| Thu 31 Mar 2005, 15:53 | | RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2004 |
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African Gem Resources Limited - Consolidated Interim Results For The Six Months
Ended 31 December 2004 And Renewal Of Cautionary Announcement
African Gem Resources Limited
(Incorporated in the Republic of South Africa)
(Registration No. 1998/007292/06)
Share code: AFG ISIN code: ZAE000025540
CUSIP code (Level 1 ADR programme): 008283103
(`AFGEM` or `the Company`)
CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2004 AND
RENEWAL OF CAUTIONARY ANNOUNCEMENT
Six Six Twelve Nine
months months months months
ended ended ended ended
Income statements 31 Dec 30 Jun 31 Dec 31 Dec
2004 2004 2004 2003
Reviewed Reviewed Reviewed Audited
R R R R
Revenue - 36 542 36 542 72 659
068 068 236
Cost of sales - (10 140 (10 140 (25 977
160) 160) 310)
Gross profit - 26 401 26 401 46 681
908 908 926
Management fees 7 000 000 - 7 000 000 -
received
Net foreign 4 563 670 2 673 058 7 236 728 (8 203
exchange 809)
gain/(loss)
Other income - - - 221 571
Operating expenses (1 051 (23 793 (24 844 (30 658
158) 002) 160) 871)
Operating income 10 512 5 281 964 15 794 8 040 817
512 476
Net interest 234 870 (339 472) (104 602) (1 120
received/(paid) 616)
Profit on sale of - 86 506 86 506 -
business 980 980
Net income before 10 747 91 449 102 196 6 920 201
taxation 382 472 854
Taxation (3 224 (17 701 (20 925 5 269 815
214) 498) 712)
Net income after 7 523 168 73 747 81 271 12 190
taxation 974 142 016
Outside - (466 977) (466 977) (17 329)
shareholders
Net profit for the 7 523 168 73 280 80 804 12 172
period 997 165 687
Earnings per share 5,23 51,34 56,72 8,70
(cents)
Headline 5,23 (4,60) (0,99) 8,70
earnings/(loss) per
share (cents)
Weighted average 143 797 142 746 143 274 139 951
number of ordinary 717 532 997 637
shares in issue
As at As at As at
31 Dec 2004 30 Jun 2004 31 Dec 2003
Reviewed Reviewed Audited
Balance sheets R R R
Non-current assets
Property, plant and 2 826 360 2 721 640 92 577 755
equipment
Deferred taxation - - 12 548 844
Current assets 34 072 026 42 820 861 94 086 545
Inventory - - 28 890 956
Accounts receivable 5 890 033 176 247 12 956 481
Short-term loans 18 233 084 34 020 926 -
Taxation refundable - - 3 026 501
Cash and cash equivalents 9 948 909 8 623 688 49 212 607
Total assets 36 898 386 45 542 501 199 213 144
Equity and liabilities
Shareholders` interest 24 360 369 16 837 201 162 376 405
Outside shareholders` - - 159 815
interest
Non current liabilities 2 031 647 2 222 299 26 690 271
Long term liabilities 2 031 647 2 222 299 16 744 099
Deferred taxation - - 9 401 722
Environmental - - 544 450
rehabilitation provision
Current liabilities 10 506 370 26 483 001 9 986 653
Accounts payable and 7 265 798 7 650 948 9 986 653
provisions
Dividends payable - 13 771 997 -
Taxation payable 3 240 572 5 060 056 -
Total equity and 36 898 386 45 542 501 199 213 144
liabilities
Net asset value per share 16,94 11,71 114,14
(cents)
Number of shares in issue 143 797 717 143 797 717 142 256 182
Statements of changes in Share Share Retained
equity capital premium income Total
R R R R
Opening balance 1 1 422 131 040 31 334 162 376
January 2004 015 968 405
Net profit for the - - 73 280 73 280
period 997 997
Ordinary shares issued 16 1 622 672 - 1 622 688
Capital repaid - (131 040 - (131 040
015) 015)
Dividends declared on
sale of tanzanite - - (40 349 (40 349
business 585) 585)
Retained income of
subsidiaries disposed of - - (49 050 (49 050
754) 754)
Opening balance 1 July 1 438 1 622 672 15 213 16 837
2004 091 201
Net profit for the - - 7 523 168 7 523 168
period
Balance as at 31 1 438 1 622 672 22 736 24 360
December 2004 259 369
Six months Six months Twelve Nine
ended ended months months
31 Dec 30 Jun ended ended
Cash flow 2004 2004 31 Dec 31 Dec
statements Reviewed Reviewed 2004 2003
R R Reviewed Audited
R R
Cash flows from
operating
activities
Cash (utilised (13 697 1 442 811 (12 254 16 125 024
in)/generated by 183) 372)
operations
Net interest 234 870 (339 472) (104 602) (1 120
received/(paid) 616)
Taxation (5 043 (836 984) (5 880 3 157 495
(paid)/refund 698) 682)
received
Dividends paid (13 771 (157 617 (171 389 -
997) 602) 599)
Net cash flows from (32 278 (157 351 (189 629 18 161 903
operating 008) 247) 255)
activities
Cash flows from
investing
activities
Additions to (227 045) (5 709 (5 937 (4 567
property, plant and 975) 020) 720)
equipment
Proceeds on - 157 009 157 009 152 503
disposal of 829 829
property, plant and
equipment
Investment in - - - (1 830
