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VIL
VIL
VIL - Village - Report to shareholders for the year ended 30 June 2010
Village Main Reef Gold Mining Company (1934) Limited ("Village")
(Incorporated in the Republic of South Africa)
(Registration Number 1934/005703/06)
JSE Code VIL ISIN: ZAE000007720
Report to shareholders for the year ended 30 June 2010
The financial year ended 30 June 2010 saw an exciting and significant step in
rebuilding Village into a new generation precious metals mining company with the
successful acquisition of the Lesego Platinum project on 15 June 2010. This
acquisition lifted Village from curtailed operational status to one of the top
performing shares on the JSE, with a market capitalization of over R550 million,
by financial year end.
A significant opportunity exists in South Africa to build a critical mass of
underperforming gold and platinum assets and turning these into robust cash
generative mines. Many of these underperforming assets are currently small and
relatively insignificant within the overall portfolio of larger mining companies
and as such, quite rightly, don`t necessarily enjoy the focus or attention that
is required to optimize their performance and efficiency. Village, with its lean
cost structure and strong management team with a track record of turning
marginal operations into cash producers, is well positioned to take advantage of
these opportunities.
Lesego is the first step towards rebuilding Village into this new generation
precious metals mining company and forms an excellent anchor investment. The 28
million ounce 4E PGM project, which is fully funded through to a Definitive
Feasibility stage, was acquired at $2.50 an ounce and is poised for significant
shareholder return as the investment should re-rate, relative to its peers, as
the project progresses through scoping, pre-feasibility and onto a definitive
feasibility stage.
As a result of the Lesego transaction, Village is now a 60% black owned listed
company, ideally positioning the company as an `acquirer of choice` in the South
African market place.
In addition Lesego provides Village with a robust foundation from which to build
a precious metals company. Our stated strategy of acquiring cash generative
precious metal assets will prove to be effective as the board continues to
deliver on a series of transactions, currently in the pipeline.
Reverse Asset Acquisition
During the year Village acquired a number of companies that gave it control of
Lesego Platinum Mining (Pty) Ltd and Sweet Sensation 79 (Pty) Ltd (the reverse
asset acquisition). Lesego Platinum Mining (Pty) Ltd and Sweet Sensation 79
(Pty) Ltd have prospecting rights over numerous properties in the eastern limb
of the Bushveld Igneous Complex (Lesego Platinum Project). In settlement of the
acquisition Village issued shares which resulted in a change of control and a
reverse listing.
The effect of the accounting treatment, as a result of the reverse asset
acquisition, is that even though the consolidated financial statements are
issued under the name of Village, it represents a continuation of Lesego
Platinum Mining (Pty) Ltd and Sweet Sensation 79 (Pty) Ltd, except for its
capital structure. As a result, the comparative information presented for the
group represents that of Lesego Platinum Mining (Pty) Ltd.
Share Capital
A total of 253,416,015 ordinary shares in Village were issued, at R2 per share,
in terms of the reverse asset acquisition. At year end Village had a total of
260,394,461 shares in issue. The closing price of Villages shares on the JSE at
30 June 2010 was R2.23 per share, giving Village a market capitalization of R580
million.
Funding and Cash on Hand
To raise funding for the Bankable Feasibility Study (BFS) on the Lesego Platinum
Project, Lesego Platinum Mining (Pty) Ltd embarked on a private equity funding
approach and in 2009 the Industrial Development Corporation (IDC) acquired a 28%
shareholding in Lesego Platinum Mining (Pty) Ltd for a consideration of R142
million.
It is anticipated that the IDC funding will be adequate to cover the entire
budget for the BFS for the Lesego Platinum Project.The BFS commenced in February
2010 and is expected to be completed by the end of 2012.
