| Wed 30 Mar 2011, 14:23 | | WEZ - Wesizwe Platinum Limited - Audited abridged year-end results for the year |
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WEZ
WEZ
WEZ - Wesizwe Platinum Limited - Audited abridged year-end results for the year
ended 31 December 2010
Wesizwe Platinum Limited
Registration number 2003/020161/06
Share code: WEZ
ISIN: ZAE000075859
("Wesizwe" or "the Group")
AUDITED ABRIDGED YEAR-END RESULTS FOR THE YEAR ENDED 31 DECEMBER 2010
Highlights
Notable achievements for the year include:
- Conclusion of the corporate governance review by Deloitte and Deneys Reitz,
which has enabled the company to effectively address the corporate governance
allegations levelled against members of Wesizwe;
- Implementation of corporate governance frameworks across the organisation to
ensure accountability, transparency and the highest levels of compliance;
- Implementation of effective reporting structures at management level and
ultimately feeding into the board and board sub-committees;
- Implementation of an approval authority framework which clarifies authority
levels across the Group;
- The successful conclusion of Project Delta which clarified the resources
attributed to the Group;
- The successful sourcing of interim funding from Bank of China to enable the
Group to continue with development of the core project as per requisites of the
mining licence;
- Successful negotiation of funding from the Chinese consortium including the
securing of transaction support from the Department of mineral resources;
- Restructuring the company in preparation for mine development activities;
- Conducting and documenting a skills audit in the community in preparation for
recruitment based on increased activities at the mine site;
- Regularising affairs of the company including the creation of tax-efficient
accounting structures as well as clearing the backlog of unresolved tax; and
- The re-establishment of the internal audit function through an out-sourced
service provider.
Introduction
The challenges of this financial year have pushed management to think out of the
box in order for the Group to stay on its strategic course. Despite the severe
capital constraints, the Group was legally obliged to continue to advance the
mine construction and development in terms of the mining licence. The company
has been affected by developments around the community`s plight for proper
accounting for their assets. The company had to rely on a court interdict
against interruptions at the construction site. The Company`s Annual General
Meeting (AGM) was halted and postponed pending a resolution of the intra-
shareholder dispute. Regrettably, other Wesizwe shareholders have been unduly
affected by these disputes. The share price of Wesizwe exhibited a free-fall
direction, a trend which was reinforced by market pessimism around management`s
ability to finalise a capitalisation transaction for the development of the
mine. The public announcement of the successful conclusion of negotiations with
the Jinchuan Group Limited (Jinchuan) and the China-Africa Development Fund
(CADFund) (collectively referred to as the Chinese consortium) has introduced a
welcome reprieve.
This successful capital raising is a significant milestone in the life of
Wesizwe - it is a destiny-changing trigger in that, after this transaction, the
company will be different in many ways. With this transaction, Wesizwe acquires
a new strategic shareholder who has the capacity to influence Wesizwe`s future.
The company will have at its disposal sufficient cash and guarantees that would
see the development and delivery of the Frischgewaagd-Ledig mine. In Jinchuan,
Wesizwe has secured a formidable technical partner who has the potential to
influence key issues over the development of its core project. With the CADFund,
Wesizwe gains access to a strong balance sheet which provides an underpin for
future growth opportunities for Wesizwe. In so far as consolidation and synergy
opportunities on the bushveld complex, Wesizwe now has a "ticket to the game"
where it can assume its rightful position in the industry alongside its peers.
Operations review
In spite of the limited cash resources, the Group had to continue mine
development activities in line with the requirements of its mining licence. With
judicious capital rationing and austerity measures, management managed to
demonstrate commitment to progress the mine construction process.
The following capital development activities at the mine site were achieved with
the benefit of interim funding from the Bank of China:
- Complete construction of the power supply (Eskom) terracing;
- Establishment of substation container base;
- Complete construction of access roads on mine site;
- Construction of temporary water pipeline;
- Ventilation shaft terracing;
- Partial construction of the Ventilation boxcut (fenced);
- Construction of trapezoidal drains; and
- Construction of the first pollution control dam.
