| Thu 6 Jun 2002, 0:00 | | Falcon Investment Holdings Societe Anonyme - Inter |
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FALCON INVESTMENT HOLDINGS SOCIETE ANONYME - INTERIM 2002
FALCON INVESTMENT HOLDINGS SOCIETE ANONYME
(Incorporated in Luxembourg. RC Number B39773)
Share Code: FLC ISIN Code: LU0042254812
Registered Office:
6 rue Adolphe Fischer,
L-1520, Luxembourg
Dear Shareholder,
The results for the half year ended 31st March 2002 are attached.
Zimbabwe
Our financial statements continue to be compiled using the official rate of
exchange for the Zimbabwe dollar, which has remained unchanged over the
period at an unrealistic rate of to Z$55:US$1. There is a parallel rate of
exchange for the Zimbabwe dollar which has diverged considerably from the
official rate and now stands in excess of Z$400:US$1.
The price of our gold production is determined by the Government of
Zimbabwe. Gold produced is paid for in US dollars at the prevailing
international price of gold in respect of 20% of the total production and
the balance is paid in Zimbabwe dollars at a "Gold Support Price". The
"Gold Support Price" has been insufficient to sustain normal mining
operations and there has been substantial depletion of reserves which
ultimately limits the future of our gold mines.
Total operating losses for all four mines were US$175,000 in the six months
to 31st March 2002, compared to US$490,000 for the whole of last year and
US$117,000 for the first half of last year. Our operating costs in Zimbabwe
for the six months ended 31st March 2002 have increased by almost exactly
100% compared to the same period last year. Gold production has declined 12
% to 564kg from 643kg in the same period last year, and 1% from 572kg in the
second half of last year. This reduction is mainly due to declining
production at Venice mine, and technical problems experienced at Golden
Quarry mine which have since been overcome.
It is with great regret that I have to announce that we have taken the
decision to close Venice gold mine. Inflation driven cost increases have
continued to outstrip rises in income, and Venice generated losses for the 6
months to 31st March 2002. With no sign of any material increase in income,
and no room to decrease costs further, the only course of action open to us
is to close the mine. No closure costs have been provided as we are in
negotiations to sell some or all of the mine and its assets. Any necessary
provisions will be included in the results for the year. Our other three
gold mines continue to operate.
The increase in the Gold Support Price from 1st March will barely sustain
operations at current rates of cost inflation for a limited period only. We
continue to encourage the Government of Zimbabwe to permit gold producers a
higher level of income through a greater share of the foreign exchange
generated to safeguard the jobs of our employees and the employees of our
suppliers. In anticipation of continuing increases in the Gold Support
Price, the accounts of our Zimbabwe subsidiaries continue to be prepared on
a going concern basis. The book value of the net assets of these
subsidiaries is US$1,884,000, translated at the official rate of exchange.
If we are forced to close the remaining mines it is unlikely that we will be
able to recover much of this value.
Chile
We are proceeding with the development of 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. Chile is the world`s major
producer of iodine and this is probably the last significant Iodine deposit
in Chile that is not controlled by one of the major suppliers. The location
is relatively accessible, close to existing road and electricity
infrastructure and near an adequate supply of water. The relatively high
grades in significant areas of the deposit and the absence of any overburden
will enable us to bring the project into production on a profitable basis
despite a recent decline in world iodine prices. Expenditure of US$107,000
has been incurred in the period and has been fully provided against in the
profit and loss account.
Prospects
We remain excited by our prospects in Chile and hope to have further news
before the end of the year. However the likelihood 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 6th June 2002
Consolidated group profit and loss account
Half years ended Year ended
31st March 31st 30th September
March
2002 2001 2001
Unaudited Unaudited
US$000 US$000 US$000
Revenue 11,578 5,837 13,894
Operating costs (11,946) (6,264) (14,613)
Operating loss before interest (368) (427) (719)
and taxation
Interest received 13 37 83
Interest paid - - (1)
Exchange gains/(losses) 4 (1) (15)
Loss before exceptional items (351) (391) (652)
and taxation
Exceptional item - surplus on 12 - -
disposal of fixed assets
Loss before taxation (339) (391) (652)
Taxation credit/(charge) 119 235 210
Loss after taxation (220) (156) (442)
Attributable to outside 60 (5) 43
shareholders
Retained loss for the period (160) (161) (399)
Loss per share (US cents) - (9) (9) (21)
basic
Headline loss per share (US (9) (9) (21)
cents)
Changes in equity
Exchange differences 43 (10) (307)
Net loss for the period (160) (161) (399)
(117) (171) (706)
Shareholders` funds at start of the 2,488 3,194 3,194
period
Shareholders` funds at end of the 2,371 3,023 2,488
period
Consolidated group balance sheets
31st March 31st 30th
March September
2002 2001 2001
Unaudited Unaudited
US$000 US$000 US$000
Fixed assets
Tangible assets 5,010 4,701 4,855
