| Fri 26 Oct 2001, 0:00 | | President Steyn Gold Mines: Quarterly Results Sept |
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QUARTERLY RESULTS SEPTEMBER 2001
Highlights
This quarter Previous quarter
Underground production 000 mt 342 311
Headline earnings per share c/share 2,2 1,7
Operating profit Rm 18,6 15,9
Three Three Nine
months months months
to Sept to June to Sept
GOLD PRODUCTION 2001 2001 2001
Ore milled 000 mt 308 306 930
Gold recovered kg 1 418 1 427 4 191
oz 45 597 45 871 134 743
Yield total g/t 4,6 4,7 4,5
underground g/t 4,6 4,9 4,8
Cash operating costs R/kg 61 729 58 118 58 657
$/oz 213 223 218
Gold price received R/kg 74 581 69 309 70 077
ABRIDGED INCOME STATEMENT R'000
Sales: gold 105 771 98 887 293 688
other operations 3 056 3 202 10 237
Cash operating costs:
gold (87 545) (82 920) (245 831)
other operations (2 664) (3 240) (8 645)
Cash operating profit: 18 618 15 929 49 449
Amortisation: fixed assets (4 675) (4 763) (13 572)
goodwill (2 319) (2 319) (6 957)
Corporate expenditure (616) (425) (1 701)
Net finance charges (1 547) (2 080) (6 196)
Profit before taxation 9 461 6 342 21 023
Taxation (954) (285) (2 191)
Net profit 8 507 6 057 18 832
Weighted average shares in issue '000 503 380 503 380 503 380
Headline earnings per share cents 2,2 1,7 5,1
Introduction
Management's paramount objective is to create and unlock shareholder value.
The past quarter has again seen increasing free cash flow as well as the
structuring and progression of the aim to establish PS!Gold as a mining
technology-driven entity.
Production and Profitability
Cash operating profit increased by R2,7 million to R18,6 million from the
previous quarter. Earnings per share improved from 1,7 cents per share to
2,2 cents per share for the quarter. The company is benefiting from the
higher Rand gold price as no production is hedged.
Underground production increased from an average of 101 000 tons per month
for the first six months to 114 000 tons per month for the last quarter. The
President Steyn gold plant has a present milling capacity of about 100 000
tons per month. Underground production exceeds this by some 10% to 15% per
month. Additional milling capacity will be operative within the next six
months. The production cost of 30 000 tons ore stockpiled during the past
quarter has been accounted for, but the output value has not yet been
included in the results to date.
Annual payroll increases have impacted on the production cost structures as
measured against the previous quarter. Electricity cost increased during the
winter months by an average of R1 million per month. Cash cost for the
quarter was US$213 per ounce (R61 729 per kilogram and R285 per ton milled).
Management is striving toward additional production flexibility and embarked
on accelerated development. Development metres therefore increased from 1
954 for the second quarter to 2 118 during the third quarter.
Management is satisfied with the overall performance of the mine and is
constantly seeking opportunities aimed at enhancing the income stream.
PS!Gold is proud to be a responsible gold miner protecting its paramount
asset - the gold reserves. Management refrains from implementing a
"harvesting strategy", thus foregoing short-term gains in favour of long-
term sustainable cash flow.
Prospects
Management will continue to focus on growing shareholders' value through
broadening its activity base.
The future cash flow and growth will be enhanced by the development and
implementation of unique value-adding projects such as the PCF-based
continuous mining technology and the PGM extraction venture.
Focus on gold and these technology-driven projects will ensure annuity
income aided by attractive blue-sky prospects.
Corporate activities
Taking the company's current and expected future financial performances into
account, the share price does not mirror the enterprise value of PS!Gold.
In order to address this issue, various alternatives have been investigated
as discussed below.
As envisaged in the previous quarterly report and the cautionary
announcement dated 27 July 2001, the Board investigated the possible de-
listing of the company's securities from the JSE Securities Exchange South
Africa. After consulting with a number of interested parties, it was
concluded not to pursue this alternative at present.
During the past year, various parties expressed interest in acquiring
PS!Gold. In a cautionary announcement dated 11 September 2001, the company
indicated that foreign companies were showing an interest aimed at acquiring
the PS!Gold mining assets. Two offers have been received from separate
Canadian (TSE) listed companies in this regard. After evaluating both
offers, the Board has decided to pursue one of them. The offer mirrors the
underlying enterprise value of the mining operations of PS!Gold, and is for
the acquisition of the subsidiaries President Steyn Free State (Pty) Ltd
and TM Training Initiative (Pty) Ltd. All technology mining licences,
agreements and projects are specifically excluded. Negotiations are ongoing
in this regard.
If the transaction set out above is concluded, PS!Gold will thus continue to
have a vested interest in the operating activities through licensing and
implementation of the PCF-controlled rock-breaking and continuous mining
processes with its related royalty income stream. Furthermore, the
development of a continuous mining system by PS!Gold and Brandrill Limited
has now reached the stage where steps are being taken to facilitate
commercial implementation. A due diligence was conducted by SRK on behalf of
Brandrill Limited on Loraine 3 shaft in order to define a point of departure
and clear milestones. Negotiations with Brandrill in this regard is expected
to be consummated soon.
In view of the above, PS!Gold has put forward an offer to acquire the
Matjhabeng mine at Welkom from Anglogold. The offer is supported by strong
motivation based on logical synergies and securing of jobs. The introduction
of low energy controlled rock-breaking and continuous mining will extend the
life of mine of Matjhabeng. This is therefore an ideal venture fitting with
the strategy of using the Brandrill PCF rock-breaking technology. By
optimising the gold resources, jobs will be secured and PS!Gold shareholders
can benefit from the positive cash flows.
In a recent cautionary announcement dated 20 September 2001, it was
indicated that PS!Gold is investigating the viability of partnering a
Platinum group metals (PGM) extraction project. The technical due diligence
has been completed and the findings encouraging. The parties have agreed to
carry out further evaluations in order to develop detail plans for the roll-
out of a number of projects. The Board is considering proposals regarding
investing in a joint venture or alternative shareholding structures in this
regard. If the outcome is positive, final transaction terms, structuring and
project planning will be announced in due course.
Negotiations are underway to introduce substantial international
shareholders, thereby attracting a wider investor base and increase the
tradability of the company's shares.
Further Cautionary Announcement
Further to the cautionary announcements dated 11 September 2001 and 20
September 2001 shareholders are advised that negotiations are still in
progress in respect of the abovementioned corporate activities. If any of
these negotiations are successfully concluded, it may have a material effect
on the price of the company's securities. Accordingly, shareholders are
advised to continue exercising caution when dealing in the company's
securities until a full announcement is made.
On behalf of the Board
J S van der Merwe
Chief Executive Officer
Johannesburg
26 October 2001
Transfer secretaries
Mercantile Registrars Limited, 7th Floor, 11 Diagonal Street, Johannesburg
Registered office
7 Main Reef Road, Germiston. PO Box 915, Bedfordview 2008
Directors
J S van der Merwe, C R de Wet, F N Lotz, D L Parodi
www.psgold.co.za
