| Fri 29 Jul 2005, 13:56 | | Renewal Of Cautionary Announcement |
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Matodzi Resources Limited - Reviewed Preliminary Results For The Year Ended 31
March 2005 And Renewal Of Cautionary Announcement.
MATODZI RESOURCES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1933/004523/06)
Share Code : MTZ ISIN : ZAE000042412
(`Matodzi` or `the Company` or `the Group`)
REVIEWED PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2005 AND RENEWAL OF
CAUTIONARY ANNOUNCEMENT.
HIGHLIGHTS
- The Letseng Diamond mine in Lesotho continues to deliver exceptional results.
- In January 2005 over a six-day period, four flawless clear diamonds weighing
112, 105, 76 and 71 carats were recovered.
- R90m of the R160m IDC loan to Letseng was repaid early.
- Conversion of certain of Matodzi`s mineral rights to `new form prospecting
rights` accepted.
COMMENTARY
RECLASSIFICATION AND RESTRUCTURING OF THE PREFERENCE SHARES
The terms relating to the 200 million unsecured redeemable convertible
participating `B` Preference shares (`Matodzi Prefs`) issued by the Company
were amended at the annual general meeting held on 18 August 2004. As a result
of this the Company reviewed the manner in which the Matodzi Prefs and the 200
million cumulative, redeemable preference shares issued by a subsidiary company,
Witnigel Investments (Pty) Limited (`Witnigel Prefs`) had been accounted for
in terms of AC125: Financial Instruments: Disclosure and Presentation and
AC133: Financial Instruments, Recognition and Measurement. It was concluded
that in terms of these accounting statements the Matodzi Prefs and the
Witnigel Prefs should have been disclosed in the financial statements as debt
and not as part of shareholders equity and outside shareholders` interest and
consequently the results for the year ended 31 March 2004 have been restated.
The consolidated balance sheet reflects a negative ordinary shareholders
interest of R263 million, and an amount relating to the Matodzi Prefs and the
Witnigel Prefs of R338 million which gives a positive combined ordinary and
preference shareholders` interest of R75 million.
In order to resolve the apparent insolvency of Matodzi, JCI Limited (`JCI`),
the beneficial owner of all of the 200 000 000 Matodzi prefs:
- has agreed to convert the Matodzi prefs into ordinary shares, on the basis
of one ordinary share for each Matodzi pref, (`the conversion`);
- will acquire for a consideration of R1 the entire issued share capital of
Witnigel Investments (Pty) Limited (`Witnigel`), a wholly owned subsidiary of
Matodzi (in which JCI holds 200 000 000 Witnigel Prefs). Witnigel`s net
liabilities, including the Witnigel Prefs, amount to R155 million (collectively
`the proposals`).
These proposals are subject to:
- the JSE Limited granting a listing for the 200 000 000 ordinary shares to be
issued in terms thereof;
- ordinary shareholders of Matodzi in general meeting passing a special
resolution to amend the terms of the preference shares to provide for the early
conversion and to the registration of the special resolution by the Registrar
of Companies;
- to the extent necessary, the unconditional written approval of the
Competition Authorities arising from the change of control of respectively
Matodzi and Witnigel referred to below;
- the proposals are subject to such other regulatory approvals as may be
necessary.
The effect of the proposals is that:
- Matodzi will, for accounting purposes, be solvent as the Matodzi Prefs which
are classified as debt in the preliminary results, will become equity and the
Witnigel prefs will have been acquired by JCI;
- JCI will become the beneficial holder of 57% of the issued ordinary share
capital of Matodzi. Prior to the conversion, JCI did not own any ordinary
shares in the share capital of Matodzi.
At the general meeting of Matodzi shareholders held on 30 July 1999, resolutions
were passed approving the terms and issue of the Matodzi Prefs and to waive any
right or entitlement by ordinary shareholders to a mandatory offer in terms of
the Securities Regulation Code on Take-Overs and Mergers (`the Code`). The
Securities Regulation Panel (`the SRP`) has confirmed that no mandatory offer
is required to be made to ordinary shareholders as a consequence of the
conversion.
The following table illustrates the pro forma financial effects of the proposals
on Matodzi based on the assumption that the proposals were effective for the
year ended 31 March 2005 and on the preliminary results of Matodzi for the year
then ended as set out herein.