Financial review
Wesizwe`s gross charges for the year amounted to R102,8 million (R57,5 million
in 2009) and relates to operating expenditure, impairment of mineral rights,
investment in subsidiary and exploration expenditure. Included in the operating
expenditure are material exceptional expense items such as corporate finance and
transaction fees of R27,8 million, Yorkville and Bank of China draw down
facility fees of R5 million, legal fees of R3,2 million and corporate governance
review costs of R1,7 million.
Operational activities resulted in a profit of R298,9 million (R38,9 million in
2009) comprising gross charges of R102,8 million (R57,5 million in 2009) offset
by a gain on bargain purchase of R378,1 million, profit on the re-measurement of
the equalisation liability denominated in a foreign currency of R17,9 million,
net finance income of R5,6 million and other sundry income of R0,1 million.
There was a significant reduction in interest income which amounted to R6,1
million (R18,5 million in 2009). The basic earnings per share for the period was
40,87 cents per share (basic loss of 6,65 cents per share for the same period in
2009). The headline loss per share was 9,78 cents per share (headline loss of
6,58 cents per share for same period in 2009).
During the year under review the Group`s assets doubled from R1,3 billion to
R2,6 billion. This increase was mainly attributable to the acquisition by
Wesizwe of Rustenburg Platinum Mines Limited`s (RPM) prospecting rights and 37%
participation rights in the Western Bushveld Joint Venture (Project Delta),
which led to the consolidation and rationalisation of the various reserves
around Wesizwe`s core project, the Frischgewaagd-Ledig mine. As the acquisition
was equity-settled, RPM becomes the single largest shareholder in Wesizwe.
Applying the principles of IFRS 3 Business Combinations and IAS 27 Consolidated
and Separate Financial Statements, the Project Delta transaction was accounted
for using the purchase method. Any difference between the acquisition-date fair
value and the consideration paid is required to be recognised as goodwill.
In accounting for Project Delta, the fair value of the 37% interest in the WBJV
far exceeded the consideration payment thus resulting in a "bargain purchase".
A bargain purchase represents negative goodwill which must be accounted for in
profit or loss through the statement of comprehensive income.
The Project Delta 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.
It is important to highlight that Wesizwe`s reported headline loss resulted from
cash consuming activities that support the project development process which is
the basis for value creation and future capital growth. These losses therefore
are likely to continue until such time that the Group commences mining
production activities that will generate revenues and ultimately profit for
distribution in the form of dividends in the long run.
It is a common industry practice to value the company by attributing a discount
or premium to the net present value (NPV) of the company`s projects. Development
stage (junior) companies are usually priced at a discount to NPV (currently 0.4x
to 0.9x). Producers are priced at a premium to NPV (average 1.5x). At the lowest
ebb, Wesizwe was valued at 0.3x NPV, a 70% discount to NPV.
Strategy direction and focus
The resumption of the 2009 AGM should offer Wesizwe an opportunity to draw a
line in the sand from the murky past. The Group ought to leave behind all the
negative aspects and move into a new era focusing on shareholder value creation.
Wesizwe shareholders deserve better and should at least be relieved from the
theatrics and dramatics which have been the primary cause for value erosion.
With capital funding secured, the strategic thrust for the company is now clear.
The focus will be on accelerating the mine construction at the core project of
Wesizwe.
While the primary focus for Wesizwe is the development and construction of the
Frischgewaagd-Ledig mine, the company is well placed to play a key role in the
opportunities for consolidation around the bushveld complex. In addition,
management is evaluating potential infrastructure synergies with the Group`s
neighbours on the complex. The realisation of these synergies would
significantly reduce investment expenditure which would in turn improve the NPV
of the project.
The conclusion of Project Delta provided a simplified ownership structure which
makes it viable and possible to implement and realise cost optimisation
synergies that are beneficial to both the Frischgewaagd-Ledig mine and Maseve
Investments 11 (Proprietary) Limited (Maseve) (Projects 1 and 3). Wesizwe and
Platinum Group Metals (RSA) (Proprietary) Limited (PTM) have a cordial working
relationship which is essential for unlocking and realising the contemplated
synergies. As an ultimate 26% investor participant in Maseve, Wesizwe will have
influence over the developments of Projects 1 and 3. Wesizwe`s capital
contribution is significantly covered for a period in excess of two years of
development through PTM`s exercising the option to subscribe for additional
shares, thus diluting Wesizwe`s shareholding from 45,25% to 26% in Maseve.
