| Tue 17 Aug 2004, 17:45 | | SECOND QUARTER |
|
MESSINA - THE RESULTS FOR THE SECOND QUARTER FOR SOUTHERNERA RESOURCES LIMITED,
MESSINA`S HOLDING COMPANY, RELEASED IN TORONTO ON 16 AUGUST 2004
MESSINA LIMITED
(Registration number 1950/035912/06)
Share code: MES
ISIN: ZAE 000004438
(`Messina`)
THE FOLLOWING IS AN EXTRACT FROM THE RESULTS FOR THE SECOND QUARTER FOR
SOUTHERNERA RESOURCES LIMITED, MESSINA`S HOLDING COMPANY, RELEASED IN TORONTO ON
16 AUGUST 2004.
August 16, 2004
Shares Issued and Outstanding: 85,335,411
TSX: SUF
AIM: SRE
SouthernEra Releases Second Quarter Results
TORONTO, ONTARIO - The Board of SouthernEra Resources Limited announced the
following highlights from the second quarter of 2004:
* Transaction closed to increase stake in Johannesburg-listed Messina
Platinum to 91.5 percent;
* Messina`s successful first blast on mechanized long-hole stope;
Phase 2 feasibility study completed;
* Continuous operations implemented at Messina;
SouthernEra awarded 41 diamond exploration permits in the Democratic
Republic of Congo (DRC);
* Monts de Cristal PGM/nickel/copper project in Gabon returned encouraging
PGM and nickel results;
* SouthernEra reported on Koumba Gold Project first phase drill results;
* Subsequent to June 30, SouthernEra announced shareholder approval for the
re-organisation of the company into separately listed Platinum and Diamond
Companies.
The Company realized a net loss for the three months to June 30 of $12.2 million
(16Cents (USD) per share) compared to net income of $1.2 million (2Cents (USD)
per share) in the second quarter of 2003. In the current quarter, the Company
incurred an operating loss of $8.4 million on revenue of $7 million versus an
operating loss of $1.3 million on revenue of $0.6 million in the comparable
quarter of 2003. Cash flow used in operations for the quarter was $7.9 million
(10Cents (USD) per share), compared to a use of $9.7 million (16Cents (USD) per
share) in the second quarter of 2003.
Operations Update
Progress in the quarter with development at Messina Platinum`s Phase 1 Mine was
satisfactory with rates having doubled since January. Production during the
quarter was adversely affected by illegal industrial action and, consequently,
was less than satisfactory. Encouragingly, accident rates have halved since
January. This can be attributed to interventions taken by mine management since
January. In the quarter Messina produced approximately 18,300 ounces of 5PGEs
plus gold from 157,150 tonnes milled. The average head grade for the quarter was
4.12 grams per tonne (5PGE`s+Au) and the plant recoveries were 87.9 percent.
Production during the quarter was below expectations as a consequence of a
number of human resources-related factors, including:
- Illegal industrial action during the last week of May and first week of
June;
- The impact of the implementation of continuous operations; and
- Continuing labour inefficiencies as a result of the relative inexperience
of the workforce;
- Messina Platinum implemented continuous operations at the Phase 1 Mine
during the quarter. The implementation of continuous operations on the
shafts, engineering and support services occurred without incident during
May. However, the implementation of continuous operations on development
and stoping was met with some resistance as a small rival union to the main
recognised union at Messina engaged in minor illegal industrial action in
opposition to its implementation. This action disrupted development and
production during the last week of May and the first week of June and has
resulted in disciplinary action being taken against approximately 90 of
Messina`s 1,900 employees. Development and stoping has returned to normal
and the benefits of continuous operations will become apparent in the
months ahead.
The upper four levels of the mine, which are now open and manned, are designed
to support production at a rate of 80,000 tonnes per month. It is apparent that
skills and productivity issues relating to the mine`s workforce are posing a
challenge to achieving this production rate in the time frame anticipated.
Despite the slow progress, the mine`s management remains confident that this
production rate will be achieved and sustained in the current quarter.
Over the past three-and-a-half years since production at the mine commenced,
Messina`s management team has sought continuous improvements as its knowledge of
the ore body has improved. The materially lower levels of faulting of the reefs,
compared to what was anticipated in the 2000 feasibility study, resulted in a
decision to trial conventional long-hole stoping, which was done on the Merensky
reef on the 275-meter level. Based on this experience, Messina is now
implementing mechanised long-hole stoping on the lower levels of the mine.
Compared to conventional down-dip stopping, which is the primary mining method
on the four upper levels, mechanised long-hole stoping is a safer, more
efficient and less costly mining method.
