| Tue 28 Sep 2010, 13:34 | | WEZ - Wesizwe Platinum Limited - Reviewed condensed consolidated interim |
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WEZ
WEZ
WEZ - Wesizwe Platinum Limited - Reviewed condensed consolidated interim
financial information for the six months ended 30 June 2010 and renewal of
cautionary announcement
WESIZWE PLATINUM LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2003/020161/06)
JSE code: WEZ ISIN: ZAE000075859
("the Company" or "Wesizwe")
REVIEWED CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE SIX
MONTHS ENDED 30 JUNE 2010 AND RENEWAL OF CAUTIONARY ANNOUNCEMENT
HIGHLIGHTS
- Negotiations are progressing with a Chinese consortium to secure a US$877
million financing package by way of debt and equity for the development
of the Company`s core asset, the Frischgewaagd-Ledig Project;
- In April 2010, the Department of Mineral Resources granted its approval
enabling the Project Delta transaction to be concluded whereby Wesizwe is
now the holder of 100% of the Frischgewaagd-Ledig Project ("Project 2"),
while holding a 45.25% stake in a new company that houses Projects 1 and
3;
- An interim funding facility of R91 million secured with the Bank of China
on favourable terms;
- Early-stage preparatory work underway at the Frischgewaagd-Ledig Project
site;
- Corporate Governance review completed; and
- Mr Arthur Mashiatshidi appointed as CEO of the Company, taking over from
Mr Michael Solomon.
COMMENTARY
As an exploration and development Group, Wesizwe Platinum Limited does not
generate any operational revenues. Reported losses are made up of expenditure
into capital development activities, which are intended to prompt capital
growth. Therefore, reported losses reflect project investment expenditure that
is the basis of the Group`s value creation process until such time as the
Group commences mining production activities that generate revenues.
Wesizwe`s gross expenditure for the six months ended 30 June 2010 amounted to
R46.7 million (R26.9 million for the six months ended 30 June 2009). The
comprehensive income for the six months under review was R334.8 million
(compared to a loss of R14.9 million for the same period in 2009).
The basic earnings per share for the period was 50.47 cents per share (basic
loss of 2.55 cents per share for the same period in 2009). The headline loss
per share was 6.52 cents per share (headline loss of 2.56 cents per share for
same period in 2009).
The total number of shares in issue at 30 June 2010 was 797 942 598 (30 June
2009: 585 489 846).
LONG-TERM FUNDING AND STRATEGIC IMPERATIVES
Wesizwe`s strategic intent is to build and operate a platinum group metals
(PGMs) mine at the Frischgewaagd-Ledig Project, which has the potential of
positioning the Group as a significant mid-tier precious metals producer.
In May 2010, the Group signed a term sheet with a Chinese consortium,
consisting of the Jinchuan Group Limited ("JNMC") and the China-Africa
Development Fund ("CAD Fund"), whereby the Chinese consortium will provide
Wesizwe with a total financing solution of US$877 million (R6.6 billion) by
way of debt and equity for the development of its core asset.
Wesizwe and its advisors are advanced in the discussions relating to the
conclusion of this transaction, and it is expected that legal agreements will
be finalised over the coming months.
SHORT TERM FUNDING
At 30 June 2010, the Group had total cash on hand of R83 million, of which the
restricted cash component amounted to R27.8 million, thus available cash
amounted to R55.2 million. In addition to this, the Group has subsequently
secured an interim debt draw-down facility of R91 million on favourable terms
from the Bank of China. Funding from the Bank of China facility will be used
exclusively for capital development activities on the Frischgewaagd-Ledig
Project.
GOING CONCERN
The Management of Wesizwe assesses the liquidity risk of the Group on a
continuous basis and has adopted a cash preservation approach in dealing with
operating costs of the Group. Where possible, capital commitments are deferred
with the exception of long lead items of a strategic nature to the project
such as infrastructure for the provision of electricity and water.
The Western Bushveld Joint Venture ("WBJV") agreements require the payment of
an equalisation payment by Africa Wide Mineral Prospecting and Exploration
(Pty) Ltd ("Africa Wide") to (Rustenburg Platinum Mines Ltd ("RPM") of
approximately R139 million to equalise the mineral resources and funding
contribution of Africa Wide in relation to its historic 26% economic
participation in the WBJV. It is expected that this liability shall be settled
by way of cash from the anticipated financing package being negotiated with
the Chinese consortium. RPM has the right to nominate settlement in Wesizwe
shares. The number of shares to be issued if the current liability is settled
in shares would be approximately 84.3 million shares at a share price of R1.65
(at the date of this report).
