| Wed 28 Mar 2001, 0:00 | | Mazal - Interim Report |
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MAZAL MINING AND EXPLORATION LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/013468/06)
("Mazal" or "the Company")
INTERIM REPORT
CONSOLIDATED INCOME STATEMENT
6 months ended Year ended
31 December 30 June
2000 2000
(Unaudited) (Audited)
Operating loss
before interest (3 240 200) (6 773 314)
Net interest paid (457 359) (147 529)
Attributable loss (3 697 559) (6 920 843)
Actual number of shares
in issue 180 000 000 180 000 000
Weighted average number
of shares in issue 180 000 000 180 000 000
Loss per share (2,05) (3,84)
Depreciation for the period 1 746 771 1 906 113
CONSOLIDATED BALANCE SHEET
As at As at
31 December 30 June
2000 2000
(Unaudited) (Audited)
ASSETS
Non-current assets 25 330 072 24 194 990
Current assets 532 635 674 922
Total assets 25 862 707 24 869 912
EQUITY AND LIABILITIES
Shareholders' funds 12 539 108 16 236 669
Non-current liabilities
and provisions 8 035 391 4 005 927
Current liabilities 5 288 208 4 627 316
Total equity and liabilities 25 862 707 24 869 912
Net asset value per share (cents) 6,97 9,02
CONSOLIDATED CASH FLOW STATEMENT
6 months ended Year ended
31 December 30 June
2000 2000
(Unaudited) (Audited)
Cash outflow from
exploration activities (1 602 614) (3 161 337)
Cash outflow from
investing activites (2 281 854) (6 356 220)
Cash inflow from
financing activities 2 867 587 790 496
Decrease in cash and cash
equivalents (1 016 881) (8 727 061)
Net cash and cash equivalents
at beginning of period 213 918 8 940 979
Net cash and cash equivalents
at end of period (802 963) 213 918
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share capital Accu-
mulated
and premium loss Total
Balance at 30 June 1999 28 878 523 (5 721 011) 23 157 512
Net loss for the year (6 920 843) (6 920 843)
Balance at 30 June 2000 28 878 523 (12 641 854) 16 236 669
Net loss for the period (3 697 559) (3 697 559)
Balance at 31 December 2000 28 878 523 (16 339 413) 12 539 110
COMMENTS
The six-month period under review was a difficult time for the Company. The
delay in commissioning the DMS Plant, coupled with the lack of available ground
water, saw recoveries during this period being substantially reduced and
concomitantly surplus cash was utilised to continue funding the project.
With the DMS Plant finally commissioned and the pipeline to the Vaal River
delivering water to Paardeberg by November 2000, trial mining and fine tuning
of the Plant took place. The problems previously experienced with the
pan/grease system were eradicated and an immediate increase in recoveries was
recorded with the small calcretised diamonds not previously recovered, now
being recovered. As part and parcel of the Company's intention to relocate its
listing to the Diamond Sector of the JSE Securities Exchange South Africa
("JSE") the services of an independent firm of process engineers were
contracted in order to furnish a report on the DMS Plant. The conclusions
reached are that the Plant design is correct, mechanically competent and
capable of realising the Company's objectives.
The Board believes that the infrastructural problems experienced during this
period are now behind us. The decision was taken to commence mining in December
2000. This will imply the capitalisation of mining development costs
retro-active to the beginning of the current financial year.
* ADDITIONAL CAPITAL EXPENDITURE REQUIREMENTS AND FUNDING THEREOF
In order to further enhance recoveries, the Company purchased, installed and
commissioned in December 2000 an additional crusher and in February 2001
additional earth moving equipment was purchased. Substantial deposits for this
equipment were paid with the balance being funded on instalment sale. The Board
is confident that with recoveries increasing as they are, there will be no
difficulty in meeting these instalments as they fall due.
The results of introducing this additional machinery were immediately apparent
with recoveries for February 2001 exceeding those in January 2001 by some 50%.
The Company is confident that within the next four to six weeks it will reach
its short-term production target of 3 600 carats per month. At a current
average of approximately US$90,00 per carat this will realise sufficient cash
in the short term to alleviate the cash flow problems experienced during the
year to date.
* MANAGEMENT EXPERTISE
The Board is of the opinion that the small management team has the expertise to
bring the deposit into successful and sustainable production.