Development to support the build-up to full production is progressing well on
the new 370 and 390-meter levels. These levels have been designed to support
mechanised long-hole stoping. During the quarter, the first long hole blast was
taken on the UG2 reef between the 350 and 370 meter levels. Results from this
blast exceeded expectation with the hanging and footwalls holding up well and
very satisfactory fragmentation being achieved. The long-hole drilling and
blasting on these new levels is in now continuing.
The companies operations at Messina Platinum continued to be negatively impacted
by the strength of the South African Rand. In the second quarter the Rand was 5%
stronger than during the first quarter. The Company welcomes the announcement by
the South African Reserve Bank of a 50 basis points interest reduction which is
anticipated to lead to a weakening of the currency.
Commenting, SouthernEra`s President and CEO Patrick Evans said: `We are proud of
our progress at Messina over the three-and-a-half years since development and
stoping at Messina commenced. For a Company that had no platinum assets four
years ago, we have built the Phase 1 mine in about half the time it normally
takes to bring a mine of this size into production and Messina is already well
past the halfway mark to full production`. Mr. Evans added: `Despite the
challenges associated with any new mining operation, we have constantly sought
continuous improvements. In 2001 we elected to hire and train our own labour
force rather than use outside contractors, which would have been less
sustainable; in 2002 we expanded the mine`s capacity; and in 2003 we prepared to
implement mechanised long-hole stoping. These initiatives will ensure the
optimal performance of this mine over its twenty-year life. The minor delays of
a few months in achieving previously planned production targets are not material
in the context of the important benefits that will be derived from these
innovative initiatives over the next decade and more. In addition, the lessons
we are learning at the Phase 1 mine are contributing in important ways to the
Phase 2 feasibility study and the Phase 3 pre-feasibility study.`
At the end of June, the Company finalized an agreement with a consortium of
Messina Limited shareholders acquiring 3,700,536 Messina shares representing
18.4 percent of Messina`s issued and outstanding shares. The successful
conclusion of this transaction increased SouthernEra`s ownership in Messina
Limited to approximately 91.5 percent.
During the quarter, the Company encountered encouraging platinum group metals
(PGM) and nickel assay results from stream samples collected within the new
Monts de Cristal `Kinguele` ultra-mafic complex in Gabon. This project will
continue to be explored. The company also announced the results from drilling
that tested gold-in-soil geochemical anomalies within the main Mainou Vein gold
mineralized trend on the Koumba gold project, Gabon, where SouthernEra has a 95%
interest in a 625 square kilometer gold exploration permit. Although below
expectations, exploration at Koumba is at a very early stage. The company will
also continue exploration at this project.
The company also continued to advance its extensive diamond exploration program
in Canada, Gabon, the DRC, South Africa and Australia. Increased focus on
diamond activities is expected once the re-organisation of the Group is
finalised.
The Messina Phase 2 (Doornvlei and Dwaalkop sections) feasibility study was
completed on schedule at the end of June. The results of this study are
currently being assessed and are expected to be released at the end of the third
quarter.
Subsequent to the quarter, at the annual and special meeting of the Company held
on Tuesday July 27, shareholders voted overwhelmingly in favour of the proposed
reorganization of the Company into two separately listed companies. Of the
shares represented at the meeting, 99.7% were voted in favour of the
reorganization. The proposed re-organisation also received Court approval on
July 29th. The company is awaiting approval for the listing of Southern Platinum
on the Toronto Stock Exchange and also a tax ruling from the Canada Revenue
Agency. Following this, the Board will decide on the effective date for the re-
organisation.
SouthernEra Resources is an independent producer of platinum group metals (PGMs)
and diamonds. The Company also has an extensive PGM, gold and diamond
exploration program. The common shares are listed on the Toronto Stock Exchange
and the London Stock Exchange`s AIM.
The full, unaudited interim financial statements and management`s discussion and
analysis for the quarter ended June 30, 2004 are available at
www.southernera.com.
