| Fri 22 Feb 2002, 0:00 | | President Steyn Gold Mines - Audited Results And A |
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PRESIDENT STEYN GOLD MINES LIMITED
(Registration number 1998/014461/06)
JSE Share code: PGD ISIN: ZAE000026654
("PS!Gold")
AUDITED RESULTS AND ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2001
OPERATIONAL HIGHLIGHTS FOR THE YEAR 2001
- Cash flow from operations of R74,3 million
- Gold production increase by 5,5% to 5 517 kg
- Pre-tax profit increase by 13,8% to R31,5 million
- Headline EPS increase to 6,9 cents
SUMMARY OF AUDITED GROUP RESULTS
for the quarter and year ended 31 December 2001
Quarterly results Annual results
3 months 3 months 12 months 15 months
to to to to
December September December December
Notes 2001 2001 2001 2000
GOLD PRODUCTION 1
Ore milled 000 mt 299 308 1 229 1 053
Gold recovered kg 1 326 1 418 5 517 5 232
oz 42 634 45 590 177 377 168 198
Yield total g/t 4,3 4,6 4,5 5,0
underground g/t 4,4 4,6 4,7 5,2
Cash operating costs R/kg 2 77 514 61 738 63 189 50 311
$/oz 236 213 226 207
Gold price received R/kg 92 265 74 581 75 409 62 616
$/oz 281 276 273 258
INCOME STATEMENT (abridged)
SALES gold R'000 122 343 105 771 416 031 327 574
other 3 012 3 056 13 249 17 696
CASH OPERATING COSTS
gold (102 784) (90 833) (351 903) (272 187)
gold stock
movement 3 288 3 288 8 959
other (2 649) (2 664) (11 294) (16 212)
CASH OPERATING PROFIT 19 922 18 618 69 371 65 830
Amortisation: fixed assets (4 879) (4 675) (18 451) (16 308)
goodwill (2 320) (2 319) (9 277) (9 277)
Corporate expenditure (1 189) (616) (2 890) (3 106)
Net finance charges (1 012) (1 547) (7 208) (9 422)
PROFIT BEFORE TAX 10 522 9 461 31 545 27 717
Taxation: current 3 (4 047) (954) (6 238) (3 109)
prior year 4 (5 414)
NET PROFIT 6 475 8 507 25 307 19 194
Capital expenditure R'000 7 403 6 423 29 899 247 69
Weighted average
shares in issue '000 503 380 503 380 503 380 423 080
Headline earnings
per share cents 5 1,7 2,2 6,9 6,7
Attributable earnings
per share cents 1,3 1,7 5,0 4,5
Notes:
1. The comparative period of 15 months include 12 months gold mining
operations.
2. Cash operating cost for the quarter include R4 100 000 cost relating to
prior quarters.
3. Taxation for the current quarter include a provision for prior quarters
of R2 303 000.
4. Taxation prior year of R5 414 000 refers to an underprovision for
deferred tax in that year.
5. Headline earnings per share exclude amortisation of goodwill. Last year
earnings were restated with the underprovision for deferred tax.
6. The group results were audited by JCB Incorporated (Chartered Accountants
SA) and their unqualified opinion letter will be open for inspection.
7. The group results have been prepared in accordance with Generally
Accepted Accounting Practice and are consistent with the accounting policies
of the company.