Markets
Money markets and commodity markets have continued to be extremely volatile. The
rand strengthened from R7.34 in January and closed at R6.63. Platinum prices
have improved from an average of USD1205/oz in 2009 to an average of USD1581/oz.
While the rand`s strength and platinum group metals (PGM) prices usually have a
counteracting effect on minerals value, the situation is different in that these
instruments are exhibiting differing rates of volatility. The rand is more
volatile than PGM prices. Most concerning to Wesizwe is the fact that, as a
result of the strengthening of the rand, the company may receive a reduced rand
amount from the dollar capital proceeds from its capitalisation transaction.
Corporate governance
The objective of Wesizwe`s governance regime is to achieve the highest level of
compliance in all regulated and legislated areas. The board is the ultimate
custodian of the Group`s governance principles and policies; therefore a strong,
well functioning board is fundamentally important to the achievement of good
corporate governance. It is anticipated that after the conclusion of the
capitalisation transaction, the Wesizwe board will be complemented and
strengthened further with representatives of the new shareholders.
Currently, the board is supported by five sub-committees, which are chaired by
non-executive directors. It is anticipated that going forward, these committees
will be rationalised to provide a platform for optimal compliance on corporate
governance matters.
Directors and changes in directors
The following directorate changes have taken place since the last report:
Humphrey Mathe Resigned 11 January 2010
Clive Knobbs Resigned 11 January 2010
Ezekiel Monnakgotla Resigned 11 January 2010
Arthur Mashiatshidi Appointed as finance director on 1 March 2010
Mlibo Mgudlwa Appointment changed from non-executive to
executive director 15 March 2010
Mike Rogers Appointed 23 April 2010 and resigned 25
August 2010 due to a conflict of interest
Kgomotso Moroka Resigned 14 May 2010
Barrie van der Merwe Appointed as non-executive director
representing Rustenburg Platinum Mines
Limited on 7 September 2010
Goleele Mosinyi Resigned 17 September 2010
Michael Solomon Resigned as chief executive and remains as
non-executive director effective 1 October
2010
Arthur Mashiatshidi Assumed the role as chief executive effective
1 October 2010
Jacques de Wet Appointed as finance director on 1 October
2010
In accordance with article 29 of the company`s articles of association one-third
of the directors shall retire at each annual general meeting on a rotational
basis as determined in this article. Retiring directors are eligible for re-
election. Julian Williams was not re-elected at the 2009 annual general meeting
held on 9 March 2011.
In terms of the company`s articles of association, new directors may hold office
until the next annual general meeting at which they are required to retire and
offer themselves up for re-election. Arthur Mashiatshidi and Mlibo Mgudlwa`s
appointments were confirmed at the 2009 annual general meeting held on 9 March
2011.
The directors retiring and seeking re-election at the annual general meeting are
Mike Eksteen, Dawn Mokhobo, Rob Rainey and Michael Solomon. Confirmation of the
appointments of Jacques de Wet and Barrie van der Merwe will be sought at the
2010 annual general meeting.
Funding and 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 were deferred
with the exception of items of a strategic nature to the implementation timeline
of the Frischgewaagd-Ledig mine such as the terracing of the shafts and the
electricity substation.
The WBJV agreements require the payment of an equalisation payment by Africa
Wide Mineral Prospecting and Exploration (Proprietary) Limited (Africa Wide) to
RPM of approximately R120 million to equalise the mineral resources and funding
contribution of Africa Wide in relation to its historic 26% economic
participation in the WBJV. RPM has the right to nominate settlement in Wesizwe
shares. Although the liability is due by 31 March 2011, RPM has granted Wesizwe
extension to 31 May 2011 pending the imminent finalisation of the transaction
with the Chinese consortium, after which it will be settled in cash.
