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FALCON INVESTMENT HOLDINGS SOCIETE ANONYME -
Falcon Investment Holdings Societe Anonyme
(Incorporated in Luxembourg - R.C. Number B39773)
("the Company")
Share code: FLC ISIN number: LU0042254812
Registered Office
6 rue Adolphe Fischer,
L-1520, Luxembourg
INTERIM REPORT 2003
26 June 2003
Dear Shareholder,
The results for the half-year ended 31st March 2003 are attached.
Chile
During the period our 52.29% owned subsidiary, Minera Falcon de Chile SCM
("MFdC") entered into an option agreement to sell its mining assets in Chile.
The non-refundable premium received was US$1.3 million, with a further US$11.7
million payable on exercise of the option. We have received confirmation that
the option has been exercised and cash has been received by MFdC. We plan to
return the maximum funds possible to MFdC"s shareholders after costs, local
taxation and foreign dividend taxes. We anticipate that we will receive
approximately US$4 million by way of dividends and return of capital, generating
an after tax profit on this investment of US$2.6 million.
Zimbabwe
In line with the accounting policy adopted at 30th September 2002, we have not
consolidated the results of our Zimbabwean subsidiaries, but have included them
in the accounts as fixed asset investments. Our 57.1% stake in Falcon Gold
Zimbabwe Limited is included at its market value on the Zimbabwe Stock Exchange
converted at the "implied" or "parallel" exchange rate Z$1400:US$1 at 31st March
2003. Our unlisted investment in Olympus Gold Mines Limited remains in our
balance sheet at nominal value (30th September 2002 and 31st March 2002 - same).
The price received for our gold production is determined by the Government of
Zimbabwe. Gold produced is now paid for in US dollars at the prevailing
international price of gold in respect of 50% of the total production and the
balance is paid in Zimbabwe dollars converted at the official exchange rate of
Z$824:US$1. The increase with effect from January in the proportion of our
income received in US dollars (from 20%) and the devaluation of the official
exchange rate (from Z$55:US$1) have substantially improved the income recorded
by our mines in Zimbabwe. However, this increase in income has not all been
reflected in cash balances, as a substantial part of the cash was outstanding at
31st March 2003.
Total operating profits of our Zimbabwean subsidiaries converted at average
"parallel" exchange rates were US$697,000 in the six months to 31st March 2003,
compared to a profit of US$87,000 for the whole of last year and a loss of
US$19,000 for the first half of last year. Our operating costs in Zimbabwe for
the six months ended 31st March 2003 have increased by 123% compared to the same
period last year. Gold production has declined 18% to 461kg from 564kg in the
same period last year, and 13% from 529kg in the second half of last year. This
reduction is mainly due to the treatment of lower grade material from the dumps
and underground operations at Dalny.
The operating environment remains difficult in Zimbabwe. We are suffering from
regular power cuts despite the imposition of an increase in electricity prices
of 1300% with effect from 1st February 2003. Indeed, we are having problems
securing payments from the Gold Fund, established to assist the mining industry,
and also accessing the foreign currency bank accounts in order to pay for
essential inputs.
Our suppliers are finding it increasingly difficult to operate because of the
extreme shortage of foreign exchange. As a result, they are carrying lower
stocks and we are suffering from increased lead times for basic inputs. These
increased lead times could cause us to run out of spare parts and stocks of
consumables with a knock-on effect on production. Our increasing investment in
inventories and other increases in working capital resulting from hyperinflation
make it prudent for our Zimbabwean subsidiaries to preserve cash and therefore
it is unlikely that dividends will be paid until the situation improves.
In any event, owing to the shortage of foreign exchange, the Government of
Zimbabwe has recently prioritised how foreign exchange receipts can be utilised,
and dividend remittances in foreign currency are deemed a low priority.
Therefore we do not expect to be able to remit any dividends from our
subsidiaries in Zimbabwe to Luxembourg in the foreseeable future.
Prospects
Europe
It is your Director"s intention that the cash realised from Chile will be re-
invested in an operating subsidiary in Europe in due course.
Zimbabwe
The recent devaluation and increase in proportion of income received in US
dollars have enabled our Zimbabwe subsidiaries to survive for the time being.
However, in the absence of continuing devaluation of the official exchange rate,
operating costs will soon catch up with this increase in income, and the future
viability of all operations in Zimbabwe remains uncertain. Gold is a major
foreign currency earner for the country. We expect that the Government of
Zimbabwe will manage the mechanism for the purchase of gold by the State in a
manner that enables the bulk of the gold mining industry to continue operating.
