| Thu 23 Sep 2004, 8:37 | | AFRICAN GEM RESOURCES LIMITED - INTERIM GROUP RESU |
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AFRICAN GEM RESOURCES LIMITED - INTERIM GROUP RESULTS FOR THE 6 MONTHS ENDED 30
JUNE 2004 AND CAUTIONARY ANNOUNCEMENT
AFRICAN GEM RESOURCES LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1998/007292/06
ISIN: ZAE000025540
Share code: AFG
CUSIP code (Level 1 ADR programme): 008283103
INTERIM GROUP RESULTS FOR THE 6 MONTHS ENDED 30 JUNE 2004 AND CAUTIONARY
ANNOUNCEMENT
Balance sheet
30-Jun-04 30-Sep-03 31-Dec-03
Reviewed Reviewed Audited
R`000 R`000 R`000
Non-current assets 2,722 107,968 105,127
Property, plant and equipment 2,722 99,181 92,578
Deferred taxation - 8,787 12,549
Current assets 42,821 85,508 94,087
Inventory - 30,402 28,891
Accounts receivable 176 13,127 12,956
Short-term loans 34,021 - -
Taxation refundable - 3,072 3,027
Cash and cash equivalents 8,624 38,907 49,213
Total assets 45,543 193,476 199,214
Equity and liabilities
Shareholders` interest 16,837 157,321 162,376
Outside shareholders` interest - 68 160
Non-current liabilities 2,223 26,338 26,691
Long-term liabilities 2,223 15,786 9,402
Deferred taxation - 10,552 17,289
Current liabilities 26,483 9,749 9,987
Accounts payable 1,832 9,749 9,987
Dividends payable 13,772 - -
Taxation payable 10,879 - -
Total equity and liabilities 45,543 193,476 199,214
- - -
Number of shares in issue 143,798 142,256 142,256
(thousands)
Net asset value per share (cents) 11.71 110.64 114.26
Income statement
6 months 6 months 9 months
ended ended ended
30-Jun-04 30-Sep-03 31-Dec-03
Reviewed Reviewed Audited
R`000 R`000 R`000
Revenue 36,542 36,687 72,659
Cost of sales (10,140) (9,957) (25,977)
Gross profit 26,402 26,730 46,682
Net foreign exchange gain/(loss) 2,673 (4,627) (8,204)
Operating expenses (23,793) (14,568) (30,437)
Operating income 5,282 7,535 8,041
Net interest paid (339) (865) (1,121)
Profit on sale of Tanzanite 86,507 - -
Business
Net income before taxation 91,450 6,670 6,920
Taxation (17,701) 515 5,270
Net income after taxation 73,749 7,185 12,190
Outside shareholders (467) (68) (17)
Net profit for the period 73,282 7,117 12,173
Weighted average number of ordinary 142,747 138,793 139,952
shares in issue (thousands)
Earnings per share (cents) 51.34 5.13 8.70
Headline (loss)/earnings per share (4.60) 5.13 8.70
(cents)
Dividends per share (cents) 91.13 - -
Statement of changes in Equity
Share Share Retained Total
capital Premium income
R`000 R`000 R`000 R`000
Opening balance 1 April 2003 1 112,028 19,162 131,191
Net profit for the period - - 12,173 12,173
Ordinary shares issued - 19,012 - 19,012
Opening balance 1 January 2004 1 131,040 31,335 162,376
Net profit for the period - - 73,282 73,282
Ordinary shares issued - 1,623 - 1,623
Capital repaid - (131,040) - (131,040
Dividends declared on sale of the - - (40,350) (40,350)
Tanzanite Business
Retained income of subsidiaries - - (49,054) (49,054)
disposed of
Balance as at 30 June 2004 1 1,623 15,213 16,837
-
Cash flow statement
6 months 6 months 9 months
ended ended ended
30-Jun-04 30-Sep-03 31-Dec-03
Reviewed Reviewed Audited
R`000 R`000 R`000
Cash flows from operating
activities
Cash generated by operations 1,443 5,910 16,125
Interest paid (339) (874) (1,121)
Taxation paid (837) 3,659 3,158
Net cash inflow from operating 267 8,695 18,162
activities
Cash flows from investing
activities
Additions to property, plant and (5,710) (3,552) (4,568)
equipment
Disposal of property, plant and - - 153
equipment
Proceeds on sale of property, plant 157,010 - -
and equipment
Capital repaid and dividends paid (157,618) - -
Investment in subsidiary company - (1,973) (1,831)
Net cash outflow from investing (6,318) (5,525) (6,246)
activities
Cash flows from financing
activities
Long-term liabilities repaid (2,140) (2,010) (450)
Proceeds from shares issued 1,623 - -
Loans granted (34,021) - -
Net cash outflow from financing (34,538) (2,010) (450)
activities
Net (decrease)/increase for the (40,589) 1,160 11,466
period
At beginning of the period 49,213 37,747 37,747
At end of the period 8,624 38,907 49,213
- -
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 at the company`s registered office.
The Period`s Review
The Tanzanite Business
On 21 May 2004 the tanzanite business was sold to Tanzanite One SA (Pty) Ltd at
a profit of R86,5 million. The business consists of the entire tanzanite
business and assets of
African Gem Resources Limited (`Afgem`), comprising the Management Services
Business of Afgem and the entire issued share capital and loan accounts of:
31 Afgem International Ltd;
31 The Tanzanite Company (Pty) Ltd; and
31 Merelani Mining Ltd,
together with Afgem`s indirect interests in Afgem Logistics (Pty) Ltd, the
Tanzanite Foundation Ltd and TaTan Ltd and all the assets and liabilities of
Afgem, excluding Afgem`s investment in Afgem Diamonds (Pty) Ltd and the share
capital and cash balances of Afgem.
