| Wed 31 Mar 2010, 7:05 | | WEZ - Wesizwe Platinum Limited - Results announcement for the year ended 31 |
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WEZ
WEZ
WEZ - Wesizwe Platinum Limited - Results announcement for the year ended 31
December 2009
Wesizwe Platinum Limited
(Incorporated in the Republic of South Africa), (Registration number
2003/020161/06)
JSE code: WEZ & ISIN: ZAE000075859, ("the Company" or "Wesizwe")
Results Announcement for the year ended 31 December 2009
Highlights
* The Board has been re-organised and strengthened with improved
governance oversight and compliance.
* The Frischgewaagd-Ledig project remains one of the best
un-mined PGM resources in South Africa.
* The feasibility study conducted on the project describes a
current resource of over 13 million PGM ounces and indicates a
near-term potential of producing 350 000 PGM ounces a year.
* Significant progress was achieved towards the implementation of
Project Delta.
* Ministerial granting of Section 11 permissions the last
condition precedent for the consummation of Project Delta
* On implementation Project Delta, Wesizwe`s attributable
resource base is expected to increase to nearly 16 million
ounces and the annual attributable PGM production to over
415 000 ounces a year.
* Options for funding the development of the Frischgewaagd-Ledig
project are being analysed and pursued aggressively.
Wesizwe Platinum Limited (Wesizwe) is a public company incorporated in the
Republic of South Africa and its shares are listed on the JSE Limited. Its
principal business interest is the development of platinum mining rights held by
its wholly-owned subsidiaries, Bakubung Minerals (Pty) Limited ("Bakubung
Minerals") and Africa Wide Mineral Prospecting and Exploration (Pty) Limited
("Africa Wide").
Introduction
The financial year under review has been difficult for Wesizwe, not least
because of the impact of the global economic crisis, but also because of the
Board and management changes that occurred in the second half of the year.
Wesizwe has emerged from these challenges a significantly stronger company with
a renewed focus on its principal objective of creating value for shareholders.
Year in Review
Operationally, the financial year 2009 was fairly low key. Gross expenditure for
the year amounted to R74,6 million (R182,8 million in 2008) and relate mostly to
the procurement of long-lead capital items.
Operational activities resulted in a loss of R38,9 million (R27,8 million in
2008) made up of administration expenses of R57,5 million (R62,3 million in
2008) and a significant reduction in interest income which amounted to R18,5
million (R34,3 million in 2008).
As an exploration and development company, Wesizwe does not generate any
operational revenues. Reported losses are made up of cash disbursements into
capital development activities which are intended to spur significant capital
growth in the near term. Therefore, reported losses reflect project investment
expenditure which is the basis of the Company`s value creation process until
such time as the Company commences mining production activities that generate
revenues. It is important that investors understand this distinction in
interpreting the Company`s reported losses.
Shareholders and investors should be assured that the company is in a going
concern status. The Company had cash on hand of R111 million at the end of
the financial year (R315 million in 2008). Management has designed flexibility
in execution of material contracts to enable effective cash flow management. The
Company also has access to a R550 million draw-down facility (YA Global
Facility) which remained undrawn for the year under review.
Asset Consolidation and Development
In fulfilling the strategy of consolidating and rationalising mineral projects
adjacent to Wesizwe`s core project area, the Frischgewaagd-Ledig Complex,
Wesizwe shareholders approved a transaction which will result in the Company
owning 100% of the Frischgewaagd-Ledig project while retaining 26% in the
Western Bushveld Joint Venture (WBJV) of which Platinum Group Metals (RSA) (Pty)
Limited (PTM) will hold the other 74%(Project Delta). In consideration of
the acquisition, the Company will issue 211 850 125 shares to Rustenburg
Platinum Mines (RPM), a subsidiary of Anglo Platinum Limited. On conclusion of
Project Delta, Anglo Platinum Limited will become the largest single shareholder
in the Company holding 26,7% of the Company`s ordinary share capital. The
implementation of this transaction will increase Wesizwe`s attributable platinum
group metals (PGM) resources by more than 20% from 13 to 15,7 million ounces.
Strategically, this transaction provides a simplified ownership structure which
makes it viable and possible to implement and realise cost optimization
synergies that are beneficial to both the Frischgewaagd-Ledig project and the
WBJV projects. Wesizwe and PTM have an excellent working relationship which is
essential for unlocking and realizing the contemplated synergies.