Before(1) After Change
Ordinary shareholders` funds (R`000) (263 315) 55 456 121%
Net asset value per share (cents) (176.4) 15.9 109%
Net tangible asset value per share (cents) (231.1) (7.5) 97%
Basic earnings per share (cents) (74.3) (23.5) 68%
Headline earnings per share (cents) (84.3) (16.6) 80%
Shares issued (`000) 149 262 349 262
NOTES
(1) Extracted from the preliminary results of Matodzi for the year ended 31
March 2005 as set out herein.
(2) The par value of 1 cent per preference share and premium of 94,69 cents per
preference share was applied in subscribing for each ordinary share issued
pursuant to the conversion and adjusted for the disposal of Witnigel.
(3) Earnings have been adjusted for finance costs on the preference shares
which will no longer be accrued after the proposals and the profit on
restructuring of debt.
LETSENG
Matodzi now beneficially holds 50% of the issued share capital of Letseng
Investment Holdings South Africa (Pty) Limited (`Letseng Holdings`), and
controls the appointment of the majority directors of Letseng Holdings, which
owns 76% of Lesotho`s Letseng Diamond mine. As a result of that position,
Matodzi now consolidates the results of Letseng Holdings. Investigations are
in progress to find an appropriate means to unlock shareholder value
attributable to Letseng Diamonds (Pty) Ltd which continues to deliver
exceptional results. Exercises are being undertaken to double the annual
production at the mine.
CONVERSION OF MINERAL RIGHTS
The Group has made application to the Department of Minerals and Energy
(`the DME`) for the conversion of the old order mineral rights, over 26 farms,
into new form prospecting rights. The DME has accepted certain applications
subject to the Group submitting Environmental Management Plans and consulting
with all affected parties including landowners and communities. The Group
intends to implement an exploration and prospecting programme in partnership
with other companies.
ENHANCING SHAREHOLDER VALUE
The Company is currently being restructured with the aim of reducing corporate
costs, restructuring the balance sheet and facilitating the funding of mining
projects.
Matodzi`s business prospects for growth are favourable with the recent signing
of diamond concessions together with its South African partners, Bolotola
Holdings and Orlyfunt Holdings, and the Angolan government. The two deals have
been gazetted, which will assist Matodzi in raising guarantees and finance to
fund these projects.
GOING CONCERN
The Group`s total liabilities exceed its total assets by R263 million at year
end, an increase of R111 million compared to that of the previous year, taking
into consideration the reclassification of the preference shares. As indicated,
a positive combined ordinary and preference shareholders` interest of
R75 million exists.
Currently the Witnigel Prefs are redeemable but as Witnigel`s balance sheet
consists of the preference shares and assets with a market value of R20 million,
the net liability as at year end for the Group is R20 million if the holder of
the preference shares wanted to redeem the preference shares.
The holder of the Matodzi Prefs can only impose redemption of these
preference shares after the redemption date of 31 July 2006. Refer to the
proposals set out in the commentary above, to restore Matodzi`s solvency within
the Group.
Should the Group not be successful in the proposals set out above and only if
the holders of the preference shares impose redemption, there is significant
doubt that the Group will be able to meet their obligations in the normal
course of business and therefore a material uncertainty exists that the Group
may be able to continue as a going concern without undertaking further
borrowings and/or the partial disposal of a portion of its assets.
The directors are confident that the proposed restructuring of the preference
shares and the disposal of Witnigel will be satisfactorily concluded. The
solvency position of the Group will be restored and that the Group will
meet its obligations as they fall due. Accordingly, the directors continue to
adopt the going concern basis in the preparation of the preliminary results.
AUDIT REVIEW
The preliminary results have been reviewed by the Company`s auditors Charles
Orbach & Company. In their review report, they have included an emphasis of
matter paragraph drawing attention to the directors` statement in the
commentary relating to going concern. A copy of their review report is
available for inspection at the Company`s registered office.
RENEWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the cautionary and renewal of cautionary
announcements published on 12 April 2005, 9 June 2005 and 28 July 2005
respectively, and are advised that the discussions detailed in those
announcements are continuing. As these negotiations may have an effect on the
price of the Company`s shares, shareholders are advised to continue exercising
caution when dealing in their Matodzi shares until a further announcement is
made.