The IDC funding will be invested in three tranches coinciding with three
distinct development phases in the BFS for the Lesego Platinum Project. These
are summarised below:
Investment Development IDC IDC Effective
tranche phase investment investment shareholding
- in Lesego
R`000 cumulative
R`000
Tranche 1 Scoping 30,953 30,953 6.1%
Study
Tranche 2 Pre- 56,976 87,929 17.3%
Feasibility
Study
Tranche 3 BFS 54,071 142,000 28.0%
Total 142,000
Tranche 1 was advanced by the IDC for the purposes of fulfilling the first stage
of the development phase during the year, and as at 30 June 2010 R27.2 million
of this tranche remained unspent.
The IDC funding may only be spent on the BFS of the Lesego Platinum Project.
Progress on the Bankable Feasibility Study:
The Lesego Platinum Project is currently in the first stage of a three phased,
fully funded, Bankable Feasibility Study (BFS) programme, which includes an
exploration drilling campaign of a total of 62 000 m. The three phases are
scoping study, pre-feasibility study and feasibility study. Drilling is
progressing according to plan and reef intersection results to date are in line
with initial expectations and information from historical boreholes. Four
diamond exploration drill-rigs are currently drilling on site and phase 1 of the
drilling programme is expected to be completed by the end of October 2010, while
phase 2 will commence in November with a total of 7 exploration drill-rigs
deployed.
Should Phase 2 progress as expected the drilling programme should result in an
upgrade of certain portions of the current Inferred Resource to an Indicated
Resource category. Furthermore, completion of Phase 3, which commences in
Quarter 3 of 2011, should result in certain portions of the resource being
upgraded to a Measured Resource category and thus effectively leading to a mix
of Measured, Indicated and Inferred Resources in the project area.
As part of phase 1 of the Bankable Feasibility Study (BFS), we are also busy
completing the scoping study for the project which is essentially a conceptual
study testing the viability of the project. This study is expected to be
finalised by mid-October, prior to commencement of Phase 2.
Going concern statement
As at 30 June 2010, the group`s assets exceeded its liabilities and it had
adequate cash and cash equivalent assets to meet its current liabilities as and
when they become due. The group has also secured sufficient funding from the
Industrial Development Corporation of South Africa Limited to enable it to
complete bankable feasible studies on its platinum project.
Directorate
The following changes occurred to the company`s directorate during the financial
year:
Name of Change in Effective Type of Directorate
Director Directorate Date
R New 21 June Chairman and
Pitchford appointment 2010 Independent non-
executive director
K McClain New 21 June Independent non-
appointment 2010 executive director
D Noko New 21 June Independent non-
appointment 2010 executive director
P Mbuyazi New 21 June Non-executive
appointment 2010 director
K Scott New 21 June Non-executive
appointment 2010 director
D Wrigley New 21 June Executive director -
appointment 2010 Chief Operating
Officer
M Pleming Resignation 21 June -
2010
G Resignation 21 June -
Rawstorne 2010
In addition, the following non-executive directors were appointed into Executive
Director roles on 21 June 2010.
Name of Type of Directorate
Director
B Swanepoel Chief Executive Officer
D Ncube Executive Director -
Projects
C Halsey Chief Financial Officer
In addition Mr F Dippenaar, was appointed as Lead Independent Director.
NOTE REGARDING FINANCIAL INFORMATION
The condensed preliminary consolidated financial statements below have been
prepared using accounting policies that comply with International Financial
Reporting Standards ("IFRS") which are consistent with the accounting policies
used in the audited annual financial statements for the year ended 31 December
2009. These condensed preliminary financial statements are prepared in
accordance with IAS 34, Interim Financial Reporting, and in the manner required
by the Companies Act of South Africa.
