Revenue 893 227 369 329
4. Loss per share attributable to the equity holders
Quarter Quarter Quarter
ended ended ended
30 September 30 June 31 March
2008 2008 2008
(Unaudited) (Unaudited) (Unaudited)
Loss attributable to equity
holders of the Company (R`000) (150 175) (173 640) (103 858)
Weighted average number of
ordinary shares in issue 93 544 675 93 544 675 62 617 801
Basic, diluted and headline
loss per share (cents) (161) (186) (1 66)
9 months Year
ended ended
30 September 31 December
2008 2007
(Unaudited) (Audited)
Loss attributable to equity holders
of the Company (R`000) (427 673) (208 488)
Weighted average number of ordinary
shares in issue 83 273 341 41 676 644
Basic, diluted and headline loss
per share (cents) (514) (500)
5. Tangibles/intangibles in the process of being identified
Following the acquisitions accounted for in the periods under review, no
purchase price allocation has been performed at the date of this report. This
will be performed before the year end. As a result no goodwill or negative
goodwill has been recorded in the period under review. Currently the difference
between the cost of the combination and the carrying amounts of assets and
liabilities has been recorded as "Tangibles/intangibles in the process of being
identified".
The following is a summary of the assets and liabilities acquired by Pamodzi
Gold Limited:
Orkney Free State
Operations Operations Total
(R`000) (R`000) (R`000)
Property, plant and equipment 290 585 166 840 457 425
Rehabilitation investments 27 963 16 337 44 300
Trade and other receivables 9 967 9 967
Inventories 21 594 21 594
Cash and cash equivalents 6 648 6 648
Long-term liability (1 199) (1 199)
Short-term liability (33 294) (33 294)
Rehabilitation provision (61 479) (58 372) (119 851)
Deferred tax liability (81 364) (81 364)
Trade creditors (107 977) (107 977)
Accruals and provisions (63 194) (22 166) (85 360)
Total net assets 112 511 (1 622) 110 889
Details of the net assets acquired
are as follows:
Total cost of business combination 376 063 214 705 590 768
Less net asset value on date of
acquisition (112 511) 1 622 (110 889)
Tangibles/intangibles in process of
being identified 263 552 216 327 479 879
6. Share capital and premium
New shares were issued in February 2008 for the purchase considerations and
other expenses relating to the Orkney and President Steyn acquisitions. As a
result, the share capital and share premium as at 30 September 2008 can be
summarised as follows:
(R`000)
Share capital before new issue 302
Shares issued 50
Total share capital as at 30 September 2008 352
Share premium before new issue 255 518
Shares issued 566 155
Share issue transaction costs (15 741)
Total share capital as at 30 September 2008 805 932
Total share capital and share premium as at 30 September 2008 806 284
7. Share capital Pamodzi Gold Limited (legal parent)
30 September 2008 30 June 2008
Authorised 1 billion shares of 1 billion shares of
0,1 cent per share 0,1 cent per share
Issued 93 544 675 93 544 675
31 March 2008 31 December 2007
Authorised 1 billion shares of 1 billion shares of
0,1 cent per share 0,1 cent per share
Issued 93 544 675 43 465 664
8. Cash utilised by operations
Quarter Quarter Quarter
ended ended ended
30 September 30 June 31 March
2008 2008 2008
(Unaudited) (Unaudited) (Unaudited)
Net loss before taxation (150 175) (176 489) (103 858)
Adjustments for:
Amortisation 22 179 29 273 8 323
Interest paid 8 434 10 326 2 689
Interest received (2 179) (1 131) (542)
Loss/(profit) from associate 6
Share based payments 1 405
Unwinding of rehabilitation
provision 7 804 7 577 2 170
Valuation of medical liability
Revaluation of financial
derivative (90 522) 7 146 (2 511)
Unrealised foreign exchange
(gain)/loss 19 123 18 628 56 189
Operating loss before working
capital changes (185 336) (103 259) (37 540)
Working capital changes 203 013 156 882 25 748
Decrease/(increase) in
receivables
and prepayments 7 418 3 532 (4 728)
Decrease/(Increase) in
deferred stripping 2 377 (460) (174)
Increase in trade and other
payables 159 140 169 357 44 787
Decrease/(Increase) in inventories 34 133 (15 243) (14 074)
