| Thu 20 Nov 2003, 11:37 | | Interim results for the period ended 30 |
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African Gem Resources Limited - Interim results for the period ended 30
September 2003
AFRICAN GEM RESOURCES LIMITED
Registration number: 1998/007292/06)
Share code: AFG
ISIN code: ZAE000025540
CUSIP code (Level 1 ADR programme): 008283103
Interim results for the period ended 30 September 2003
- Earnings and headline earnings up by 30% compared to the previous interim
period
- Earnings and headline earnings per share up by 21%
- Acquired remaining 15% in Merelani Mining Limited
- Fixed assets increased by 19% compared to the previous interim period
- Tanzanite Foundation showcased at Jewellex International 2003 and
International Jewellery London
- Tanzanite BLUE, pret-a-porter range of jewellery endorsed by Tanzanite
Foundation, launched in South Africa
Financial summary
Balance sheets
6 months ended 6 months ended Year ended
30 Sep 2003 30 Sep 2002 31 Mar 2003
Reviewed Unaudited Audited
R"000 R"000 R"000
Assets
Fixed assets 99 181 83 144 80 769
Non current assets
Deferred taxation 8 787 1 407 3 309
Current assets 85 508 113 595 83 619
Inventory 30 402 36 808 26 162
Accounts receivable 13 127 15 309 12 726
Taxation refundable 3 072 3 089 6 984
Cash and cash 38 907 58 389 37 747
equivalents
Total assets 193 476 198 146 167 697
Equity and liabilities 157 389 158 048 133 164
Shareholders" interest 157 321 154 409 131 191
Outside shareholders" 68 3 639 1 973
interest
Non current liabilities 26 338 26 950 24 218
Deferred taxation 10 552 8 656 6 231
Long term liabilities
- interest bearing 14 399 16 174 15 620
- non interest bearing 1 387 2 120 2 367
Current liabilities 9 749 13 148 10 315
Accounts payable 9 749 13 148 10 315
Total equity and 193 476 198 146 167 697
liabilities
Changes in equity
Share capital and share 131 042 111 968 112 029
premium
Balance at beginning of 112 029 111 968 111 968
period
Arising from share issue 19 013 - 61
Retained income 26 279 42 441 19 162
Balance at beginning of 19 162 36 964 36 964
period
Earnings attributable to 7 117 5 477 (17 802)
ordinary shareholders
157 321 154 409 131 191
Number of shares in issue 142 256 129 519 129 581
(thousands)
Net asset value per share 111 119 101
(cents)
Income statements
6 months ended 6 months ended Year ended
30 Sep 2003 30 Sep 2002 31 Mar 2003
Reviewed Unaudited Audited
R"000 R"000 R"000
Revenue 36 687 42 427 74 080
Cost of sales (9 957) (18 536) (40 025)
Gross profit 26 730 23 891 34 055
Net foreign exchange (4 627) (850) (13 273)
loss
Operating expenses (14 568) (10 270) (34 368)
Operating income/(loss) 7 535 12 771 (13 586)
Net interest (865) 242 (325)
(paid)/received
Net income/(loss) before 6 670 13 013 (13 911)
taxation
Taxation 515 (3 897) 888
Income after taxation 7 185 9 116 (13 023)
Outside shareholders" (68) (3 639) (4 779)
interest
Earnings/headline 7 117 5 477 (17 802)
earnings
Weighted average number 138 793 129 519 129 531
of ordinary shares in
issue (thousands)
Earnings/headline 5,13 4,23 (13,74)
earnings per share
(cents)
Cash flow statements
Cash flows from
operating activities
Cash generated 5 910 8 875 (4 016)
by/(utilised in)
operations
Net interest (874) 242 (325)
(paid)/received
Taxation refund 3 659 (5 919) (9 390)
received/(paid)
Net cash 8 695 3 198 (13 731)
inflow/(outflow) from
operating activities
Cash flow from
investing activities
Additions to fixed (3 552) (9 574) (10 148)
assets
Investment in (1 973) - (2 806)
subsidiary company
Cash flow from
financing activities
Long term liabilities (2 010) (2 203) (2 597)
repaid
Net proceeds from - - 61
shares issued
Cash and cash
equivalents
Net increase/(decrease) 1 160 (8 579) (29 221)
for the period
At beginning of period 37 747 66 968 66 968
At end of period 38 907 58 389 37 747
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.