The condensed consolidated preliminary financial statements for the year ended
30 June 2010 on pages 4 to 7 have been reviewed in accordance with the
International Standards on Review Engagements 2410 - Review of Interim Financial
Information performed by the independent Auditors of the company,
PricewaterhouseCoopers Inc. Their unqualified review opinion is available for
inspection at the company`s registered office.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2010 AND THE YEAR ENDED 31 DECEMBER 2009
Audited
30 June 31 Dec 2009
2010
Notes R`000 R`000
Revenue
- -
Operating expenses
(9,806) (182)
Other income
598 -
Finance costs
(562) (218)
Share in loss of associate
(8)
Reverse asset acquisition expense
(13,964) -
Net Loss before taxation
(23,734) (408)
Taxation - -
Net loss and total comprehensive
loss for the year (23,734) (408)
Loss and total comprehensive loss
attributable to: 211 -
Non-controlling interests
Owners of the parent
(23,523) (408)
30 June 31 Dec 2009
2010
Cents Cents
LOSS PER SHARE
Basic loss per share (9.44) (0.16)
Basic Headline loss per share (9.44) (0.16)
Weighted average number of shares 251,296,844 250,906,947
The comparative loss per share and headline loss per share disclosed above
relate to Lesego Platinum Mining (Pty) Ltd earnings for the year ended 31
December 2009.
The Loss Per Share for Village reported for the period ending 30 June 2009, was
a basic loss of 25 cents per share and a headline loss of 24 cents per share.
Due to the reverse asset acquisition discussed in note 1, the comparative
earning per share was required to be of the Accounting Acquirer.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
AS AT 30 JUNE 2010
30 June 31 Dec
2010 2009
Notes R`000 R`000
Audited
ASSETS
Non-current assets
Environmental 4,448 -
rehabilitation trust
Investment in associate 2 - 13,436
companies
Other receivables - 2,229
Property plant and -
equipment 58
Intangible assets 41,692 18,874
Total non-current assets 46,198 34,539
Current assets
Cash and cash 27,317 20
equivalents
Trade and other accounts 1,453 -
receivables
Total current assets 28,770 20
Total assets 74,968 34,559
EQUITY AND LIABILITIES
Capital and reserves
Share capital issued 4 101,511 35,549
Equity loan - 8,287
Accumulated loss (48,543) (10,892)
Non controlling interest 3,796 -
Total shareholders` 56,764 32,944
equity
Non-current liabilities
Provision for 5,367 -
environmental
rehabilitation
Group company loans - -
Other long term 10 10
liabilities
Total non-current 5,377 10
liabilities
Current liabilities
Trade and other payables 11,667 1,425
Shareholder loans 1,160 180
Taxation - -
Total current 12,827 1,605
liabilities
Total equity and 74,968 34,559
liabilities
CONDENSED
CONSOLIDATED
STATEMENT OF
CHANGES IN
EQUITY
AS AT 30 JUNE
2010
Total Equity Accumula Total Non- Total
Share ted attribut Controlli
able ng
Capital Loan loss to Interest
owners
R `000 R R R R `000 R `000
`000 `000 `000
Balance at 1 26,065
January 2009 35,549 1,000 (10,484) - 26,065
Net loss for (408)
the period (408) (408)
Equity loan 7,287
raised 7,287 7,287
Balance at 31 35,549 8,287 (10,892) 32,944 - 32,944
December 2009
Share capital 41,455 (8,287) - 33,168 - 33,168
issued
Reverse 24,507 - (14,128) 10,379 4,007 14,386
acquisition
adjustments
Net loss for 6 - - (23,523) (23,523) (211) (23,734)
months
ended 30 June
2010
Balance at 30 101,511 - (48,543) 52,968 3,796 56,764
June 2010
CONDENSED CONSOLIDATED CASH
FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30
JUNE 2010
30 June 31Dec
2010 2009
R`000 R`000
Audited
Cash from operating
Activities
Cash generated/(tilized in)
from operations (1,455) (8,006)
Interest Received
598 0
Finance Costs
(562) (218)
Taxation
- -
Net Cash Generated
from/(Utilised in) (1,419) (8,224)
operations
Cash flow from investing
activities
Purchases of property plant
and equipment (61) -
Growth in environmental
rehabilitation trust fund 109 -
Increase in exploration
expenditure (4,325) (114)
Net Cash Utilised in
investing activities (4,277) (114)
Cash flow from Financing
Activities
Share capital issued -
33,166
Increase in related party
loans - 7,286
(Decrease)/increase in
shareholder loans (173) 180
Increase in group company
loans - 851
Net Cash flow from financing
activities 32,993 8,317
Net increase/(decrease) in
Cash 27,297 (21)
Net cash at beginning of the
period 20 41
Net cash at end of the
period 27,317 20
NOTES TO THE CONDENSED FINANCIAL STATEMENTS:
Reverse asset acquisition
During the year Village acquired a number of companies that gave it control of
Lesego Platinum Mining (Pty) Ltd and Sweet Sensation 79 (Pty) Ltd (the reverse
asset acquisition). Lesego Platinum Mining (Pty) Ltd and Sweet Sensation 79
(Pty) Ltd have prospecting rights over numerous properties in the eastern limb
of the Bushveld Igneous Complex. In settlement of the acquisition Village issued
shares, which resulted in a change of control and a reverse listing.