Following the approval by the shareholders of Wesizwe on 9 March 2011 for the
recapitalisation of the company through the issuing of an additional 829,884
million shares and the approval for the waiver of the requirement under Rule 8
of the SRP Code for Jinchuan and CADFund to make a mandatory offer for all the
company`s ordinary shares, the remaining key conditions precedent to the
financial closure of the transaction are:
- The registration of all resolutions and special resolutions required to enable
the issuing of the shares to the subscribers;
- The receipt of approval from the Financial Surveillance Department for the
Parties to perform their respective obligations; and
- The receipt of all necessary Chinese regulatory approvals by Jinchuan and
CADFund, namely the approval of the National Development and Reform Commission,
the Ministry of Commerce, the State-owned Assets Supervision and Administration
Commission, and the State Administration of Foreign Exchange.
Management is of the view that, since the shareholder approval has been secured,
outstanding conditions precedent, from a Wesizwe perspective, are of an
administrative nature and therefore should not prevent the execution of the sale
of shares agreement for cash within a reasonable timeframe. Management`s
understanding is that the Chinese regulatory approvals are at an advanced stage
with little or no significant delays being anticipated.
At the date of this report, the Group had cash resources of R31 million
available to cover operating expenditure. In addition the Group has access to
R49 million available from the Bank of China drawdown facility which will enable
the Group to continue progressive development of the Frischgewaagd-Ledig mine.
The directors are of the opinion that the cash resources at the date of this
report coupled with the cash to be received from the pending subscription
transaction would be sufficient to support the activities of the Group for the
next twelve months.
Subsequent events
a) Exercise of PTM option
In April 2010, Wesizwe received the necessary regulatory approvals required
under Project Delta to assume 100% ownership of its core Frischgewaagd-Ledig
project whilst retaining a 45,25% interest in Projects 1 and 3 of Maseve with
PTM owning the balance of 54,75%. This transaction also granted PTM the option,
within a stipulated time period, to increase its stake to 74%. On 14 January
2011 PTM exercised this option by depositing approximately R408 million into an
escrow account on behalf of the company. The escrow account is held by Maseve
but will be used solely for funding Wesizwe`s now 26% contribution to project
development.
b) Increase in share capital
In terms of an ordinary resolution passed at the company`s last general meeting
held on 9 March 2011, the authorised ordinary share capital of the company was
increased from 1 500 000 000 to 2 000 000 000 by the creation of 500 000 000 new
ordinary shares of R0,00001 each.
c) Jinchuan transaction
On 9 March 2011 the Shareholders of Wesizwe approved the issuing of 732 522 177
and 97 362 283 new ordinary shares to a Chinese consortium, consisting of
Jinchuan and CADFund, and Micawber, respectively representing 45% and 6% of the
company`s enlarged issued share capital. The consortium and Micawber will settle
the aggregate subscription price of USD227 million as follows:
- in respect of the consortium subscription shares, by way of a cash payment of
USD200 368 295;
- in respect of the Micawber subscription shares, by way of a cash payment of
USD26 631 705.
The combined subscription by the Chinese consortium and Micawber equates to a
subscription price of R1.86 per Wesizwe share, at an exchange rate of USD/R6.82
(closing exchange rate 14 December 2010. The company is not providing any
funding or any guarantees to or on behalf of Micawber in respect of the specific
issue of the Micawber subscription shares.
- In addition, Jinchuan and CADFund will secure the provision of a USD650
million debt facility to the company on the following terms:
- total commitment is USD650 000 000;
- term of loan is 12 years (including a grace period of five years);
- the interest rate is six month LIBOR plus margin of 350 bps;
Wesizwe believes that the proposed transaction represents both a compelling
value and strategic proposition for shareholders as it provides for a total
financing solution for the development of the core project, thereby ensuring
that there will be no further dilution of equity throughout the construction
phase. With the introduction of Jinchuan, Wesizwe has also secured an
experienced mining, financial and technical partner.
Share capital 2010 2009
Authorised R`000 R`000
1 500 000 000 (2009: 1 500 000 000) ordinary shares 15 15
of R0.00001 each
Issued
797 942 598 (2009: 586 092 473) ordinary shares of 8 6
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.
