| Thu 7 Jun 2001, 0:00 | | Falcon - Interim Report 2001 |
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FALCON INVESTMENT HOLDINGS SOCIETE ANONYME
(Incorporated in Luxembourg. RC Number B39773)
INTERIM REPORT 2001
Registered Office:
6 rue Adolphe Fischer,
30th May 2001 L-1520, Luxembourg
Dear Shareholder,
It is with great relief that I am able to report that the Group's four gold
mines in Zimbabwe are operating, despite the temporary suspension of
operations at Venice mine for part of March and April. This is entirely due
to the introduction on 23rd April 2001 by the Government of Zimbabwe of a
Gold Price Support Scheme equivalent to US$326 per ounce. As part of our
discussions with the government we have committed to maximising gold
production for as long as we can sustain viable operations. Therefore we
are continuing to produce gold at the loss making Venice mine.
In the continuing absence of a devaluation, and without the introduction of
the gold support price, we would have needed to close three of our four
mines, and the future of the fourth mine would have been in doubt.
Nevertheless, the outlook remains uncertain because of the continuing
increase in input costs. Local inflation is in excess of 55%. If costs
continue to rise at the current rate, then, unless the support price is
increased or the Zimbabwe dollar devalues, we will be forced to close some
or all of the mines before the end of the calendar year. Some capital
expenditure is being incurred to increase efficiency, however no further
development work can be afforded.
Gold production at our two Zimbabwe subsidiaries (Falcon Gold Zimbabwe
Limited (Falgold) - 57.1% owned) and Olympus Gold Mines Limited (Olympus) -
66.7% owned) was 20,686 ounces in the six months to 31st March 2001,
compared to 21,960 ounces in the previous six months, and 20,177 ounces in
the first half of last year.
The Group's loss for the period of US$156,000 (2000 - loss of US$275,000)
includes a reduction in the deferred tax provided by our two Zimbabwe
subsidiaries of US$292,000. This arose from a decrease in corporate tax
rates for Zimbabwe mining companies from 36.05% to 25.75%.
The profit and loss accounts and balance sheets of our Zimbabwean
subsidiaries have been translated at the official exchange rate of
Z$55:US$1. Our share of the profit, including a deferred tax write back, of
these subsidiaries was US$66,000 and our share of their net assets at 31
March 2001 was US$1,402,000.
We are proceeding with the development of a pre-feasibility study on our 52%
owned iodine deposit in Chile's Atacama Desert. The deposit that has been
identified shows close to 50 million metric tonnes of mineable resources
with economically attractive iodine grades that could support an operation
to supply around 10% of current world consumption for ten years. Work is
progressing on access rights, the identification of cheaper water supplies,
and the clearance of a minor title dispute. Expenditure of US$116,000 has
been incurred in the period and has been fully provided against in the
profit and loss account.
The proposed share consolidation was approved at the Annual General Meeting
and shareholders have been issued with new share certificates for two new
shares of Euro 1.25 each to replace three old shares of US$2.00 each. The
resulting reduction in share capital and share premium has been transferred
to eliminate the deficit on the holding company's profit and loss account.
We remain excited by our prospects in Chile and hope to have further news
before the end of the year. However the liklihood of an economic recovery
in Zimbabwe appears doubtful for the foreseeable future and the Group will
continue to operate in a survival only mode.
Yours faithfully D.C. Marshall
Chairman
Consolidated group profit and loss account
Half years ended Year ended
31st March 31st March 30th September
2001 2000 2000
Unaudited Unaudited
US$000 US$000 US$000
Revenue 5,837 5,920 12,062
Operating costs (6,264) (6,450) (12,774)
Operating loss before interest
and taxation (427) (530) (712)
Interest received 37 228 307
Exchange losses (1) - (20)
Loss before exceptional items
and taxation (391) (302) (425)
Exceptional item - surplus on
disposal of mining properties - - 198
Loss before taxation (391) (302) (227)
Taxation credit/(charge) 235 27 (16)
Loss after taxation (156) (275) (243)
Attributable to outside
shareholders (5) 20 30
Retained loss for the period (161) (255) (213)
Loss per share
(US cents) - basic (9) (14) (11)
Changes in equity
Exchange differences (10) 2 (507)
Net loss for the period (161) (255) (213)
(171) (253) (720)
Shareholders' funds at start
of the period 3,194 3,914 3,914
Shareholders' funds at end
of the period 3,023 3,661 3,194
Consolidated group balance sheets
31st March 31st March 30th September
2001 2000 2000
Unaudited Unaudited
US$000 US$000 US$000
Fixed assets
Tangible assets 4,701 4,349 4,651
Investments - unlisted
(Directors' valuation
US$17,000) 17 44 17
4,718 4,393 4,668
Current assets
Mine stores 341 468 296
Other current assets 341 258 334
Cash and bank balances 1,560 2,549 1,998
2,242 3,275 2,628
Current liabilities (1,669) (1,485) (1,512)
Net Current Assets 573 1,790 1,116
Total assets, less current
Liabilities 5,291 6,183 5,784
Deferred taxation (410) (1,027) (722)
4,881 5,156 5,062
CAPITAL AND RESERVES
Share capital 2,060 5,592 5,592
Non-distributable reserves (1,432) (1,432) (1,432)
Profit and Loss Account 2,395 (499) (966)
Shareholders' funds 3,023 3,661 3,194
Outside shareholders' interests 1,858 1,495 1,868
4,881 5,156 5,062
Consolidated cash flow statement
Half years ended Year ended
31st March 31st March
30th September
2001 2000 2000
Unaudited Unaudited
US$000 US$000 US$000
