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MVL
MVL
MVL - Mvelaphanda Resources Limited - Unaudited Interim Results For The Six
Months Ended 31 December 2008
MVELAPHANDA RESOURCES LIMITED
(Registration number: 1980/001395/06
Incorporated in the Republic of South Africa
Share code: MVL
ISIN number: ZAE000050266
Unaudited Interim Results for the six months ended 31 December 2008
FEATURES
- Booysendal Transaction concluded
- Basic earnings increase to 228cps from 114cps loss
- Strong operational performance from Northam
- Balance sheet robust - provides options for further value unlock
GROUP BALANCE SHEET
As at
R`000 Notes Unaudited Reviewed Audited
31 December 31 December 30 June
2008 2007 2008
ASSETS
Non-current
assets
GFI-SA loan 2 4,617,000 4,846,000 5,080,000
Investment in
associate
companies 53,775 943,771 1,074,617
Property, plant
and equipment 3 9,715,971 577 483
Goodwill - 75,869 75,869
Environmental and
social investments 99,125 - -
Deferred taxation 40,178 39,109 57,170
Total non-current
assets 14,526,049 5,905,326 6,288,139
Current assets
Inventories 680,944 - -
Accounts receivable
and prepayments 181,811 44,330 63,865
Cash and cash
equivalents 4 1,318,037 1,708,949 1,919,586
Total current
assets 2,180,792 1,753,279 1,983,451
Non-current assets
classified as held
for sale
Booysendal Platinum
project - 315,892 315,892
Available for sale
investments 368 8,903 7,047
Total non-current
assets classified as
held for sale 368 324,795 322,939
TOTAL ASSETS 16,707,209 7,983,400 8,594,529
EQUITY AND LIABILITIES
Share capital and
reserves 6,737,523 5,586,721 6,093,342
Minority interest
in Northam
Platinum Limited 3,582,517 - -
Total share capital
and reserves 10,320,040 5,586,721 6,093,342
Non-current
liabilities
Preference share
funding
(Booysendal
Transaction) 5 2,000,000 - -
"A" ordinary shares
(held by Afripalm 2) 700 700 700
Senior bank loan
(GFI-SA) - 69,946 -
Mezzanine finance
(GFI-SA) 6 - 1,727,108 -
Long-term
provisions 76,801 19,254 23,733
Deferred taxation 7 1,375,472 102,515 136,445
Total non-current
liabilities 3,452,973 1,919,523 160,878
Current liabilities
Short-term portion
of preference
share funding
(Booysendal
Transaction) 5 346,648 - -
Short-term portion
of senior bank
loan (GFI-SA) 69,946 314,949 230,736
Short-term portion
of mezzanine
finance (GFI-SA) 6 1,959,892 - 1,839,477
Accounts payable
and accruals 228,711 42,998 79,522
Short-term
provisions 223,445 119,209 173,407
Current taxation
payable 105,554 - 17,167
Total current
liabilities 2,934,196 477,156 2,340,309
TOTAL EQUITY
AND LIABILITIES 16,707,209 7,983,400 8,594,529
GROUP INCOME STATEMENT
Unaudited Reviewed Audited
6 months to 6 months to 12 months
31 December 31 December to 30 June
R`000 Notes 2008 2007 2008
OPERATING MINING
INCOME DERIVED
FROM NORTHAM
(FOUR MONTHS)
Sales revenue 940,509 - -
Cost of sales (760,454) - -