Auditors" review
The interim results have been reviewed by the company"s auditors, KPMG Inc. The
review opinion is available for inspection at the company"s registered office.
Commentary on results
Revenue for the period of R36,7 million was 13% down from that of the previous
interim period (R42,4 million). Although demand for rough and polished tanzanite
remains strong, the strengthening of the Rand against the US Dollar resulted in
a drop in Rand revenues. Gross profit margins were healthy as a result of higher
margins on increased sales of rough tanzanite.
The stronger Rand negatively affected earnings, with a foreign exchange loss of
R4,6 million (compared to the previous interim period"s foreign exchange loss of
R0,9 million).
Income attributable to ordinary shareholders increased from R5,5 million to R7,1
million with earnings and headline earnings per share increasing from 4,23 cents
per share to 5,13 cents per share, an increase of 30% and 21% respectively
compared to the previous interim period.
A positive cash flow of R1,2 million since the financial year end resulted in
cash holdings increasing to R38,9 million.
Fixed assets increased by 19% compared to the previous interim period mainly due
to the acquisition of the remaining 15% in Merelani Mining Limited ("MML"), the
group"s Tanzanian subsidiary.
The status of litigation and surety as indicated in the annual report remains
unchanged.
Geology and mining
The mining of production drives, establishment of additional areas of ore
reserves and various exploration projects aimed at providing a better
understanding of potentially productive zones have been the primary focus areas
during the period under review. Furthermore, various studies aimed at enhancing
the predictability of the ore body have been conducted. These include extensive
surface trenching, diamond drilling and chemical analyses.
Development and production for the six months to 30 September 2003 (grades
reflected are for combined A, B and C material):
Tonnes Carats Grade
Off-reef development 18 798
Ore mined and processed 12 311 812 526 66 cts/t
In a drive to further enhance security measures at the mine, AFGEM has
commissioned the development of a customised X-ray body scanner.
Socio-politically, AFGEM continues to nurture and develop relationships with the
Tanzanian government and with the Ministry of Energy and Minerals in particular.
Support for AFGEM"s investment from the Tanzanian authorities has been
unwavering and whilst undermining of the licence area is an on-going challenge,
illegal underground intrusions have been reduced by approximately 80%.
Dual listing onto the Dar es Salaam Stock Exchange ("DSE")
AFGEM has the necessary approvals from the relevant South African regulatory
bodies to proceed with a dual listing onto the DSE. Once all approvals from the
relevant Tanzanian institutions have been granted, AFGEM will proceed with the
listing.
Buying operation
AFGEM has established a buying operation in Arusha, the town closest to the
tanzanite mining area and the main area for rough tanzanite trade. The buying
operation is owned 51% by MML, and 49% by a Tanzanian company that is
experienced, well networked and highly regarded in the industry. The buying
operation will focus on the purchase of good quality rough tanzanite that can
either be on-sold to rough tanzanite customers or, if economically viable, cut
and polished at AFGEM"s facilities.
Sales and marketing
Trends and prices
Tanzanite"s unparalleled rarity and finite supply have served to position it as
both an investment stone and a boutique choice for the discerning jewellery
buyer. With demand for coloured stones firm and tanzanite"s strong status in its
competitive set, US Dollar prices, particularly for top quality rough tanzanite,
have increased by 20-25% in the calendar year to date. Furthermore, the
geographical market for tanzanite is showing signs of expanding beyond the
United States into markets such as Europe and the Far East.
Marketing
During the period under review, the Tanzanite Foundation has continued to
operate as a quality and integrity endorsement for tanzanite. Such positioning
has been effected through advertising (both to the consumer and to the trade),
presence at trade fairs (Jewellex International 2003 in South Africa and
International Jewellery London in the United Kingdom), training of sales store
staff, point-of-sale material and public relations activities, including a
presence at prestigious auctions and high profile fashion events.
Market research has indicated that there is strong demand by retail jewellery
outlets in South Africa for ready-to-wear tanzanite jewellery. In response
thereto, AFGEM has launched Tanzanite BLUE: a range of pret-a-porter jewellery,
endorsed by the Tanzanite Foundation.