The Directors are of the opinion that the cash resources at the date of this
report, together with the debt facilities, are sufficient to support the
activities of the Company for the next twelve months.
ASSET CONSOLIDATION AND DEVELOPMENT
In April 2010, approvals were received from the Department of Mineral
Resources, which enabled the successful conclusion of Project Delta.
Project Delta relates to the consolidating and rationalising of the various
projects adjacent to and near the Company`s core project area. Following the
conclusion of Project Delta, the Company now has full ownership of its core
Frischgewaagd-Ledig Project (Project 2), whilst holding a 45.25% shareholding
in a new company, Maseve Investments 11 (Pty) Ltd ("Maseve") (which holds
Projects 1 and 3 as they existed in the WBJV) with the remaining 54.75% being
held by Platinum Group Metals (RSA) (Pty) Ltd ("PTM"). In settlement of the
transaction, 211 850 125 shares, at the market price of R2.20 per share, were
issued to RPM, a company wholly owned by Anglo Platinum Limited. RPM is
currently the largest single shareholder in Wesizwe with a 26.9% interest.
With the adoption of IFRS 3 Business Combinations and IAS 27 Consolidated and
Separate Financial Statements, the abovementioned transaction was accounted
for using the purchase method. Any difference between the acquisition-date
fair value and the consideration paid should be recognised as goodwill.
In accounting for Project Delta, the fair value of the 37% interest in the
WBJV far exceeded the consideration payment ("bargain purchase"); therefore a
gain on the bargain purchase was recognised through the Statement of
Comprehensive Income.
This transaction further resulted in the Net Asset Value of the Group
exceeding the current market capitalisation. Management is of the opinion that
the investment acquired is fairly valued and no impairment is required.
FRISCHGEWAAGD-LEDIG PROJECT UPDATE
The level of activity at the project site is consistent with the level of
capital currently available to the Group. Over the last six months,
significant ground-breaking work began in preparation for the full-scale
development of the project into a mine. Terracing and road works are under
construction to be completed before the onset of the rainy season.
The interim funding from the Bank of China will ensure the continuation of the
steady-state development work. This paves the way for the sinking of the shaft
to commence in 2011 when capital becomes available.
COMMUNITY ISSUES
The ongoing conflict among the Community members (which members are comprised
in structures that make-up a significant BEE partner to the Group) pertaining
to the transfer and/or monetisation of the Community`s shares have led to
multiple legal proceedings, which are currently underway in the Courts to
resolve. The conflicts culminated in the Group`s Annual General Meeting
("AGM") intended for 19 August 2010 being postponed by an order of the Court,
flowing from an urgent application to determine who has the right to vote the
community shares. The Group is cited as a Respondent in the matter and has
taken counsel on the appropriate response. Management awaits the directive
from the Court, which will dictate the timing of the resumption of the
postponed AGM.
In addition to the normal liaison activities with the Community, and in order
to be more responsive to Community issues, the Group has been party to the
formation of a Steering Committee comprising the Department of Mineral
Resources, the North West Government, the Royal Family and representatives of
the Concerned Groups in the Community. The Group has committed to work through
the Steering Committee structure to speedily resolve issues that affect the
Community. Through this structure, the Group has been requested to assist the
Community and the Royal Family in their efforts to obtain an Accounting Audit
for the Community`s assets in relation to Wesizwe. The Group has,
consequently, advanced funds to the Community and the Royal Family by way of
payment for the execution of a legal process to account for the Community
assets. The Group expects to be refunded as soon as control of the Community`s
assets is vested appropriately.
ALLEGED GOVERNANCE AND MISCONDUCT
Deloitte (Accounting) and Deneys Reitz (Legal) have concluded their forensic
investigation on the allegations levelled against Mr Michael Solomon and Mr
Robert Rainey. The findings of the investigation found deficiencies in
Controls and Governance matters, but exonerated Mr Solomon and Mr Rainey of
any wrong doing. The results of these findings have been publicised and widely
reported on by the media.
CORPORATE GOVERNANCE
The Group has committed to addressing Governance deficiencies identified by
the forensic review. In their final submission, Deloitte and Deneys Reitz have
acknowledged the positive progress made in improving controls, procedures and
a delegation of authority framework to guide the activities of the executives
and directors of the Group. The Group continues to work on improving
governance standards in an effort to reach full compliance with King III and
all other relevant regulations.
