| Tue 12 Nov 2002, 15:08 | | African Gem Resources Limited - Interim Results |
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African Gem Resources Limited - Interim Results
AFRICAN GEM RESOURCES LIMITED
(Registration No. 1998/007292/06)
Share code: AFG
ISIN code:ZAE000025540
CUSIP code (Level 1 ADR programme): 008283103
Interim Results for the six months ended 30 September 2002
BALANCE SHEETS
6 months 7 months 13 months
ended ended ended
30 Sep 2002 30 Sep 2001 31 Mar 2002
Unaudited Unaudited Audited
R`000 R`000 R`000
Assets
Fixed assets 83 144 60 264 80 071
Non current assets
Deferred taxation 1 407 256 1 574
Current assets 113 595 101 572 105 593
Inventory 36 808 12 817 27 055
Accounts receivable 15 309 15 736 11 570
Taxation refundable 3 089 - -
Cash and cash equivalents 58 389 73 019 66 968
Total assets 198 146 162 092 187 238
Equity and liabilities 158 048 146 715 148 932
Shareholders` interest 154 409 143 845 148 932
Outside shareholders` 3 639 2 870 -
interest
Non current liabilities 26 950 8 313 26 038
Deferred taxation 8 656 4 808 5 385
Long term liabilities
- interest bearing 16 174 198 17 238
- non interest bearing 2 120 3 307 3 415
Current liabilities 13 148 7 064 12 268
Accounts payable 13 148 5 379 9 862
Taxation payable - 1 685 2 406
Total equity and 198 146 162 092 187 238
liabilities
INCOME STATEMENTS
Revenue 42 427 18 188 41 305
Cost of sales (18 536) (7 594) (25 514)
Gross profit 23 891 10 594 15 791
Net foreign exchange (850) 4 665 16 567
(loss)/gain
Operating expenses (10 270) (4 985) (18 610)
Operating income 12 771 10 274 13 748
Net interest received 242 3 362 3 294
Income before taxation 13 013 13 636 17 042
Taxation (3 897) (4 085) (5 275)
Income after taxation 9 116 9 551 11 767
Outside shareholders` (3 639) 327 3 198
interest
Income attributable to 5 477 9 878 14 965
ordinary shareholders
Weighted average number of 129 519 129 349 129 349
ordinary shares in issue
(thousands)
Earnings and headline 4,23 7,64 11,56
earnings per share (cents)
CHANGES IN EQUITY
6 months 7 months 13 months
ended ended ended
30 Sep 2002 30 Sep 2001 31 Mar 2002
Unaudited Unaudited Audited
R`000 R`000 R`000
Share capital and share 111 968 111 968 111 968
premium
Balance at beginning of 111 968 111 771 111 771
period
Arising from share issue - 197 197
Retained income 42 441 31 877 36 964
Balance at beginning of 36 964 21 999 21 999
period
Income attributable to 5 477 9 878 14 965
ordinary shareholders
154 409 143 845 148 932
Number of share in issue 129 519 129 519 129 519
(thousands)
Net asset value per share 119 111 115
(cents)
CASH FLOW STATEMENTS
Cash flows from operating
activities
Cash generated by 8 875 3 783 5 775
operations
Net interest received 242 3 362 3 294
Taxation paid (5 919) (6 901) (8 112)
Net cash inflow from 3 198 244 957
operating activities
Cash flows from investing
activities
Additions to fixed assets (9 574) (13 533) (37 101)
Cash flows from financing
activities
Long term liabilities (2 203) (877) 15 927
(repaid)/raised
Net proceeds from shares - 197 197
issued
Cash and cash equivalents
Net decrease for the period (8 579) (13 969) (20 020)
At beginning of period 66 968 86 988 86 988
At end of period 58 389 73 019 66 968
NOTES
The accounting policies adopted for the purposes of these interim results
comply, in all material respects, with South African Statements of Generally
Accepted Accounting Practice, as well as with applicable legislation. These
accounting policies are also consistent with those of the previous period.
COMMENTARY ON RESULTS
Revenue for the period was 133% up from that of the 2001 interim period, with
strong local demand for polished tanzanite and consistent demand for rough
tanzanite resulting in sales of R42,43 million.While exchange rates for the
period were relatively stable, a slightly strengthened rand affected earnings
with a foreign exchange loss of just short of R850 000 (compared to the 2001
interim period`s foreign exchange gain of R4,67 million). Marketing spend
increased in line with budget, with approximately R1 million spent on
advertising during the period. An operating income of R12,77 million was
achieved, compared to R10,27 million for the 2001 interim period.Net interest
received decreased from R3,38 million in the 2001 interim period to R242 000 in
the period under review due to the lower rates received on dollar cash holdings.
Income before taxation was down 4,6% on that of the 2001 interim period. 25% of
Merelani Mining Limited ("MML"), the group`s Tanzanian subsidiary, is currently
held by outside shareholders (Tanzanian nationals). As such, R3,64 million was
attributed to these shareholders, representing 25% of MML`s after tax profits.
Income attributable to ordinary shareholders of R5,48 million saw the group
achieve both earnings and headline earnings of 4,23 cents per share.R3,70
million was spent on increasing the group`s inventory of premium quality cut and
polished tanzanite in preparation for the penetration of the European market. At
30 September 2002, the group had R58,39 million in cash and cash equivalents.
R8,88 million cash was generated from operations for the period, compared to
R3,78 million for the interim period in 2001.MiningDuring the period under
review, completion of mine development, the capture and analysis of geological
data and improvements in security systems have been the primary points of focus.