Significant activities for the development of the Frischgewaagd-Ledig Complex
were on hold during 2009. A Bankable Feasibility Study (BFS) completed in 2008
based on a high-grade ore body with an estimated 35-year Life of Mine indicates
that this project is robust. Economic inputs for the valuation in this study
have changed and two reviews were conducted during 2009. It is prudent that a
new review will be conducted in 2010 to incorporate changes in commodity prices
that have a material impact on project`s NPV.
Finance from conventional sources for developmental projects remains scarce and
expensive. There are encouraging signs of renewed interest as financial markets
are beginning to attribute value to quality projects.
The "Wezlite" strategy, initiated in 2008 in the face of the Global Financial
Crisis (GFC) sought to keep the Company`s main project moving on-course by
modularising the capital expenditure programme. This strategy provided for much
smaller amounts of capital and scheduling of activities to be in line with the
Company`s access to capital. The primary objective of Wezlite was and still is
to add tangible value to the project during the economic hiatus occasioned by
the GFC.
Strategic imperatives
Management remain committed to the objective of delivering value to
shareholders. Despite extraneous challenges introduced by the economic downturn,
the overriding strategic options for the Company have not changed. The four
strategic options available to the Company remain:
* deferring the project until the economic situation improves;
* running an asset disposal process to unlock immediate value for
shareholders;
* building the mine as a standalone Wesizwe project; or
* taking on a strategic balance sheet partner to build the mine
as a Wesizwe project.
Simply speaking, it makes no sense to dispose of a good asset in the current
market, so the disposal option is not ideal. Deferring the project any longer
would impair the project value as a result of rising capital expenditure costs
leading to shareholder frustration. Management is therefore of the opinion that
the most optimal option would vests in a strategic local or foreign partnership.
Specific opportunities underpinning this option are being evaluated and the
results will be presented to the Board, prior to asking shareholders to consider
the chosen strategic option.
Platinum Market
Volatility in Wesizwe`s key value driver, the prices of platinum and rhodium,
stabilised during 2008 and improved markedly towards the end of 2009 and
continued on this trajectory in early 2010. Strong PGM prices are certainly
encouraging and there is broad consensus that these should endure. Gains from
metal prices are potentially offset substantially by the unexpected and
continued strength of the ZAR/USD exchange rate.
Wesizwe`s profitability is contingent on the Rand basket revenue for the metal
concentrate product; the ZAR/USD exchange rate is the most sensitive variable in
the economic mix of the Company`s NPV equation.
It is noteworthy and an important qualification that the net present value (NPV)
calculation of the Company`s BFS is premised on future revenues and economic
factors prevailing from 2013 onwards and not current factors. There is a broad
consensus that the ZAR/USD rates will move into more favourable terrain by that
time.
Corporate Governance
The Board experienced a number of disruptive changes during the year under
review, including the removal of the acting Chairman, Robert Rainey, and Chief
Executive Officer, Michael Solomon amidst allegations of mismanagement and poor
Corporate Governance. At the Company`s AGM and during the course of the year,
other directors were also removed from the board. At an Extra-Ordinary General
Meeting in December 2009, shareholders reversed the decision and reinstated
Rainey and Solomon as well as the other directors who had been removed.
The new Board, under the leadership of Dawn Mokhobo, is now effectively
capacitated to perform its fiduciary duties and effectively discharge its
mandate. The Board is supported by five sub-committees, which are chaired by
independent non-executive directors as required under the provisions of King
III.
The newly constituted Board mandated Deloitte and Deneys Reitz to perform a
forensic review of the matters alleged in an internal audit report. This mandate
was an extension of a review commissioned by the former Board whose findings
were referred to the Extra-Ordinary General Meeting in December 2009.
The findings of the legal and forensic experts concluded that the allegations
levelled against Rainey and Solomon were unfounded. Consequently the board saw
it proper to absolve Rainey and Solomon of the alleged wrongful conduct. The
Board will announce details of the review findings as soon as the experts have
delivered their Final Report.
Notice of change to the board of directors
Shareholders are advised that during 2010, Mr. Arthur Mashiatshidi was appointed
as Financial Director in compliance with the requirements of the JSE while Mr.
Mlibo Mgudlwa has been appointed as the Executive Director: Statutory and Legal
Affairs with effect from 15 March 2010 and is accordingly no longer a Non-
Executive director of the Company.
Notice of Annual General Meeting
Notice is hereby given that the annual general meeting will be held at the
Glenhove Conference Centre, 52 Glenhove Road, Melrose Estate, Houghton, on
Thursday 19 August 2010 at 10h00, to transact the business as stated in the
notice of AGM, forming part of the financial statements.
Shareholders are advised that the financial statements will be distributed to
shareholders on Wednesday 31 March 2010.