BOARD AND MANAGEMENT CHANGES
The Group`s current Chief Executive Officer, Mr Michael Solomon, will not
renew his contract. As a consequence, the Board has announced that, with
effect from 1 October 2010, Mr Arthur Mashiatshidi, the Group`s current
Finance Director, will assume the position of Chief Executive Officer. The
Group`s Chief Financial Officer, Mr Jacques de Wet, will succeed Mr
Mashiatshidi as the Finance Director. Mr Solomon has committed to continue to
serve the Group in an advisory capacity for a further six months and will
remain as a non-executive director.
Over the last six months, Mr Mashiatshidi has played a central role in
strengthening the executive team at Wesizwe and bolstering the finance and
administrative function, including the implementation of sound governance
practices and policies.
Consequent to the conclusion of Project Delta, Mr Mike Rogers was nominated by
RPM to act as its representative on the Wesizwe Board. Due to a conflict of
interests, Mr Rogers has subsequently resigned as a non-executive director and
RPM has nominated Mr Barrie van der Merwe to be the representative of RPM, on
the board of the Group.
The Board further advises that, due to other commitments and time constraints,
Mr Goleele Mosinyi resigned as a non-executive director of the Company with
effect from 17 September 2010.
COMPANY SECRETARY CHANGES
Routledge Modise Inc. practising as Eversheds, has given notice that it will
be closing down its Corporate Governance department and this has resulted in
Eversheds tendering its resignation as Company Secretary. The Board
subsequently announced the appointment of Ms Sirkien van Schalkwyk as Company
Secretary with effect from 17 September 2010.
Ms van Schalkwyk completed her BLC in 1996 and entered the company secretarial
market where she completed her LLB part time. With more than 12 years`
secretarial experience, including acting as Company Secretary for a number of
listed entities, the Board believes that she is suitably qualified and
experienced and that she will add value on various levels within the
organisation
RENEWAL OF CAUTIONARY ANNOUNCEMENT
Further to the detailed cautionary announcement dated 24 May 2010 and the
renewal of cautionary announcements dated 6 July 2010 and 17 August 2010,
shareholders are advised that negotiations on the formal transaction documents
are still progressing.
Accordingly, shareholders are therefore advised to continue exercising caution
when dealing in the Company`s securities, until a full announcement is made.
By order of the Board:
DAWN MOKHOBO, Chairman
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Six months Six months Year
ended June ended June ended
2010 2009 December
2009
Note Reviewed Reviewed Audited
R`000 R`000 R`000
ASSETS
Non-current assets 2 493 775 1 194 419 1 218
727
Property, plant and 134 240 124 565 130 993
equipment
Tangible exploration and 147 191 134 457 143 473
evaluation assets
Intangible exploration 11 1 284 774 261 151 268 367
and evaluation assets
Environmental deposit - 436 -
Loans and long term 1 429 - -
receivables
Available-for-sale 8 560 5 078 7 162
financial asset
Investment in equity 7 917 581 668 732 668 732
accounted investee
Current assets 104 026 215 205 143 756
Other receivables 5 20 958 4 258 4 870
Restricted cash 10 27 828 27 780 27 802
Cash and cash equivalents 55 240 183 167 111 084
TOTAL ASSETS 2 597 801 1 409 624 1 362
483
EQUITY AND LIABILITIES
Capital and reserves 2 139 880 1 355 349 1 337
828
Share capital 8 6 6
Share premium 1 955 159 1 487 934 1 489
091
Share-based payment 63 763 57 981 62 582
reserve
Available- for- sale 726 - 726
financial asset reserve
Retained earnings / 120 224 (190 572) (214
(accumulated loss) 577)
Non-current liabilities
Deferred tax liability 7 285 251 - -
Current liabilities 172 670 54 275 24 655
Trade and other payables 33 573 54 275 24 655
Equalisation liability 8 139 097 - -
TOTAL EQUITY AND 2 597 801 1 409 624
LIABILITIES 1 362
483
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months Six months Year
ended June ended June ended
2010 2009 Decembe
r
2009
Note Reviewed Reviewed Audited
R`000 R`000 R`000
Revenue
- - -
Other income 71 95 176
Gain on bargain purchase 6 378 083 - -
Administration 9 (46 663) (26 890) (56
expenditure 910)
Profit on sale of - 49 49
property, plant and
equipment
Impairment of - - (436)
environmental deposit
Exploration and (7) (353) (363)
evaluation expenses
Profit / (loss) from 331 484 (27 099) (57
operations 484)
4 218 12 173 18 553
Finance income
Finance expense (901) - -
Profit / (loss) before 334 801 (14 926)
taxation (38
931)
Income tax expense - -
-
Profit / (loss) for the 334 801 (14 926)
period (38
931)
Net change in fair value - - 726