In terms of an ordinary resolution passed at the company`s last annual general
meeting held on 9 March 2011, all authorised but unissued share capital was
placed under the control of the directors, with the aggregate number of ordinary
shares which may be allotted and issued being limited to 15% of the ordinary
shares in issue, until the next annual general meeting of shareholders.
Shareholders` approval will be sought at the next annual general meeting for the
continued placing of unissued share capital under the control of directors.
Notice of annual general meeting
Notice is hereby given that the annual general meeting of shareholders will be
held at the Glenhove Conference Centre, 52 Glenhove Road, Melrose Estate,
Houghton, Johannesburg at 10h00 on Thursday, on 5 May 2011 to consider and, if
deemed fit, to pass, with or without modification, the resolutions as stated in
the financial statements.
Shareholders are advised that the financial statements will be distributed to
shareholders on 31 March 2011.
Statements of financial position at 31 December
Group Company
2010 2009 2010 2009
R`000 R`000 R`000 R`000
ASSETS
Non-current assets 2 516 054 1 218 727 808 716 631 583
Property, plant and 1 583 551 130 993 8 459 9 785
equipment
Tangible exploration and - 143 473 - -
evaluation assets
Intangible exploration and - 268 367 - -
evaluation assets
Available-for-sale 10 283 7 162 - -
financial asset
Investment in equity 922 220 668 732 - -
accounted investee
Investment in subsidiaries - - 800 257 621 798
Current assets 56 237 143 756 1 035 678 717 931
Loans receivable from - - 988 768 577 499
subsidiaries
Loan to the Bakubung 8 257 - 8 257 -
community
Other receivables 9 271 4 870 291 1 711
Restricted cash 27 852 27 802 27 852 27 802
Cash and cash equivalents 10 857 111 084 10 510 110 919
TOTAL ASSETS 2 572 291 1 362 483 1 844 394 1 394 514
EQUITY AND LIABILITIES
Capital and reserves 2 105 860 1 337 828 1 716 902 1 337 102
Share capital 8 6 8 6
Share premium 1 955 159 1 489 091 1 955 159 1 489 091
Share-based payment 65 384 62 582 65 384 62 582
reserve
Available-for-sale reserve 1 012 726 - -
Retained earnings/ 84 297 (214 577) (303 649) (214 577)
(accumulated loss)
Non-current liabilities 290 113 - - -
Deferred tax liability 290 113 - - -
Other non-current - - - -
liabilities
Current liabilities 176 318 24 655 127 492 12 412
Trade and other payables 22 214 24 655 6 658 12 412
Bridging loan 33 270 - - -
Equalisation liability 120 834 - 120 834 -
TOTAL EQUITY AND 2 572 291 1 362 483 1 844 394 1 349 514
LIABILITIES
Statements of comprehensive income
for the year ended 31 December
Group Company
2010 2009 2010 2009
R`000 R`000 R`000 R`000
Revenue - - 14 186 12 824
Other income 144 176 144 176
Gain on bargain purchase 378 083 - - -
Profit on re-measurement 17 878 - - -
of liability denominated
in a foreign currency
Administration expenditure (85 821) (56 910) (83 424) (61 948)
Profit on sale of - 49 - 59
property, plant and
equipment
Impairment of mineral (7 721) - - -
rights
Impairment of - (436) - -
environmental deposit
Exploration and evaluation (1 787) (363) (11) (363)
expenses
Impairment of loan to - - (26 079) (8 232)
subsidiary
Profit/(loss) from 300 776 (57 484) (95 184) (57 484)
operations
Net finance income 5 600 18 553 6 112 18 553
Finance income 6 122 18 553 6 121 18 553
Finance costs (522) - (9) -
306 376 (38 931) (89 072) (38 931)
Share of loss of equity (2 640) - - -
accounted investee (net of
tax)
Profit/(loss) before 303 736 (38 931) (89 072) (38 931)
income tax
Income tax expense (4 862) - - -
Profit/(loss) for the year 298 874 (38 931) (89 072) (38 931)
Net change in fair value 286 726 - -
of the available-for-sale
financial asset
Other comprehensive income 286 726 - -
Total comprehensive 299 160 (38 205) (89 072) (38 931)
income/(loss) for the year
Earnings/loss per share
Basic earnings/(loss) per 40,87 (6,65)
share (cents)
Diluted earnings/(loss) 40,85 (6,65)
per share (cents)
Statements of cash flows
for the year ended 31 December
Group Company
2010 2009 2010 2009
R`000 R`000 R`000 R`000
Cash flows from operating (89 637) (118 690) (69 124) (55 414)
activities
Finance income 6 122 18 553 6 121 18 553
Finance cost paid (9) - (9) -
Cash utilised in (83 524) (100 137) (63 012) (36 861)
operations
Cash flows utilised by
investing activities
Acquisition of property, (41 945) (36 766) (234) (44)