Share capital
Group/Company
2009 2008
R`000 R`000
Authorised 15 10
1 500 000 000 (2008: 1 000 000 000) ordinary
shares of R0.00001 each
Issued 6 6
586 092 473 ordinary shares of R0,00001 each
(2008: 585 489 846 ordinary shares of
R0,00001 each)
The holders of ordinary shares are entitled to receive dividends as declared
from time to time and are entitled to one vote per share at meetings of the
Company.
There is 15% of the unissued ordinary shares under the control of the directors
until the next annual general meeting.
Statements of financial position
at 31 December 2009
Note Group Group Company Company
s 2009 2008 2009 2008
R`000 R`000 R`000 R`000
ASSETS
Non-current 1 218 1 142 631 583 632 673
assets 727 827
Property, plant 2 130 993 95 857 9 785 10 875
and equipment
Tangible 3 143 473 122 443 - -
exploration and
evaluation assets
Intangible 3 268 367 251 559 - -
exploration and
evaluation assets
Environmental 4 - 436 - -
deposits
Available-for- 20 7 162 3 800 - -
sale financial
asset
Investment in 21 668 732 668 732 - -
equity accounted
investee
Investment in 5 - - 621 798 621 798
subsidiaries
Current assets 143 756 328 181 717 931 761 512
Loans receivable 5 - - 577 499 470 124
from subsidiaries
Other receivables 6 4 870 11 998 1 711 233
Restricted cash 15.1 27 802 739 27 802 739
Cash and cash 15.1 111 084 315 444 110 919 290 416
equivalents
Total assets 1 362 1 471 1 349 1 394 185
483 008 514
EQUITY AND
LIABILITIES
Capital and 1 337 1 369 1 337 1 369 563
reserves 828 563 102
Share capital 7 6 6 6 6
Share premium 8 1 489 1 487 1 489 1 487 934
091 934 091
Share-based 9 62 582 57 269 62 582 57 269
payment reserve
Available-for- 20 726 - - -
sale financial
asset reserve
Accumulated loss (214 (175 (214 (175 646)
577) 646) 577)
Non-current
liabilities
Other non-current 10 - 6 962 - 6 962
liabilities
Current
liabilities
Trade and other 11 24 655 94 483 12 412 17 660
payables
Total equity and 1 362 1 471 1 349 1 394 185
liabilities 483 008 514
Statements of comprehensive income
for the year ended 31 December 2009
Note Group Group Company Company
s 2009 2008 2009 2008
R`000 R`000 R`000 R`000
REVENUE - - 12 824 16 818
Other income 176 196 176 196
Administration (56 910) (52 935) (61 (60
expenditure 948) 494)
Profit/(loss)on sale 49 (7) 59 (7)
of property, plant
and equipment
Impairment of 4 (436) - - -
environmental
deposit
Impairment of 3 - (1 212) - (1 212)
capitalised
exploration and
evaluation asset
Exploration and (363) (8 199) (363) (8 199)
evaluation expenses
Impairment of loan - - (8 232) (9 256)
to subsidiary
Loss from operations 12 (57 484) (62 157) (57 (62
484) 154)
Finance income 13 18 553 34 319 18 553 34 316
Finance costs 13 - (1) - (1)
Loss before taxation (38 931) (27 839) (38 (27
931) 839)
Income tax expense 14 - - - -
Loss for the year (38 931) (27 839) (38 (27
931) 839)
Net change in fair 20 726 - - -
value of the
available-for-sale
financial asset
Other comprehensive 726 - - -
income
Total comprehensive (38 205) (27 839) (38 (27
loss for the year 931) 839)
Loss per share
Basic loss per share 17 (6,65) (4,89)
(cents)
Diluted loss per 17 (6,65) (4,89)
share (cents)
Statements of cash flows
for the year ended 31 December 2009
Note Group Group Company Company
s 2009 2008 2009 2008
R`000 R`000 R`000 R`000
Cash flows from 15 (118 33 016 (55 414) (48 979)
operating 690)
activities
Finance cost 13 - (1) - (1)
Finance income 13 18 553 34 319 18 553 34 316
Cash (utilised)/ (100 67 334 (36 861) (14 664)
generated from 137)
operations
Cash flows
utilised by
investing
activities
Acquisition of (36 766) (61 355) (44) -
property, plant
and equipment as a
result of
increasing
operations
Acquisition of (21 030) (78 989) - (6 349)
tangible
exploration and