subsidiary Company 662)
Net cash flows from (227 045) 151 299 151 072 (6 245
investing 854 809 879)
activities
Cash flows from
financing
activities
Long term (190 652) (2 139 (2 329 (450 309)
liabilities repaid 288) 940)
Proceeds from - 1 622 688 1 622 688 -
shares issued
Loan repayments 34 020 926 - 34 020 926 -
received
Loans granted - (34 020 (34 020 -
926) 926)
Net cash flows from 33 830 274 (34 537 (707 252) (450 309)
financing 526)
activities
Net 1 325 221 (40 588 (39 263 11 465 715
increase/(decrease) 919) 698)
for the period
At the beginning of 8 623 688 49 212 607 49 212 607 37 746 892
the period
At end of the 9 948 909 8 623 688 9 948 909 49 212 607
period
AUDITORS` REVIEW
The interim results have been reviewed by the Company`s auditors, KPMG Inc. The
unmodified review opinion is available at the Company`s registered office.
These reviewed consolidated interim financial statements are prepared in
accordance with South African Statements of Generally Accepted Accounting
Practice. The principal accounting policies applied in the preparation of these
results are consistent with those applied in the prior reporting period.
INTRODUCTION
As indicated in the Company`s previous SENS announcement on 14 January 2005, the
financial year-end of the Company has been extended to 31 March. Consequently,
these are results for the six and twelve months to 31 December 2004. Results
and financial statements for the 15 months to 31 March 2005 are expected to be
released in June 2005.
PROPOSED ACQUISITION, BLACK ECONOMIC EMPOWERMENT (`BEE`) AND RENEWAL OF
CAUTIONARY ANNOUNCEMENT
The interim period under review is the first financial period following the sale
of the Company`s tanzanite business to Tanzanite One Limited (`TanzaniteOne`),
in May 2004. Accordingly, the new focus of the Company has been mainly on the
management of the assets which are the subject of a proposed acquisition from
Rex Diamond Mining Corporation (`Rex Corporation`), a Company listed on the
Toronto Stock Exchange. As previously announced, Afgem has entered into three
key agreements with Rex Corporation, the summarised details of which are as
follows:
Management agreement
Afgem entered into an agreement with, inter alia, Rex Corporation and Loxton
Exploration (Proprietary) Limited (`Loxton`) to act as manager of its business
which has the licence to mine various kimberlite-fissure properties near Barkley
West in the Northern Cape Province. The management agreement is ongoing and
Afgem receives a management fee of R1 million per month in terms of this
agreement.
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 South
African subsidiary of Rex Corporation; details of which are contained in the
Financial review below.
Sale of shares agreement
Afgem entered into an agreement 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 Diamonds`) and Bellsbank
Consolidated Diamond Mine (Proprietary) Limited (`Bellsbank`) (collectively `the
target companies`) for a consideration of approximately R60 million. The sale of
shares agreement has not yet become unconditional and, as a result, Afgem does
not own the target companies at present.
A Scheme of Arrangement in terms of Section 311 of the South African Companies
Act, No 61 of 1973, is currently being proposed by Afgem between Loxton,
Bellsbank, Rex Diamonds, Rex Mining and their creditors. A scheme meeting has
been held and is expected to be sanctioned by the Court in April 2005. To this
end, Afgem has committed to settle all creditor claims against the
abovementioned companies to the extent of 20c (twenty South African cents) for
every R1, 00 (one South African Rand) owed. A payment of 30c (thirty South
African cents) will be made to certain preferential creditors. The first
settlement of these liabilities is payable in full by 30 April 2005 and the
additional 10c in the Rand to preferential creditors in April 2006. As such
Afgem now has a greater level of control of these companies.
Afgem is in the process of negotiating with certain black economic empowerment
parties to acquire a significant stake in the Company. A circular and pre-
listing statement, which will include the competent person`s report on the
target companies, is in the process of being prepared. A terms announcement
containing further details of the acquisition of the target companies and the
proposed BEE transaction, including financial effects, is expected to be made in
April 2005. Accordingly, shareholders are advised to continue exercising
caution when dealing in Afgem shares until such an announcement is made.