plant and equipment as a
result of increasing
operations
Acquisition of tangible - (21 030) - -
exploration and evaluation
assets as a result of
increasing operations
Expenditure on intangible - (16 808) - -
exploration and evaluation
assets as a result of
increasing operations
Loan to associate (7 279) - - -
Recovery of intangible 10 346 - - -
exploration and evaluation
expenditure
Capital invested in the (2 835) (2 636) - -
available-for-sale
financial asset
Loan advanced (8 257) - (8 257) -
Increase in amounts owed - - (28 903) (115 607)
by Group companies
Proceeds on disposal of 47 80 47 78
property, plant and
equipment
Net cash outflow from (49 923) (77 160) (37 347) (115 573)
investing activities
Cash flows from financing
activities
Bridging loan raised 33 270 - - -
Net cash inflow from 33 270 - - -
financing activities
Net decrease in cash and (100 177) (177 297) (100 359) (152 434)
cash equivalents
Cash and cash equivalents 138 886 316 183 138 721 291 155
at the beginning of the
year
Cash and cash equivalents 38 709 138 886 38 362 138 721
at the end of the year
Statement of changes in equity
for the year ended 31 December
Available-
Share Share for-sale
capital premium reserves
R`000 R`000 R`000
Group
Balance at 1 January 2009 6 1 487 934 -
Loss for the year - - -
Other comprehensive income - - 726
Total comprehensive loss for the - - 726
year
Transactions with owners recorded
directly in equity
LTIP shares issued * 1 157 -
Share-based payment expenditure - - -
Balance at 31 December 2009 6 1 489 091 726
Profit for the year - - -
Other comprehensive income - - 286
Total comprehensive income for the - - 286
year
Transactions with owners recorded
directly in equity
Issue of shares 2 466 068 -
Share-based payment expenditure - - -
Balance at 31 December 2010 8 1 955 159 1 012
Share- Retained
based earnings/
payment (accumulated
reserve loss) Total
R`000 R`000 R`000
Group
Balance at 1 January 2009 57 269 (175 646) 1 369 563
Loss for the year - (38 931) (38 931)
Other comprehensive income - - 726
Total comprehensive loss for the - (38 931) (38 205)
year
Transactions with owners recorded
directly in equity
LTIP shares issued (1 157) - -
Share-based payment expenditure 6 470 - 6 470
Balance at 31 December 2009 62 582 (214 577) 1 337 828
Profit for the year - 298 874 298 874
Other comprehensive income - - 286
Total comprehensive income for the - 298 874 299 160
year
Transactions with owners recorded
directly in equity
Issue of shares - - 466 070
Share-based payment expenditure 2 802 - 2 802
Balance at 31 December 2010 65 384 84 297 2 105 860
* Nominal amount
for the year ended 31 December
Available-
Share Share for-sale
capital premium reserves
R`000 R`000 R`000
Company
Balance at 1 January 2009 6 1 487 934 -
Loss for the year - - -
Total comprehensive loss for the - - -
year
Transactions with ownersrecorded
directly in equity
LTIP shares issued * 1 157 -
Share-based payment expenditure - - -
Balance at 31 December 2009 6 1 489 091 -
Loss for the year - - -
Total comprehensive loss for the - - -
year
Transactions with owners recorded
directly in equity
Issue of shares 2 466 068 -
Share-based payment expenditure - - -
Balance at 31 December 2010 8 1 955 159 -
Share- Accumu-
based
payment lated
reserve loss Total
R`000 R`000 R`000
Company
Balance at 1 January 2009 57 269 (175 646) 1 369 563
Loss for the year - (38 931) (38 931)
Total comprehensive loss for the - (38 931) (38 931)
year
Transactions with owners recorded
directly in equity
LTIP shares issued (1 157) - -
Share-based payment expenditure 6 470 - 6 470
Balance at 31 December 2009 62 582 (214 577) 1 337 102
Loss for the year - (89 072) (89 072)
Total comprehensive loss for the - (89 072) (89 072)
year
Transactions with owners recorded
directly in equity
Issue of shares - - 466 070
Share-based payment expenditure 2 802 - 2 802
Balance at 31 December 2010 65 384 (303 649) 1 716 902
Notes to the financial statements
for the year ended 31 December
1. Basis of preparation of financial results
The consolidated financial statements are prepared in accordance with
International Financial Reporting Standards (IFRS), International Accounting
Standard (IAS) 34 and AC 500 Standards issued by the International Accounting
Standards Board (IASB) and in the manner required by the Companies Act of South
Africa.