OPERATING MINING
PROFIT DERIVED
FROM NORTHAM
SINCE ACQUISITION
(FOUR MONTHS) 180,055 - -
OTHER OPERATING
INCOME 373,764 392,858 928,256
Earnings from
associate companies 12,343 92,636 303,948
- Northam
Platinum
Limited (equity
accounted
results for
two months) 27,033 94,993 308,550
- Trans Hex Group
Limited (14,690) (2,357) (4,602)
Investment income 317,272 300,021 620,254
Interest earned on
GFI-SA loan 218,703 218,703 437,405
Other interest earned 98,569 81,318 182,849
Net sundry income 44,149 201 4,054
Total operating
profit 553,819 392,858 928,256
NON-MINING OPERATING
EXPENSES (252,701) (194,664) (485,123)
Exploration and
project
development costs (6,235) (5,735) (12,032)
Corporate expenses (14,611) (13,898) (51,220)
Share-based
incentive costs 8 52,015 (9,388) (90,021)
Finance costs (283,870) (165,643) (331,850)
- Senior bank loan
(GFI-SA) (12,160) (28,060) (48,118)
- Mezzanine finance
(GFI-SA) (154,843) (137,583) (282,882)
- Coupon on preference
shares (Booysendal
Transaction) (116,867) - -
- Other - - (850)
PROFIT BEFORE OTHER
(EXPENSES)/INCOME 301,118 198,194 443,133
OTHER (EXPENSES)
/INCOME (604,680) (486,787) (265,033)
Impairment due to the
difference between
market value and
book value of Trans
Hex Group Limited (125,306) (2,835) (32,542)
Difference between
market value
and purchase
consideration on
the Booysendal
Transaction 3 2,691,273 - -
Impairment due
to the difference
between market
value and
book value of
Northam
assets 3 (1,192,038) - -
Impairment
write-down
on goodwill 3 (1,498,908) - -
Impairment
write-back
on Tirisano
mine project - - 19,891
Loss on revaluation
of financial
instruments (463,000) (483,952) (252,382)
- GFI-SA loan (463,000) (427,000) (193,000)
- Trans Hex Group
Limited forward
purchased shares - (56,952) (59,382)
Costs associated with
the Impala Transaction (13,688) - -
Loss on disposal of
Etruscan shares (3,013) - -
(LOSS)/PROFIT BEFORE
TAXATION (303,562) (288,593) 178,100
TAXATION 437,454 50,762 7,221
- Normal (84,502) (11,479) (39,151)
- Deferred 7 521,956 62,241 46,372
NET PROFIT/(LOSS) 133,892 (237,831) 185,321
Profit/(loss)
attributable to:
- Owners of
Mvelaphanda
Resources
Limited 487,781 (237,831) 185,321
- Minority
interest in
Northam Platinum
Limited (353,889) - -
NET PROFIT/(LOSS) 133,892 237,831) 185,321
EARNINGS/(LOSS)
PER ORDINARY
SHARE (cents)
- Basic 9 228 (114) 89
- Headline 9 1,110 (112) 93
- Diluted 226 (114) 86
ABRIDGED GROUP SEGMENTAL RESULTS*
Unaudited Reviewed Audited
6 months to 6 months to 12 months
31 December 31 December to 30 June
R`000 2008 2007 2008
Net profit/(loss)
after taxation
- Platinum 574,074 92,383 301,301
- Gold (348,377) (319,419) (89,837)
- Diamonds (145,785) (56,596) (71,351)
- Other 53,980 45,801 45,208
NET PROFIT/(LOSS) 133,892 (237,831) 185,321
* A detailed segmental income statement is available on the company`s website:
www.mvelares.co.za.