Decrease in post retirement
medical liability (55) (304) (63)
17 677 53 623 (11 792)
9 months Year
ended ended
30 September 31 December
2008 2007
(Unaudited) (Audited)
Net loss before taxation (430 522) (208 421)
Adjustments for:
Amortisation 59 775 28 959
Interest paid 21 449 6 255
Interest received (3 852) (3 439)
Loss/(profit) from associate 6 (22)
Share based payments 1 405 3 210
Unwinding of rehabilitation provision 17 551 4 021
Valuation of medical liability 400
Revaluation of financial derivative (85 887) 76 448
Unrealised foreign exchange (gain)/loss 93 940 (10 612)
Operating loss before working capital changes (326 135) (103 201)
Working capital changes 385 643 66 648
Decrease/(increase) in receivables and prepayments 6 222 2 257
Decrease/(Increase) in deferred stripping 1 743 (1 399)
Increase in trade and other payables 373 284 68 928
Decrease/(Increase) in inventories 4 816 (2 902)
Decrease in post retirement medical liability (422) (236)
59 508 (36 553)
9. Derivative financial instruments
The Group`s revenues are sensitive to the ZAR/US$ exchange rate as all the
revenues are generated through gold sales, denominated in US$. Historically,
the Group entered into forward sales to establish a ZAR/US$ exchange rate in
advance for the sale of the future gold production.
As at 30 September 2008 108 000 (30/06/2008 115 500; 31/03/2008 124 500;
31/12/2007 133 500) ounces were outstanding on the US$ Contingent Forwards.
The gold contingent forwards revalued at 30 September 2008 amounted to R473
million liability (31/12/2007 R454 million).
Effect of derivative financial instrument on earnings
Quarter Quarter Quarter
ended ended ended
30 September 30 June 31 March
2008 2008 2008
(Unaudited) (Unaudited) (Unaudited)
(R`000) (R`000) (R`000)
Realised hedge loss (41 916) (51 070) (42 575)
Revaluation of derivatives 90 552 (7 146) 2 511
Foreign exchange gain/(loss)
on derivatives (20 261) (18 045) (54 481)
Adjusted loss excluding hedging
and derivatives attributable to
equity holders of the Company 28 345 (76 261) (94 545)
Weighted average
number of shares 93 544 675 93 544 675 62 617 801
Effect of hedging and
derivatives on basic and
diluted loss per share (cents) 30 (82) (151)
Basic and diluted loss per share
(cents) (note 4) (161) (186) (166)
Basic and diluted loss per share
excluding hedging and
derivatives (cents) (191) (104) (15)
9 months Year
ended ended
30 September 31 December
2008 2007
(Unaudited) (Audited)
(R`000) (R`000)
Realised hedge loss (135 561) (102 081)
Revaluation of derivatives 85 887 (76 448)
Foreign exchange gain/(loss) on derivatives (92 787) 10 612
Adjusted loss excluding hedging
and derivatives attributable to
equity holders of the Company (142 461) (167 917)
Weighted average number of shares 83 273 341 41 676 644
Effect of hedging and derivatives on
basic and diluted loss per share (cents) (171) (403)
Basic and diluted loss per share
(cents) (note 4) (514) (500)
Basic and diluted loss per share excluding
hedging and derivatives (cents) (343) (97)
10. Net debt position
30 September 2008
(Unaudited)
(R`000)
Non-current
Kloof Gold Mining Company Carried at fair value, calculating by 783
discounting future cash flow
using prime interest rate
Finance leases Various vehicles and assets being leased 5 344
for periods between 3 to 5 years
linked to prime interest rate 6 127
Current
Kloof Gold Mining Company Carried at fair value, calculating by 2 416
discounting future cash flow
using prime interest rate
Short term loan Loan is interest free and has 4 697
no fixed terms for repayment
Finance leases Various vehicles and assets being leased 3 649
for periods between 3 to 5 years
linked to prime interest rate
Short term loan Interest at prime 107 213
Revolving credit facility Prime compounded monthly in arrears 27 004
Bridging overdraft facility Interest paid in advance and repayable in 19 000
two equal installments
MC Resources Limited and Interest at USD prime plus 2% 37 213
Casten Holdings Limited 201 192
Total borrowings 207 319
Cash and cash equivalents 9 946
Net debt (197 373)
Total equity 159 512
31 December 2007