ABRIDGED BALANCE SHEET
31 December 31 December
2001 2000
R'000 R'000
ASSETS
Mining assets,property,
plant and equipment 184 983 182 882
Goodwill 166 985 176 262
Current assets 67 977 56 029
Total assets 419 945 415 173
EQUITY AND LIABILITIES
Shareholders' equity 298 020 272 713
Long-term liabilities 28 345 55 245
Deferred tax 22 606 16 522
Provision for environmental
rehabilitation 15 505 19 567
Current liabilities 55 469 51 126
Total equity and liabilities 419 945 415 173
Number of shares in issue ('000) 503 380 503 380
Net asset value per share (cents) 59,2 54,2
Year 15 months
ended ended
31 December 31 December
2001 2000
R'000 R'000
STATEMENT OF CHANGES IN EQUITY
Balance at beginning of period 272 713 16 175
Issue of shares less expenses 239 618
Distribution in specie on
disposal of businesses (2 274)
Retained income for the period 25 307 19 194
Balance at end of period 298 020 272 713
Represented by:
Share capital 5 034 5 034
Share premium 235 591 235 591
Non-distributable reserve 1 138 1 138
Retained income 56 257 30 950
298 020 272 713
ABRIDGED CASH FLOW STATEMENT
Cash generated from operations 74 344 (23 822)
Net interest (7 207) (9 422)
Taxation (370) (3 791)
Cash flow from operating activities 66 767 (37 035)
Cash flow from investing activities (24 417) (23 729)
Cash flow from financing activities (13 633) 51 584
Net increase in cash resources 28 717 (9 180)
Net overdraft included in
subsidiaries acquired and sold (11 926)
Cash and cash equivalents at
beginning of year (20 495) 611
Cash and cash equivalents
at end of year 8 222 (20 495)
Capital expenditure
- incurred for the year 29 899 24 722
- committed but not contracted 3 412 33 750
LETTER TO SHAREHOLDERS
The Management team of President Steyn has delivered on their promise
made to shareholders in the 2000 annual report to enhance shareholders'
value. Substantial value has been created and unlocked. The company's
operational activities established a base through increased production and
cash flow, allowing management to aggressively pursue its vision.
Shareholders are now receiving a special dividend in excess of the year's
average shareprice. The year 2002 will see corporate activities aiming at
establishing a unique enterprise, delivering Dollar-based income with a
strong annuity element.
At a shareholders' meeting on 15 January 2002, the disposal of the gold
mining interests of PS!Gold to Thistle Mining Incorporated was approved at a
consideration of US$32 050 000. Shareholders also approved a share premium
distribution of 55 cents per share. The disposal consideration was received
on 15 February 2002.
An amount of R276,8 million will be returned to shareholders, which
exceeds the average market capitalisation of the company over the past year
by 37,5%. The special dividend is a result of the re-positioning of the
company, whereby the gold mining assets have been sold.
PS!Gold is well positioned to form a diverse entity with focused business
divisions. The company's cash flow standing can be used to leverage new
opportunities to shareholders benefit.
2002 Forward looking statement
* Dollar-based royalty of approximately US$1 500 000 for the year.
* Interest on debentures of US$4 500 000.
* Debentures conversion option ensures capital growth driven by gold
industry performance.
* Profits from remaining mining operations.
* Opportunity income from R75 million cash.
* Comparable headline EPS is expected.
CORPORATE HIGHLIGHTS
PS!Gold's management have progressed towards establishing the company as
a mining and related technology company with an annuity income stream. In
the previous annual report, management also promised the creation and
unlocking of shareholders' value.
The "consolidation" of the Free State gold mining assets consummated in
the acquisition by Harmony of all the Freegold assets. A number of parties
indicated their interest in acquiring the PS!Gold mining assets, adding more
mass to already substantial gold producing entities. These factors have
influenced PS!Gold to re-evaluate its participation in the underground
mining activities of the Free State area.
A transaction has been concluded whereby Thistle Mining Incorporated, a
public company listed on the Toronto Stock Exchange, acquired the mining
operations' companies as well as the training centre, from PS!Gold.
In a circular to shareholders the following was announced:
"With effect from the effective date and subject to the fulfilment of the
conditions precedent, PS!Gold will dispose of:
* its shareholding in Mindserv, including its wholly-owned subsidiary PSGM
Free State;
* its shareholding in TMTI; and
* its claims against Mindserv, PSGM Free State and TMTI.