of the available-for-
sale financial asset
Other comprehensive - 726
income -
Total comprehensive 334 801 (14 926) (38
income / (loss) for the 205)
period
Basic earnings / (loss) 50.47 (2.55) (6.65)
per share (cents)
Diluted earnings / 50.45 (2.55)
(loss) per share (cents) (6.65)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share- Availa Retained
Share based ble- earnings /
capi- Share payment for- (accumulate
tal premium reserve sale d Total
reserv loss)
es
R`000 R`000 R`000 R`000 R`000 R`000
Balance at 1 - 1 369
January 2009 6 1 487 934 57 269 (175 646) 563
Share-based - - 712 - - 712
payment
expenditure
Net loss and total - - - -
comprehensive loss (14 926) (14
for the period 926)
Balance at 30 June 6 1 487 934 57 981 (190 572) 1 355
2009 - 349
LTIP shares issued - 1 157 - -
(1157) -
Share-based - - 6 470 - - 6 470
payment
expenditure
Share-based - - (712) - - (712)
payment reversal
Total - - - (23
comprehensive loss 726 (24 005) 279)
for the period
Balance at 31 6 1 489 091
December 2009 62 582 726 (214 577) 1 337
828
Shares issued - 2 466 068 - - - 466
Project Delta 070
Share-based - - 1 181 - - 1 181
payment
expenditure
Total - - - - 334 801 334
comprehensive 801
income for the
period
Balance at 30 June 1 955 159 63 763 726 120 224 2 139
2010 8 880
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six Six months Year ended
months ended June December
ended 2009 2009
June 2010 Reviewed Audited
Reviewed R`000 R`000
R`000
Cash flows from operating activities (51 882) (65 048) (118 690)
Finance income 4 218 12 173 18 553
Finance expense (4) - -
Cash utilised by operations (47 668) (52 875) (100 137)
Cash flows utilised by investing
activities
(3 953)
Acquisition of property, plant and (29 554) (36 766)
equipment as a result of expanding
operations
(3 718) (12 014) (21 030)
Acquisition of tangible exploration and
evaluation assets as a result of
expanding operations
(7 959) (9 592) (16 808)
Acquisition of intangible exploration
and evaluation assets as a result of
expanding operations
Recovery of intangible exploration and 10 306 - -
evaluation expenditure
Loans and long term receivables (1 429) - -
advanced
(1 397) (1 279) (2 636)
Capital invested in the available-for-
sale financial asset
Proceeds on disposal of property, plant - 78 80
and equipment
Net cash outflow from investing (8 150) (52 361) (77 160)
activities
Net (decrease) in cash and cash (55 818) (177 297)
equivalents (105 236)
Cash and cash equivalents at the 138 886 316 183 316 183
beginning of the period
Cash and cash equivalents at the end of 83 068 210 947 138 886
the period
Cash and cash equivalents 55 240 183 167 111 084
Restricted cash 27 828 27 780 27 802
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
for the six months ended 30 June 2010
1 Reporting entity
Wesizwe Platinum Limited ("Wesizwe" or "the Company") is a company
domiciled in the Republic of South Africa. The condensed consolidated
interim financial information of the Company as at 30 June 2010 comprise
the Company, its subsidiaries and the Group`s interests in equity
accounted investee (together referred to as the "Group"). The
consolidated financial statements of the Group for the year ended 31
December 2009 are available upon request from the Company`s registered
office at Unit 13, 2nd Floor, 3 Melrose Boulevard, Melrose Arch,
Johannesburg, 2076 or at www.wesizwe.com.
2 Statement of compliance
The condensed consolidated interim financial information has been
prepared in accordance with IAS 34 Interim Financial Reporting and AC 500
standards issued by the International Accounting Standards Board. It does
not include all of the information required for full annual financial
statements, and should be read in conjunction with the consolidated
financial statements of the Group for the year ended 31 December 2009.
The condensed consolidated interim financial information was approved by
the Board of Directors on 23 September 2010.
3 Significant accounting policies
Except as described below, the accounting policies applied by the Group
in the condensed consolidated interim financial information are the same
as those applied by the Group in its consolidated financial statements
for the year ended 31 December 2009.
a)Change in accounting policy
Accounting for business combinations
The Group has adopted IFRS 3 Business Combinations (2008) and IAS 27
Consolidated and Separate Financial Statements (2008) for business
combinations occurring in the financial year starting 1 January 2010. All
business combinations occurring on or after 1 January 2010 are accounted
for by applying the purchase method. The change in accounting policy was
applied prospectively and had no material impact on earnings per share.
