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TSX
TSX
TSX - Trans Hex Group Limited - Audited annual results for the year ended 31
March 2011
Trans Hex Group Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1963/007579/06)
ISIN: ZAE000018552
JSE share code: TSX NSX share code: THX
("Trans Hex" or "the group")
AUDITED ANNUAL RESULTS FOR THE YEAR ENDED 31 MARCH 2011
Abridged consolidated income statement
2011 2010
Notes R`000 R`000
Continuing operations
Sales revenue 657 998 715 667
Cost of goods sold (578 003) (527 611)
Gross profit 79 995 188 056
Other operating expenses 1 (25 284) (31 568)
Royalties (6 061) (29 837)
Selling and administration costs (68 822) (74 671)
Mining (loss)/profit (20 172) 51 980
Exploration costs (5 699) (4 046)
Other (losses)/gains - net 2 (847) 958
Finance income 11 023 17 649
Finance costs (20 828) (29 636)
Share of results of associated companies (10) (9)
(Loss)/profit before income tax (36 533) 36 896
Income tax (7 559) (11 747)
(Loss)/profit for the period from
continuing operations (44 092) 25 149
Discontinued operations
Loss for the period from
discontinued operations 3 (1 007) (3 543)
(Loss)/profit for the period (45 099) 21 606
Attributable to:
Continuing operations (44 092) 25 149
- Owners of the parent (41 876) 25 149
- Non-controlling interest (2 216) -
Discontinuing operations
- Owners of the parent (1 007) (3 543)
(45 099) 21 606
(Loss)/earnings per share from
continuing operations (cents)
- Basic (41,7) 23,8
- Diluted (41,7) 23,8
Loss per share from discontinued
operations (cents)
- Basic (1,0) (3,4)
- Diluted (1,0) (3,4)
Total number of shares in issue (`000) 106 051 106 051
Shares in issue adjusted for treasury
shares (`000) 105 699 105 699
Average US$ exchange rate 7,26 7,85
Headline (loss)/earnings 4
- Continuing operations (47 638) 23 313
- Discontinued operations (550) (2 775)
Headline (loss)/earnings per share
(cents)
- Continuing operations (cents) (45,1) 22,1
- Discontinued operations (cents) (0,5) (2,6)
Abridged consolidated statement of other comprehensive income
2011 2010
R`000 R`000
(Loss)/profit for the period (45 099) 21 606
Other comprehensive income net of tax:
Translation differences on foreign
subsidiaries 29 452 118 863
- Before-tax amount 9 434 38 508
- Tax benefit 20 018 80 355
Fair value adjustment on available-for-
sale financial assets 1 408 240
- Before-tax amount 1 408 240
- Tax benefit/(expense) - -
Reclassification of foreign currency
differences on repayment of long-term (3 375) -
receivable from foreign operations
Total comprehensive (loss)/income for
the period (17 614) 140 709
Attributable to:
- Owners of the parent (15 398) 140 709
- Non-controlling interest (2 216) -
(17 614) 140 709
Abridged consolidated statement of financial position
Notes 2011 2010
R`000 R`000
Assets
Property, plant and equipment 408 678 498 252
Investment in associates 108 120
Financial assets 5 93 591 43 342
Current assets 420 184 464 605
Inventories 6 114 528 162 792
Trade and other receivables 14 599 32 921
Cash and cash equivalents 291 057 268 892
Non-current assets classified as
held for sale - 2 044
922 561 1 008 363
Equity and liabilities
Total shareholders` interest 311 609 327 007
Non-controlling interest (2 216) -
Borrowings 56 937 95 772
Deferred income tax liabilities 65 629 90 165
Provisions 82 990 75 886