The following principal accounting policies were applied by the Group for the
financial year ended 31 December 2010. Except as otherwise disclosed, these
policies are consistent in all material respects with those applied in previous
years.
The consolidated financial statements for the year ended 31 December 2010 have
been prepared on the historical cost basis except for available-for-sale
financial asset measured at fair value.
2. Capital commitments
Following on from what was previously reported with respect to the Pilanesberg
Water Scheme, Magalies Water is still waiting for the ministerial approval
required to participate in the project. As a result Wesizwe`s estimated
contribution towards project expenses reported in the 2009 results, which could
reach a maximum of R26,5 million over a twelve month period, remain deferred. In
the interim, the company has secured a temporary water supply and is
investigating alternative measures to secure a permanent water supply
Project expenses, other than the potential contributions towards the water
scheme project highlighted above, valued at R59,0 million have been deferred due
to the fact that the Core Project remains on hold pending receipt of funding
from the transaction mentioned earlier in this report.
Capital commitments as at 31 December 2010 for the next 12 months, excluding the
above, were slightly lower than last year at R35,4 million (2009: R35,7
million).
3. Earnings/(loss) per share
Group Group
2010 2009
R R
The basis of calculation of basic
earnings/(loss) per share is
Attributable profit/(loss) to ordinary 298 873 679 (38 930 756)
shareholders (Rand)
Weighted average number of ordinary 731 195 298 585 595 512
shares in issue (shares)
Basic earnings/(loss) per share (cents) 40,87 (6,65)
The basis of calculation of diluted
earnings/(loss) per share is:
Attributable profit/(loss) to ordinary 298 873 679 (38 930 756)
shareholders (Rand)
Adjusted weighted average number of 731 611 765 585 595 512
ordinary shares in issue (shares)
Weighted average number of ordinary 731 195 298 585 595 512
shares in issue (shares)
LTIP and SARS outstanding 416 467 *
Diluted earnings/(loss) per share (cents) 40,85 (6,65)
* Anti-dilutive impact, thus not taken into account
The basis of calculation of headline loss and diluted headline loss per share
is:
Attributable profit/(loss) to ordinary 298 873 679 (38 930 756)
shareholders (Rand)
(370 362 219) 401 195
Profit on disposal of asset - (48 871)
Tax on above - 13 684
Impairment of environmental deposit - 436 382
Impairment of mineral rights 7 720 825 -
Gain on bargain purchase (378 083 044) -
Headline loss (71 488 540) (38 529 561)
Weighted average number of ordinary 731 195 298 585 595 512
shares in issue (shares)**
Headline loss and diluted headline loss (9,78) (6,58)
per share (cents)
** The outstanding shares of 416 467 under the Group`s LTIP and SARS schemes
were not taken into account as they have an anti-dilutive effect
4. Other notes
Dividends: No dividend was declared or proposed during the year ended 31
December 2010 (2009: R Nil).
Segmental analysis of annual results: No segmental report has been prepared as
the Group is conducting mine development activities in one geological location,
which represents only one business activity. The information reported in these
results is the same as that reported to the chief operating decision maker.