Investments - unlisted (Directors` 18 17 18
valuation)
5,028 4,718 4,873
Current assets
Mine stores 713 341 733
Other current assets 456 341 1,154
Cash and bank balances 1,348 1,560 864
2,517 2,242 2,751
Current liabilities (3,166) (1,669) (3,054
)
Net Current (Liabilities)/Assets (649) 573 (303)
Total assets, less current 4,379 5,291 4,570
liabilities
Deferred taxation (160) (410) (325)
4,219 4,881 4,245
CAPITAL AND RESERVES
Share capital 2,060 2,060 2,060
Non-distributable reserves 326 (1,432) 326
Profit and Loss Account (15) 2,395 102
Shareholders` funds 2,371 3,023 2,488
Outside shareholders` interests 1,848 1,858 1,757
4,219 4,881 4,245
Consolidated cash flow statement
Half years ended Year ended
31st 31st 30th
March March September
2002 2001 2001
Unaudite Unaudite
d d
US$000 US$000 US$000
Operating activities
Cash generated from/(absorbed by) 823 55 (537)
normal trading activities
Net cash inflow/(outflow) from 823 55 (537)
operating activities
Returns on investments and servicing
of finance
Interest received and other 17 37 82
investment income
Taxation - recovered/(paid) 31 (116) (183)
Investment activities
Purchase of tangible assets (318) (393) (990)
Proceeds on disposal of investments 389 - 111
and tangible fixed assets
Net cash inflow/(outflow) from 71 (393) (879)
investment activities
Net cash inflow/(outflow) before 942 (417) (1,517)
financing
Financing activities
Minority interest in Falcon de Chile 19 - 94
Dividend paid to outside shareholders - - (107)
Net cash inflow/(outflow) from 19 - (13)
financing
Net increase/(decrease) in cash 961 (417) (1,530)
Net funds at start of period 385 1,998 1,998
Effect of foreign exchange rate 2 (21) (83)
changes
Net funds at end of period 1,348 1,560 385
Offices:
Zimbabwe South Africa United Kingdom
131 Josiah Tongogara Street. 11 Sunbury Park, 25 City Road,
14th Avenue, La Lucia Ridge Office Estate, London, EC1Y 1BQ
Buluwayo La Lucia 4051
Durban
Transfer Agents
Europe South Africa Zimbabwe
C.I. Registrars Ltd Computershare Services Ltd Syfrets Corporate
Cresta House, Alma Street 11 Diagonal Street and Merchant Bank
Luton, Bedfordshire Johannesburg, 2001 Central Scrip
LU1 2PU, England (P.O. Box 1053, Johannesburg Administration
2000) 46 Speke Avenue
5th Floor,
Zimbank House
(P.O. Box 2540),
Harare
Notes
1. Basis of preparation
The results for the half year ended 31st March 2002 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 2001, and
comply with International Accounting Standards and Luxembourg law in all
material respects except as explained in note 7.
2. Loss per share
Loss per share is based on the net loss attributable to members and the
1,864,026 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
2002 2001 2001
US$000 US$000 US$000
Reven Resul Revenue Result Revenue Result
ue t
Gold mining - 11,57 (175) 5,837 (118) 13,894 (490)
Zimbabwe 8
Iodine development - (107) - (116) - (33)
- Chile
Head office, - (86) - (193) - (196)
projects and other
11,57 (368) 5,837 (427) 13,894 (719)
8
Interest received
and other income 17 37 83
Interest paid and - (1) (16)
other charges
Exceptional items
- gold 12 - -
mining - Zimbabwe
Loss before tax (339) (391) (652)
4 Deferred Taxation
Movement in the period: Half years ended Year
ended
31st 31st 30th
March March Septembe
r
2002 2001 2001
US$000 US$000 US$000
Exchange movement - (20) (26)
Effect of reduction in corporate tax - (205) (199)
rates
Other movements (165) (87) (172)
Decrease in the period (165) (312) (397)
Balance brought forward 325 722 722
Balance carried forward 160 410 325
5. Net capital expenditure, after proceeds from disposals, was negative
during the period at US$71,000. Capital expenditure authorised but not
contracted was US$273,000 at 31st March 2002, but there none was contracted
at 31st March 2002.
6. 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 2002, which are
unaudited, have been published on the basis that the going concern
assumption is still appropriate. Those accounts, reporting a loss of
US$61,000 after tax and minority interest and net assets of US$1,892,000,
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.
7. Hyperinflation
Our Zimbabwe subsidiaries, Falcon Gold Zimbabwe Ltd. And Olympus Gold Mines
Ltd. have not complied with IAS 29, Financial Reporting in Hyperinflationary
Economies. All expenditure in Zimbabwe is subjected to a stringent
cost/benefit analysis and the additional costs arising from the preparation
and audit of restated accounts incorporating hyperinflation adjustments
cannot be justified.
In normal circumstances the exchange rates of countries suffering high
levels of inflation depreciate to reflect inflation levels. However, the
Government of Zimbabwe has ensured that the official Zimbabwe dollar
exchange rate has remained relatively unchanged over the year.
Consequently, we are unable to determine the full impact of any changes to
the financial statements that would be required to adjust for the effects of
hyperinflation. It is estimated that the only significant impact on the
Group balance sheet would be to reverse prior year translation differences,
which have reduced Zimbabwe fixed assets at the balance sheet dates, and to
reduce unrealised exchange losses by a corresponding amount. No significant
adjustment to the profit and loss account would be required.
6 June 2002
Sponsor
PricewaterhouseCoopers Corporate Finance (Pty)Ltd
Date: 06/06/2002 07:46:00 AM Produced by the SENS Department