The Group has applied the purchase method for the transactions that
occurred during the interim period ended 30 June 2010 as disclosed in
note 6.
Control is the power to govern the financial and operating policies of an
entity so as to obtain benefits from its activities. In assessing
control, the Group takes into consideration potential voting rights that
currently are exercisable. The acquisition date is the date on which
control is transferred to the acquirer. Judgement is applied in
determining the acquisition date and determining whether control is
transferred from one party to another.
The Group measures the gain on bargain purchase as the fair value of the
consideration transferred including the recognised amount of any non-
controlling interest in the acquiree, less the net recognised amount
(generally fair value) of the identifiable assets acquired and
liabilities assumed, all measured as at the acquisition date.
A contingent liability of the acquiree is assumed in a business
combination only if such a liability represents a present obligation and
arises from a past event, and its fair value can be measured reliably.
Consideration transferred includes the fair values of the assets
transferred, liabilities incurred by the Group to the previous owners of
the acquiree, and equity interests issued by the Group.
Transaction costs that the Group incurs in connection with a business
combination, such as finder`s fees, legal fees, due diligence fees, and
other professional and consulting fees are expensed as incurred.
4 Estimates
The preparation of the interim financial information requires management
to make judgements, estimates and assumptions that affect the application
of accounting policies and the reported amounts of assets and
liabilities, income and expense. Actual results may differ from these
estimates.
Except as described below, in preparing the condensed consolidated
interim financial information, the significant judgements made by
management in applying the Group`s accounting policies and the key
sources of estimation were the same as those that applied to the
consolidated financial statements for the year ended 31 December 2009.
During the six months ended 30 June 2010 management reassessed its
estimates in respect of:
* Business combinations (refer to note 6);
* The recoverable amount of intangible exploration and evaluation
assets (refer to note 11);
* The recoverable amount of goodwill (refer to note 7); and
* Reserve on share-based payments.
5 Financial risk management
Credit risk - other receivables
The Group has credit exposure to receivables of R11.2 million. This
relates to cost recovery of R11.1 million from PTM, and sundry debtors of
R0.1 million.
Market risk - current liabilities
Market risk is the risk of changes in market prices, such as foreign
exchange rates, interest rates and equity prices and how this affects the
Group`s income or the value of its holdings or financial instruments. The
Group faces foreign exchange rate exposure as well as interest rate
exposure on the equalisation liability of R139 million that is
denominated in US$ and carries interest at the monthly US Treasury Bill
rate (refer to note 8 ).
Other aspects of the Group`s financial risk management objectives and
policies are consistent with those disclosed in the consolidated
financial statements for the year ended 31 December 2009.
6 Acquisition of Joint Venture
Business combination
On 22 April 2010 the Group acquired an additional 37% ownership interest
in the WBJV from RPM, together with certain prospecting rights held by
RPM. Prior to this acquisition, the Group held a 26% interest in the
WBJV. The carrying amount of the Group`s investment in the WBJV`s net
assets in the consolidated financial statements on the date of the
acquisition was R668 731 946.
Following the acquisition of RPM`s 37% in the WBJV and the transfer of
RPM`s prospecting rights to the Group, the WBJV structure unwound and all
participation interest in the WBJV terminated.
The acquisition from RPM enabled the transfer of prospecting rights in
Project 2 to Bakubung Minerals (Pty) Ltd ("Bakubung") and the prospecting
rights in Projects 1 and 3 were transferred to Africa Wide Mineral
Prospecting and Exploration (Pty) Ltd ("Africa Wide"). Africa Wide in
turn transferred the acquired rights, together with its existing rights
to a new company, Maseve in exchange for a 45.25% shareholding. The other
54.75% shareholding in Maseve was acquired by PTM who will control the
new entity. PTM has the right to subscribe for additional shares to
increase its percentage shareholding to 74% by contributing R408 606 555
into an interest bearing escrow account in favour of the Group and will
count as part of the Group`s contribution towards the development of
Projects 1 and 3.
The reorganisation and consolidation of projects within the Pilansberg
complex provide the following benefits:
- The Group now holds 100% interest in its core asset, the
Frischgewaagd-Ledig Project (Project 2);
- A clarified format for the capital markets to assess the value of
the Group;
- Has increased PGM resources attributable to the Group;
- Facilitates close co-operation between the Group and PTM
(shareholder in Maseve) to achieve cost savings in relation to
engineering, environmental impact, tailings, power and other social
infrastructure requirements; and
- Provides for a regional and unified approach to community and
economic development.