Yours faithfully
D.C. Marshall
Chairman
Consolidated group profit and loss account
Year ended Half years ended Half years ended Year
ended
30th 31st 31st 31st 31st 30th
September March March March March September
2002 2002 2003 2003 2002 2002
Unaudited Unaudited Unaudited Unaudited
Restated Restated
R000 R000 R000 US$000 US$000 US$000
- - - Revenue - - -
(3,805) (2,869) (2,156) Operating costs (274) (253) (361)
(3,805) (2,869) (2,156) Operating loss
before interest
and taxation (274) (253) (361)
1,318 386 Income from
investment in
Zimbabwean
subsidiary-
- dividend - 34 125
116 57 8 Interest received 1 5 11
(42) 45 (197) Exchange
(losses)/gains (25) 4 (4)
(2,413) (2,381) (2,345) Loss before
exceptional items
and taxation (298) (210) (229)
(5,892) 6,532 11,081 Exceptional item
(note 4) 1,408 576 (559)
(8,305) 4,151 8,736 Profit/(Loss)
before taxation 1,110 366 (788)
(348) (159) (40) Taxation (5) (14) (33)
(8,653) 3,992 8,696 Profit/(Loss)
after taxation 1,105 352 (821)
253 306 (4,407) Attributable to
outside
shareholders (560) 27 24
(8,400) 4,298 4,289 Retained
profit/(loss) for
the period 545 379 (797)
SA cents SA cents SA cents
(453) 227 228 Profit/(Loss) per
share (US cents)
- basic 29 20 (43)
(137) (125) (63)
Headline loss per
share (US cents) (8) (11) (13)
Changes in equity
Year ended Half years ended Year ende
Half years ended
30th 31st March31st March 31st March31st March 30th
September September
2002 2002 2003 2003 2002 2002
Unaudited Unaudited Unaudited Unaudited
Restated Restated
R000 R000 R000 US$000 US$000 US$000
327 1,134 79 Exchange
differences 10 100 31
(8,400) 4,298 4,289 Net profit/(loss)
for the period 545 379 (797)
(8,073) 5,432 4,368 555 479 (766)
20,226 21,761 9,074 Shareholders"
funds at start of
the period 1,153 1,919 1,919
12,153 27,193 13,442 Shareholders"
funds at end of
the period 1,708 2,398 1,153
Consolidated group balance sheet
30th 31st 31st 31st March 31st March 30th
September March March September
2002 2002 2003 2003 2002 2002
Unaudited Unaudited Unaudited Unaudited
Restated Restated
R000 R000 R000 US$000 US$000 US$000
Non current
assets
18,150 20,276 13,552 Property, plant
and equipment 1,722 1,788 1,722
1,370 14,345 1,873 Investments 238 1,265 130
19,520 34,621 15,425 1,960 3,053 1,852
Current assets
1,170 771 693 Other current
assets 88 68 111
3,362 4,763 8,468 Cash and bank
balances 1,076 420 319
4,532 5,534 9,161 1,164 488 430
(2,867) (3,119) (1,960) Current
liabilities (249) (275) (272)
1,665 2,415 7,201 Net current
assets 915 213 158
21,185 37,036 22,626 Total assets,
less current
liabilities 2,875 3,266 2,010
Capital And
Reserves
21,712 23,360 16,212 Share capital 2,060 2,060 2,060
3,436 3,697 2,566 Non-distributable
reserves 326 326 326
(12,996) 136 (5,336) Revenue reserve (678) 12 (1,233)
12,152 27,193 13,442 Shareholders"
funds 1,708 2,398 1,153
9,033 9,843 9,184 Outside
shareholders"
interests 1,167 868 857
21,185 37,036 22,626 2,875 3,266 2,010
Consolidated group cash flow statement
Year ended Half years ended Year ended
Half years ended
30th 31st 31st March 31st March31st March 30th
September March September
2002 2002 2003 2003 2002 2002
Unaudited Unaudited Unaudited Unaudited
Restated Restated
R000 R000 R000 US$000 US$000 US$000
Operating
activities
(4,585) (3,561) (2,070) Cash absorbed by
normal trading
activities (263) (314) (435)
Returns on
investments and
servicing of
finance
116 57 8 Interest received
and other
investment income 1 5 11
1,318 386 Dividend received
from Zimbabwean
- subsidiary - 34 125
1,434 443 8 1 39 136
(422) (204) (63) Taxation (8) (18) (40)
Investment
activities
(949) (102) (47) Purchase of
tangible assets (6) (9) (90)
- 10,231 Proceeds on