The disposal consideration, payable on the effective date by Thistle to
PS!Gold in terms of the agreement, will be an amount of US$32 050 000. The
disposal consideration in South African Rands, calculated at the Rand/US$
exchange rate on Thursday, 13 December 2001, being the last practical date
prior to the finalisation of this circular, is R355 755 000.
The disposal consideration will be settled as follows on the effective
date:
* US$27 550 000 in cash; and
* US$4 500 000 by way of an issue to PSGM of redeemable convertible
debentures.
In addition to the disposal consideration, Thistle will pay to PS!Gold a
royalty calculated on the formula of US$8 per ounce of gold produced over a
period of 60 months from the effective date. An amount equal to the net
profit after tax of Mindserv, PSGM Free State and TMTI for the period 19
September 2001 until the effective date, shall also accrue to PS!Gold by way
of a dividend, and will be payable within 30 days after determination and
certification thereof by the auditors.
The disposal consideration and other payments were negotiated on an arm's
length basis between PS!Gold and Thistle. Thistle has no direct or indirect
interest in PSGM, nor have any of its directors or persons acting in concert
with Thistle. PS!Gold has no direct or indirect interest in Thistle nor has
any party acting in concert with PS!Gold.
PS!Gold and Thistle have also agreed to use their best endeavours to
negotiate and enter as soon as possible into agreements in respect of the
following:
* a joint venture agreement pertaining to the extraction and refining of
gold from the Freddies waste dump;
* an agreement pertaining to the extraction and refining of gold from
certain excess ore stock piled as at the effective date; and
* an agreement pertaining to the implementation of a continuous mining
system at the five operating mine shafts of PSGM Free State.
Thistle agreed to create and maintain, for so long as PS!Gold is a holder
of any redeemable convertible debentures, an executive committee for Thistle
SA to be responsible for the compliance of the implementation of the
strategic plan of PSGM Free State. Mr J S van der Merwe (or his nominee)
shall have the right to be appointed as a member of the executive
committee."
This transaction has all the elements needed to convert PS!Gold into a
technology-driven company with a strong annuity income base.
PS!Gold residual value and income stream after the special dividend
payment.
* The company has more than R75 million cash available to invest in value
adding projects.
* PS!Gold holds redeemable convertible debentures from Thistle to the value
of US$4,5 million. The coupon rate is 10% per annum and it is redeemable
after 60 months. The debentures are convertible at the lower of market price
or C$0,25 per Thistle share at the option of PS!Gold.
* PS!Gold is to receive a production royalty of US$8 per ounce of gold
produced at the five shafts sold to Thistle. This royalty is payable on a
monthly basis. Monthly production is expected to increase from the present
15 000 ounces to around 16 000 ounces after the commissioning of the new
mill at the processing plant. At an exchange rate of R11,50 to US$, this
amounts to a monthly annuity income of approximately R1,4 million.
Technology driven projects.
* During the past year PS!Gold has entered into a development agreement with
Brandrill on the implementation of their PCF low energy controlled, rock-
breaking system. Product and commercial trials have been conducted and
finalised at President Steyn's 1a shaft. PS!Gold has entered into an
agreement with Thistle to act as the facilitating agent for the
implementation of the developed methodology at the five shafts. Negotiations
are progressing whereby Brandrill will be contracted to the mining
operations of Loraine 3 shaft, establishing a PCF demonstration unit.
Investigations are taking place identifying other shafts where PS!Gold will
commercially introduce the PCF continuous mining technology.
* PS!Gold has entered into a joint venture agreement with Thistle on
extracting gold from a surface rock dump known as the Freddies dump. This is
a 3,8 million-ton dump, the final grade profile has not been audited yet.
The initial studies indicated attractive viability with sound cash flow.
PS!Gold will be a 60% profit beneficiary of the project. Gekko technology
will be contracted by PS!Gold who will also be remunerated for the
technology transfer. A final feasibility study is being conducted and will
be concluded in due course.