(Audited)
(R`000)
Non current
Kloof Gold Mining Company Carried at fair value, calculating by 930
discounting future cash flow
using prime interest rate
Finance leases Various vehicles and assets being leased 7 052
for periods between 3 to 5 years
linked to prime interest rate 7 982
Current
Kloof Gold Mining Company Carried at fair value, calculating by 1 978
discounting future cash flow
using prime interest rate
Short term loan Loan is interest free and has 4 697
no fixed terms for repayment
Finance leases Various vehicles and assets being leased 3 954
for periods between 3 to 5 years
linked to prime interest rate
Short term loan Interest at prime 33 000
Revolving credit facility Prime compounded monthly in arrears 14 000
Bridging overdraft facility Interest paid in advance and repayable in
two equal installments
MC Resources Limited and Interest at USD prime plus 2%
Casten Holdings Limited 57 629
Total borrowings 65 611
Cash and cash equivalents (5 236)
Net debt (70 847)
Total equity 35 316
The borrowings increased by 216% from R66 million as at 31 December 2007 to
R207 million as at 30 September 2008. The effect of the increase borrowings on
the loss per share and the headline loss per share for the nine months is 24,2
cents based on a weighted average number of shares of 83 273 341.
Please refer to note 3 in the Commentary with regards the current funding
status of the Company.
11. Dividends
No dividends have been declared or paid since the incorporation of the Company.
The Company anticipates that, for the foreseeable future, earnings generated
by Pamodzi Gold and its subsidiaries will not be distributed to shareholders as
dividends but will be retained for the development of the Company and its
subsidiaries. The Directors will consider a revision to the dividend policy at
an appropriate point in time.
12. Segment reporting
East West
Rand Rand Orkney
Quarter ended Operations Operations Operations
31 March 2008 (R`000) (R`000) (R`000)
Segment revenue
continuing operations 138 178 10 308 50 484
Realised hedge loss (42 575)
Net segment revenue
continuing operations 95 603 10 308 50 484
Profit/(loss) from operations
before tax (65 184) (6 097) 11 645
Income tax expense
(65 184) (6 097) 11 645
President
Steyn
Quarter ended Operations Other Total
31 March 2008 (R`000) (R`000) (R`000)
Segment revenue
continuing operations 35 187 234 157
Realised hedge loss (42 575)
Net segment revenue
continuing operations 35 187 191 582
Profit/(loss) from operations
before tax (17 265) (26 957) (103 858)
Income tax expense
(17 265) (26 957) (103 858)
East West
Rand Rand Orkney
Quarter ended Operations Operations Operations
30 June 2008 (R`000) (R`000) (R`000)
Segment revenue
continuing operations 145 676 10 641 128 511
Realised hedge loss (51 070)
Net segment revenue
continuing operations 94 806 10 641 128 511
Loss from operations
before tax (88 484) (8 275) (2 292)
Income tax expense
(88 484) (8 275) (2 292)
President
Steyn
Quarter ended Operations Other Total
30 June 2008 (R`000) (R`000) (R`000)
Segment revenue
continuing operations 116 268 401 096
Realised hedge loss (51 070)
Net segment revenue
continuing operations 116 268 350 026
Loss from operations
before tax (58 945) (18 493) (176 489)
Income tax expense 2 849 2 849
(58 945) (15 644) (173 640)
East West
Rand Rand Orkney
Quarter ended Operations Operations Operations
30 September 2008 (R`000) (R`000) (R`000)
Segment revenue
continuing operations 145 983 6 127 109 352
Realised hedge loss (41 916)
Net segment revenue
continuing operations 104 067 6 127 109 352
Loss from operations before tax (4 179) (5 151) (52 371)
Income tax expense
(4 179) (5 151) (52 371)
President
Steyn
Quarter ended Operations Other Total
30 September 2008 (R`000) (R`000) (R`000)
Segment revenue
continuing operations 132 073 393 535
Realised hedge loss (41 916)
Net segment revenue
continuing operations 132 073 351 619
Loss from operations before tax (74 029) (14 445) (150 175)
Income tax expense
(74 029) (14 445) (150 175)
East West
Rand Rand Orkney
Nine months ended Operations Operations Operations
30 September 2008 (R`000) (R`000) (R`000)