GROUP CASH FLOW STATEMENT
Unaudited Reviewed Audited
6 months to 6 months to 12 months
31 December 31 December to 30 June
R`000 2008 2007 2008
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated
from/(utilised in)
operations 331,459 (35,768) (85,548)
Interest received 317,272 300,021 620,255
Finance costs (96,807) (60,742) (114,582)
Taxation paid (176,503) (18,587) (22,633)
Net cash
generated by
operating activities 375,421 184,924 397,492
CASH FLOWS FROM
INVESTING ACTIVITIES
Dividends received 1,078 145,982 220,998
Additions to
property, plant
and equipment (236,450) (148) (181)
Acquisition of
Booysendal
(Booysendal
Transaction) (2,388,423) - -
Acquisition of
Northam shares
(Booysendal
Transaction) (1,596,864) - -
Take-on cash
balance from
Northam Platinum
Limited 1,379,240 - -
Additions to
township
development (11,280) - -
Proceeds on
disposal of
assets 3,659 12,500 14,768
Net cash (utilised
in)/generated by
investing activities (2,849,040) 158,334 235,585
CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds from
the issue of
preference shares
(Booysendal
Transaction) 2,500,000 - -
Capital repayment
in respect of
preference shares
(Booysendal
Transaction) (220,000) - -
Capital repayment
in respect of
senior bank
loan (GFI-SA) (160,790) (147,530) (301,688)
Net proceeds
from shares
issued - 9,895 84,871
Dividends paid
to Northam
Platinum Limited
minority
shareholders (247,616) - -
Contribution from
minority
shareholders 476 - -
Net cash generated
by/(utilised in)
financing
activities 1,872,070 (137,635) (216,817)
Net (decrease)/
increase in
cash and cash
equivalents (601,549) 205,623 416,260
Cash and cash
equivalents
at beginning of
the period 1,919,586 1,503,326 1,503,326
CASH AND CASH
EQUIVALENTS AT
END OF THE PERIOD 1,318,037 1,708,949 1,919,586
GROUP STATEMENT OF CHANGES IN EQUITY
R`000 Total
Restated balance at 30 June 2007 5,814,376
Attributable loss for the period (237,831)
Equity compensation reserve 2,452
Net proceeds from shares issued 9,895
Equity accounted portion of
share-based payments of associates 1,974
Equity accounted portion of foreign currency translation reserve
(119)
Equity accounted portion of fair
value adjustment on available-for-
sale financial assets (49)
Unrealised loss on revaluation
of listed investments (3,977)
Reviewed balance at 31 December 2007 5,586,721
Attributable profit for the period 423,152
Equity compensation reserve 1,634
Net proceeds from shares issued 74,975
Equity accounted portion of share-based
payments of associates 1,808
Equity accounted portion of foreign
currency translation reserve (629)
Equity accounted portion of fair
value adjustment on available-for-
sale financial assets 5,401
Unrealised profit on revaluation
of listed investments 280
Audited balance at 30 June 2008 6,093,342
Attributable profit for the period 487,781
Equity compensation reserve 1,633
Shares issued (Booysendal Transaction) 147,171
Portion of share-based payments
of Northam attributable to Mvela
Resources shareholders 6,573
Equity accounted portion of foreign
currency translation reserve (254)
Equity accounted portion of cash flow hedges 1,299
Unrealised loss on revaluation of
listed investments (22)
Unaudited balance at 31 December 2008 6,737,523
NOTES
1. Basis of preparation
These condensed consolidated financial statements have been prepared on the
historical cost 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 2008 and which are compliant
with International Financial Reporting Standards ("IFRS") and in accordance with
IAS 34:"Interim Financial Reporting", the South African Companies Act, 1973, as
amended, and the JSE Listings Requirements.
The increase in Mvela Resources shareholding in Northam to 63%, requires that
Northam, as a subsidiary of Mvela Resources, be fully consolidated in Mvela
Resources financials from the end of August 2008. In keeping with previous
practice, Northam has been equity accounted until the end of August 2008 and
reported numbers for the six months ended 31 December 2008, reflect equity
accounting of 22% of Northam for the first two months of the period (resulting
in Northam contributing R27 million to equity accounted "Earnings from
associated companies") and full consolidation of Northam`s financial results for
the final four months, resulting in fully consolidated "Operating mining income
derived from Northam" of R180 million. As a result, like for like comparisons
with the six month period ended 31 December 2007 are difficult.