* THE DEPOSIT
It was decided in March 2001 to commence the bulk sampling procedures and on 16
March 2001 we announced the results of the first bulk sampling exercise which
took place on our Paardeberg East property.
This is the first of at least four proposed bulk sampling exercises to assess
diamond value of our MK1 kimberlite site. The sampling activities are also a
key requirement of the competent person's report being compiled for the
relocation of Mazal's listing on the JSE from the "Mining Exploration" to the
"Diamond" sector.
The initial 2 837,64 tonne sample, comprising calcretised weathered kimberlite,
was collected from a 10m vertical section about 10m from the surface of the
pipe's eastern lobe. A total of 2 353 diamonds weighing 275,07 carats were
recovered from the bulk sample, equating to a grade of 9,69 carats per 100
tonnes. The average value per carat was US$80,71 with an average stone size of
0,12 carats. This result is comparable to an estimate of the grade of 10,76
cpht that was made based on a survey of the tailings heap. The tailings heap
represents the previous seven months' production.
The grade realised from this first bulk sample, which grade the Board expects
to increase with depth, is in and of itself sufficient to sustain a diamond
mining operation and put the company in a cash surplus position. At an average
value of US$80,00 per carat, and an average grade of 10 carats per 100 tonnes,
this translates into an average revenue per tonne of US$8,00 or R64,00. The
company's estimated mining costs are R20,00 per tonne which costs the company
believes to be realistic and sustainable.
The next sample will be taken from an area of fresh kimberlite (blue ground)
providing a better indication of the recoveries that can be expected for the
largest part of the ore body. It is envisaged that this bulk sample will
commence in early April 2001 and is expected to last approximately one week.
The results will be announced as soon as they are to hand.
A further exciting development has been the recovery of diamonds from
kimberlite historically outside the delineated ore body. The effect of this is
that the MK1 kimberlite seems to be larger than initially identified. Our
geologists are currently preparing their report and this too shall be published
shortly. Pitting and trenching continues to determine the exact extent of this
increase and the implications thereof. It is further envisaged that exploration
will commence in May 2001 of the MK2 and MK3 kimberlites.
* QUOTES FROM OUR CONSULTANTS
Independent geologist Lyndon de Meillon overseeing the sampling programme says:
"The calcretised kimberlite treated during this sample represents approximately
10% of the total tonnage to a depth of 150m and is only from one area (eastern
lobe) of the kimberlite. The degree of calcretisation decreases with depth."
Adds de Meillon: "The plant and equipment are modern and efficient and a
systematic exploration programme is being implemented. From what I have seen so
far the diamonds recovered are above average for a kimberlite."
"The results of the first bulk sample are encouraging and definitely merit the
further work planned on the property", says Theo Botoulas of BoE Merchant
Bank's Investment Banking Division. "Exploration is currently being conducted
in a systematic and professional manner and the grade and price achieved thus
far seem normal for a diamondiferous kimberlite. A better idea of the grade and
diamond distribution representative of the project will be gained as
exploration work continues on different zones of the kimberlite. Currently only
the calcretised portion of the oxidised zone has been bulk sampled. In addition
to the MK1 pipe, Mazal has a portfolio of exploration targets that offer 'blue
sky' potential to investors in the company. The Paardeberg find could be a
company maker. It could be one of the most significant finds in the Northern
Cape in recent years and could make a significant impact on the economy of the
region in terms of job creation. Mazal has put a lot of work and capital into
the mine and is adopting the correct procedures in exploration of the MK1 pipe"
* RESIGNATION OF DIRECTOR
Due to a perceived conflict of interest between ourselves and a major diamond
producer, Mike Skinner was forced to resign his directorship of Mazal. However,
he remains employed by Mazal as their Consulting Geologist. The company is
confident that it has the correct management in place who, together with the
consultants being utilised, will transform Mazal into a successful and a
significant diamond producer.
For and on behalf of the Board
Y Weltsman D Levithan
Director Director
28 March 2001
Directors: C P Dollery, D Levithan, S Weltsman, Y Weltsman.
Transfer Secretaries: Computershare Services Limited, 4th Floor, Edura House,
41 Fox Street, Johannesburg 2001.
Registered Office: Suite 403, SA Diamond Centre, 240 Commissioner Street,
Johannesburg.