evaluation assets
as a result of
increasing
operations
Expenditure on (16 808) (42 545) - -
intangible
exploration and
evaluation assets
as a result of
increasing
operations
Capital invested (2 636) (3 800) - -
in the available-
for-sale financial
asset
Investment in - (8 884) - -
equity accounted
investee
Increase in - - (115 (131
amounts owed by 607) 566)
Group companies
Proceeds on 80 195 78 195
disposal of
property, plant
and equipment
Net cash outflow (77 160) (195 (115 (137
from investing 378) 573) 720)
activities
Cash flows from
financing
activities
Proceeds from - 196 729 - 196 729
share issues
Net cash inflow - 196 729 - 196 729
from financing
activities
Net (decrease)/ (177 68 685 (152 44 345
increase in cash 297) 434)
and cash
equivalents
Cash and cash 316 183 247 498 291 155 246 810
equivalents at the
beginning of the
year
Cash and cash 15.1 138 886 316 183 138 721 291 155
equivalents at the
end of the year
Decrease in - (18 403) - (18 403)
current portion of
interest bearing
liabilities
Net cash inflow 196 729 463 230 196 729 463 230
from financing
activities
Net increase in cash 68 685 187 330 44 345 186 650
and cash equivalents
Cash and cash 247 498 60 168 246 810 60 160
equivalents at
the beginning of
the year
Cash and cash 316 183 247 498 291 155 246 810
equivalents at
the end of the
year
Notes to the financial statements
for the year ended 31 December 2008
1. Basis of preparation and accounting policies
The ?nancial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) and its
interpretations adopted by the International Accounting
Standards Board (IASB) and in a manner required by the
Companies Act of South Africa.
The policies have been consistently applied to all years
presented, except for the adoption of the revised IAS 1. As a
result the Balance Sheets has been changed to Statements of
financial position, the Income statements to Statements of
comprehensive income and the Cash flow statements to Statements
of cash flows.
The ?nancial statements information for the year ended 31
December 2009 have been prepared on the historical cost basis
except for available-for-sale asset measured at fair value.
2. Capital commitments
Capital commitments as at 31 December 2009 for the next twelve
months, were substantially lower than last year at R35,7
million (2008: R61,8 million).
3. Headline loss per share
Group Group
2009 2008
R R
The basis of calculation of basic and
diluted loss per share is:
Attributable loss to ordinary 38 930 756 27 839 000
shareholders (Rand)
Weighted number of ordinary shares 585 592 210 569 795
outstanding during the year (shares) 868
Basic and diluted loss per share 6,65 4,89
(cents)*
The basis of calculation of headline
loss per share is:
Attributable loss to ordinary 38 930 756 27 839 000
shareholders (Rand)
Adjusted by: (401 195) (1 219
000)
Profit/(loss) on disposal of asset 48 871 (7 000)
Tax on above (13 684) -
Impairment of environmental deposit (436 382) -
Impairment of exploration and - (1 212
evaluation asset 000)
Headline loss 38 529 561 26 620 000
Weighted number of ordinary shares 585 592 210 569 721
outstanding during the year (shares) 121
Headline loss per share (cents) 6,58 4,67
*?During the year the Group had 1 851 305 outstanding options
under its LTIP and SARS schemes. These shares were not taken
into account for the purpose of calculating diluted loss per
share as they have an anti-dilutive effect.
4. Other notes
Dividends: No dividend was declared or proposed during the year
ended 31 December 2009 (2008: Nil).
Segmental analysis of annual results: No segmental report has
been prepared as the Group is conducting exploration activities
in one geological location, which represents only one business
activity.