Segment revenue
continuing operations 429 837 27 076 288 347
Realised hedge loss (135 561)
Net segment revenue
continuing operations 294 276 27 076 288 347
Profit/(loss) from operations
before tax (157 847) (19 523) (43 018)
Income tax expense
(157 847) (19 523) (43 018)
President
Steyn
Nine months ended Operations Other Total
30 September 2008 (R`000) (R`000) ( R`000)
Segment revenue
continuing operations 283 528 1 028 788
Realised hedge loss (135 561)
Net segment revenue
continuing operations 283 528 893 227
Profit/(loss) from operations
before tax (150 239) (59 895) (430 522)
Income tax expense 2 849 2 849
(150 239) (57 046) (427 673)
East West
Rand Rand
Year ended Operations Operations Other Total
31 December 2007 (R`000) (R`000) (R`000) (R`000)
Segment revenue
continuing operations 415 010 56 400 471 410
Realised hedge loss (102 081) (102 081)
Net segment revenue
continuing operations 312 929 56 400 369 329
Profit/(loss) from
operations
before tax (205 062) 1 447 (4 806) (208 421)
Income tax expense (1 651) 1 584 (67)
(206 713) 3 031 (4 806) (208 488)
All operations are located in the Republic of South Africa and all revenue is
derived from the sale of gold.
Commentary
1. Safety
Pamodzi Gold continues to drive the process of implementing the required
culture of safety and health throughout the group:
We value the Safety and Health of our employees.
We measure the safety culture maturity level on each operation through an
assessment process.
Effective training is the key to changing the current safety culture and
current training methodologies need to be challenged.
Major focus given to management and supervisory training with the knowledge
of human risk-taking behaviour being the most fundamental skill.
All supervisory levels are Safety Role Models.
Effective employee involvement and participation in Safety and Health is a
pre-requisite of employment and promotion.
People are encouraged to behave responsibly by engaging their minds when
Hazards and Risks are encountered in the workplace through a practical risk
assessment process.
New group safety initiatives have been implemented.
Despite the safety achievements to date in 2008, Pamodzi Gold regrets to
announce that there were unfortunately two fatal accidents during the quarter:
At our East Rand operations on 2 July 2008 Mr Jose Albino Mugabe was run
over by hoppers which were being pushed into the development cross-cut to
commence afternoon shift cleaning. He died from asphyxiation.
At our Orkney operations on 3 September 2008 Mr Themba Phohleli was fatally
injured by a fall of ground.
The following table highlights the Key Performance Indicators in terms of the
industry standard frequency rates for measurement of loss:
Lost
time Reportable Fatal
Operation injury injury injury
rate rate rate
East Rand Quarter ended 30 September 2008 2,4 0,8 0,4
Quarter ended 30 June 2008 3,2 2,4
Quarter ended 31 March 2008 2,1 2,5 0,4
Year ended 31 December 2007 6,0 2,7 0,1
West Rand Quarter ended 30 September 2008
Quarter ended 30 June 2008
Quarter ended 31 March 2008
Year ended 31 December 2007
Orkney Quarter ended 30 September 2008 5,5 6,8 0,4
(from 1 March 2008) Quarter ended 30 June 2008 6,8 9,3 0,98
Month ended 31 March 2008 4,5 7,5 1,5
President Steyn Quarter ended 30 September 2008 2,9 3,2
(from 1 March 2008) Quarter ended 30 June 2008 2,9 5,7 0,4
Month ended 3 1 March 2008 7,5 4,5
2. Operational overview for the quarter ended 30 September 2008
Production
Quarter Tons Kilo-
Operation ended milled grams Ounces R/Ton
East Rand
30 September 2008 481 325 671,3 21 582 323
30 June 2008 498 623 604,9 19 449 288
31 March 2008 490 753 656,5 21 107 200
31 December 2007 525 078 690 22 202 195
West Rand
30 September 2008 21 487 27,2 874 465
30 June 2008 30 061 51 1 637 497
31 March 2008 32 150 44 1 412 423
31 December 2007 41 917 90 2 918 436
Orkney
30 September 2008 165 840 511,1 16 432 886
(note)
30 June 2008 185 094 571,6 18 378 630
1 to 31 March 2008 57 178 204,8 6 584 563
President
30 September 2008 156 902 613,3 19 718 1 212
Steyn
30 June 2008 187 201 527,5 16 960 847
(note)