- The following summarises the consideration transferred, and the
recognised amounts of the investment acquired at the acquisition
date:
Consideration transferred R`000
Equity instruments (211 850 125 ordinary shares) 466 070
The value of the ordinary shares issued was based on the listed share
price of the Company on 22 April 2010 at R2.20 per share.
The following fair values at acquisition date have been determined for
the investments acquired:
Fair value of intangible assets
(Prospecting rights in Project 2) 1 018 754
Fair value of intangible assets
(Prospecting rights in Project 1 and 3) 143 730
Total fair value acquired 1 162 484
Gain on bargain purchase
a)Gain on bargain purchase on the 37% acquisition from RPM was recognised as
follows:
Fair value of 37% interest in the WBJV
at acquisition 1 162 484
Less: Total consideration transferred
(211 850 125 ordinary shares at R2.20 each) (466 070)
Gain on bargain purchase before deferred
Taxation 696 414
Less: Deferred taxation (28% of fair value) (325 495)
Gain on bargain purchase in acquiring
37% of the WBJV 370 919
b)Gain on bargain purchase on the initial 26% was recognised as follows:
At acquisition date fair value of previously
held 26% interest in the WBJV 816 881
Less: Current net asset value of 26% interest in
the WBJV (806 931)
Gain on bargain purchase of previously held
26% interest before deferred taxation 9 950
Less: Deferred taxation (28%) (2 786)
Gain on bargain purchase on previously
held 26% interest in the WBJV 7 164
Total gain on bargain purchase as a result of the
acquisition a)+b) 378 083
The re-measurement of the fair value of the Group`s existing 26% interest
in the WBJV resulted in a gain of R7.164 million after deducting deferred
taxation of R2.786 million.
Gain on bargain purchase is the difference between the purchase
consideration and the fair value of the investment acquired. The gain on
bargain purchase arose as a result of the purchase price being fixed in
shares of 211 850 125 at the monthly average share price as determined in
September 2008. With the decline in the share price from an average of
R5.50 in 2008 to R2.20 at acquisition date, a gain on bargain purchase
has arisen. Management is confident that the fair value of the assets
remained unchanged since the acquisition date.
7 Investment in equity accounted investee
On 22 April 2010 the last suspensive condition to the restructuring of
the WBJV assets and the acquisition of RPM`s 37% interest in the WBJV,
which required the final approval by the Minister of the Department of
Mineral Resources, was met.
Following the unwinding of the WBJV structure and the acquisition of
Prospecting Rights from RPM, the Group contributed certain of these
Prospecting Rights (Project 1 and 3 Prospecting Rights) to a new company,
Maseve, in exchange for a 45.25% shareholding, whilst the remaining
Prospecting Rights in Project 2 were transferred to Bakubung (a 100%
subsidiary of Wesizwe that held the remaining Prospecting Rights in
Project 2).
Investment in Equity Accounted Investee: R`000
a)Original Consideration paid for 26% interest in the
WBJV
Recorded value of 26% investment in the WBJV as at
31 December 2009 668 732
Plus: Equalisation liability transferred to
current liabilities (refer note 8) 140 236
Less: Adjustment to equalisation liability and
assets (refer note 8) (2 037)
Current value of 26% interest in the WBJV 806 931
b)Additional acquisition of Prospecting rights at
fair value
Acquisition of Prospecting rights in Project 1 and 3
at fair value 143 730
Less: Deferred tax on Project 1 and 3 (40 244)
Acquisition of Project 1 and 3 Prospecting rights
after providing for deferred taxation 103 486
c)Gain on bargain purchase of previously held 26%
interest in the WBJV
Gain on bargain purchase of previously held 26%
interest before deferred taxation 9 950
Less: Deferred taxation (28%) (2 786)
Gain on bargain purchase on previously held 26%
interest in the WBJV 7 164
Total Investment in Equity Accounted
Investee a)+b)+c) 917 581
8 Equalisation liability
The WBJV agreements required the payment/receipt of an equalisation
payment by the partners of the WBJV to equalise the mineral resources and
funding contribution of each party in relation to its economic
participation in the WBJV. An estimated equalisation liability of R140
million payable to RPM by Africa Wide was recognised as part of
Investment in Equity Accounted Investee in the Consolidated Financial
Statements of the Group. Subsequent to the unwinding of the WBJV
structure this liability is still due by Africa Wide to RPM.