Deferred income 11 140 17 824
Current liabilities 396 472 401 709
Trade and other payables 262 176 264 776
Current income tax liabilities 16 138 20 619
Borrowings 94 571 92 987
Bank overdraft 23 587 23 327
922 561 1 008 363
Net asset value per share (cents) 292 308
Abridged consolidated statement of changes in equity
2011 2010
R`000 R`000
Balance at 1 April 327 007 186 298
Total comprehensive (loss)/income
for the period (17 614) 140 709
Balance at end of period 309 393 327 007
Abridged consolidated statement of cash flows
2011 2010
R`000 R`000
Cash available from operating 38 889 122 714
activities
Movements in working capital 54 211 20 924
Income tax paid (16 558) (2 324)
Cash generated from operations 76 542 141 314
Cash employed (54 637) (101 087)
Property, plant and equipment
- Proceeds from disposal 2 093 5 696
- Replacement (34 276) (30 396)
- Additional (15 962) (43 011)
Borrowings (33 276) (33 376)
Investment and loans 26 784 -
Net increase in cash and cash 21 905 40 227
equivalents
Cash and cash equivalents at
beginning of year 245 565 205 338
Cash and cash equivalents at end of 267 470 245 565
year
Notes
2011 2010
R`000 R`000
1. Other operating expenses
Other operating expenses consist of Luarica
and Fucauma care and maintenance costs. 25 284 31 568
2. Other (losses)/gains - net
Other (losses)/gains - net consists mainly
of the following principal categories:
- Net foreign exchange (losses)/gains (4 222) 958
- Foreign exchange gains on repayment of
long-
term receivable from foreign operation 3 375 -
(847) 958
3. Discontinued operations
The marine mining vessels were included
in the group`s discontinued Namibian
segment.
The remaining vessel, the MV Namakwa was
sold on 26 May 2010.
Revenue - 111
Expenses (550) (2 886)
(550) (2 775)
Impairment of assets - (1 067)
Loss on sale of assets (457) -
Loss before income tax (1 007) (3 842)
Taxation - 299
Loss for the year (1 007) (3 543)
4. Reconciliation of headline earnings
Continuing operations
(Loss)/profit for the period (44 092) 25 149
- Profit on sale of assets (237) (2 550)
- Taxation impact 66 714
- Foreign exchange gains on repayment of
long-term receivable from foreign (3 375) -
operation
- Taxation impact - -
Headline (loss)/earnings (47 638) 23 313
Discontinued operations
Loss for the period (1 007) (3 543)
- Loss on sale of assets 457 -
- Taxation impact - -
- Impairment of assets - 1 067
- Taxation impact - (299)
Headline loss (550) (2 775)
2011 2010
R`000 R`000
5. Financial assets
On 12 May 2010, the group signed the
Somiluana
mining contract and thereby acquired a 33%
equity interest in the project and the right
to reimbursement of the expenditure incurred
during the exploration phase. The loan of
R46,3 million to the associate is based on
the net asset value of Somiluana on the date
of the signature of the mining contract,
less repayments received. The balance of the
financial assets represents the available-
for-sale investments.
6. Inventories
Diamonds 91 833 133 889
Consumables 22 695 28 903
114 528 162 792
The carrying value of diamond inventories
carried at net realisable value amounted to
R40 million (2010: R22 million).
7. Capital commitments
(including amounts authorised, but not
yet contracted) 54 841 61 539
These commitments will be financed from the
group`s own resources or with borrowed
funds.