For and on behalf of the board
ANDREW MLANGENI SELLO RASETHABA
CHAIRMAN CHIEF EXECUTIVE OFFICER
JOHANNESBURG
29 JULY 2005
CONSOLIDATED INCOME STATEMENTS (ABRIDGED)
Reviewed Restated Audited
year ended year ended year ended
31 March 31 March 31 March
2005 2004 2004
Notes R`000 R`000 R`000
Revenue 280 121 153 153
Operating profit/(loss) before items listed below
97 873 (5 257) (5 257)
Depreciation (23 704) (13) (13)
Impairment of property, plant and equipment
(24 207) - -
Loss on disposal of investments (13 439) - -
Profit on restructuring of debt 2 39 149 - -
Fair value adjustments - investments (81 945) 27 711 27 711
Operating (loss)/profit for the year (6 273) 22 441 22 441
Investment income 2 439 3 3
Finance costs 3 (58 453) (49 821) (14 732)
Net (loss)/profit before taxation (62 287) (27 377) 7 712
Taxation 4 (35 748) (317) (317)
(Loss)/profit after taxation (98 035) (27 694) 7 395
Profit attributable to outside shareholders
(12 870) - (4 167)
(Loss)/profit attributable to shareholders
(110 905) (27 694) 3 228
(Loss)/earnings per share - (cents) 5
- basic (loss)/earnings (74.3) (18.6) 2.2
- headline (loss)/earnings (84.3) (18.6) 2.2
CONSOLIDATED BALANCE SHEETS (ABRIDGED)
Reviewed Restated Audited
year ended year ended year ended
31 March 31 March 31 March
2005 2004 2004
Notes R`000 R`000 R`000
ASSETS
Non-current assets
- Property, plant and equipment 201 370 25 177 25 177
- Goodwill 81 618 - -
- Investments 6 51 461 248 661 248 661
- Loans receivable 4 800 - -
339 249 273 838 273 838
Current assets
- Cash and cash equivalents 58 566 97 97
- Other 41 999 751 751
100 565 848 848
Total assets 439 814 274 686 274 686
EQUITY AND LIABILITIES
Capital and reserves
- Shareholders` interest (263 315) (152 410) 137 133
- Outside shareholders` interest 22 359 - 52 500
Interest bearing borrowings
- Preference shares 2 338 272 342 043 -
- Other 232 759 78 067 78 067
Deferred tax 35 641 - -
365 716 267 700 267 700
Current liabilities
- interest bearing 33 991 73 73
- non-interest bearing 40 107 6 913 6 913
74 098 6 986 6 986
Total equity and liabilities 439 814 274 686 274 686
Number of shares in issue
- ordinary shares of 25 cents each 149 262 157 149 262 157 149 262 157
- `B` preference shares of 1 cent each
200 000 000 200 000 000 200 000 000
CASH FLOW STATEMENTS (ABRIDGED)
Reviewed Restated Audited
year ended year ended year ended
31 March 31 March 31 March
2005 2004 2004
Notes R`000 R`000 R`000
Cash flows from/(to) operating activities 66 592 (5 114) (19 560)
Cash flows to investing activities (21 388) (63 661) (63 661)
Cash flows from financing activities 1 924 68 637 83 083
Net cash and cash equivalent in flow/(outflow)
47 128 (138) (138)
Cash and cash equivalents at beginning of the year
97 235 235
Cash and cash equivalents on acquisition of subsidiary
11 341 - -
Cash and cash equivalents at end of the year
58 566 97 97
STATEMENT OF CHANGES IN EQUITY
Share capital Accumulated
and premium loss Total
Note R`000 R`000 R`000
Balance 31 March 2003 - as previously stated
218 705 (89 800) 128 905
Reclassification of preference shares
2 (139 380) (96 574) (235 954)
Balance 31 March 2003 (restated) 79 325 (186 374) (107 049)
Change in accounting policy - AC133 (restated)
- (17 667) (17 667)
Net loss for the year (restated) - (27 694) (27 694)
Balance 31 March 2004 79 325 (231 735) (152 410)
Net loss for the year - (110 905) (110 905)
Balance 31 March 2005 79 325 (342 640) (263 315)
NOTES TO THE PRELIMINARY RESULTS
1. BASIS OF ACCOUNTING
The consolidated results are prepared in accordance with South African
Statements of Generally Accepted Accounting Practice (`GAAP`) and Schedule 4
of the Companies Act, 61 of 1973, As amended. The Accounting Policies applied
are consistent with those used in the annual financial statements for the year
ended 31 March 2004, except for the adoption of AC140: Business Combinations,
in terms of which goodwill is no longer amortised but is instead reviewed for
impairment in terms of AC128: Impairment of Assets.