2. Unaudited Reviewed Audited
6 months to 6 months to 12 months
31 December 31 December to 30 June
R`000 2008 2007 2008
Loan advanced
to GFI-SA 4,139,000 4,139,000 4,139,000
Unrealised fair
value adjustment
at end of the period 478,000 707,000 941,000
GFI-SA loan at
fair value 4,617,000 4,846,000 5,080,000
The value of this investment is derived from Gold Fields` share price. The
decrease in the value of the GFI-SA loan to R4.6 billion from R5.0 billion (as
at 30 June 2008) is primarily attributable to the decrease in the Gold Fields
share price from R99.50 (as at 30 June 2008) to R91.90 (as at 31 December 2008).
Upon repayment of the loan on 17 March 2009, the group will receive 50 million
Gold Fields shares.
3. Acquisition of Northam Platinum Limited
On 20 August 2008, Mvela Resources acquired 53.1 million Northam Platinum
Limited (Northam) shares and 50% of
Booysendal, from Anglo Platinum Limited, for a total consideration of R4
billion. Subsequently, Mvela Resources sold 100%of Booysendal to Northam,
resulting in Mvela Resources gaining a controlling interest of 62.8% in Northam.
(The Booysendal Transaction).
The difference between the deemed purchase price (being the fair value of the
assets acquired on the effective date of acquisition) and the actual purchase
consideration of R4 billion paid for the Booysendal Transaction, was calculated
at R2.7 billion and is accounted for as a credit in the Income Statement.
The difference between Mvela Resources` share of the fair value of Northam`s net
assets acquired at date of acquisition and the deemed purchase price, resulted
in goodwill of R1.5 billion. The significantly weaker outlook for global growth
and PGM demand and the impact this had on metal prices reduced the fair value of
Northam`s assets at 31 December 2008. This resulted in an impairment provision
of R1.2 billion and a goodwill
write-off of R1.5 billion.
4. Cash and cash equivalents
Unaudited Reviewed Audited
6 months to 6 months to 12 months
31 December 31 December to 30 June
R`000 2008 2007 2008
Cash and cash
equivalents
attributable to:
Mvela Resources
Group 587,346 1,708,949 1,919,586
Northam Platinum
Limited 730,691 - -
Total cash and
cash equivalents 1,318,037 1,708,949 1,919,586
5. Preference share funding
The preference share funding, originally amounting to R2.5 billion, was advanced
by Nedbank Limited pursuant to the Booysendal Transaction that was concluded in
August 2008. The preference shares are redeemable over a period of 5.5 years at
a dividend rate of 73% of the South African Prime overdraft lending rate. The
short-term portion represents a capital repayment of R280 million plus accrued
dividends of R66.6 million as at 31 December 2008.
6. Mezzanine finance
Unaudited Reviewed Audited
6 months to 6 months to 12 months
31 December 31 December to 30 June
R`000 2008 2007 2008
Loan advanced
to Mvela Gold 1,086,000 1,086,000 1,086,000
Net interest
capitalised at
beginning of
the period 753,477 536,208 536,208
Net interest
capitalised
during the
period 120,415 104,900 217,269
Mezzanine finance
at fair value 1,959,892 1,727,108 1,839,477
The Mezzanine finance was advanced to Mvela Gold in March 2004 as part of the
funding package on the Gold Fields
transaction. The Mezzanine finance is repayable on 17 March 2009.
7. Deferred tax
The deferred tax provision on the balance sheet mainly relates to the deferred
tax raised on the fair value adjustment on the Northam assets acquired pursuant
to the Booysendal Transaction. The deferred tax credit on the income statement
mainly relates to the impairment provision on the Northam assets.
8. Share-based incentive costs
The reversal of the cost is primarily attributable to the decrease in the share
price of Mvela Resources from R64.95 (as at 30 June 2008) to R23.00 (as at 31
December 2008).