Consolidated balance sheets
(in thousands of United States dollars)
(unaudited)
June 30, 2004 December 31, 2003
Assets
Current assets:
Cash and cash equivalents $ 31,283 $ 64,023
Accounts receivable 10,576 13,133
Inventories - supplies 2,890 1,197
44,749 78,353
Property, plant and equipment 201,426 179,623
Development projects 13,878 13,616
Exploration projects 23,115 16,919
Future income taxes 3,369 3,403
$ 286,537 $ 291,914
Liabilities and shareholders`
equity
Current liabilities:
Accounts payable and accrued $ 12,651 $ 12,866
liabilities
Income taxes payable 12,992 11,862
Messina loans 17,387 16,064
43,030 40,792
Messina loans 52,164 55,944
Future income taxes 1,588 1,772
Environmental rehabilitation
provision 2,163 1,998
100,506 98,945
Non-controlling interests 4,160 17,315
Shareholders` equity:
Common shares 259,813 230,740
Share purchase warrants 2,592 2,592
Contributed surplus 2,809 2,293
Deficit (92,384) (70,155)
Cumulative translation 10,602 8,623
adjustments
183,432 174,093
$ 286,537 $ 291,914
Consolidated statements of operations
(in thousands of United States dollars, except income (loss) per share amounts)
(unaudited)
Three Months Ended June 30 Six Months Ended June 30
2004 2003 2004 2003
Revenue $7,032 $564 $16,882 $1,650
Direct costs:
Mining operations (11,110) (1,521) (23,404) (3,372)
Amortization (4,313) (348) (8,292) (693)
(15,423) (1,869) (31,696) (4,065)
Loss from mining (8,391) (1,305) (14,814) (2,415)
operations
Interest expense (3,045) - (6,191) -
General and (1,589) (1,717) (3,110) (2,719)
administration
expenses
Loss before the (13,025) (3,022) (24,115) (5,134)
undernoted
Foreign exchange (2,142) 3,806 (3,961) 5,827
(loss) gain
Interest income 303 371 776 651
(Loss) income before (14,864) 1,155 (27,300) 1,344
income taxes
Income taxes:
Future recovery 80 13 182 130
(Loss) income after (14,784) 1,168 (27,118) 1,474
income taxes
Non-controlling 2,569 15 4,889 17
interests
(Loss) income for the $
period $(12,215) $1,183 (22,229) $1,491
Basic and diluted $(0.16) $0.02 $(0.29) $0.03
(loss) income per
common share
Consolidated statements of deficit, contributed surplus and cumulative
translation adjustments
For the Six Months Ended June 30
(in thousands of United States dollars)
(unaudited)
2004 2003
DEFICIT CONTRI- CUMULA- DEFICIT CONTRI- CUMULA-
BUTED TIVE BUTED TIVE
SURPLUS TRANS- SURPLUS TRANS-
LATION LATION
ADJUST- ADJUST-
MENTS MENTS
Beginning of $(70,155) $2,293 $8,623 $ (57,869) $1,635 $206
period
Translation - - 1,979 - - 2,697
gains (losses)
net for the
period
Fair value of - 516 - - 492 -
share options
granted and
vested
(Loss)income for (22,229) - - 1,491 - -
the period
End of period $(92,384) $2,809 $10,602 $ (56,378) $2,127 $2,903
Consolidated statements of cash flows
For the Periods Ended June 30
(in thousands of United States dollars)
(unaudited)
Three months ended Six Months Ended
June 30 June 30
2004 2003 2004 2003
(Loss) gain for the $(12,215) $1,183 $(22,229) $1,491
period
Adjustment for non-cash
items:
Amortization 4,313 348 8,292 693
Accrued interest charged 3,045 - 6,191 -
to earnings
Fair value of granted 56 414 516 492
Future income taxes (80) (13) (182) (130)
Foreign currency 2,142 (3,806) 3,961 (5,827)
translation loss (gain)
Gains on sale of fixed (138) (12) (138) (26)
assets
Non-controlling (2,569) (15) (4,889) (17)
interests
(5,446) (1,901) (8,478) (3,324)
Change in non-cash (2,424) (7,750) (1,397) (11,002)
working capital balances
Cash used in operations (7,870) (9,651) (9,875) (14,326)
Financing activities:
Loan repayment - - (10,595) -
Issue of common shares
for cash - - 98 43,707
Cash (used in) provided - - (10,497) 43,707
by financing activities
Investing activities:
Exploration and (2,859) (2,152) (4,921) (3,636)
development projects
Messina platinum project (689) (9,433) (2,422) (18,131)
Proceeds from sale of 318 - 392 -
property, plant and
equipment
Purchase of property, (399) (20) (426) (444)
plant and equipment
Cash used in investing (3,629) (11,605) (7,377) (22,211)
activities
(Decrease) increase in (11,499) (21,256) (27,749) 7,170
cash
Foreign exchange (loss) (2,243) 5,736 (4,991) 6,534
gain on cash held in
foreign currency
Cash and equivalents - 45,025 32,094 64,023 2,870
beginning of period
Cash and equivalents - $31,283 16,574 31,283 16,574
end of period
Cash and cash
equivalents comprise
Cash and bank balances $518 359 518 359
Short-term investments 64,527 28,733 64,527 28,733
Less overdraft facility (33,762) (12,518) (33,762) (12,518)
$31,283 16,574 31,283 16,574
FOR FURTHER INFORMATION PLEASE CONTACT:
SouthernEra Resources Limited
Mr. Patrick Evans, President and CEO, or
Dr. Sally Eyre, Vice President Corporate Affairs
Telephone: (416) 359-9282
Fax: (416) 359-9141
E-mail: inbox@southernera.com
www.southernera.com
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
CORPORATE FINANCE