1 to 31 March 2008 49 095 146,2 4 702 938
TOTAL
30 September 2008 825 554 1 822,9 58 606 612
30 June 2008 891 696 1 754,6 56 385 481
31 March 2008 629 176 1 051,4 33 805 302
31 December 2007 566 995 780 25 120 213
Cash cost
Capital
Quarter R/Kilo expenditure
Operation ended gram $/Ounce (R`000)
East Rand
30 September 2008 231 563 958 3 356
30 June 2008 237 346 955 10 883
31 March 2008 149 835 621 13 731
31 December 2007 148 411 685 16 900
West Rand
30 September 2008 367 760 1 520 386
30 June 2008 313 428 1 261 1 190
31 March 2008 310 077 1 284 185
31 December 2007 201 185 922 244
Orkney
30 September 2008 291 981 1 207 23 506
(note)
30 June 2008 204 068 821 27 615
1 to 31 March 2008 157 156 651 9 962
President
30 September 2008 310 040 1 281 3 500
Steyn
30 June 2008 300 667 1 209 6 591
(note)
1 to 31 March 2008 315 003 1 305 1 036
TOTAL
30 September 2008 277 049 1 145 30 748
30 June 2008 247 628 996 49 819
31 March 2008 180 926 749 24 914
31 December 2007 154 542 713 17 144
Note: The Orkney and President Steyn operations included only from 1 March
2008.
Certain capital expenditure has been delayed due to the required financing not
obtained in the quarter and, as a result, production was affected on all the
operations. Stoppages in the areas where safety was a concern and where the
fatalities occurred also negatively affected production. Unit costs are high
as a result of the non-production of gold.
3. Capital raising, Rights Offer and potential restructuring of the East Rand
Hedge
Pamodzi Gold has experienced extremely difficult trading conditions as a result
of shortage of capital. Accordingly, the Company embarked on a capital raising
exercise in the face of very challenging capital market conditions.
Pamodzi Gold shareholders were advised in an announcement dated Friday 24
October 2008 that the Company had finalised the terms for the remaining R200
million of capital required by the Company. The remaining R200 million was
sourced for Pamodzi Gold by Pamodzi Resources. This additional amount, together
with the IDC`s R200 million loan facility, concluded the Company`s R400 million
capital raising. The Pamodzi Resources loan and the IDC loan will bear interest
at prime.
All the necessary conditions precedent in the loan agreements were met on
Wednesday 24 December 2008. The funds will be used to meet working capital
requirements and to advance capital expenditure in the mines.
This represents a significant milestone in the life of the Company. The capital
raising will include a specific issue of 15 929 777 call options to Best Rock
Investments (Proprietary) Limited ("Best Rock specific issue") and a possible
future specific issue of 14 483 144 call options to Bayerische Hypo-und
Vereinsbank AG ("HVB future specific issue"). Each call option will allow Best
Rock and HVB to subscribe for one PZG share at R1.13 per PZG share.
Shareholders are also advised that the Company has agreed with Harmony,
conditional on the conclusion of the R400 million funding facility, that R103
million of its current exposure to Pamodzi Gold will be converted into an
equity exposure. This represents mainly the capital expenses incurred and
losses incurred during the management agreement with Harmony from 1 October
2007. In order to support the Company, Harmony has agreed to convert this R103
million into equity in Pamodzi Gold. In order to be fair to all shareholders it
was decided to do the conversion in the form of an underwritten rights offer
("Rights Offer"), subject to the fulfilment of the conditions precedent
referred to in paragraph 4 below. In terms of the Rights Offer and subject to
the required approvals, a total of 91 150 442 new PZG ordinary shares ("Rights
Offer Shares") will be offered to ordinary shareholders in the ratio of
97.44055 Rights Offer Shares for every 100 ordinary shares held at a price of
R1.13 per Rights Offer Share. The Rights Offer will be underwritten by Pamodzi
Resources, using a wholly-owned Special Purpose Vehicle, which will in turn be
funded by Harmony. Excess subscriptions will not be invited and no minimum
subscription is applicable.