disposal of
investments and
tangible fixed
- assets 1,300 - -
(949) (102) 10,184 Net cash
inflow/(outflow)
from investment
activities 1,294 (9) (90)
(4,522) (3,424) 8,059 Net cash
inflow/(outflow)
before financing 1,024 (302) (429)
Financing
activities
306 Minority interest
in Minera Falcon
- - de Chile - - 29
- (2,101) Dividend paid to
outside
- shareholders (267) - -
306 (2,101) Net cash
(outflow)/inflow
- from financing (267) - 29
(4,216) (3,424) 5,958 Net
increase/(decreas
e) in cash 757 (302) (400)
7,599 8,176 2,510 Net funds at
start of period 319 721 721
(21) 11 Effect of foreign
exchange rate
- changes - 1 (2)
3,362 4,763 8,468 Net funds at end
of period 1,076 420 319
Notes
1.Accounting Policy
The results for the half year ended 31st March 2003 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 2002, and comply with
International Accounting Standards and Luxembourg law. The Group changed its
accounting policy at 30th September 2002 and the results of Zimbabwean
subsidiaries are not consolidated. They have been included the accounts as
fixed asset investments. Comparative figures for the half-year to 31st March
2002 have been restated.
2.Profit/(Loss) per share
Profit/(Loss) per share is based on the result attributable to members and the
1,864,026 shares in issue.
3.Segmental analysis
The segmental analysis of turnover and operating profit is as follows:-
Half years ended 31st March Year ended
2003 2002 30th September
2002
US$000 US$000 US$000
Revenue Result Revenue Result Revenue Result
Iodine
development -
Chile - (132) - (91) - (113)
Head office,
projects and
other - (142) - (162) - (248)
- (274) - (253) - (361)
Dividend from
subsidiary - 34 125
Interest
received and
other income 1 5 11
Exchange
(losses)/gains (25) 4 (4)
Exceptional
items
- gold mining -
Zimbabwe 108 576 (559)
- iodine
development -
Chile 1,300 - -
Profit/(Loss)
before tax 1,110 366 (788)
Year ended 30th Half years ended 31st March
September 2002 2002 2003
R000 R000 R000
Revenue Result Revenue Result Revenue Result
(1,191) (1,032) (1,039)
- Iodine
development -
- - Chile
(2,614) (1,837) (1,117) Head office,
- projects and
- - other
1,317 385 Dividend from
- subsidiary
116 57 8 Interest
received and
other income
(42) 45 (197) Exchange
(losses)/gains
Exceptional
items
(5,892) 6,532 850 - gold mining
- Zimbabwe
- - 10,231 - iodine
development -
Chile
(8,306) 4,150 8,736 Profit/(Loss)
before tax
4.The exceptional item in the current period includes the receipt of
US$1,300,000 non-refundable option over the assets of Minera Falcon de Chile SCM
and the fair value adjustment to market value of the investment in Falcon Gold
Zimbabwe Limited. In the prior year the exceptional item was a fair value
adjustment, to market value, of the investment in Falcon Gold Zimbabwe Limited.
5.There was no capital expenditure authorised but not contracted, and none
contracted at 31st March 2003 (2002 - same)
Offices:
Zimbabwe
131 Josiah Tongogara Street.
14th Avenue,
Buluwayo
South Africa
11 Sunbury Park,
La Lucia Ridge Office Estate
La Lucia 4051, Durban
United Kingdom
25 City Road
London, EC1Y 1BQ
Transfer Agents
Europe
Northern Registrars Limited
Northern House, Woodsome Park
Fenay Bridge, Huddersfield,
HD8 0LA, England
South Africa
Computershare Limited
70 shall Street
Johannesburg, 2001
(P.O. Box 61051, Marshalltown, 2107)
Zimbabwe
Syfrets Corporate and Merchant Bank
Central Scrip Administration,
5th Floor, Zimbank House
46 Speke Avenue, (P.O. Box 2540)
Harare
Sponsor on the JSE
The Janus Corporation (Pty) Ltd
Date: 26/06/2003 11:45:38 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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