8. Segment information
Operating segments
Continuing Discon-
tinued
Year ending South
31 March 2011 Africa Angola Liberia Total Namibia
Carats sold 77 957 - - 77 957 -
R`000 R`000 R`000 R`000 R`000
Revenue 657 998 - - 657 998 -
Cost of goods sold (574 625) (3 378) - (578 003) -
Gross profit 83 373 (3 378) - 79 995 -
Other operating
expenses - (25 284) - (25 284) (1 007)
Royalties (6 061) - - (6 061) -
Selling and
administration (59 982) (8 840) - (68 822) -
costs
Mining loss 17 330 (37 502) - (20 172) (1 007)
Exploration costs (5 699) - - (5 699) -
Other
(losses)/gains -
net 5 421 (6 268) - (847) -
Finance income 11 023 - - 11 023 -
Finance costs (13 439) (7 389) - (20 828) -
Share of results of
associated (10) - - (10) -
companies
Loss before
income taxation 14 626 (51 159) - (36 533) (1 007)
Depreciation
included
in the above (82 734) (1 788) - (84 522) -
Assets 859 310 63 231 20 922 561 -
Liabilities 383 100 230 068 - 613 168 -
Capital expenditure 51 573 298 - 51 871 -
Net asset value per
share (cents) 449 (157) - 292 -
Continuing Discon-
tinued
Year ending South
31 March 2010 Africa Angola Liberi Total Namibia
a
Carats sold 95 251 1 220 - 96 471 -
R`000 R`000 R`000 R`000 R`000
Revenue 714 279 1 388 - 715 667 111
Cost of goods sold (520 562) (7 049) - (527 611) (2 886)
Gross profit 193 717 (5 661) - 188 056 (2 775)
Other operating
expenses - (31 568) - (31 568) -
Royalties (29 837) - - (29 837) -
Selling and
administration (63 643) (12 189) 1 161 (74 671) -
costs
Mining profit 100 237 (49 418) 1 161 51 980 (2 775)
Exploration costs (4 046) - - (4 046) -
Other
(losses)/gains -
net 958 - - 958 -
Finance income 17 649 - - 17 649 -
Finance costs (18 683) (10 953) - (29 636) -
Impairment of - - - - (1 067)
assets
Share of results of
associated (9) - - (9) -
companies
Profit before
income taxation 96 106 (60 371) 1 161 36 896 (3 842)
Depreciation
included
in the above (95 490) (5 107) - (100 597) -
Assets 906 989 98 680 650 1 006 319 -
Non-current assets
classified as held
for sale - - - - 2 044
Liabilities 456 835 224 521 - 681 356 -
Capital expenditure 31 955 2 097 - 34 052 -
Net asset value per
share (cents) 424 (119) 1 306 2
Revenues from transactions with certain customers amount to ten percent or
more of total revenue. During the period under review total revenue from
these customers amounted to R74,6 million (2010: R0,0 million).
9. Mineral resources and mineral reserves
The Baken mine has seen a reduction of 30% (74,830cts) year on year in terms
of total carats in reserve as a result of a 16% reduction in volume due to
mining activities and a reduction of 17% in grade due to lower than estimated
grades realizing for a portion of the orebody. The Bloeddrif reserve
increased by 83% mainly on the back of higher diamond pricing and at the
Richtersveld operations reserves increased slightly. The resources at
Somiluana have been updated using production information resulting in
probable reserves of 1,422,000 carats and a total resource of 10,015,000
carats.
10. Contingent liabilities
There have been no material changes to contingent liabilities previously
reported in the annual report.
11. Accounting policies
The abridged group financial statements for the year ended 31 March 2011 were
prepared in accordance with IAS 34. The accounting policies used to prepare
financial statements are consistent with those applied in the previous
period, except for the adoption of IAS 27 Consolidated and Separate Financial
Statements (Revised). The adoption of this revised standard has resulted in a
debit balance being recognised for non-controlling interest which has not
been accounted for previously.
12. Report of independent auditor
The external auditors, PricewaterhouseCoopers Inc. have audited the group`s
annual financial statements and the abridged financial statements contained
herein for the year ended 31 March 2011. Copies of their unqualified audit
reports are available on request at the company`s registered office.
Overview
In this commentary, results are compared with the twelve months of the
2009/2010 financial year (in brackets).
A significant turnaround from the South African operations was achieved
during the second six months of the reporting year. Profit before tax of
R116,0 million was generated compared to a loss before tax of R101,4 million
in the first six months.
Strong diamond prices during the second six months of the year offset grade
under-performance at the South African operations. The continued strength of
the Rand against the US dollar however continued to have a negative effect.
Good progress has been made in Angola, where production capacity at Somiluana
is being steadily increased and six successful sales have been held during
the year.