Operating activities
Cash generated
from/(absorbed by) normal
trading activities 55 (516) (529)
Net cash inflow/(outflow)
from operating activities 55 (516) (529)
Returns on investments and
servicing of finance
Interest received and other
investment income 37 228 307
Taxation - paid (116) (392) (231)
Investment activities
Purchase of tangible assets (393) (676) (2,226)
Proceeds on disposal of
investments and tangible
fixed assets - 26 437
Net cash outflow from
investment activities (393) (650) (1,789)
Net cash outflow before
Financing (417) (1,330) (2,242)
Financing activities
Minority interest in Falcon
de Chile - 820
Net cash outflow from
Financing - - 820
Net decrease in cash (417) (1,330) (1,422)
Net funds at start of period 1,998 3,879 3,879
Effect of foreign exchange
rate changes (21) - (459)
Net funds at 30th September 1,560 2,549 1,998
Offices:
Zimbabwe South Africa United Kingdom
Forestry Commission Building 11 Sunbury Park, 25 City Road,
71 Fife Street, La Lucia Ridge Office Estate, London, EC1Y 1BQ
(P.O. Box 4096), La Lucia 4051
Bulawayo Durban
Transfer Agents
Europe South Africa Zimbabwe
C.I. Registrars Ltd Mercantile Registrars Ltd Syfrets
Corporate and
Merchant Bank
Cresta House, Alma Street 11 Diagonal Street, Central Scrip
Administration,
Luton, Bedfordshire Johannesburg, 2001 46 Speke Avenue
LU1 2PU, England (P.O. Box 1053,
Johannesburg 2000) 5th Floor,
Zimbank House
(P.O. Box 2540),
Harare
Notes
1. Basis of preparation
The results for the half year ended 31st March 2001 and the balance sheet as
at that date, which are unaudited, have been prepared on the basis of
accounting policies adopted for the period to 30th September 2000, and
comply with International Accounting Standards and Luxembourg law in all
material respects except as explained in note 8.
2. Loss per share
Loss per share is based on the net loss attributable to members and the
1,864,206 shares in issue. The comparative amounts have been restated to
reflect the share consolidation.
3. Segmental analysis
The segmental analysis of turnover and operating profit is as follows:-
Half years ended 31st March Year ended 30th September
2001 2000 2000
US$000 US$000 US$000
Revenue Result Revenue Result Revenue Result
Gold mining -
Zimbabwe 5,837 (118) 5,920 (180) 12,062 (399)
Iodine development
- Chile - (116) - (156) - 45
Head office,
projects and other - (193) - (194) - (358)
5,837 (427) 5,920 (530) 12,062 (712)
Interest received 37 228 307
Interest paid and
other charges (1) - (20)
Exceptional items - gold
mining - Zimbabwe
- - 198
Loss before tax (391) (302) (227)
4 Deferred Taxation
Movement in the period: Half years ended Year ended
31st March 31st March 30th September
2001 2000 2000
US$000 US$000 US$000
Exchange movement (20) - (293)
Effect of reduction in
corporate tax rates (205) - -
Other (87) (107) (119)
Decrease in the period (312) (107) (412)
Balance brought forward 722 1,134 1,134
Balance carried forward 410 1,027 722
5 Share Consolidation
As a result of the deficit on the holding company's profit and loss account
at 30th September 2000, which arose because of the decision to provide
against our investments in Zimbabwe, shareholders considered at the Annual
General Meeting a proposal that the share capital of the Company be
consolidated and reduced. The consolidation was approved on the basis that
for every three shares of US$2.00 held as at 30th March 2001, shareholders
received two shares of Euro 1.25 each. Consequently, a transfer was made to
profit and loss account of the difference between the nominal value of the
new shares issued and the nominal value of the shares currently in issue
together with the balance of the share premium account.
6. Capital expenditure during the period was US$393,000. There were no
capital expenditure commitments at 31st March 2001.
7. Going Concern
The Directors of our subsidiary Falcon Gold (Zimbabwe) Limited ("Falgold")
have stated that the ability of that company to continue to operate is
dependent upon achieving budgeted gold output at the expected yields per
tonne, a stable or increasing US dollar gold price, and a depreciation of
the Zimbabwe dollar against the US dollar to offset the expected rate of
inflation in Zimbabwe.
The accounts of Falgold for the six months ended 31st March 2001, which are
unaudited, have been published on the basis that the going concern
assumption is still appropriate. Those accounts, reporting a loss of
US$12,400 and net assets of US$2,303,000, have been consolidated into the
Group accounts. Consequentially the Group accounts do not include any
adjustments relating to the recoverability and classification of recorded
assets, or to amounts and classifications of liabilities that may be
necessary should Falgold cease to continue as a going concern.
The Group accounts have been prepared on the going concern basis since the
directors are satisfied that the parent company and the Group have adequate
resources to continue in operational existence for the foreseeable future.
8.Hyperinflation
Zimbabwe companies are not required by the Zimbabwe Accounting Practices
Board and the Institute of Chartered Accountants of Zimbabwe to comply with
IAS 29, Financial Reporting in Hyperinflationary Economies, for financial
years ending before 31st December 2000, due to local, practical,
difficulties. We are unable to determine the full impact of any changes to
the financial statements that would be required from application of IAS 29.
It is estimated that the only significant adjustments arising from the
application of IAS29 would be to reverse translation differences which
reduce Zimbabwe fixed assets at 31st March 2001 and to reduce unrealised
exchange losses by a corresponding amount.