Other projects under consideration.
The Board has set a return on investment threshold of 30% for new
projects. Indications are that a number of financial institutions are
interested in funding projects if additional funding is required. Various
projects and growth scenarios are under consideration.
Broadening of the shareholder base.
The Board of Directors and major shareholders have agreed that the share
liquidity and shareholder spread will have to be addressed.
Negotiations are taking place with an international investor who has an
option to acquire a substantial shareholding in the company. Other actions
to introduce the company to a broader base of investors are under
consideration.
2001 OPERATIONAL AND FINANCIAL RESULTS
Production
Ore milled for the year of 1,2 million tonnes shows an increase of 16,7%
over last year. Although the yield reduced from 5,0 grams per ton to 4,5 in
the year, gold production of 5 517 kg was 5,5% above last year.
Profitability
Cash operating profit for the year of R69,4 million shows an increase of
5,4% above last year. The increase in the selling price of gold per kg was
somewhat negated with the increase in cash operating cost per kg. The
increase in the cash operating cost was mainly due to the reduction in grams
per ton recovered, major repairs and maintenance and the annual wage
increase above inflation. Management emphasised quality repairs and
maintenance on plant and equipment as an important factor to ensure
continued production in the long term.
Pre-tax profit of R31,5 million for the year shows an increase of 13,8%
over last year. The tax charge of R6,2 million this year includes a deferred
tax provision of R6,1 million. In addition, a prior year under-provision for
deferred tax of R5,4 million were adjusted to last year's net profit, to
afford a meaningful comparison. This reduced the headline EPS declared last
year of 8,0 cents per share to 6,7 cents.
Headline earnings per share for the year of 6,9 cents was slightly better
than the headline EPS of 6,7 cents last year. However, last year EPS was
calculated on a lower weighted average shares in issue, with the result that
dilution reduced the current year's EPS.
Cash flow
Cash generated from operations during the past year amounted to R74,3
million. This eliminated the bank overdraft of R24,9 million at the end of
December 2000 and also eliminated director's loan accounts to the extent of
R22,9 million.
Quarterly results
March June September December
Gold recovered (kg) 1 346 1 427 1 418 1 326
Development metres 1 636 1 955 2 120 2 151
Yield (g/t) 4,3 4,7 4,6 4,3
Cash operating profit (R'000) 14 902 15 929 18 618 19 922
The financial results progressively improved during the year. For optimum
returns though, President Steyn's mining operations have always formed part
of a bigger operational unit. Sharing of non-productive costs, utilising
infrastructures, benefiting from critical mass and addressing "farm fences"
as mining boundaries, will all add to the present sound enterprise base of
PSGM Free State.
Resulting from the sales agreement, PS!Gold has relinquished control over
the daily operations of the President Steyn production unit. Through the
royalty agreement, debenture arrangements, continuous mining project and
executive management committee, PS!Gold is still very much interrelated to
the mining operations. The new owners will bring supplementary dynamics to
the company and it is expected that through Thistle's international
exposure, President Steyn Free State will blossom as a reputable gold
producer.
FUTURE
With the disposal of the mining interests concluded, PS!Gold will still
have a substantial interest in gold mining activities through:
* licensing and implementation of the Brandrill PCF-based rock-breaking and
continuous mining processes with a related income stream;
* a dollar-based royalty income estimated at R16 million per annum for five
years in terms of the agreement of sale with Thistle;
* a convertible debenture of US$4,5 million in the holding company of the
disposed gold mining activities;
* joint venture agreement with Thistle to produce gold from the Freddies
dump;
* cash estimated at R75 million for investment into other mining and related
activities.
Under the above circumstances, the company's listing under the gold mining
sector of the JSE Securities Exchange should continue.
On behalf of the Board
J S van der Merwe
Chief Executive Officer
Johannesburg
25 February 2002