On 25 February 2010 an agreement was reached with RPM to fix the
equalisation liability in US$ terms at US$18 million. This resulted in a
revision of the equalisation liability to R138.2 million. The
equalisation liability, which remains in US$, carries interest at the
monthly US-Treasury Bill rate. This liability exposes the Group to
exchange rate risk. Management have taken a decision not to hedge this
exposure.
The following table highlights the movement in the Equalisation
Liability: R`000
Equalisation liability transferred from
Investment in Equity Accounted Investee 140 236
Adjustment of liability following agreement to
fix the liability in US$ terms (2 037)
Equalisation liability transferred to current
liabilities 138 199
Interest capitalised 352
Exchange rate fluctuation 546
139 097
The agreement with RPM requires the equalisation liability to be settled
in cash by Africa Wide before April 2010, failing which Wesizwe will
assume the liability. RPM has the right to request full settlement of the
liability in Wesizwe shares at that stage. The number of shares to be
issued if the current liability is settled in shares would be
approximately 84.3 million at a share price of R1.65 (at the date of this
report). It is Management`s intention to settle this liability in cash
once the funding from the Chinese consortium is secured.
9 Financial results
As an exploration and development Group, Wesizwe will not earn revenue
from mining activities until such time as a mine is brought into
production.
The total comprehensive income for the six months under review was R334.8
million (compared to a loss of R14.9 million for the same period in
2009). The total comprehensive income for the period comprises
administration expenses of R46.7 million, offset by the gain on bargain
purchase of R378 million, net finance income of R3.3 million and other
income of R0.1 million.
Administration expenses of R46.7 million include the following:
- Depreciation - R0.7 million
- Other administrative overheads - R2.4 million
- Corporate advisory and success fee on Project Delta - R26.4 million
- Consulting and professional fees - R4.1 million
- Directors expenses - R3.6 million
- Salaries - R3.7 million
- Marketing expenses and investor relations - R2.3 million
- Community sustainable projects - R2.3 million
- Share-based payment - R1.2 million
The basic earnings per share for the period was 50.47 cents per share
(June 2009: basic loss of 2.55 cents per share). The headline loss per
share was 6.52 cents per share (June 2009: headline loss of 2.56 cents
per share).
No dividend was declared during the period ended 30 June 2010. (June
2009: Nil).
No segmental report has been produced as the Group is conducting
exploration activities in one geological location, which represents its
only one business activity.
Capital Expenditure includes: intangible exploration and evaluation
expenses capitalised of R7.9 million; purchase of long-lead items
consisting of plant and equipment to the value of R3.9 million; and
tangible exploration and evaluation expenses capitalised (engineering and
drawings) to the value of R3.7 million
The total number of shares in issue at 30 June 2010 was 797 942 598 (30
June 2009: 585 489 846).
Capital commitments as at 30 June 2010 were R27.7 million (30 June 2009:
R3 million). This figure included an amount of R22 million payable to
Eskom for the supply of 2x20 MVA transformers as well as an amount of
R3.4 million that was payable to ABB for design work on a single drum
winder.
10 Restricted cash
Restricted cash covers the guarantee of R27 million in favour of the DMR
on issue of the mining licence and R0.8 million guaranteed to the
landlord for the operating lease agreement.
11 Intangible exploration and evaluation assets
The following table highlights the movement in Intangible exploration and
evaluation assets: R`000
Opening Balance - 1 January 2010 268 367
Plus: Transfer of Project 2 Prospecting
rights to Bakubung (refer note 6) 1 018 754
Additions during the year 7 959
Recovery of intangible exploration and
evaluation asset (10 306)
Closing Balance - 30 June 2010 1 284 774
12 Independent review
The condensed consolidated statement of financial position at 30 June
2010 and related condensed consolidated statements of comprehensive
income, changes in equity and cash flows for the period have been
reviewed by KPMG Inc. Their unmodified review report is available for
inspection at the Company`s registered office.
13 Significant changes to Mineral Resources
Following the conclusion of Project Delta and the re-organisation of
assets in the WBJV structure with RPM and PTM, the attributable resource
ounces of Wesizwe increased substantially to 17.835 million ounces from
12.529 million ounces (42.36%).
Wesizwe attributable resource ounces (4E) before/after
Project Delta
Bakubung Africa Wide Totals
Before After Before After Before After
(Moz) (Moz), (Moz), (Moz), (Moz) (Moz)
Various 100% 26% WBJV 45.25%
%`s Maseve
Inferred 2.700 3.473 0.506 0.881 3.206 4.354
Indicated 6.330 8.436 1.394 2.426 7.724 10.862
Measured 0.871 1.352 0.728 1.267 1.599 2.619
Total 9.900 13.261 2.628 4.574 12.529 17.835
Ounces increase after Project Delta 5.307 42.36%
Notes: All figures rounded to 3 decimals
All figures in million ounces (Moz)
14 Judgements by Directors and Management
Consideration on the impairment of assets
Following the recent volatility in the ZAR/US$ exchange rates as well as
an indication of a possible reduction in capital cost, a decision was
taken to formally update the financial models before year end by an
independent third party.