2. PREFERENCE SHARES
As a result of the reclassification of the preference shares, the opening
Balance of the accumulated loss at the beginning of 2003 was adjusted, while
the comparative amounts were restated accordingly. The effect of the
reclassification of the preference shares on the results of 2004 was as
follows:
Restated
year ended
31 March
2004
R`000
Increase in finance costs 35 089
Decrease in profit attributable to outside shareholders (4 167)
Decrease in profit attributable to shareholders - 2004 year 30 922
Decrease in adjustment on 1 April 2004 on adoption of AC133 22 667
Adjustment to accumulated loss at 1 April 2003 96 574
Reclassification of share capital and premium 139 380
Reclassification of outside shareholders` interest 52 500
Preference shares - 31 March 2004 342 043
MATODZI PREFS
As a result of the change in the terms relating to the Matodzi Prefs, which was
approved at the Company`s Annual General Meeting held on 18 August 2004 a profit
of R39 149 000 has arisen. This is the difference between the carrying value
calculated in terms of AC125 and AC133 of the Matodzi Prefs prior to the change
in terms and the carrying value post the change in terms. An amount of
R163 195 000 in respect of these shares is included in the amount of
R338 272 000 reflected as preference shares at 31 March 2005. The gross
redemption price of these shares on 31 July 2006 is R191 380 000. Interest to be
expensed in terms of AC125 and AC133 between 1 April 2005 and 31 July 2006
amounts to R28 185 000.
WITNIGEL PREFS
An amount of R175 077 000 in respect of these shares is included in the amount
of
R338 272 000 reflected as preference shares at 31 March 2005.
Reviewed Restated Audited
year ended year ended year ended
31 March 31 March 31 March
2005 2004 2004
R`000 R`000 R`000
3. FINANCE COSTS
- Preference shares 35 378 35 089 -
- Other 23 075 14 732 14 732
58 453 49 821 14 732
4. TAXATION
Normal tax
- current year 127 5 5
- prior year under-provision - 312 312
Deferred tax
- current year 35 621 - -
35 748 317 317
5. (LOSS)/EARNINGS PER SHARE
Basic (loss)/earnings per share is based on an attributable (loss)/profit of
(110 905) (27 694) 3 228
Reconciliation between basic (loss)/earnings and headline (loss)/earnings
Attributable (loss)/profit (110 905) (27 694) 3 228
Impairment of property, plant and equipment
24 207 - -
Profit on restructuring of debt (39 149) - -
Headline (loss)/earnings per share is based on a (loss)/profit of
(125 847) (27 694) 3 228
Weighted average number of ordinary shares in issue
149 262 157 149 262 157 149 262 157
6. INVESTMENTS
Listed investments - at market value 50 461 163 029 163 029
Unlisted investments 1 000 1 000 1 000
Associated company - 84 632 84 632
Directors` valuation of unlisted investments
1 000 1 000 1 000
7. During the year under review, the Company`s authorised share capital remained
unchanged at 250 000 000 ordinary shares of 25 cents each and 200 000 000 `B`
preference shares of 1 cent each, of which 149 262 157 ordinary shares and
200 000 000 `B` preference shares remained in issue throughout the period.
DIRECTORS:
A Mlangeni (Chairman), SM Rasethaba (Chief Executive Officer), HC Buitendag,
RB Kebble, K Makhado, ME Mkwanazi, T Mosololi.
COMPANY SECRETARY:
PB Beale.
REGISTERED OFFICE
28 Harrison Street, Johannesburg, 2001.
PO Box 6966, Johannesburg, 2000.
http://www.matodzi.co.za/
INVESTOR RELATIONS
Khangale Makhado
28 Harrison Street, Johannesburg, 2001.
PO Box 6966, Johannesburg, 2000.
Tel: + 27 11 688 5001, Fax: + 27 11 688 5101
TRANSFER SECRETARIES
Computershare Investors Services 2004 (Pty) Limited.
70 Marshall Street, Johannesburg, 2001.
PO Box 61051, Johannesburg, 2107.
SPONSOR
River Sponsors (Pty) Limited.
Block C, 1st Floor, Parc Nouveau, 225 Veale Street,
Brooklyn, Pretoria, 0181.
PO Box 1666, Groenkloof, 0027.
Date: 29/07/2005 12:22:08 PM
Produced by the JSE SENS Department