9. Earnings/(Loss) per ordinary share are calculated as follows:
Unaudited Reviewed Audited
6 months to 6 months to 12 months
31 December 31 December to 30 June
R`000 2008 2007 2008
(a) Basic earnings
/(loss) per
share (cents) 228 (114) 89
R`000
Attributable
profit/(loss) 487,781 (237,831) 185,321
Weighted average
number of
shares
in issue 214,095,848 208,893,109 209,167,285
(b) Headline
earnings/(loss)
per share (cents) 1,110 (112) 93
R`000
Attributable
profit/(loss) 487,781 (237,831) 185,321
Attributable
loss/(profit)
on sale of assets 3,016 - (3,881)
Attributable impairment
write-downs 1,884,679 2,835 12,651
Headline earnings
/(loss) 2,375,476 (234,996) 194,091
Weighted average
\number of shares
in issue 214,095,848 208,893,109 209,167,285
10. Post balance sheet events
Northam Platinum Limited declared an interim dividend of 38 cents per share to
be paid on 9 March 2009. This will represent a cash inflow of R85.8 million for
the Mvela Resources Group.
COMMENTARY
CORPORATE ACTIVITY
Platinum
The Booysendal Transaction with Anglo Platinum and Northam was implemented on 20
August 2008, resulting in Mvela Resources increasing its shareholding in Northam
to 63% and Northam acquiring 100% of the world class Booysendal resource.
Section 11 approval by the Minister of Minerals and Energy is the final
condition for the transfer of the Booysendal right.
Shareholders were advised on 2 October 2008, that Mvela Resources and Northam
had received unsolicited expressions of interest from a number of parties
including Impala Platinum. In a joint cautionary, Impala Platinum expressed
interest, through a series of interconditional steps, in acquiring the entire
issued share capital of Mvela Resources and Northam. As a result of the sharp
decline in PGM prices and increasing uncertainly with regard to the global
economic outlook, the parties were unable to agree on an equitable exchange
ratio reflecting the fair value of Mvela Resources and Northam and shareholders
were advised
that discussions with Impala Platinum had been terminated on 14 January 2009.
Despite the slowdown in global growth and continued economic headwinds, Mvela
Resources remains positive about the longer term outlook for the PGM industry
and the intrinsic potential of its investment in Northam. As reported at
Northam`s recent results on 5 February 2009, the company remains cash generative
at its Zondereinde mine and has a robust balance sheet with cash of R731
million. The bankable feasibility at Booysendal is scheduled for completion in
the third quarter of the calendar year at which point a decision will be made on
the scale, scheduling and financing of the Booysendal project.
Booysendal is accessible from surface and can be developed in a low risk,
modular fashion according to the prevailing circumstances. The current, initial
focus is on a 120 000tpm, UG2 production unit that can be easily replicated
should conditions allow. Mvela Resources is positive about the economic merit of
developing Booysendal and anticipates higher metal prices from 2010, when
Booysendal will begin building its production profile.
Gold
In anticipation of the Gold Fields Transaction maturing on 17 March 2009, Mvela
Resources has procured refinancing of the R2.1 billion mezzanine debt, and is in
the process of finalising documentation. Further detail will be released in due
course.Mvela Resources is positive on the outlook for gold and Gold Fields in
2009, following guidance from Gold Fields management
that the operations will normalise during the March quarter.
FINANCIAL COMMENTARY
Northam reported a solid operating performance with sales revenue of R1.6
billion, 7% higher than in the six months ended 31 December 2007 as a result of
a 10% increase in precious metals sold and a marginally higher rand basket price
received. An 11% increase in production, coupled with inflationary increases in
the cost of labour, consumables and services and additional costs associated
with the rebuild of the smelter during the period led to a 22% decline in
profits attributable to shareholders from R473 million to R371 million.
Earnings from associates of R12 million, include the R27 million (two months) of
equity accounted earnings from Northam mentioned earlier as well as the R15
million equity accounted share of Trans Hex`s loss for the six-month period to
30 September 2008. Trans Hex`s reported loss widened from R2.7 million to R56
million on the back of a 24% decline in rough diamond sales.