OPERATIONAL REVIEW OF TARGET COMPANIES
In August 2004, Afgem assumed management control over the target companies,
namely, Loxton, an operating kimberlite fissure mine, Bellsbank, a kimberlite
fissure mine which is on care and maintenance and Rex Diamond Mine, a kimberlite
fissure mine, also on care and maintenance.
The Loxton mine is located along a six kilometre kimberlitic fissure formation
and is presently mining at depths of nearly 500 metres. Currently Loxton is
operating two of its numerous shafts; namely du Plessis and Ardo. The remaining
shafts, all of which are along strike, have been mothballed. When Afgem took
over management control in August 2004, Loxton was in a state of disrepair. The
antiquated pan plant was subsequently closed down and a temporary Dense Media
Separation (`DMS`) plant, belonging to Afgem, was commissioned. New stopes are
being opened up at Du Plessis shaft while the Ardo shaft was closed to allow for
the instalment of a refurbished winder. This refurbishment should be completed
within the next few months.
To interim period end, Loxton participated in three rough diamond auctions and
has sold some 2 500 carats of diamonds recovered from old underground ore,
previously stockpiled material and tailings at an average price of US$160/carat.
It is expected that grades will rise as increasing quantities of material from
underground sources are treated at the expense of older, more diluted stockpiled
material.
Largely as a result of historical technical and financial information not being
available, Afgem`s major focus during the period under review has been the
establishment of new mining levels and ends in order to access higher grade
material, thereby reducing unit operating costs. Both these objectives are
ongoing.
A major cost cutting programme has been implemented during the period under
review. Prior to August 2004, the operating costs of Loxton were approximately
R3 million per month; by December 2004 these had been reduced to R2, 5 million.
The two labour unions represented at the mine, have been intimately involved in
these negotiations, which are currently ongoing.
The construction of a new DMS and final recovery plant for Loxton is in final
planning and costing stages.
Bellsbank and Rex remain on care and maintenance and Afgem has not undertaken
any further work on these assets. The licenses of these properties are in the
process of being upgraded to new order licences and once converted, geological
exploration programmes will start with a view to re-commencing mining
operations.
FINANCIAL REVIEW
In terms of the management agreement entered into with Rex Corporation, Afgem
earned management fees of R1 million per month for the five months to end
December.
A further R2 million in management fees were earned from TanzaniteOne during the
period. Subsequent to the sale of the Company`s tanzanite business, loans
outstanding from the tanzanite business were repaid to the Company by
TanzaniteOne. A net foreign exchange gain of R4, 6 million was realised on the
repayment of this loan.
Afgem has made two loans to Rex Corporation and its subsidiaries totalling R14,
2 million, which comprise of the following:
- R5 million is in terms of the loan agreement entered into with Rex
Corporation -as referred to above. This loan is interest free and is repayable
on demand within five days notice after 5 August 2005. In the event of the
acquisition of the target companies being successfully concluded then R2, 5
million of this loan is intended to be set off against the purchase
consideration and the remainder payable on demand; and
- R9, 2 million is in terms of the management agreement entered into with,
inter alia, Loxton as referred to above. In terms of this agreement Afgem is
obliged to fund up to R12 million of Loxton`s working capital and business
requirements.
This loan is interest free and is repayable in either of the following events:
Within 30 days of the date upon which the shareholders of Afgem fail to approve
the purchase of the target companies and there has been a material breach of any
of the warranties outlined in the sale of shares agreement referred to above; or
Within 12 months of the date upon which Afgem shareholders fail to approve the
purchase of the target companies but there has been no material breach of the
warranties outlined in the sale of shares agreement.
This loan is secured by the pledge of the share capital in and the cession of
the claims on loan account against Bellsbank, by Rex Corporation, and the pledge
of the share capital in and the cession of the claims on loan account against
Loxton and Rex Diamonds, by Rex Mining.
Afgem has also made a R4 million loan to Frannor Finance and Investment Limited,
a company incorporated in the British Virgin Islands, to fund exploration
expenditure in Angola. Negotiations are ongoing as to Afgem`s future
participation in the project in Angola. However, it is expected that this loan
will be repaid to the Company in the short term. This loan is unsecured, does
not earn interest and is repayable on demand. Afgem remains confident of its
ability to realise value from this investment.
For and on behalf of the board
MJ Nunn MR Summers
Chief Executive Officer Group Financial Director
Johannesburg
31 March 2005
Corporate advisor and transactional sponsor
Absa Corporate and Merchant Bank - Corporate Finance
A division of ABSA Bank Limited
Reg no 1986/004794/06
Sponsor
Java Capital (Proprietary) Limited
Date: 31/03/2005 03:47:09 PM
Produced by the JSE SENS Department