Milestones- Two shafts (Bravo Shaft and Delta Shaft) are complete and are in
the process of being commissioned.- A third shaft (Main Shaft) was relocated
due to regional steepness of the ore body; development and surface
infrastructure as at 30 September 2002 is 70% complete.- The tanzanite
grading system has been refined.- Approximately 8 500 tonnes of ore was
processed during development, achieving a combined grade of approximately 20
grams/tonne of A, B and C grade tanzanite.- Further underground drilling has
been conducted, providing detailed geological data and a better understanding of
variable controls.- Significant improvements have been made in the security
systems.
Development production during the period under reviewThese figures include
grades A,B,C and specimens (2 571g). Shaft Volume
Tonnes Grade (m3) (tonnes)
(g/tonne) Bravo Shaft 2 143,4 5 680 23,51
JW Decline 1 075,1 2 849 12,16
Delta Shaft - - -
Main Shaft - - - Sub total
(average) 3 218,5 8 529 19,72Sales and
marketingCut and Polished TanzaniteDuring the period under review, local sales
were bolstered by the R1 million spent on the South African roll-out of an
advertising campaign for the Tanzanite Foundation: AFGEM`s premium brand for top
quality cut and polished tanzanite. Local sales amounted to R11,05 million: 26%
of total revenue for the period.In the first official international launch of
its premium brand, AFGEM successfully introduced the Tanzanite Foundation at
International Jewellery London in September 2002. A niche distribution strategy
is being pursued in the UK, with an appointed Tanzanite Foundation agent
targeting high-end jewellery stores. Although tanzanite is not commonly known in
the UK, encouragingly, the UK market is mature in terms of its familiarity with
and aspiration for luxury goods brands. Rough TanzaniteAFGEM`s primary
challenge with regard to the sale of rough tanzanite has been supply generation
rather than demand stimulation. During the period under review, rough sales
accounted for 73% of total revenue (R31,16 million).Corporate affairsBoard
AppointmentsOn 3 July 2002, AFGEM appointed Keith Rayner as Non Executive Deputy
Chairman of the board. Keith is a chartered accountant who, having begun his
career in corporate finance in 1987, has a wealth of experience in corporate
finance in general and mining corporate finance in particular. He joined HSBC`s
South African corporate finance team in 1993 where he remained until 2002. Keith
is a member of the JSE Listings Advisory Committee and has been actively
involved in assisting the JSE Listings Division since 1995.Concurrently, Joanne
Herbstein was appointed to the board as Corporate Affairs Director. Joanne
graduated with an Honours degree (Cum Laude) at Wits University, where she
achieved the Dean`s Merit Award for Top Student in a Professional Degree. She
completed a post-graduate diploma in Business Administration at Wits Business
School, where she was awarded the Executive Women`s Club Scholarship. Joanne
manages corporate affairs, investor relations and strategic human resources for
the group.
Share OptionsA summary of share options granted is provided below in accordance
with the provisions the African Gem Resources Limited Share Incentive
Scheme.Aggregate number of shares that may be allocated 20% of issued share
capital 25 903 836Number of options allocated at 29
July 2002 3 110 000Number of options due for exercise at
30 September 2002 -Corporate governanceAFGEM
is committed to maintaining the highest standards of integrity, accountability
and transparency and to aligning the goals of all stakeholders. In order to
enhance the group`s existing corporate governance practices, AFGEM engaged
KPMG`s Corporate Governance Services to conduct an assessment and a course for
the board of directors in August 2002. The board has implemented active Audit,
Remuneration and Risk Committees and is committed to ensuring that appropriate
structures and processes continue to remain in place to guide and manage the
activities of the group with the objective of enhancing shareholder
value.Dividend PolicyNo dividends have been declared or paid in the period under
review.Investor fact fileAfrican Gem Resources Limited Registration number:
1998/007292/06Share code: AFGISIN code: ZAE000025540CUSIP code (Level 1 ADR
programme): 008283103- Number of shares in issue: 129 519 182- Weighted average
share price for 6 month period ended 30 September 2002 ("interim period"): 195
cps- Share price as at 30 September 2002: 190 cps- PE ratio as at 30 September
2002: 17,80- Earnings yield as at 30 September 2002: 5,61- Share trade volume
for interim period: 22,6 million shares- Percentage of issued shares traded
during interim period: 18%- (Percentage of issued shares traded for 13 month
period ended 31 March 2002: 8%)Year end: 31 March Publication of Annual Report:
June
For and on behalf of the board
MJ Nunn MR Summers
Chairman and CEO Financial director
12 November 2002
Directors:
MJ Nunn (Chairman and CEO), KA Rayner (Non-executive Deputy Chairman),
IT Harebottle (Operations), MR Summers (Financial), JL Herbstein (Corporate
Affairs), AR Mpungwe (Non-executive), A Bekker (Non-executive), J Coetzee (Non-
executive), CH Boulle (Non-executive).
To access the full commentary on these results, visit www.africangem.com
To discover more about the world`s most desired gemstone, visit
www.tanzanitefoundation.com
Date: 12/11/2002 11:00:00 AM Produced by the JSE SENS Department