The results
As a result of the sale of the tanzanite business, the financial statements for
the period 5 months ended 31 May 2004, have been included in Afgem`s results.
The sale of the tanzanite business resulted in significant movements on the
balance sheet.
No significant changes occurred in revenue and gross profit from that of the
previous interim period, as reflected below.
6 months 6 months 9 months
ended ended ended
30-Jun-04 30-Sep-03 31-Dec-03
Revenue (R`000) 36,542 36,687 72,659
Gross profit percentage 72% 73% 64%
The Rand has strengthened against the US Dollar and a net foreign exchange
profit was
recorded on the translation of foreign subsidiaries.
Net interest paid decreased from that of the previous interim period, due to the
decrease in the prime lending rates in South Africa.
Cash position after dividends
The negative cash flow of R40,6 million since the financial year end, resulted
from the distribution of the proceeds received (R157 million) on the sale of the
tanzanite business
and a special dividend of 10 cents per Afgem share paid in June 2004.
Reconciliation between earnings and
headline loss
6 months 6 months 9 months
ended ended ended
30-Jun-04 30-Sep-03 31-Dec-03
R`000 R`000 R`000
Earnings 73,282 7,117 12,173
Profit on the sale of the Tanzanite (86,507) - -
Business
Tax relating to the sale of the 6,656 - -
Tanzanite Business
Headline (loss)/earnings (6,569) 7,117 12,173
Post balance sheet events
Subsequent to 30 June 2004, the following material transactions have taken
place:
- Repayment of short term loans to the value of R34,021 million has been
received;
- Dividends payable to the value of R13,772 million have been paid; and
- Secondary Tax on Companies to the value of R5,044 million (included in
Taxation payable)
has been paid.
The Acquisition
As previously announced, Afgem entered into 3 key agreements (collective
comprising `the acquisition`) with Rex Diamond Mining Corporation (`Rex
Corporation`), a company listed
on the Toronto Stock Exchange and certain of its subsidiaries, the key terms of
which are set out below.
Management agreement
Afgem entered into an agreement with, inter alia, Rex Corporation and Loxton
Exploration (Proprietary) Limited (`Loxton`), a wholly-owned subsidiary of Rex
Corporation, to act as manager of the business owned by Loxton (the `management
agreement`). Loxton has the mining licence to mine various Kimberlite-fissure
properties near Barkley-West in the Northern Cape Province. Afgem has been
managing Loxton since 1 August 2004 and has commissioned its own diamond
recovery plant on site at Loxton.
Loan agreement
Afgem entered into an agreement with, inter alia, Rex Corporation to lend R5
million to Rex Mining Corporation Limited (`Rex Mining`), a wholly-owned
subsidiary of Rex Corporation (the `loan agreement`). Rex Mining is the vendor
of certain of the shares to be acquired by Afgem in terms of the sale of shares
agreement, detailed below.
Sale of shares agreement
Afgem entered into an agreement, subject to the conditions precedent set out
below, with, inter alia, Rex Corporation to acquire the entire issued share
capital of, and claims on loan account against, Loxton, Rex Diamond Corporation
(Proprietary) Limited (`Rex Diamond`) and Bellsbank Consolidated Diamond Mine
(Proprietary) Limited (`Bellsbank`) (collectively comprising `target companies`)
for a consideration of approximately R60 million. The purchase consideration
shall be discharged as follows:
- R2,5 million thereof in cash which shall be off-set against R2,5 million of
the amount that is owed to Afgem by Rex Mining in terms of the loan agreement
detailed above;
- R25 million thereof through the issue of 50 million Afgem shares at 50 cents
each; and
- the balance by paying Rex Mining four percent of the gross revenue on rough
diamond sales of Loxton, Rex Diamond and Bellsbank for the period commencing on
1 January 2006 and ending on 31 December 2021, to which a net present value of
approximately R32,5 million has been attributed.
The implementation of the sale of shares agreement is subject, inter alia, to
the following conditions precedent:
- obtaining the necessary regulatory approvals, including the JSE Securities
Exchange South Africa (`JSE`), the Competition Commission and the South African
Reserve Bank, if required;
- the approval by the shareholders of Afgem and the approval by the shareholders
of Rex Corporation; and
- the approval of the JSE for the continued listing on the JSE of the enlarged
capital of Afgem.
Approvals
Both the board and the controlling shareholder of Rex Corporation have provided
Afgem with irrevocable undertakings to vote in favour of the sale of shares
transaction and shareholders holding approximately 25% of the issued share
capital of Afgem have also provided Afgem and Rex Corporation with irrevocable
undertakings to vote in favour of the acquisition.
Capital commitments
The capital commitments relating to the 3 key agreements, as disclosed above,
are the only authorised and approved capital commitments.
Changes to Board of directors
Mr Ian Harebottle and Mr Phillip Gray resigned as directors of the company with
effect from 1 September 2004. Given the current size of Afgem and its status as
a cash shell, it was decided to reduce the number of directors on the board
accordingly. The board of Afgem thank Ian and Phillip for their contribution to
the board and the company and wish them well for the future.
CAUTIONARY ANNOUNCEMENT
Afgem is currently in the process of preparing a circular and pre-listing
statement and an announcement containing further details of the acquisition of
the target companies, including financial effects. Shareholders are advised to
exercise caution when dealing in Afgem shares until such further announcement is
made.