Marketing objectives include the expansion of the application of the Tanzanite
Foundation"s grading system in the trade, an improved advertising campaign based
on results of consumer focus groups, an increase in strategic public relations
activities in both Africa and the United Kingdom and incentive programmes for
jewellery store sales staff.
Rough tanzanite sales
Of total revenue for the period, 61% represents the sale of rough tanzanite.
Such tanzanite is sourced from AFGEM"s mine production and, to a far lesser
extent, from traded goods bought on the open market.
Polished tanzanite sales
AFGEM"s polished tanzanite sales represented 39% of total revenue. It is
estimated that in excess of 80% of tanzanite sold in South Africa is sold to
tourists. R1,1 million of revenue was generated from sales of Tanzanite
Foundation endorsed tanzanite in the United Kingdom, where AFGEM has an agency.
Corporate affairs
Board appointments
On 27 June 2003, AFGEM appointed Philip Gray as a non executive director. Philip
holds a Masters degree in Marketing from Lancaster University in the United
Kingdom. He began his career as European Investment Analyst at James Capel &
Company in London and spent 21 years in the field of investment strategy and
portfolio management, focusing on emerging markets. In 1994, Philip was
appointed Executive Chairman of HSBC James Capel (Asia) Limited in Hong Kong,
where he was responsible for rebuilding the company"s presence in Asia and for
developing its distribution capability in London, New York and Tokyo. Prior to
retiring in 2000, Philip was Asian Investment Strategist and a Member of the
Executive Committee at Nomura International (Hong Long) Limited.
Appointment of new sponsors
On 1 July 2003, Java Capital (Pty) Ltd replaced HSBC Investment Services
(Proprietary) Limited as AFGEM"s sponsors.
Change of company secretary
On 27 June 2003, Mark Summers, AFGEM"s Financial Director, assumed the role of
Company Secretary, replacing JD Hill and Company.
AFGEM Diamonds (Pty) Ltd ("AFGEM Diamonds") In line with the stated intentions
in AFGEM"s 2003 Annual Report, AFGEM Diamonds, a wholly-owned subsidiary of the
company incorporated on 18 March 2003, has been actively evaluating a number of
small to medium scale advanced diamond opportunities in southern Africa.
Share options
A summary of share options granted is provided below in accordance with the
provisions of the African Gem Resources Limited Share Incentive Scheme.
Aggregate number of shares that may be allocated 27 164 036
Total number of options allocated as at 30 September 2003 5 107 500
Acquisition of remaining 15% of Merelani Mining Limited
As indicated in the SENS release of 9 May 2003, AFGEM acquired the remaining 15%
in its Tanzanian mining subsidiary company, Merelani Mining Limited, for a total
consideration of R19,01 million, settled by the issue of 12 675 000 ordinary
shares at a price of 150 cents per share.
Dividend policy
No dividends have been recommended, declared or paid during the period under
review
Corporate governance
AFGEM is committed to managing the business in the best interests of all
stakeholders and doing so with integrity, professionalism and transparency. An
experienced and diverse board of directors retains full and effective control
over the company. Audit, Risk and Remuneration Committees operate effectively in
accordance with written terms of reference confirmed by the board.
Investor fact file
African Gem Resources Limited
Registration number: 1998/007292/06
Share code: AFG
ISIN code: ZAE000025540
CUSIP code (Level 1 ADR programme): 008283103
- Number of shares in issue: 142 256 182
- Weighted average share price for 6 month period 134 cps
ended 30 September 2003 ("interim period"):
- Share price as at 30 September 2003: 110 cps
- PE ratio as at 30 September 2003: 21,44
- Earnings yield as at 30 September 2003: 4,66
- Share trade volume for interim period: 8,9 million shares
- Percentage of issued shares traded during 6,3%
interim period:
Year-end: 31 March
Next publication of Annual Report: June 2004
Next Annual General Meeting: July 2004
Investor relations website: www.africangem.com
Marketing/product website: www.tanzanitefoundation.com
The interim announcement has been prepared in accordance with the JSE Securities
Exchange South Africa Listings Requirements.
Date: 20/11/2003 11:20:11 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