Both Harmony and Pamodzi Resources have indicated that they will not underwrite
or fund the underwriting of the Rights Offer unless Pamodzi Gold shareholders
agree that they do not require a mandatory offer; 56% of non-conflicted
shareholders have undertaken to vote in favour of the waiver.
Shareholders are further advised that the Company is still in negotiations with
the holders of the hedge which will result in restructuring of the hedge
profile.
The circular giving full details of the capital raising, the waiver and notice
of a general meeting was posted to shareholders on 17 December 2008.
4. Conditions precedent to the Rights Offer
The Rights Offer is subject to:
the Best Rock specific issue, the HVB future specific issue and the waiver
of a mandatory offer being approved at the general meeting to be held on
Thursday 15 January 2009;
approval of the Rights Offer circular by the JSE Limited; and
registration of the Rights Offer circular by the Companies and Intellectual
Property Registration Office of South Africa.
5.Pro forma financial effects of the capital raising
The table below sets out the unaudited pro forma financial effects of the
capital raising on Pamodzi Gold`s published unaudited basic EPS, fully diluted
basic EPS, headline EPS, fully diluted headline EPS, NAV per share and NTAV per
share based on the unaudited interim results of Pamodzi Gold ended 30 June
2008.
The unaudited pro forma financial effects are the responsibility of the
directors and have been prepared for illustrative purposes only to provide
information about how the capital raising may have affected the financial
position of Pamodzi Gold on the relevant reporting date. Due to their nature,
the unaudited pro forma financial effects may not be a fair reflection of
Pamodzi Gold`s financial position after the implementation of the capital
raising. In particular, the pro forma effects do not show the impact of working
capital on the operations of the mine which have been negatively impacted by
the lack of cash to invest in the mines.
Unaudited after Unaudited after
IDC loan, Pamodzi conversion of
Unuadited Resources loan HVB debt and
published and Best Rock HVB future
PZG(1) specific issue(2) specific issue(3)
EPS (cents) (355.4) (419.5)
Diluted EPS (cents) (355.4) (419.5)
HEPS (cents) (355.4) (419.5)
Diluted HEPS (cents)(5) (355.4) (419.5)
NAV (cents) 331.1 391.5 399.8
NTAV (cents) 327.0 387.5 395.8
Weighted average number
of shares in issue (`000) 78 081 78 081 78 081
Number of shares
in issue (`000) 93 545 93 545 93 545
Pro forma
after the
Rights capital
Offer(4) raising Change
EPS (cents) 245.7 (173.8) 51.1%
Diluted EPS (cents) 245.7 (173.8) 51.1%
HEPS (cents) 245.7 (173.8) 51.1%
Diluted HEPS (cents)(5) 245.7 (173.8) 51.1%
NAV (cents) (141.5) 2 58.3 (22.0)%
NTAV (cents) (139.6) 256.2 (21.7)%
Weighted average number of shares
in issue (`000) 91 150 184 695
Number of shares in issue (`000) 91 150 184 695
Notes:
1.Extracted from the published unaudited condensed consolidated results of
Pamodzi Gold for the six months ended 30 June 2008.
2.Pamodzi Gold raises R400 million, of which R200 million is received from
the IDC and R200 million received from Pamodzi Resources. The funds will be
applied as follows and split evenly between each loan:
R180 million to settle long outstanding creditors;
Settle the loan from MC Resources Limited and Casten Holdings Limited,
shareholders of Thistle, amounting to R34.2 million;
Settle the RMB revolving credit facility of R26.8 million; and
R160 million for future capital expansion and assumed to be split evenly
between IDC loan and Pamodzi Resources loan.
The IDC loan is accounted for as a financial liability, initially recognised at
its fair value. The loan has an effective interest rate of 35% per annum, which
is a market-related interest rate for the Company based on its current risk
profile. Interest payable on IDC loan of R200 million for six months at 35%,
being the market-rate, net of reversal of interest on revolving credit
facility. Interest earned at 10% on the remaining balance to be used for
capital expansion, after utilising the IDC and Pamodzi Resources loan proceeds
of R400 million to settle outstanding debt and creditors of R240,1 million. It
is assumed that the capital expansion will be spread evenly over the six-month
period, split evenly between the IDC loan and the Pamodzi Resources loan.