5. Notes to the cash flow statement
Group Company
2010 2009 2010 2009
R`000 R`000 R`000 R`000
Reconciliation of
profit/(loss) for the year to
cash flows from operating
activities:
Profit/(loss) from operations 300 776 (57 484) (95 184) (57 484)
Adjustments for:
- Depreciation 1 867 1 599 1 513 1 115
- Gain on bargain purchase (378 083) - - -
- Profit/(loss) on re- (17 878) - - -
measurement of liability
denominated in a foreign
currency
- Impairment of mineral rights 7 721 - - -
- Impairment of loan to - - 26 079 8 232
subsidiary
- Share-based payment 2 802 6 470 2 802 6 470
expenditure
- Impairment of environmental - 436 - -
deposit
- Profit on sale of property, - (49) - (59)
plant and equipment
Operating loss before working (82 795) (49 028) (64 790) (41 726)
capital changes
Changes in working capital (6 842) (69 662) (4 334) (13 688)
(Increase)/decrease in other (4 401) 7 128 1 420 (1 478)
receivables
Decrease in trade and other (2 441) (69 828) (5 754) (5 248)
payables
Decrease in other non-current - (6 962) - (6 962)
liabilities
Cash flow from operating (89 637) (118 690) (69 124) (55 414)
activities
6 Tangible and intangible exploration and evaluation assets
Group - 2010
Cost
Opening Closing
balance Transfers Additions Impairment balance
R`000 R`000 R`000 R`000 R`000
Tangible 143 473 (143 473) - - -
exploration and
evaluation
asset
Intangible 268 367 (1 269 054) 1 008 408* (7 721) -
exploration and
evaluation
asset
Total 411 840 (1 412 527) 1 008 408 (7 721) -
* the amount reflected is net of the recovery of R10,3 million on exploration
and evaluation expenses previously capitalised. This cost recovery was made on
winding up of the WBJV on conclusion of the Project Delta agreement.
The following table highlights the movement in intangible R`000
exploration and evaluation assets
Transfer of Project 2 prospecting rights to Bakubung 1 018 754
Recovery of intangible exploration and evaluation asset (10 346)
Net movement for the year 1 008 408
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 31 668 732
December 2009
Plus: Equalisation liability transferred to current 140 236
liabilities
Less: Adjustment to equalisation liability and assets (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 143 730
value
Less: Deferred tax on Project 1 and 3 (40 244)
Acquisition of Project 1 and 3 Prospecting rights after 103 486
providing for deferred taxation
Gain on bargain purchase of previously held 26% interest in
the WBJV
c) Gain on bargain purchase of previously held 26% interest 9 950
before deferred taxation
Less: Deferred taxation (28%) 2 786
Gain on bargain purchase on previously held 26% interest in 7 164
the WBJV
d) Additional net cash call 7 279
e) Share of loss in associate (2 640)
Total Investment in Equity Accounted Investee a)+b)+c)+d) 922 220
8 Available-for-sale financial assets
The available-for-sale financial asset is pledged as security for a R22 million
guarantee in favour of Eskom.
2010 2009
R`000 R`000
Capital invested* 9 271 6 436
Return on investments (Fair value investments) 1 012 726
Total 10 283 7 162
* 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 Independent auditor`s opinion
KPMG Inc., the Group`s independent auditors has audited the consolidated
financial statements of the Group and the company and has issued an unqualified
audit opinion. Their opinion is available for inspection at the company`s
registered office.
10 Forward looking statement
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, performance 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.
Signed on behalf of the board
DNM Mokhobo AB Mashiatshidi
Chairman Chief executive
Johannesburg
30 March 2011
Sponsors
Investec Bank Limited
Directors
DNM Mokhobo** (Chairman)
AB Mashiatshidi (Chief executive)
JP de Wet (Finance director)
WM Eksteen**
PG Gaylard**
MG Mgudlwa
RG Rainey**
MH Solomon*
BJ van der Merwe*
*non-executive
**independent non-executive
Company secretary
S van Schalkwyk
Auditors
KPMG Inc.
Registered address
Unit 13, 2nd Floor
3 Melrose Boulevard, Melrose Arch, 2076
www.wesizwe.com
Date: 30/03/2011 14:23:12 Produced by the JSE SENS Department.
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