South African production during the reporting period amounted to 69,508
carats (2010: 92,904 carats). Whilst total gravels treated increased by 17%
over the corresponding reporting period in 2010 and the unit cost of
production was reduced by 8%, the average grade achieved decreased from 2,07
carats/100m3 to 1,27 carats/100m3. The year on year reduction in grade was
also due to the decision to temporarily suspend stripping at the Baken
operations given current exchange rates.
Total sales attributable to the South African operations marginally decreased
to US$90,6 million (2010: US$91,2 million), at an average price of US$1,162
per carat (2010: US$957). The average price per carat increased despite fewer
carats sold originating from the Richtersveld Operations which achieved a
significantly higher price per carat than those from other operating areas.
The average price per carat achieved during the second six months of the
reporting year was US$1,394 per carat. In Rand terms, revenue was down by
7,9% to R658,0 million (2010: R714,3 million).
The loss from Angolan operations, mainly attributable to the Luarica and
Fucauma projects that are under care and maintenance, amounted to R51,2
million.
As a result, the Group reports an after-tax loss for the period of R45,1
million (2010: profit of R21,6 million).
Cash and cash equivalents at the end of the reporting period increased to
R267,5 million (2010: R245,6 million).
Prospects in Angola have improved significantly. Somiluana (in which Trans
Hex has a 33% stake) had sales amounting to US$19,3 million (2010: US$0,0
million), of which US$3,5 million was repaid to Trans Hex against the
outstanding investment loan amount.
Financial headlines
- Sales revenue down to R658,0 million (2010: R715,7 million) primarily as a
result of grade under-performance and the decision to temporarily suspend
stripping at the Baken operations, but also affected by stronger diamond
prices in the second half and a strong Rand.
- South African operations generated a profit before tax of R116,0 million
during the second six months compared to a loss before tax of R101,4 million
in the first six months resulting in profit before tax for the year of R14,6
million.
- Group loss after tax of R45,1 million, against a profit of R21,6 million in
2010 financial year.
- Net cash generated during the reporting period was R21,9 million (2010:
R40,2 million generated) resulting in the Group`s net cash position being
R267,5 million (2010: R245,6 million).
- Headline loss per share amounted to 45,6 cents compared to earnings per
share of 19,5 cents in 2010.
- Somiluana sales of US$19,3 million (2010: US$0,0 million), of which US$3,5
million repaid to Trans Hex.
Operating performance
Detailed project information (Unaudited)
2011
Average Carats Average Average
grade per produced carats per price per
100 m3 stone carat
achieved
(US$)
South Africa
Baken - own operations 1,23 44 095 1,02 1 106
Baken - contractor 0,97 2 255 1,09 1 579
Baken - total 1,21 46 350 1,02 1 121
Richtersveld
operations 1,41 15 503 1,89 1 714
Shallow water - 7 655 0,27 366
Angola
Fucauma - - - -
Luarica - - - -
Somiluana 18,36 27 662 0,46 351
Detailed project information
(Unaudited) (continued)
2010
Average Carats Average Average
grade per produced carats per price per
100 m3 stone carat
achieved
(US$)
South Africa
Baken - own operations 1,90 58 760 1,10 921
Baken - contractor - - - -
Baken - total 1,90 58 760 1,10 921
Richtersveld
operations 2,67 24 436 1,64 1 228
Shallow water - 9 708 0,29 306
Angola
Fucauma - - - -
Luarica - - - -
Somiluana 33,91 20 510 0,41 -
Note: Fucauma and Luarica were under care and maintenance during the period
South Africa
South African production decreased from 92 904 carats in the 2010 financial
year to 69 508 carats as a result of lower grades.
A 17% increase in total gravels treated was achieved, together with an 8%
reduction in the unit cost of production.
Total sales attributable to the South African operations amounted to US$90,6
million at an average price of US$1,162 per carat (2010: US$957). The average
price per carat increased despite fewer carats sold originating from the
Richtersveld Operations, which fetch a significantly higher price per carat
than those from other operating areas. The average price per carat achieved
during the second six months of the reporting year was US$1,394 per carat.