5. Notes to the cash flow statement
Group Group Company Company
2009 2008 2009 2008
R`000 R`000 R`000 R`000
Reconciliation of
comprehensive loss for
the year to cash flows
from operating
activities:
Loss from operations (57 484) (62 157) (57 484) (62 154)
Adjustments for:
-?depreciation 1 599 1 504 1 115 1 063
-?impairment of loan 8 232 9 256
to subsidiary
-?share-based payment 6 470 510 6 470 510
expenditure
-?impairment of 436 - - -
environmental deposit
-?impairment to - 1 212 - 1 212
exploration and
evaluation asset
-?(Profit)/loss on (49) 7 (59) 7
sale of property,
plant and equipment
Operating loss before (49 028) (58 924) (41 726) (50 106)
working capital
changes
Changes in working (69 662) 91 940 (13 688) 1 127
capital
Decrease/(Increase) in 7 128 25 914 (1 478) 547
other receivables
(Decrease)/Increase in (69 828) 70 889 (5 248) 5 443
trade and other
payables
Decrease in other non- (6 962) (4 863) (6 962) (4 863)
current liabilities
Cash flow from (118 690) 33 016 (55 414) (48 979)
operating activities
6. Tangible and intangible exploration and evaluation assets
Group - 2009
Cost
Opening Closing
balance Additions Impairment balance
R`000 R`000 R`000 R`000
Tangible exploration 122 443 21 030 - 143 473
and evaluation asset
Intangible exploration 251 559 16 808 - 268 367
and evaluation asset
Total 374 002 37 838 - 411 840
7. Investment in equity accounted investee
In the year 2007, the Group acquired 100% of Africa Wide for
R611 million (including capitalised expenses of R10 217 337
incurred on acquisition) at 1 048 cents per share. The purchase
consideration was settled by issuing 57 421 643 new Wesizwe
Platinum Limited shares. The primary asset of Africa Wide is a
26% shareholding in the WBJV. The other parties are Anglo
Platinum Limited holding 37% and Platinum Group Metals Limited
holding 37%. The effective date of the transaction was
14 September 2007. Since acquisition all exploration and
evaluation expenditure has been capitalised in accordance with
the Group`s accounting policy.
Notwithstanding the 100% acquisition of Africa Wide, the
underlying investment in the WBJV is accounted for as an
investment in equity accounted investee, using the equity
method of accounting.
The assets and liabilities of Africa Wide and the fair values
attributed to these at acquisition date were as follows. The
only asset at the date of acquisition was the equity accounted
investee in the WBJV.
Total
R`000
Intangible assets 808 626
Trade and other payables (38 323)
Loan accounts (4 083)
Equalisation liability* (140 236)
At acquisition (128 871)
Additional top-up (11 365)
Total assets and liabilities acquired 625 984
Deferred tax liability (234 502)
Goodwill 220 514
Consideration at acquisition date settled by share 611 996
issue
Subsequent expenditure capitalised - 2007 47 853
Total 31 December 2007 659 849
Subsequent expenditure capitalised - 2008 8 883
Total 31 December 2009** 668 732
* Upon completion of a Bankable Feasibility Study for the WBJV
the respective deemed capital contribution of each party will
be credited based on their contribution of Measured. Indicated
and Inferred PGM ounces from the contributing properties
comprising the WBJV, determined in accordance with the SAMREC
code. The three partners will either make equalisation payments
or receive equalisation receipts from other partners so that
the percentage holding interest among the three parties in the
WBJV remains 37% Anglo Platinum Limited, 37% Platinum group
Metals Limited, 26% Africa Wide, Management estimate that the
equalisation liabilities, which represent equalising cash
payments to be paid by Africa Wide to the other WBJV partner(s)
in future, to be R140 million as at the effective date of the
transaction and recognised as part of the business combination.
Goodwill relates to capital and operational synergistic
benefits that will arise as the WBJV properties are next to
Wesizwe`s core project properties.
** No expenditure was incurred for 2009.
8. Available-for-sale financial asset
In terms of section 41 of the MPRDA, a financial provision is
required by the holder of a Prospecting Right, Mining Right or
Mining Permit to achieve the total quantum for rehabilitation
and remediation of environmental impacts and associated damage
as well as close-out cost.
The DMR approved the Environmental Management Programme for
Wesizwe and the following amounts have been invested for
closure cost purposes based on the approved figures.
2009 2008
R`000 R`000
Capital invested* 6 436 3 800
Return on investments (Fair 726 -
value adjustment)
Total 7 162 3 800
** Valuation Method - Level 2: Inputs other than quoted prices
included with Level 1 that are observable for the asset or
liability, either directly (i.e., as prices) or indirectly
(i.e., derived from prices).
9. Forward looking statements
Certain statements included in this report constitute "forward
looking statements" that are not profit forecasts or estimates
in any way as defined by the JSE Listings Requirements. Such
forward looking statements do however involve known and unknown
risks, uncertainties and other factors that may cause the
actual results, performances or achievements expressed or
implied by those forward looking statements. Wesizwe is
subject to the effect of changes in platinum group metal
prices, exchange rates and the risks involved in mining and
exploration operations.
on behalf of the Board
Dawn Mokhobo Michael Solomon
Chairman Chief Executive Officer
Johannesburg 31 March 2010
Enquiries
Wesizwe Platinum,
Telephone +27 11 994 4600
Mike Solomon, CEO
Julian Gwillim
Telephone +27 (0) 824 524 389
Sponsors
Investec Bank Limited
www.wesizwe.com
Date: 31/03/2010 07:05:12 Produced by the JSE SENS Department.
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