The R200 million loan from Pamodzi Resources has been recorded at its estimated
fair value of R129 million and deferred taxation has been provided on the
difference between the estimated fair value and the R200 million loan, net of
assessable losses of R20.5 million. The Pamodzi Resources loan is accounted for
as a financial liability, initially recognised at its fair value. Interest on
the loan is charged prime which is a below market rate for the Company based on
its current risk profile. In order to measure the loan at its fair value on
initial recognition, Pamodzi Resources have been deemed to issue Pamodzi Gold a
loan at a market-related interest rate of 35% per annum and the differential
between the market-related interest rate and the portion of the below market
interest rate is included as an additional capital contribution from Pamodzi
Resources. In order to secure the funding, Pamodzi Gold provided Best Rock,
who provided the loan on a back-to-back arrangement through Pamodzi Resources,
with call options on its shares. The total proceeds of R200 million are split
between three components which is:
the call option (R7.758 million);
capital contribution from Pamodzi Resources (R43.035 million);
the loan (R129.454 million).
The transaction costs amounting to R1.478 million and relating to the
conclusion of all the transactions presented are not considered to have a
material effect on the effective interest rate of the loans and were therefore
expensed in the income statement for purposes of the pro forma financial
effects.
3. Outstanding hedge at 30 June 2008, amounting to USD 12.6 million owing to
Standard Bank is effectively repaid at 30 June 2008 exchange rate from a USD
18.1 million loan with HVB, repayable over the same terms as the IDC and
Pamodzi Resources loans. The difference will be utilised to settle forex losses
in future to date of settlement of the debt.
The HVB loan is accounted for as a financial liability, initially recognised at
its fair value. The loan carries interest at an effective interest rate of
LIBOR + 5.5%. This interest rate is a market-related rate for this loan due to
security provided by Pamodzi Gold to the lender. Record interest at prime rate
based on the conversion of the outstanding hedge payments using the average
exchange rate for the six months, to a loan at 30 June 2008 and recording
interest for six months. The proceeds will be utilised to settle the current
hedge liability. As part of the loan agreement, HVB has been granted options on
its shares by Pamodzi Gold. The total proceeds of the loan are split between
two components which is:
the loan (R133.794 million);
the call option (R7.758 million).
4.Proceeds from the Rights Offer will be utilised to settle the Harmony
short-term debt. The interest accrued for the six months on the short-term
loan, settled from the proceeds of the Rights Offer, has been reversed.
5.The exercise of the Best Rock and HVB options is anti-dilutive.
6.Further announcement and documentation
A further announcement, confirming the results of the general meeting will be
published on Thursday 15 January 2009 and an announcement detailing the salient
dates of the Rights Offer, will be published on or about Friday 30 January
2009.
Further details on the Rights Offer will be included in a Rights Offer
circular to be posted to shareholders.
7. Withdrawal of cautionary announcement
Pamodzi Gold shareholders are advised that as the capitalisation of the Company
has been effected, the cautionary announcement referred to in paragraph 3 above
is hereby withdrawn.
Signed on behalf of the board
NA Ntsele PW Steenkamp
Chairman Chief Executive Officer
Bruma
29 December 2008
Merchant bank and sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Directors
NA Ntsele1 (Chairman), KM Steenkamp1, (Deputy Chairman), JJ du Plooy1 (Acting
Financial Officer), HA Dikgale1, MP O`Connor1, SP Radebe (Corporate Affairs),
MB Mokgata2, MI Mthenjane2, P Taljaard2, MR Lephondo2, PW Steenkamp
(Chief Executive Officer), AJ Murdoch Eaton
(Chief Operating Officer) (Zimbabwean).
(1 Non-executive 2 Independent non-executive)
Company Secretary
GM Chemaly
Registered office
2nd Floor Building C, East Gate Office Park, South Boulevard, Bruma
Pamodzi Gold Limited
(Formerly Bema Gold South Africa (Pty) Limited)
(Incorporated in the Republic of South Africa)
Registration number: 2002/013039/06
Share code: PZG
ISIN: ZAE000088563
("Pamodzi Gold" or "the Company" or "the group")
www.pamodzigold.co.za
Date: 29/12/2008 13:47:21 Produced by the JSE SENS Department.
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