Angola
Somiluana commenced production build-up in June 2010, directly after the
signing of the mining contract. By the end of March, a total of 27 662 carats
at an average stone size of 0,46 carats per stone had been produced.
Total sales attributable to the project during the period amounted to US$19,3
million at an average price of US$351 per carat. US$3,5 million was repaid to
Trans Hex against the outstanding investment amount.
Expansion of production capacity is being funded through cash generated from
operations and the earthmoving fleet in particular has seen the addition of a
number of key production units.
Projects Luarica and Fucauma remain under care and maintenance.
Namibia
The last remaining vessel was sold during the reporting period and all
operations in Namibia have terminated.
Outlook
As reported at the interim results, it was decided to suspend stripping
operations at Baken given current exchange rates. The mine is now
concentrating on lowering total costs and generating an acceptable margin by
processing existing low grade stockpiles at increased throughput levels.
South African production for the 2012 financial year is now expected to be
86,000 carats.
In Angola, the forecast for Somiluana for the coming year is to produce 42
000 carats. As of 1 October 2010 the operations are running on a continuous
shift basis.
Trans Hex is continuing discussions with its Angolan partners over the future
of the Luarica and Fucauma projects.
Tight controls over cash and costs will continue to be exercised in all
areas.
Demand for rough diamonds remained strong throughout the financial period
which saw a continued strengthening of prices. Prices for Trans Hex
production currently stand at all time highs, buoyed by restocking of the
diamond pipeline and good demand for polished diamonds, most notably from
China and India.
The strength in the market seems likely to continue given demand levels, but
pricing levels are anticipated to show greater stability in the longer-term
after a sustained period of increases.
In respect of new business opportunities, an agreement with De Beers
Consolidated Mines Limited ("DBCM") was signed on 6 May 2011 in terms of
which, and subject to certain conditions precedent, Trans Hex`s 50% held
associate, Emerald Panther Investments 78 (Pty) Limited will acquire assets
and liabilities relating to Namaqualand Mines, a division of DBCM.
Exploration activities are continuing in Southern Africa and potential new
ventures are being evaluated on an ongoing basis.
Changes in Directorship
At the board meeting held on 27 May 2010, Mr Bernard van Rooyen was confirmed
as chairman of the board for a further period of one year.
Mr Ian Hestermann was appointed Financial Director with effect from 27 May
2010 after serving as acting director from 1 February 2010.
Mr Greg van Heerden was appointed as company secretary with effect from 27
May 2010.
Dr E de la H Hertzog, Adv Theo van Wyk and Mr Jan Dreyer resigned as
directors of the company effective 26 October 2010 pursuant to Remgro Limited
unbundling its shareholding in Trans Hex.
Mr Mervyn Carstens resigned as executive director for SA land operations
effective 5 April 2011 pursuant to his secondment on a full-time basis as
managing director of Trans Hex`s new joint venture agricultural company.
Dividend
In order to maintain cash resources, the directors deem it prudent not to
declare a final dividend.
Shareholders` diary
The annual report will be mailed before 30 June 2011 and the annual general
meeting is scheduled for 4 August 2011.
By order of the board
BR van Rooyen L Delport
Chairman Chief Executive Officer
Parow
31 May 2011
Registered office
405 Voortrekker Road, Parow 7500 PO Box 723, Parow 7499
Transfer secretaries
South Africa
Computershare Investor Services (Pty) Limited
PO Box 61051, Marshalltown 2107
Namibia
Transfer Secretaries (Pty) Ltd
PO Box 2401, Windhoek
Directorate
BR van Rooyen (Chairman), L Delport (Chief Executive Officer),
IP Hestermann (Financial Director), T de Bruyn, AR Martin,
GM van Heerden (Company Secretary)
Sponsor
RAND MERCHANT BANK (a division of FirstRand Limited)
Date: 02/06/2011 07:05:01 Produced by the JSE SENS Department.
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