Subsequent to the decision to formally update the financial model
supporting the Bankable Feasibility Study in the last quarter of 2010, a
decision was taken by Management to perform a reasonability check on the
assets of the company based on current market multiples (ZAR resource
value/4PGE ounce). The following guidelines were obtained from an
independent third party on resources of a similar nature:
- Measured Resources - R490/4PGE ounce
- Indicated Resources - R210/4PGE ounce
- Inferred Resources - R28/4PGE ounce
Based on the financial models at year end and the reasonability checks
performed at half-year end, Management is confident that the assets of
the Group are not impaired.
15 Subsequent event
Subsequent to the end of the interim reporting period, the Group signed a
short-term bridging facility of R91 million with the Bank of China
("BOC"). This facility is to progress with the development of the
Frischgewaagd-Ledig Project whist the Company is concluding negotiations
for the comprehensive funding of the Project. The Facility was agreed at
very favourable terms and will be repaid once the Primary Funding is
secured.
RECONCILIATION OF PROFIT / (LOSS) FOR THE PERIOD TO CASH FLOWS FROM OPERATING
ACTIVITIES
Group Group Group
Six months Six months Year ended
ended June ended June December
2010 2009 2010
Reviewed Reviewed Audited
R`000 R`000 R`000
Profit / (loss) from 331 484 (27 099) (57 484)
operations
Adjustment for:
Share-based payment 1 181 712 6 470
expenditure
Impairment of environment - - 436
deposit
Depreciation 706 817 1 599
Gain on bargain purchase (378 083) - -
Profit on disposal of - (49) (49)
property, plant and equipment
Operating loss before working (44 712) (25 619) (49 028)
capital changes
Changes in working capital (7 170) (39 429) (69 662)
(Increase) / decrease in (16 088) 7 740 7 128
other receivables
Increase / (decrease) in 8 918 (40 207) (69 828)
trade and other payables
Movement in non-current - (6 962) (6 962)
liability
Cash flow from operating (51 882) (65 048) (118 690)
activities
EARNINGS / (LOSS) PER SHARE
Six months Six months Year ended
ended June ended June December
2010 2009 2009
Reviewed Reviewed Audited
The basis of calculation of basic
earnings/(loss) per share is:
Attributable profit / (loss) to 334 800854 (14 926 (38 930
ordinary shareholders (Rand) 164) 756)
Weighted average number of 663 341 690 585 592 210
ordinary shares in issue 585 489 846
(shares)
Basic earnings / (loss) per
share (cents) 50.47 (2.55) (6.65)
The basis of calculation of diluted
earnings / (loss) per share is:
Attributable profit / (loss) to 334 800 854 (14 926 (38 930
ordinary shareholders (Rand) 164) 756)
Adjusted weighted average 663 673 245 585 489 846 585 592 210
number of ordinary shares
outstanding (shares)
Weighted average number of 663 341 690 585 489 846 585 592 210
ordinary shares in issue
LTIP and SARS options 331 555 -* -*
outstanding
Diluted earnings / (loss) per 50.45 (2.55) (6.65)
share (cents)
The basis of calculation of Headline
earnings / (loss) per share is:
Attributable profit / (loss) to 334 800 854 (14 926 (38 930
ordinary shareholders (Rand) 164) 756)
(378 083 044) (48 871) 401 195
Impairment of environmental - - 436 382
deposit
Taxation on above - - -
Profit on disposal of property, - (48 871) (48 871)
plant and equipment
Taxation on above - - 13 684
Gain on bargain purchase (378 083 044) - -
Taxation on above - - -
Headline loss (43 282 190) (14 975 035) (38 529 561)
Weighted average number of 663 341 690 585 489 846 585 592 210
ordinary shares in issue
Headline loss per share
(cents)* (6.52) (2.56) (6.58)
* The outstanding LTIP and SARS options were not taken into account for the
purpose of calculating diluted headline loss per share as they have a
potentially anti-dilutive effect on the earnings
28 September 2010
Sponsor: Investec Bank Limited
Date: 28/09/2010 13:34:00 Produced by the JSE SENS Department.
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