Finance costs for the period were R118 million higher than in the previous
corresponding period, largely due to coupon payments on the R2.5 billion
preference shares raised for the Booysendal Transaction.
Continued volatility in share prices played a significant role in the bottom
line profitability of the group. The share price of Gold Fields decreased from
R99.50 at 30 June 2008 to R91.90 at 31 December 2008, resulting in an
unrealized, non-cash fair value adjustment of R463 million. Trans Hex too,
declined from R9.00 at 30 June 2008 to R3.18 at 31 December 2008 resulting in an
impairment of the Trans Hex investment of R125 million.
The balance sheet reflects healthy reserves and a strong cash balance of R1.3
billion at 31 December 2008 - R587 million for Mvela Resources and R731 million
for Northam. The GFI-SA senior bank loan will be fully repaid by the maturity
date of the GFISA transaction on 17 March 2009, while the mezzanine finance will
have rolled up to approximately R2.1 billion on that date.
The GFI-SA loan had a fair value of R4.6 billion at 31 December 2008. Mvela
Resources will receive 50 million Gold Fields shares on 17 March 2009. The
market value of these shares at 31 December 2008 was R4.6 billion, this had
increased to R5.7 billion on 12 February 2008.
The Booysendal Transaction was funded through a combination of cash reserves
(R1.5 billion) and the issue of preference shares (to the value of R2.5
billion). The preference share funding is redeemable at 73% of the South African
Prime lending rate, over a period of 5.5 years. As at 31 December 2008, a
capital redemption of R220 million had been made, bringing the capital balance
owing at that date to R2.280 billion (R2 billion in non-current liabilities and
R280 in current liabilities along with the accrued portion of the coupon at 31
December 2008).
Major cash flows for the group during the period related to; the Booysendal
Transaction, capital expenditure of R236 million incurred by Northam and a final
dividend (for 2008) of R248 million paid by Northam to the minority
shareholders. Mvela Resources will receive its attributable share of the Northam
interim dividend, amounting to R85.8 million, in March 2009.
PROSPECTS
The economic outlook remains uncertain for the foreseeable future. The impact of
global rescue packages, interest rate cuts and infrastructure programmes has yet
to be felt and it is uncertain how long the downturn will persist.
The value of Mvela Resources` investment in Gold Fields has appreciated
significantly since December 2008 and the gross value for that stake currently
exceeds debt (both relating to the Gold Fields and Booysendal Transactions) by
over R1 billion, a healthy position in current debt averse markets. The company
is positive on the outlook for gold and Gold Fields in the near term and
consequently has procured refinancing of the GFI-SA mezzanine debt, to allow for
a more gradual disposal of the shares in a positive market.
Northam`s improved operating performance and cost containment in recent years,
puts the company in the lower half of the industry cost curve and generating
cash even at current depressed PGM prices. The company has a world class project
in Booysendal and the flexibility to develop the project according to the
prevailing economic climate and availability of financing.
for and on behalf of the board
PL Zim PC Pienaar
Chairman Chief Executive Officer
Sponsor
JP Morgan Equities Ltd
19 February 2009
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); PC Pienaar* (CEO); NS Ntsaluba* (FD); SW Mofokeng*; BR van
Rooyen*; ME Beckett; P M Buthelezi; CK Chabedi***; R Moonsamy; Z Mtshotshisa**;
TMG Sexwale;;
MJ Wilcox; MSMM Xayiya
(* Executive Directors)
(**Alternate to TMG Sexwale)
(***Independent)
Transfer Secretaries
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Johannesburg, 2001
Registered Office
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Magalieszicht Avenue
P O Box 413420, Craighall, 2024
Date: 19/02/2009 08:00:05 Produced by the JSE SENS Department.
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