The effect of the accounting treatment, as a result of the reverse asset
acquisition, is that even though the consolidated financial statements are
issued under the name of Village, it represents a continuation of Lesego
Platinum Mining (Pty) Ltd and Sweet Sensation 79 (Pty) Ltd, except for its
capital structure. As a result, the comparative information presented for the
group represents that of Lesego Platinum Mining (Pty) Ltd.
For the purposes of consolidation the value attributed to Village under the
reverse asset acquisition was R13,964,000 and is a non-recurring expense.
At a consolidated level, a minority interest is held in Lesego Platinum Mining
(Pty) Ltd by the IDC, currently being an effective ownership interest of 6.1%
due to a claw back condition in the IDC`s subscription agreement (with a
possibility of increasing to 28% in the future if all funding tranches are met).
Investment in subsidiary companies
Village acquired the following shareholdings in the companies listed in the
table below following the reverse asset acquisition:
Name of Company Percentage Effective
Shareholding Shareholding
Acquired
Umbono Minerals and 100.0% 100.0%
Mining (Pty) Ltd
Umbono Platinum Mining 27.2% 100.0%
(Pty) Ltd
Lesego Platinum Mining 26.7% 93.9%
Ltd
Nebavest 69 (Pty)Ltd 100.0% 100.0%
The acquisition of these companies was part of a reverse asset acquisition
transaction whereby Village also acquired an indirect shareholding in the
following companies:
Name of Company Effective
Shareholding
Khumo Mining and 100.0%
Investments (Pty) Ltd
Sweet Sensation 79 (Pty) 97.3%
Ltd
Investment in associate companies
Before the reverse asset acquisition, Lesego had a 45% shareholding in Sweet
Sensation and as a result was equity accounted in the prior year`s financial
statements. After the reverse acquisition transaction, Village obtained a
controlling interest in Sweet Sensation and has consolidated it in the current
financial statements.
Share capital
Consolidated
30 June 31Dec 2009
2010
Par Number Number of shares (`000)
value of
per shares
share (`000)
Authorised share
capital
Village Main Reef 12.5 500,000 500,000
Gold Mining Company cents
(1934) Limited
Consolidated
30 June 31Dec 2009
2010
R`000 R`000
Issued share
capital
Ordinary 100
197
Share premium 101,314 35,449
101,511 35,549
The company issued 253 416 016 ordinary shares at R2 each during the current
financial year as part of the reverse acquisition transaction, referred to note
1. At year end Village had a total of 260,394,461 shares in issue.
At group level, Lesego issued 42 056 280 ordinary shares as part of a rights
issue and 55 296 220 to the Industrial Development Corporation of South Africa
Ltd as part of the financing arrangement for the Lesego Platinum Project.
Related party transactions
To The Point Growth Specialists Investments 2 (Pty) Ltd, a company controlled by
Mr B Swanepoel and Mr C Halsey (both directors of the company) and a shareholder
of the company earned a success fee for deal initiation and advisory work on the
Lesego transaction, amounting to R5,018,138. This fee was settled through the
issuance of 2,509,069 ordinary shares in Village to To The Point Growth
Specialists Investments 2 (Pty) Ltd.
JOHANNESBURG
29 September 2010
Sponsor:Investec Bank Limited
Date: 29/09/2010 07:33:01 Produced by the JSE SENS Department.
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